A Look At The Wild West Of Business Court Constitutionality

Aside from Delaware's Court of Chancery, state business courts are relatively new, with New York and Illinois starting commercial dockets in 1993 and other states starting their own systems at a fairly steady pace ever since. As of 2019, more states had their own business courts—either a separate court or aa docket within an existing state court—than didn't.

What's stood out this year on that front is the different processes adopted and constitutional challenges faced by three of the states that have added business courts most recently: Texas, Nevada and Oklahoma. (Utah launched a business court as well this year, but to my knowledge it hasn't faced a constitutional challenge so far.)

Here's the big issue: Each of these states wants to appoint, not elect, the judges that sit on their business courts. But state constitutions vary as to whether they allow those appointments. That means if states want them, they're going to have to go about it via very different, non-traditional routes.

"Some of the issues that are popping up in these cases are issues that, on some level, people haven't thought about for 100 years or more," said Andrew Price of Norton Rose Fulbright's Houston office.

University of Oklahoma law professor Megan Shaner said the newest business courts are part of a wave that differs from those established in the 1990s and 2000s, which were primarily focused on providing a benefit to the businesses already in a state. In contrast, she said, the newer business courts seem to be at least partially aimed at making a state more attractive to businesses than other states.

"I think that's where you're also seeing more of these challenges and a little bit more aggressive legislation," Shaner said. "When you looked at the first huge wave of business courts being created, there just weren't those types of challenges and that type of political dynamic and competition among the states really going on."

Ben Edwards, a law professor at the University of Nevada, Las Vegas, said that setting up designated business courts in Nevada is largely a matter of keeping Nevadan businesses in-state and giving them a way to resolve litigation efficiently at home.

"If outside capital's not going to be confident that they can get their case resolved in a reasonable amount of time in Nevada, they're going to force Nevadans operating Nevada businesses to opt for Delaware law," Edwards said. "If you want to be able to keep that activity local, you need to have a business court that can handle the load."

Texas and Oklahoma both passed legislation setting up business courts. Texas' courts have been up and running for a little over a year now, and while the appellate court established at the same time as the business courts did face a constitutional challenge, it was rejected.

Oklahoma's legislation, passed in May, was supposed to go into effect Oct. 1, creating two business courts. But the Oklahoma Supreme Court decided at the beginning of October that the courts, as outlined in the new law, would have violated the state's constitution, which requires district court judges to be elected.

"The governor of Oklahoma and the legislature of Oklahoma wanted these new courts and wanted the appointment power over these judges," said Rafe Schaefer, a Houston-based partner at Norton Rose Fulbright. "The Oklahoma Supreme Court said, 'Without commenting on that as a policy, you didn't do it in a way that lines up with the Oklahoma Constitution.'"

Meanwhile, Nevada has started making moves toward a constitutional amendment that would allow the establishment of separate business courts with appointed judges. The process would take years if successful: A constitutional amendment would need to be approved twice by Nevada's legislature, which meets every other year. If voters approve it after that, the legislature could then propose creating business courts and allocating funding to them—a step Texas was able to take as its first. Nevada has also launched a commission to explore ways to revamp the existing business dockets within the state's district courts.

So why has Texas, which generally elects its judges, been able to move forward with its system of appointing business court judges in a way Oklahoma wasn't and Nevada is still a long way from officially attempting? And how did it go from introducing legislation to having active courts within two years?

"I think the distinction is clear and simple: We didn't need a constitutional amendment," said Brandon Renken, a Mayer Brown partner in Houston. "Given the makeup of our legislature, when they really want to do something, they can usually just get it done. The breadth of the language in the Texas Constitution just made it so easy for the legislature to say, 'Hey, we can write this bill, and if we get it passed, that's all we need to do.'"

In states that already elect their judges—which is most of them—why not just avoid the headache of litigating whether judicial appointments are constitutional by requiring business court judges to also be elected?

"The risk in a jurisdiction where you're electing your judges is that you're going to have a bunch of former prosecutors and criminal defense lawyers and public defenders, who are all, I'm sure, lovely people and smart," said Edwards, who has advocated for the proposed specialized business courts in Nevada before the state's legislature. "It's just this is not their area, so the way you would have to present a case and get them up to speed, it changes everything."

Shaner, in Oklahoma, said appointing some judges in a state where the judiciary is otherwise elected has the potential to create a rift between the two groups, especially at a time when judicial elections are becoming increasingly politicized.

"That's what really gets highlighted in the Oklahoma case but is an issue for all states," she said. "Are you making your business court judges special in some way? That just doesn't sit well, generally, with your state judiciary."

But the advantage of having an appointed business court bench, especially one with terms longer than a couple of years, is twofold, Shaner said: Qualified lawyers are more likely to leave private practice and take a pay cut to become a judge the longer they're guaranteed to have that role, and both businesses and the attorneys representing them tend to appreciate the predictability that comes from a bench with less turnover.

That's one area in which amending the constitution offers states more flexibility. Nevada, where the proposed constitutional amendment would establish six-year terms for business court judges, could eventually hold an edge in predictability over Texas, where the state constitution limits terms for business court judges to two years.

Currently, Nevada allows courts in its two most populous counties to operate business court dockets within the existing state court system, but the judges handling those dockets are also juggling other civil and criminal cases.

Nevada has previously tried to pass a referendum to convert its entire judiciary, which as it stands is elected, to one that's appointed. The current proposal involves a judicial nominating commission that would recommend business court judges, who would then be subject to retention elections. By contrast, in Texas, business court judges' appointment is at the governor's discretion.

Edwards said narrowing appointments only to a business court would allow for a specialized business court bench whose expertise isn't being dispersed across all types of cases without taking away Nevadans' ability to vote for the judges who are handling criminal cases and matters with a local focus that affect them directly.

Time will tell if Nevada's proposed business court system goes live or if Oklahoma will go back to the drawing board and try to rework its own. Unless and until that happens, Texas seems as if it will keep pulling ahead in the latest western business court race.

Reprinted with permission from the December 4 edition of The AmLaw Litigation Daily © 2025 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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