You closed a deal two years ago. The purchase agreement is signed, the money moved, the lawyers went home. Then a former employee files suit in state district court over compensation he says he was promised when the company sold. You expect to litigate that case in the county where you have always litigated. Instead the other side removes it, and the case lands in the Texas Business Court.
That is not a hypothetical. On October 15, 2026 the Fifteenth Court of Appeals issued what appears to be the first appellate decision construing the Business Court’s jurisdiction over actions arising out of a qualified transaction. The holding is broad, and for North Texas companies that have closed anything substantial in the last few years, it changes the answer to a question most owners never think about until they are already in a fight: which courthouse hears this?
What the Texas Business Court Is, and Why the Forum Matters
The Business Court is a statewide trial court created by the Legislature and opened for business on September 1, 2024. It sits in divisions, hears a defined slice of commercial cases, and is staffed by judges appointed for their commercial experience rather than elected county by county. Appeals from the Business Court go to the Fifteenth Court of Appeals, a separate appellate court with exclusive intermediate jurisdiction over those cases.
For a business owner, the practical differences are real. The judge hearing your case was selected for commercial work. Written opinions are the norm rather than the exception, which means the court is building a body of published reasoning that lawyers can read in advance. The jury pool is drawn differently. The docket pace is different. Whether any of that favors you depends entirely on which side of the case you are on and what the dispute is about, which is exactly why the forum question is worth money to both sides.
None of that is new. What is new is how far the court’s reach extends.
What Counts as a Qualified Transaction Under Texas Law
Chapter 25A of the Texas Government Code sets out the Business Court’s civil jurisdiction. Two subsections do most of the work. Section 25A.004(b) gives the court jurisdiction over a list of governance and internal affairs disputes, including derivative proceedings and claims under the Business Organizations Code, when the amount in controversy exceeds $5 million. Section 25A.004(d) covers a second list, also above $5 million, and the first item on that list is the one that matters here: an action arising out of a qualified transaction.
A qualified transaction is defined by statute as a transaction, or a series of related transactions, under which one or more parties pays or receives at least $5 million. There is no requirement that the transaction be a merger, that it involve a public company, or that it be documented in any particular way. A $5 million asset purchase qualifies. So does a real estate acquisition structured as an entity sale, or a roll up assembled from several smaller closings that are related to each other.
The definition carries one carve-out that matters in practice. It excludes a transaction involving a loan or an advance of money or credit by a bank, credit union, or savings and loan association. An ordinary bank financing, in other words, is not by itself a qualified transaction, however large it is.
Two thresholds also have to be met here, not one. The transaction has to be a qualified transaction, and the amount in controversy in the lawsuit has to exceed $5 million, excluding interest, statutory damages, exemplary damages, penalties, attorney’s fees and court costs. A dispute worth $400,000 that traces back to a $40 million sale does not reach the Business Court on this basis.
The $5 million figure is newer than many owners realize. House Bill 40, passed in the 2025 regular session and effective September 1, 2025, lowered both the qualified transaction figure and the amount in controversy for this subsection from $10 million to $5 million, and expanded the definition to cover a series of related transactions. The same bill broadened the court’s subject matter jurisdiction to include intellectual property and trade secret disputes and arbitration related matters, and it excluded consumer claims. The effect of the 2025 changes was to pull a great deal more ordinary middle market activity inside the court’s reach.
Chapter 25A also carves things out. The Business Court does not hear claims brought by or against a governmental entity, claims arising under the Estates Code, Family Code or Insurance Code, claims for monetary damages for bodily injury or death, legal malpractice claims, or claims under Chapter 74 of the Civil Practice and Remedies Code. Some of those exclusions apply even where the court would otherwise have supplemental jurisdiction. So the court is not a general commercial forum. It is a specific one with specific edges.
What the Fifteenth Court of Appeals Decided in October 2026
The case is In re Beard, No. 15-26-00136-CV, decided October 15, 2026 after argument in September. The facts are the kind that come up constantly in deal work.
The relator had worked at a North Texas investment firm from 2015 to 2020. He claimed an interest in one of the firm’s portfolio companies through what the parties called a promote. When he left, that company was not on the list of covered companies in his separation agreement. He alleged the omission was deliberate, that the company was difficult to value at the time, and that he was promised he would be paid once it sold. The company later sold. He sued for fraud, promissory estoppel, quantum meruit and breach of contract.
He filed in Dallas County district court. The defendants removed to the Business Court. The Business Court denied his motion to remand. He sought mandamus relief in the Fifteenth Court of Appeals asking to be sent back to district court.
The parties agreed the sale of the portfolio company was a qualified transaction. The fight was over whether his claims arose out of it. He argued his claims arose out of his own employment and separation agreements, not out of a sale he was not a party to and did not negotiate. The defendants argued that but for the sale there would be no lawsuit, and that but for causation is all the statute requires.
The court agreed with the defendants. It read the phrase arising out of according to its settled meaning in Texas law, which is but for causation, and declined to read a tighter causal requirement into the statute. Because the claims rested on an alleged promise to pay after the sale, the sale was a cause without which the litigation could not have occurred. That the relator was not a party to the transaction did not matter.
The court also declined to lean on legislative history, reasoning that floor statements by individual legislators are not a reliable guide to what the Legislature as a body intended. That methodological point is worth noting, because it means arguments about what the Business Court was supposed to be for are unlikely to carry much weight against the text of Chapter 25A.
Why But For Causation Is a Wider Net Than It Sounds
But for causation is a low bar. It asks only whether the claim could have existed without the transaction. It does not ask whether the transaction was the main event, whether the plaintiff participated in it, or whether the dispute is really about something else.
