FORUM-SELECTION CLAUSE ISSUES PRESENTED BY THE TEXAS BUSINESS COURT
The introduction of the Texas Business Court (TBC) has created a forum-selection dilemma for businesses and practitioners. On one hand, the new court, which opened on 1 September 2024, is an appealing venue for complex commercial disputes. The TBC offers the promise of specialised judges, fast timetables and a dedicated Court of Appeals focused on significant commercial disputes. On the other hand, the TBC is in its infancy; it has not developed a body of case law, and there are questions regarding its jurisdiction, the application of its rules and whether the promised efficiency will materialise. These unknowns must be considered by any litigant choosing to file or remove cases to the TBC. The uncertainty is particularly daunting for parties considering whether to commit to the court in a forum-selection clause.
Fortunately, a well-crafted and flexible forum-selection clause can alleviate the pressure of this choice. Parties who are considering whether to select an untested forum, or a forum of limited jurisdiction, should build flexibility into forum-selection clauses. By doing so, parties can opt for a forum like the TBC while avoiding the pitfalls and uncertainties of that choice.
Jurisdictional and venue challenges presented by the TBC
The TBC is, like US federal courts, a court of limited jurisdiction. Generally speaking, it is empowered to hear disputes among businesses, owners and management when, for most cases, the amount in controversy is greater than $5m. The TBC also has jurisdiction to hear actions arising out of a contract or commercial transaction in which the parties agree in the contract or a subsequent agreement that the court has jurisdiction, so long as the amount in controversy exceeds $10m. The court also may exercise supplemental jurisdiction over certain related claims. These jurisdictional rules are, to say the least, highly nuanced and quite complicated.
Jan-Mar 2025 issue
Bracewell LLP