There comes a moment in each of our lives when we decide to actually read the invoices that we are forced to pay at the end of each month. Be it the house payment, the auto loan, or even the internet bill, there is almost always a tiny phrase that in the fine print of the legalese. No matter the obligation, the companies that have the greatest hold on our personal bank accounts are invariably designated: xyz company, a Delaware corporation.
Why Delaware? One of the tiniest states in the union. Why not New York, California or even Texas?
The simple answer is that Delaware determined early in its history that in order to bring new business to its territory, it would have to provide a judicial system that was as sophisticated as the companies it sought to attract. Delaware has developed one of the most litigated, settled, seasoned and vetted court systems for complex business organizations and practices on the planet. Over the last 200 years, during the evolution of economic commerce in America, it was in the small state of Delaware that businesses learned to speak to each other and, more important, to settle disputes among themselves.
A critical component of that development was the creation of the Delaware Chancery Court, a specialized business court charged with understanding and settling sophisticated, and sometimes arcane, business disputes. As a result, Delaware became the model for the nation.
During the last half-century, Texas has transformed into the most business-friendly state in the country. Because of the tax and regulatory environment, record for creating high-wage jobs, and focus on its highways and telecom infrastructure, Texas has been nicknamed “The Texas Miracle” by pundits and journalists around the country.
And yet, our court system is often better suited for disputes among producers of oil and gas, farmers, ranchers and landowners rather than for conflicts among 21st-century companies in technology, finance, aerospace, automobile, gaming, retail and other industries. We have an incredibly talented judiciary in Texas. But we are lacking a business-centric judicial infrastructure that many of our competing states have already implemented.
How is it that unlike a majority of the other major states in the United States, including business-minded states such as New York, California, Florida, Illinois and Nevada, Texas does not have a specialized business court?
How is it that unlike so many modernized and advanced countries around the world, including the U.K., Canada, Germany, France and Japan, Texas, the ninth-largest economy on the planet, does not have a specialized business court of its own?
The answer is that a number of operatives in Texas’ legal ecosystem financially and politically benefit from the current court system. There is a Texas adage: If it ain’t broke, don’t fix it. To many Texas attorneys and judges, the system is working well for them. There is no impetus to make the advancements necessary to accommodate the vibrant and changing economy of Texas.
The arguments of the opponents of progress are often specious and self-serving. For example, some claim that a specialized business court would erode the jury system in Texas. Nothing could be further from the truth. The governor’s proposed legislation clearly provides for and anticipates a robust jury trial system. What the new business court would do is provide highly qualified judges, with extensive experience in complex business disputes.
Likewise, the claim that appointed judges would lead to a substandard, political judiciary does not recognize that the new judges would have to meet rigorous qualifications and certain enumerated standards before they could even be considered for appointment.
How do I know that this proposal is not some Trojan Horse for Big Business to take over the state as the opposition has claimed?
I know because I was the original author of this proposal to create the Texas Business Court. I wrote this bill when I was a member of the Texas Legislature because as a practicing corporate attorney, I knew that Texas is competing for the most advanced and sophisticated corporate work in the world. With a more robust and specialized business court, we could attract these companies to Texas, instead of seeing them organize in Delaware, California or New York.
As SpaceX, Toyota, JPMorganChase, Fidelity and many others have discovered, Texas is the land of milk and honey. Those companies are comfortable having offices here, but they do not incorporate here. That is a huge distinction for the bottom line of Texas.
With the Texas Business Court, without spending a penny of your tax dollars, we will be able to more easily bring thousands of high-wage jobs and associated tax revenue to your neighborhood. This is unquestionably a win-win for Texas. Let us not eschew progress in order to line the pockets of lawyers benefiting from the status quo.
Jason Villalba is a former member of the Texas House, a practicing corporate attorney and a member of the executive committee of the Texas Business Law Foundation. He wrote this column for The Dallas Morning News.
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