Run that test against the disputes that actually follow a closing in North Texas, and the list gets long. Earnout fights. Promote and carried interest claims by former principals. Deferred compensation and phantom equity claims by executives who left before the sale closed. Minority investor claims that the deal shortchanged them. Indemnity and escrow disputes. Claims by a seller’s former employees whose bonuses were tied to a liquidity event. Each of those exists only because a transaction happened, which under this reading is enough.
Two consequences follow for a company that has closed a $5 million transaction. First, the counterparties who can end up litigating against you in the Business Court include people who were never across the table from you. Second, the forum is no longer something you choose by filing first. If you file in district court and the defendant prefers the Business Court, removal is available to them on the same facts that would have been available to you.
What Is Not Settled
This is one decision from an intermediate appellate court, and the honest answer is that a good deal about the Business Court’s reach is still open.
The Supreme Court of Texas has not construed Section 25A.004(d)(1). A later decision could read arising out of more narrowly, or distinguish In re Beard on facts where the connection between claim and transaction is thinner than an express promise to pay on closing. The Business Court itself is barely two years old, the Fifteenth Court of Appeals is new, and the body of authority on how Chapter 25A fits together is being written case by case. House Bill 40 states that its changes apply to civil actions commenced on or after September 1, 2024, including actions already pending in the Business Court when the act took effect, and how that applicability provision operates has itself been litigated. Questions about aggregating claims to reach the threshold and about where supplemental jurisdiction ends are live as well.
Treat this as a shift in the odds rather than a settled rule. Any specific case turns on its own facts and its own procedural history, and the law in this area is moving fast enough that an answer from last year is not necessarily the answer today.
How Removal Actually Works, and the Deadline That Catches People
Removal to the Business Court is governed by Section 25A.006. A party to an action filed in a district court or county court at law may remove it if the action falls within the Business Court’s jurisdiction. If all parties agree, the agreed notice of removal can be filed at any time while the action is pending.
Without agreement, there is a clock. The notice is due within 30 days after the later of two events: service of process, or the date the removing party discovered or reasonably should have discovered the facts establishing the Business Court’s jurisdiction. If an application for a temporary injunction is pending, the 30 days run from the date that application is granted, denied, or denied as a matter of law.
Two things about that deadline deserve attention. The discovery trigger means the clock can start long after service, once a pleading or a document production reveals that the dispute touches a qualified transaction. And removal does not waive a venue defect or amount to an appearance for personal jurisdiction purposes, so a defendant can remove without giving up those arguments. If the Business Court concludes it lacks jurisdiction, it remands the action to the court where it was originally filed.
The practical point for an owner: when you are served with a business lawsuit, the forum question has a 30 day fuse and it is not always obvious when the fuse was lit. That is a conversation to have with counsel in the first week, not the second month. For a broader walkthrough of what the early weeks of a business suit look like, see our overview of what to do when another business sues you in Texas.
Four Things to Do Before Your Next Closing
None of this requires restructuring your business. It requires knowing where you stand.
Know your transaction history against the $5 million line. Pull the last five years of closings and ask which ones involved a party paying or receiving at least $5 million, including series of related transactions that add up. That list is the set of deals that can pull a future dispute into the Business Court.
Read your forum selection clauses. Section 25A.004(d)(2) lets the parties to a business, commercial or investment contract or transaction agree, in the contract or in a later agreement, that the Business Court has jurisdiction of an action arising out of it, with actions arising out of an insurance contract excepted. Separately, Senate Bill 29 added Section 2.115 of the Business Organizations Code, which lets a Texas entity use its governing documents to name a specific Texas court as the exclusive forum and venue for internal entity claims. Those are two different tools reaching two different kinds of dispute, and a company that wants both needs both. If you have an opinion about which court should hear a dispute under a contract you are about to sign, the time to express it is now, in writing.
Close out your deferred compensation loose ends. The claims most likely to follow a sale into the Business Court are the ones nobody papered: the promote that was discussed but never documented, the bonus tied to a liquidity event, the equity grant that was promised verbally. A separation agreement that omits a company because it is hard to value is not a problem that goes away. It is a problem that waits for a closing.
Treat trade secret exposure as part of the same picture. Section 25A.004 now reaches trade secret actions under Chapter 134A of the Civil Practice and Remedies Code, so a departing employee dispute over confidential information can reach this court on its own footing, separate from any transaction, provided the amount in controversy clears the same $5 million line. If you have not inventoried what your business would actually claim as protected, start with what counts as a trade secret under Texas law.
The Question Behind All of This
Forum is not a technicality. Where a case is heard shapes how fast it moves, who decides it, what the record looks like on appeal, and what it costs to get to the end. For most of the last century a Texas business owner could assume that a dispute would be heard in the county where the business sat. For companies that have closed real transactions, that assumption is no longer reliable, and the decision in October 2026 makes it less reliable than it was a month ago.
The companies that handle this well are the ones that know, before anything goes wrong, which of their transactions cross the statutory line and what their contracts say about forum. That is a one afternoon exercise with the right documents on the table. It is considerably more expensive to work out for the first time while a 30 day removal clock is running.
If your business has closed a transaction above the statutory threshold, or you are negotiating one now and want the forum question settled in the documents rather than in a motion, our business litigation attorneys in Frisco can walk through where your disputes would be heard and what your agreements currently do about it.
Related reading
- Does Your Texas Business Dispute Belong in the Business Court?
- Can a Texas Shareholder Sue the Board Without Asking First? What a New Business Court Ruling Says
- How Business Litigation Works in Texas: A Plain-Language Overview
About the author: Hastings L. Hanshaw is a founding partner of Hanshaw Kennedy Hafen in Frisco, Texas. He is a business litigation and trial lawyer who has tried cases in state and federal courts across Texas.