ATS S.B. 648 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 648 By: Wentworth Civil Practices 4/26/1999 Engrossed BACKGROUND AND PURPOSE A forum selection clause is a contractual provision in which the contracting parties agree to settle any dispute that might arise in a particular place (forum). Contractual forum selection clauses vary widely. Some designate a forum in general terms by specifying only the state; others designate a forum more specifically by identifying a particular county or court. Forum selection clauses are increasingly common in commercial contracts. Until 1972, most state and federal courts held these selection clauses invalid against public policy. In that year, the United States Supreme Court decided M/S Bremen v. Zapata Off-Shore Co. The court held that a forum selection clause in an international commercial contract was valid and should be enforced unless enforcement would be extremely unfair or unreasonable. Although the holding did not bind lower federal and state courts because the case involved a maritime claim, many of these courts have since extended the doctrine to domestic commercial and consumer contracts. Currently, all federal circuits and most states, either through judicial decision or direct legislative action, endorse the view that forum selection clauses are not automatically void. The question is whether Texas is one of those states. For more than 70 years, most Texas courts have viewed contractual forum selection clauses as unenforceable based on public policy grounds. Specifically, these courts have held that allowing parties to agree in advance to bring litigation over future disputes in a particular forum violates the venue statutes because the statutes designate the forums where certain claims are required or authorized to be brought. Since 1991, however, some appellate courts have upheld the validity of forum selection clauses. Because the Texas Supreme Court has not rendered an opinion resolving this conflict, uncertainty about Texas case law may preclude parties to large commercial transactions from including forum selection clauses in their contracts. S.B. 648 defines "major transaction" to mean a transaction of a commercial nature that involves at least $1,000,000. Major transactions do not include transactions of a primarily personal or familial nature or those to settle a personal injury or wrongful death claim. This bill provides for mandatory venue for an action that arises from a major transaction by requiring the action to be brought in a county if the party against whom the action is brought has agreed in writing that a suit arising from the transaction may be brought in that county. In addition, this bill prohibits an action arising from a major transaction from being brought in a county if the party bringing the action has agreed in writing that the action from the transaction may not be brought in that county, and the action may be brought in another county or in another jurisdiction, or that the action must be brought in another county or in another jurisdiction, and the action may be brought in that other county or in that other jurisdiction. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 15, Civil Practice and Remedies Code, by adding Section 15.020, as follows: Sec. 15.020. MAJOR TRANSACTIONS: SPECIFICATION OF VENUE BY AGREEMENT. (a) Defines "major transaction" to mean a transaction, not including those of a primarily personal or familial nature or those to settle a personal injury or wrongful death claim, evidenced by a written agreement under which a person pays or receives consideration with an aggregate stated value of at least $1,000,000. (b) Provides for mandatory venue for an action that arises from a major transaction by requiring the action to be brought in a county if the party against whom the action is brought has agreed in writing that a suit arising from the transaction may be brought in that county. (c) Prohibits an action arising from a major transaction from being brought in a county, notwithstanding any other provision of this title (Trial, Judgment, and Appeal), if the party bringing the action has agreed in writing that the action from the transaction may not be brought in that county and the action may be brought in another county or in another jurisdiction, or that the action must be brought in another county or in another jurisdiction and the action may be brought in that other county, under this section or otherwise, or in that other jurisdiction. (d) Provides that this section does not apply to an action if the agreement described by this section was unconscionable at the time that it was made, the agreement regarding venue is voidable under Section 35.52 (Law Applicable to Construction Contracts), Business & Commerce Code, or venue is established under a statute other than this title. (e) Provides that this section does not affect venue and jurisdiction in an action arising from a transaction that is not a major transaction. SECTION 2. Makes application of this Act prospective.