The U.S. Supreme Court has ruled that companies can agree in contracts to determine in what jurisdiction business disputes must be resolved. The ruling is described as a “huge win” for businesses that do business in multiple states and want to handle civil claims in one jurisdiction and a loss for smaller companies that focus on subcontracting. It started with a Texas business dispute.
The dispute involved a five-person Texas company that contracted with a large construction company for work on a children’s center at Fort Hood. The smaller company was to provide labor and materials. The smaller company believed it was owed $160,000 after construction was complete. It filed a lawsuit in Texas federal courts. The larger firm sought to transfer the case to a federal court in Virginia because the contract contained a forum-selection clause that allows businesses to dictate where disputes would be heard. The construction contract dispute sparked a legal battle that rose to the U.S. Supreme Court.