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Venue Selection (Common Clauses)

Updated: Nov 11, 2023

(This post is part of a series called “Common Clauses,” focused on explaining so-called boilerplate provisions of contracts. Click the link to see other posts in this series).


Venue selection is similar to, but different from, forum selection. In fact, many contracts confuse them or use them synonymously. In some states (Texas included), the distinction didn't always matter, because (previously) neither was enforceable anyway.


Where forum selection involves selecting a jurisdiction (or, really, a court system), venue involves selecting a location within that court system.


What does it look like?


A typical venue statute might look like this: "Any dispute arising under this agreement shall be heard in the court of the county in which the property is located," or "Any dispute arising under this agreement shall be heard in the court of the county in which the contract is to be performed."


These clauses may sometimes be combined (to even greater confusion) with a forum selection clause or a governing law clause as well. In such cases you may see language added to the end like "...and governed by the laws of the state of California."


What is venue?


Venue involves the selection of a court within particular court system. When I say "court system," I mean federal courts or Texas state courts or California state courts, etc. So when selecting a venue within a forum, you are selecting a more particular location for the lawsuit or other dispute resolution.


In California and Texas, "venue" usually refers to the county in which the lawsuit will take place. In federal courts, "venue" usually refers to a specific district court.


For example, let’s say you live in San Diego County. You sign a contract in San Diego. The other party lives in San Diego. You and the other party are both set to perform your obligations in San Diego. California is a big state; it doesn’t make sense to sue in Humboldt County.


Why is venue important?


Venue is important because it limits where a lawsuit (or even ADR) may be heard. Perhaps you decide that, if there will be litigation, you want trial to be near your home. This would help keep travel costs down. And, if your attorney is local, then it may keep their travel time down as well (though this is less true now, as many proceedings are conducted virtually).


On the other hand, sometimes parties to a contract would prefer a more neutral venue. For example, suppose a small business operates in a rural area with only one courthouse and maybe one or two judges. If they are entering a contract with a larger, nationwide business, that nationwide business might prefer a venue located in a more urban area. That way, if the issue comes to trial, the smaller business (or its attorney) is less likely to know the judge, and the potential jury pool is less likely to be familiar with (or patrons of) the smaller business.


Why would parties want this in a contract?


State legislatures want to make sure there is always at least one venue available to litigants. In many states, including California and Texas, there may be multiple options for venue. If that is the case, then the plaintiff will get to decide venue.


For example, in California, Code Civ. Proc. section 395 provide several venue options. It begins with the default (proper venue is where the defendant resides) and goes on. With regard to contracts, there are three options (subject to other provisions): (1) where the contract was to be performed, (2) where the parties entered into the contract, or (3) where the defendant resides. See Code Civ. Proc. section 395. And if there are multiple defendants who reside in different counties, then there are other potential venues as well.


In Texas, section 15.002 provides four venue options: (1) the county in at least a substantial part of the events or omissions giving rise to the claim occurred, (2) the county in which defendant (if an individual) resides, (3) in the county of a defendant business's principal office in Texas, and (4) if those three don't work, then in the county where the plaintiff resides. Tex. Civ. Prac. Rem. Code section 15.002(a).


What considerations go into venue selection?


Typically, parties will focus on proximity: how close is the court to their location. As mentioned above, some parties might prefer venues that are farther from the other party. Related considerations might include a party's or their attorney's relationship with the judge or judges (this can mean that the party or attorney is friendly with the judge, or that the party or attorney believes a particular judge isn't their biggest fan).


Other considerations might also come into play. In Texas, litigants often have a choice between county court at law or district court. If the subject matter of the case is not exclusive to one or the other (for example, district courts have exclusive jurisdiction for quiet title actions), the parties might prefer one or the other.


And in federal court, there are sometimes substantive law decisions in venue selections. For example, the United States District Court ("USDC") for the Eastern District of Texas hears the most patent cases in the country (the reasons for this are outside the scope of this post). The USDC for the District of Delaware is big (by virtue of being in Delaware and subject to its laws) for corporate law. And I've been informed that the USDC for the Northern District of California is an important venue for law involving technology and international issues with East Asia and the Pacific.


Is it enforceable?


It depends.


In both California and Texas, the default answer used to be "no." See General Acceptance Corp. v. Robinson 207 Cal. 285 (Cal. 1929), International Travelers Association v. Branum 109 Tex. 543 (Tex. 1919).


Now, the rule in both California and Texas is "sometimes."


In California, venue selection clauses will be enforced where venue is proper in the selected venue. For example, if a contract is (1) to be performed in Riverside County, (2) entered into in Orange County, and (3) the parties (meaning all potential defendants) reside in Imperial County, then a venue selection of San Bernardino will not likely be enforced. But a venue selection of Riverside, Orange, or Imperial will be. See Battaglia Enters, Inc. v. Superior Court of San Diego County, 215 Cal.App.4th 309 (Cal. Ct. App. 2013).


Texas mandates venue by statute. This can be by agreement: for example, Texas does enforce venue selection clauses with regard to arbitration. Civ. Prac. Rem. Code section 171.096. Also, if venue is proper in multiple counties, Texas contracts can select among those counties. However, where there is no statute specifically authorizing venue selection, venue selection clauses generally are not enforceable. One important exception is where the contract involves a "major transaction." Civ. Rem. Prac. Code section 15.020. These are transactions in which the aggregate consideration exceeds $1 million, with a few exceptions (e.g., if the contract is for a personal injury settlement, or the agreement itself was unconscionable when made).


Conclusion


Venue selection clauses determine where legal proceedings will take place. They are related to, but distinct from, forum selection and governing law clauses. Venue selection clauses are not always enforceable, but parties should still take care in determining venue. The selected venue ought to bear some relationship with the parties or the subject matter of the contract.

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