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Pick Your Fights (and Battlefields) Wisely: Negotiating Forum Selection Clauses

A venue selection provision is a provision in a contract that sets the geographical location where any disputes arising under the contract must be litigated.  Venue selection provisions can be very helpful where the parties to the contract are located (or have locations) in more than one county or state because they can settle not only the issue of whether the controversy will be heard in California or Texas but (in some cases) which county within a given state is the proper location for litigation, (i.e. Harris v. Bexar).  Two common reactions to venue selection provisions are (1) to try and locate the venue in a remote area or a jurisdiction with favorable laws or (2) to “make them come to me.”

While both of these approaches have a certain logical appeal in the right circumstances, not all venue selection provisions are enforceable.  For instance, Texas law will not honor a venue selection provision if neither the subject matter of the agreement nor one of the parties has some minimum connection with the venue selected.  Stated another way, a Texas courts will not honor an agreement between a Delaware and a Texas entity requiring litigation to be filed in Nevada unless the contract calls for performance in Nevada.  Likewise, Texas courts may not honor venue selection provisions in contracts for less than one million in consideration.  § 15.020 Texas Civil Remedies Code.

Unenforceable forum selection provisions return you to the default rules that often result in a “race to the courthouse” because the first to file may secure the location for the litigation.  Therefore, you should seek the assistance of counsel to advise you on both the reasons to pick a particular forum and to ensure that you are not overreaching with a forum selection clause in order to extract the maximum value from your forum selection provisions.

Royce Lanning

Phone Number: 281-367-1222

Fax Number: 281-210-1361

[email protected]

 

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