X Has a New Forum Selection Clause
November 5, 2024
The company formerly known as Twitter (“X”) has announced that it will adopt new Terms of Service (“TOS”) effective November 15, 2024. Among other things, the new TOS includes a new forum selection clause. The clause in the old TOS required lawsuits against X to be brought in California. The clause in the new TOS requires lawsuits against X to be brought in Texas.
On its face, this change is not surprising. In September 2024, X moved its headquarters from San Francisco, California, to Bastrop, Texas, a town located about thirty miles southeast of Austin. It stands to reason that Twitter would now prefer to litigate in Texas rather than California. What is surprising is that the courts chosen in the new forum selection clause are nowhere near Bastrop.
The new clause states that (1) any federal lawsuit must be brought in the U.S. District Court for the Northern District of Texas, and (2) any state lawsuit must be filed in Tarrant County. The Northern District of Texas encompasses the cities of Dallas, Fort Worth, Amarillo, and Wichita Falls. It does not encompass Bastrop or Austin, which sit in the U.S. District Court for the Western District of Texas. The country seat of Tarrant County is located in Fort Worth, which is located more than 200 miles away from Bastrop. On a good day, the drive from Bastrop to Fort Worth takes three hours.
When drafting forum selection clauses, most companies prefer to litigate close to home. The clause prepared by Dell—another company headquartered just outside of Austin—chooses the courts in Travis or Williamson County, which cover Austin and the surrounding area. Apple’s standard clause chooses the courts in Santa Clara County, California. Microsoft’s clause requires litigation to proceed in King County, Washington. The decision by X to choose courts that are nowhere near its new headquarters is thus distinctive.
The courts chosen in the new clause—in particular, the Northern District of Texas—are also distinctive in that the judges who sit there have acquired a reputation for being sympathetic to plaintiffs litigating on behalf of conservative causes. This reputation helps to explain why many conservative groups have chosen to file lawsuits in the Northern District. The America First Legal Foundation, for example, has backed approximately dozen lawsuits there. The U.S. Chamber of Commerce has also brought a number of cases there challenging federal rules. A group of hedge funds established a new trade association in Fort Worth… and then immediately proceeded to bring several lawsuits in the Northern District challenging SEC regulations. When Donald Trump brought a $10 billion defamation suit against CBS last week, he filed it in the Northern District. X itself has brought at least two cases there as a plaintiff—a defamation suit against Media Matters for America and an antitrust suit against advertisers accused of conspiring to boycott X.
This state of affairs has led some commentators to argue that X’s new forum selection clause represents an attempt to channel cases in which X is named as a defendant to judges who are favorably disposed to the company and its owner, Elon Musk. This argument leads to an interesting question. Let us assume, for the sake of the argument, that the new forum selection clause was drafted to ensure that litigation against X is heard by judges who are broadly sympathetic to X and Musk. Let us further assume that a plaintiff has sued X in some other U.S. state—California, for example—and that X has asked the court to enforce the forum selection clause and transfer the case to Texas. What should that court do?
I am not aware of any cases where a court has ever been called upon to answer this question with respect to a clause choosing a court in the United States. While it is common for plaintiffs to argue that a forum selection clause choosing the courts of a foreign country should not be enforced due to judicial bias, they rarely (if ever) make this argument with respect to judges in the United States. As a general rule, U.S. courts have held that a forum selection clause should not be enforced when it is unreasonable or contrary to public policy. I would argue that it is unreasonable to enforce a forum selection clause selecting a court in a random geographic location if that court was chosen for the express purpose of getting the case before a judge sympathetic to the contract drafter. I would further argue that enforcing a clause under these circumstances is contrary to public policy because it undermines public faith in an impartial judicial system. If lawyers for X were to represent to our hypothetical California court that that company did, in fact, draft its forum selection clause specifically to ensure cases were heard by judges likely to rule in its favor, then that court should refuse to enforce the clause.
It is, however, inconceivable to me that X would ever actually make such a representation. Instead, it will almost certainly offer a different explanation for why it chose the Northern District in its new forum selection clause. It could argue, for example, that its attorneys in Texas are based in Dallas and it is more convenient for them to litigate in Tarrant County or the Northern District. At this point, our hypothetical California judge will have to decide whether the company’s proffered rationale is plausible. If it is, then the clause should be enforced unless there is some other basis for invalidating it. If the issue is close, moreover, our hypothetical judge should err on the side of enforcing the clause. It would be unprecedented and deeply corrosive to the U.S. legal system for judges in one part of the country to refuse to enforce forum selection clauses because they view judges in other parts of the country as biased. This is particularly so in light of the fact that U.S. courts routinely dismiss cases on the basis of forum non conveniens in the face of arguments that judges in other countries are biased or corrupt. If we are willing to give the benefit of the doubt to foreign judges, the same grace should be extended to judges based in the United States.
So long as X offers a plausible justification for its new clause unrelated to judge-shopping, in short, the clause should be enforced unless there is some other reason not to enforce it. While it is not entirely clear to me what that justification may be—as noted above, it is an unusual clause—I suspect that the lawyers for X will have one ready when the time comes. In the unlikely event that X informs the judge that it drafted its new clause specifically to divert litigation to judges that it believes are likely to rule in its favor, however, then the clause should be disregarded.