2025 Texas Legislature Update

I. Expansion of the Texas Business Court

Texas House Bill 40 expands the subject matter jurisdiction of the Texas Business Court to include intellectual property disputes.

1. Subject Matter Jurisdiction: The provision grants the Business Court concurrent jurisdiction over actions “arising out of or relating to the ownership, licensing, lease, installation, or in performance of intellectual property.” This includes computer software, software applications, information technology and systems, data and data security, pharmaceuticals, biotechnology, and trade secrets.
   Also the business court has jurisdiction over suits to enforce an arbitration agreement or review an arbitral award involving an amount of $5 million or more as well as multi-district litigation pretrial matters if the court otherwise has jurisdiction.
2. Amount in Controversy: All disputes must still meet the Business Court’s amount in controversy requirement, which has notably been lowered from $10 million to $5 million across the board.
3. Commencement Date of Suit: In addition, all actions commenced before September 1, 2024, can be transferred to the business court by agreed motion and with permission of the Business Court.
4. Deadline for Removal: The 30-day timeline for removal to the Business Court is now triggered by the service of process, instead of filing. Finally, House Bill 40 allows business entities to designate the Business Court as the exclusive forum for internal claims in their charters, bylaws, or operating agreements.
5. Venue Designations: The statutory venue provision has been amended to allow Texas entities to designate the Business Court as the proper venue in their governing documents.

II. Updates to the Business Organizations Code

Senate Bill 29 introduces several amendments to the Texas Business Organizations Code.

1. Governing Documents Impacting Litigation: The governing documents of a domestic entity can now:
   1. Designate Texas courts as the exclusive forum and venue for internal entity claims and
   2. Contain an enforceable waiver of the right to trial by jury for internal entity claims.

2. Business Judgment Rule: Senate Bill 29 codified the business judgment rule by establishing a statutorily recognized rebuttable presumption that directors and officers act in good faith, on an informed basis, in furtherance of the interests of the corporation, and in obedience to the law. Accordingly, claims alleging breach of duty against directors or officers are limited. A claimant must

   1. Rebut the presumption of good faith and

   2. Prove that the challenged act or omission involved fraud, intentional misconduct, an ultra vires act, or a knowing violation of law. The second prong must be pled with particularity, closely aligned with the pleading standards for fraud and mistake under Federal Rule of Civil Procedure 9(b).

3. Demands for Books and Records.  A shareholder's right to sue for books and records is limited, especially in active or anticipated litigation. Shareholders are now restricted from using statutory books and records demands as a substitute for discovery in pending lawsuits. Additionally, certain electronic communications like emails, texts, and social media are generally excluded from demands unless they were part of an official corporate action.

4. Thresholds for Derivative Suits: Publicly traded companies and Texas corporations with 500 for more shareholders can set thresholds for shareholder derivatives suits with the threshold not to exceed 3% of outstanding shares.

5. Exculpation of Officers: Texas entities are now authorized to exculpate officers to the same extent as directors and other governing persons under the existing provision of the Texas Business and Organizations Code. Section 7.001 of the Texas Business and Organizations Code authorizes Texas entities to include provisions in the certificate of formation that eliminate or limit the monetary liability of governing persons, now including officers, for breach of the duty of care.

III. New Procedural Requirements for Motions for Summary Judgment

There is a significant change to the procedural requirements for motions for summary judgment.

1. Deadlines for Rulings on Motions for Summary Judgement:  For any summary judgment motion filed after September 1, 2025, courts must either hear oral argument or consider the motion without oral argument within 45 days after the response motion is filed. Starting December 4, 2025, the 45-day deadline will be triggered by the filing of the motion. If the court does not hear oral argument, it must note the date of consideration on the docket. These rules apply to business courts, district courts, and statutory county courts.
2. Written Rulings: In addition, courts must file a written ruling on the motion within 90 days of hearing or considering the motion. Notably, these deadlines cannot be modified by the Texas Supreme Court and courts are required to report compliance quarterly to the Office of Court Administration. (Accordingly, there is cause for concern that if courts are unable to meet the 90-day written ruling deadline, they may default to denying motions for summary judgment because absent a statute authorizing an interlocutory appeal, the trial court cannot be reversed for denying a motion for summary judgment.)

IV. Procedural Changes to Seal Trade Secrets

House Bill 4081 provides a new procedure for sealing trade secret information:

1. Sealing Party’s Own Trade Secrets: A party seeking to seal its own trade secret information must file a notice of sealing and an affidavit that: (1) describes the information contained in the document; (2) states the factual basis for the trade secret allegations; and (3) provides contact information for any subsequent motion to unseal. The party seeking seal must also deliver a copy of the document to the trial court in a sealed envelope identifying the corresponding notice. Lastly, the party must serve a copy of the notice, affidavit, and document on the other parties to the action.
2. Filings Containing Another’s Alleged Trade Secrets: A party filing a document containing alleged trade secrets of another must: (1) file a notice of sealing and statement describing the information contained and identifying the person who claims the information is a trade secret; (2) deliver a copy of the document to the trial court in a sealed envelope identifying the corresponding notice; and (3) serve a copy of the notice, affidavit, and document on the other parties to the action as well as any nonparty who alleges the document contains their trade secrets. Within 14 days after receiving such notice, any party alleging the document contains trade secret information must file an affidavit that: (1) describes the information contained in the document; (2) states the factual basis for the trade secret allegations; and (3) provides contact information for any subsequent motion to unseal.
3. Trial Court’s Treatment of Trade Secret Information: Once the trial court receives the notice, affidavit, and sealed information, the document is treated as permanently under seal and the trial court retains continuing jurisdiction to seal or unseal a document.
   Additionally, anyone, including nonparties, may intervene to seal or unseal documents. The claimant bears the burden of proving, by a preponderance of the evidence, that the material qualifies as a trade secret. Finally, an order granting or denying a motion to unseal a document is considered a severed and final judgment that is immediately appealable by any party or nonparty that participated in the proceeding.

V. Updates on Cybersecurity, Construction, Land Ownership, and Healthcare

The 2025 legislature also made changes impacting cybersecurity, construction law, land ownership, and healthcare.

1. Data Breaches--Limits on Damages of Small Businesses:  Senate Bill 2610 addresses damages liability for small businesses that experience data breaches. The statute limits recoverable damages for businesses with fewer than 250 employees that maintain a qualifying cybersecurity program, even if a breach involving sensitive personal information occurs.
2. Construction Law:

   House Bill 2960 introduces two significant changes in the construction context.

   1. It invalidates contractual provisions that require application of another state’s law to construction disputes involving Texas projects.
   2. It voids venue or arbitration clauses that conflict with the location of the Texas property at issue.
3. Land Ownership: Senate Bill 17 prohibits governments in and companies from China, North Korea, Russa, and Iran from owning land in Texas.
4. Healthcare Noncompete Provisions: Senate Bill 1318 imposes new restrictions on noncompete provisions for physicians and certain health care practitioners. Noncompete covenants involving physicians and health care practitioners cannot last longer than one year after termination and cannot extend beyond a five-mile radius from the location of the practitioner's primary practice.