What If My Texas Business Is Sued in Another State?

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If your Texas-based business is sued in another state – or if your out-of-state business is sued in Texas – you will need to address the lawsuit in the state where it was filed – at least initially.

Before you respond to the lawsuit, your attorney may be able to file what is known in Texas as a “special appearance” to challenge the jurisdiction.

What Is a Special Appearance?

A special appearance, in a legal context, refers to an appearance by a party or their attorney in court for a limited purpose and without submitting to the jurisdiction of the court for all aspects of the case. In other words, it allows a party to participate in a specific court proceeding without waiving their right to challenge the court's jurisdiction over them.

Important: This special appearance must be filed before filing any other pleading with the court (known as a general appearance). In Texas, a general appearance is considered consent to try the case in the court where the suit was filed.

The primary purpose of a special appearance is often to challenge the jurisdiction of the court. The party making a special appearance is typically asserting that the court does not have the authority to hear the case or issue a judgment against them.

Not all states, however, require a special appearance to challenge jurisdiction. In those states, defendants must challenge jurisdiction before addressing the actual claim itself as one would in a general appearance.

Here are some common grounds for challenging jurisdiction:

Lack of Personal Jurisdiction

The U.S. Constitution guarantees that a party cannot be bound to the judgment of a forum with which the party has no meaningful contacts, ties, or relations. This means that you are not subject to the authority of an out-of-state court if you do not have sufficient contact with the state where the lawsuit was filed.

If you challenge personal jurisdiction, the out-of-state court will analyze the quality and nature of your contact with its state. This could include engaging in business transactions, entering into a contract with a resident of the state, maintaining a physical presence, or intentionally targeting the state's residents.

Forum Non Conveniens

In cases where another forum is more appropriate for the litigation, you can argue that the court should dismiss the case in favor of a more suitable jurisdiction. This is often used in cases where it would be more convenient and fair to litigate in another state, such as when the majority of witnesses are located in the other state.

Courts typically engage in a balancing test to weigh the interests of the parties and determine whether dismissing the case in favor of another forum is more appropriate. Courts consider factors such as the convenience of the parties, the location of evidence and witnesses, the interests of justice, and the fairness of the chosen forum.

The doctrine is not meant to deprive a plaintiff of a remedy but rather to ensure that the case is heard in a forum where it is more convenient and just.

Contractual Choice of Forum Clauses

If a contract is at the center of the dispute, and the contract includes a forum-selection or choice of forum clause, the defendant may ask the court to dismiss or transfer the case to the forum specified in the contract.

While choice of forum clauses are generally honored, there are situations where a court may refuse to enforce them. For example, if the chosen forum would be severely inconvenient for one of the parties or if there are strong public policy reasons to litigate in a different jurisdiction.

Another Alternative: Removal to Federal Court

If your business does have sufficient contacts with the state in which you were sued, you may not have grounds to successfully challenge jurisdiction. There is another option, however: You can petition the courts to “remove” your case to federal court.

Federal courts have limited jurisdiction, but there are some disputes for which federal and state courts may both have jurisdiction, such as disputes between parties from different states (as long as the amount in controversy is greater than $75,000).

Removing a case to federal court can have a few advantages:

  • Some defendants prefer the procedural rules of federal court, finding them more predictable or advantageous to their case.
  • Federal judges are appointed based on their legal expertise, and federal courts often handle complex cases. Some litigants believe that federal judges may have more experience in certain types of cases, providing a more predictable and consistent legal environment.
  • One of the biggest advantages of a federal court is that federal judges are appointed, whereas state judges are elected. This can eliminate the potential for local bias in state courts.

What’s Next? Contact the Litigation Attorneys at Hendershot Cowart P.C.

When facing a jurisdictional challenge or considering initiating one, it is crucial to consult with an attorney who has experience in special appearances and jurisdictional challenges in both state and federal courts.

The business litigation attorneys at Hendershot Cowart P.C. can assess the specific circumstances of the case, review applicable laws, develop a strategy to address jurisdictional issues for your case, and ensure procedural rules are followed to preserve your rights.

Ready to get started? Call our team at (713) 909-7323 or contact us online 24/7.

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