Texas Business Court Draws a Line: Employment Discrimination Claims Stay in District Court
On May 29, 2026, the Texas Business Court held in Brown v. Exxon Mobil Corporation, 2026 Tex. Bus. 35 (11th Div.), Cause No. 25-BC11B-0099, that an employment race discrimination claim brought under Section 21.051 of the Texas Commission on Human Rights Act (TCHRA) does not fall within the Business Court’s jurisdiction. The decision draws a jurisdictional line: employment disputes, even those involving corporate officers and equity compensation, generally do not qualify as “internal affairs” within the meaning of Chapter 25A of the Texas Government Code.
Background
Artis M. Brown, a 29-year employee of Exxon Mobil Corporation (“Exxon”) and a Vice President of a division within Exxon, was terminated in July 2025 after a random drug test. Exxon contends that Brown tested positive for THC and later resigned after meeting with human resources. Brown alleges that Exxon unlawfully terminated him because of his race and that non-Black executives who committed comparable policy violations received different treatment. After his termination, Exxon canceled approximately $5 million in unvested restricted stock units (“RSUs”) awarded to Brown through annual incentive agreements. After receiving a right to file his lawsuit from the Texas Workforce Commission, Brown filed suit in the District Court of Harris County, asserting a claim for race discrimination under Section 21.051 of the TCHRA. Exxon removed the case to the Business Court, and Brown moved to remand.
Jurisdictional Arguments
Exxon asserted two bases for Business Court jurisdiction. First, under Section 25A.004(b)(2), it argued that Brown’s lawsuit was “an action regarding the governance, governing documents, or internal affairs of an organization.” Specifically, Exxon advanced three sub-arguments: (1) Exxon’s CEO participated in the termination decision, making this a matter involving the “rights, powers, and duties” of an officer or governing person; (2) Brown was an officer and governing person by virtue of his Vice President title; and (3) the forfeited RSUs constituted “ownership interests” bringing the dispute within the definition of “internal affairs” under the statute.
Second, under Section 25A.004(d)(1), Exxon argued that Brown’s claims arose out of a “qualified transaction”— defined as a “transaction, or series of related transactions” under which a party “pays or receives, or is obligated to pay or is entitled to receive, consideration with an aggregate value of at least $5 million.” Tex. Gov’t Code § 25A.001(14)(A). Exxon identified the Incentive Program and the series of annual awards to Brown as the qualifying transaction.
The Court rejected both arguments and remanded the case. Addressing the “internal affairs” question, Judge Sweeten applied the canon of construction noscitur a sociis (“it is known by its associates”) to interpret the term in context with its statutory companions in Section 25A.004(b)(2): “governance” and “governing documents.” The Court noted that “governance” relates to “the management and direction of the entity’s affairs under its governing documents and applicable law,” and that “governing documents” are those “adopted under an organization’s governing law to govern the organization’s formation and internal affairs.” Reading these terms together, the Court concluded that “internal affairs” in Section 25A.004(b)(2) is best understood as encompassing internal entity governance as dictated by the entity’s governing documents and governing law.
The Court applied the same canon to Section 25A.001(7)(A), which defines “internal affairs” as “the rights, powers, and duties of an organization’s governing persons, officers, owners, and members.” Because “rights” is tied to “powers and duties” and framed by the phrase “of an organization’s governing persons, officers, owners, and members,” the Court construed “rights” narrowly as those arising from a person’s official role under the organization’s governing documents and governing law and not all rights personal to someone who happens to hold an officer title.
This framework confines “internal affairs” jurisdiction to disputes rooted in entity governance rather than as a catch-all for any dispute that involves a corporate officer. With this framework in place, the Court dispatched Exxon’s three sub-arguments. First, the Court held that the CEO’s (unspecified) participation in Brown’s termination did not create Business Court jurisdiction; not every action taken by a CEO involves the corporation’s “internal affairs.” Second, Brown’s status as a Vice President did not convert his discrimination claim into one “regarding” the internal affairs of the organization. Brown asserted his statutory rights that are common to millions of employees and do not arise from his status as an officer.
Third, the Court found that while the forfeited RSUs tangentially related to “ownership interests,” the actual “subject of disagreement” was Exxon’s allegedly discriminatory decision to forfeit the RSUs, not the existence or value of the RSUs themselves. As the Court emphasized, “[i]t is of no consequence to Brown’s claim whether the asset in question consisted of RSUs, future cash awards, or free gas for life.” The Court declined to read Chapter 25A in a “hyperliteral manner that would yield outcomes inconsistent with [its] statutory purpose.”
The Court also rejected the “qualified transaction” theory under Section 25A.004(d)(1), concluding that the Incentive Program was not a but-for cause of Brown’s claim. Brown’s claim is a standalone statutory cause of action for race discrimination. The RSUs are merely one component of his damages, and the action arises from the alleged discrimination and not the terms of the Incentive Program.
Why This Matters
Brown v. Exxon Mobil is a significant decision for the still-developing jurisdictional boundaries of the Texas Business Court. Had the Court adopted Exxon’s interpretation, arguably “almost any CEO decision made or action taken would involve the ‘rights, powers, and duties of an organization’s governing persons [or] officers,’ conferring Business Court jurisdiction.” Likewise, any employment matter related to an officer or “governing person” role would be sufficient for Business Court jurisdiction. Because publicly traded companies face no minimum amount-in-controversy threshold under Section 25A.004(c), such a reading could have funneled a wide range of discrimination, retaliation, and wrongful termination claims into a court system designed for “efficiently addressing complex business litigation.”
Employers and their counsel should take note that the mere involvement of a corporate officer in an employment decision, or the presence of equity compensation in a damages calculation, will not, standing alone, support removal of an employment dispute to the Business Court.
