San Antonio attorneys Chance Decker and Cody Graham detail a recent court decision that could greatly impact challenges to contractual venue clauses.
In a ruling that could have far-reaching implications, the Texas Supreme Court recently declined to reverse a ruling that enforced an out-of-state forum selection clause in the face of Texas’s “Home Rule” statute (i.e., the Texas Business and Commerce Code Section 272.001).
The Home Rule statute provides that if a construction contract concerning Texas real property makes “the contract or agreement or any conflict arising under the contract or agreement subject to another state’s law, litigation in the courts of another state, or arbitration in another state, that provision is voidable by a party obligated by the contract or agreement to perform the work that is the subject of the construction contract.” Essentially, if the project is based in Texas, any contractual terms attempting to remove it from Texas jurisdiction are subject to challenge by the contractor.
In the case of MVP Terminalling, LLC v. McCarthy Building Companies, Inc., MVP (the owner) and McCarthy (the general contractor) entered into a contract for the construction of new docks and dredging at the Houston Ship Channel. McCarthy subcontracted with RLB for the dredging work. When RLB commenced the work, it claimed to have encountered subsurface conditions different from those represented during the bid phase. Following the completion of the work, RLB filed a substantial differing-site-condition claim and placed a lien on the project.
The contract between MVP and McCarthy contained a forum selection clause mandating that any litigation must be pursued in Tulsa, Oklahoma, with both parties agreeing to “irrevocably submit to the exclusive jurisdiction of that court . . . waive any objection the party may now or hereafter have to venue . . . and irrevocably waive any objections to venue or convenience of forum, or to personal or subject matter jurisdiction.” This clause flowed down to RLB through its subcontract with McCarthy.
MVP, a Magellan Midstream joint venture with ties to Tulsa, promptly filed suit in Oklahoma in accordance with the forum selection clause. Five days later, RLB initiated legal action in Texas, where the construction took place. McCarthy then notified MVP of its intention to void the forum selection clause under the Home Rule statute, aligning with RLB’s stance that litigation should occur in Texas. The table was set for a venue fight.
Representing MVP, Cokinos | Young sought to abate or dismiss the Texas litigation in favor of the original and previously-filed Oklahoma lawsuit, contending that the forum selection clause was the result of negotiations between sophisticated parties that should be respected. RLB and McCarthy dug in, arguing that the Home Rule statute rendered the clause void upon their “notice,” to which the “notice” was provided (for the first time) after commencement of the Texas litigation. MVP in turn argued that the Texas statute rendered certain forum selection clauses “voidable,” not “void,” and that RLB and McCarthy had forfeited their right to void it by agreeing to the strict forum selection clause.
The case eventually reached the 14th Court of Appeals, who carefully considered the parties’ rights to freely contract, the language of the Home Rule statute, and its legislative intent. The Court focused on MVP’s “void vs. voidable” argument, concluding that a forum-selection clause remains valid until a party exercising its option to void the provision. They reasoned that the Legislature employed the term “voidable” to acknowledge parties’ ability to contractually waive statutory requirements like the Home Rule.
Ultimately, the Court of Appeals held that the parties had unequivocally submitted to the jurisdiction of Oklahoma, thereby waiving any challenge to venue there, including the invocation of the Home Rule statute. It reasoned that to rule otherwise would render the agreed-upon forum selection clause meaningless—an attack on the right to freely contract in Texas.
The takeaway for contractors and legal practitioners alike is clear: the contract is King. The Court’s decision, which our Supreme Court declined to overturn, renders the Home Rule statute largely ineffective. Carefully review your contracts and seldom rely on anything outside of it as a backdoor out.
An aggressive and tactical litigator, Chance Decker focuses on resolving high-stakes disputes for businesses in the energy, pipe and steel distribution, construction and real estate industries. Chance also represents clients in a variety of employment litigation matters, including non-competition and trade secret disputes. He enjoys working on cases with challenging issues and helping his clients navigate the legal system in a bold and efficient manner.
Cody Graham is a trial lawyer and Senior Counsel in the San Antonio office of Cokinos | Young. Cody has extensive experience in defending against construction defect claims, trucking accident suits, workplace injury claims, and general business disputes. Cody has tried over a dozen cases in state court and through arbitration, including first-chair jury trial experience.
About Cokinos | Young
Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.
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