Principal Attorney
When Your Business Gets Sued, Where Can the Case Be Filed?
Let’s face it, when you run a business, things happen. You work hard to create your business, develop your product or service, and maintain a customer base. But no one, and no business, is immune to the opinions and grievances of others.
Whether it’s an angered employee, customer, business partner, or another contact, someone will likely threaten to sue or will actually sue your business.
The harsh reality is that 36-53% of small businesses are involved in at least one lawsuit in any given year,[1] and 90% of all businesses are engaged in lawsuits at any given time.[2]
This means the question is not if your business will be sued, but when. And when it happens, the forum (the place where the suit is filed) is critical for both legal strategy and business operations.
Suits Filed in Your Backyard
Every state is different, but generally, businesses can be sued in any state court where they are incorporated, including the formation state of an LLC. In Texas and many other states, the location of the event giving rise to the lawsuit determines where within the state the case can be filed.[3]
Example: A Dallas Storefront
If you form a Texas LLC with a physical storefront in Dallas:
- A slip-and-fall, misrepresentation, or breach of contract claim involving that store would be filed in Dallas.
- It would ordinarily be filed in Texas state court, not federal court, unless a federal question such as patents or trademarks is involved.
These cases typically land in:
- One of Dallas’s civil County Courts at Law, or
- One of its Civil District Courts.[4]
When Your Backyard Is as Big as Texas
If you begin selling online, the number of potential forums increases. For example, an El Paso customer who alleges harm may sue you in El Paso if a substantial part of the events or omissions occurred there.[5]
This rule applies across the entire state, from the largest cities to the smallest towns.
The Virtual Backyard: Getting Sued in Other States
Selling online expands exposure beyond Texas entirely.
Example: The Possumneck, Mississippi Customer
If a Mississippi customer receives a product shipped from Dallas and claims harm:
- The suit may be filed in Attala County state court, or
- In United States District Court for the Northern District of Mississippi.
If the claim exceeds $75,000 and the parties are domiciled in different states, your business may elect to remove the case to federal court.
Why Removal Can Be Strategic
Some commonly held views include:
- Federal courts tend to be more favorable to interstate businesses.
- Lifetime-appointed federal judges and law clerks may be more receptive to technical motions.
- State court judges, often elected, may be perceived as more influenced by local views of fairness.
Another practical difference is attorney admission. State courts often require full bar admission, while federal courts usually allow out-of-state counsel to appear more easily. This allows you to continue using your familiar Texas counsel instead of securing Mississippi counsel.
When a Customer Buys in Texas but Is Injured Out of State
Without an Online Presence
If your business:
- Has a single Dallas store,
- Makes no online sales, and
- Has no meaningful contacts with Mississippi,
it likely cannot be sued in Mississippi state or federal court. Exceptions exist but typically require specific factual circumstances.
What Changes When You Have an Online Presence?
Now consider two scenarios:
- Your business sells online but has physical locations only in Texas.
- Your business sells online and also has physical locations in other states, including Mississippi.
In both situations, the customer purchased the product in Dallas and traveled back to Mississippi, where the injury occurred.
The Ford Motor Co. v. Montana & Bandemer Framework
The United States Supreme Court emphasized that jurisdiction depends heavily on:
- How frequently you interact with customers in the state
- The volume of your business in the state
- The nature of your connections to the forum
If your only presence is in Texas and you have minimal online interactions with Mississippi, jurisdiction likely will not exist. But if you maintain physical locations or more substantial activity in Mississippi, the state may have authority to hear the case.
Businesses Operating in Multiple States
The range of possibilities includes:
- A national manufacturer with extensive operations in nearly every state
- A smaller company with occasional cross-border business but no activity in the state where the suit is filed[6]
The Supreme Court has not set a clear line between these extremes. But general principles apply:
- Large multi-state companies can often be sued in numerous states.
- Companies with no operational involvement in a state, aside from a customer personally transporting a product there, typically cannot be sued in that forum.
- The “middle ground” becomes fact-sensitive and depends on how robust your interstate footprint is.
Conclusion
When a customer crosses state lines with your product and suffers harm elsewhere, the Ford case provides an avenue to argue insufficient contacts with the forum state. Still, expanding operations, adding service networks, and increasing online sales can raise the risk of being sued in other states.
Business owners must evaluate whether increased interstate activity creates jurisdictional exposure. If you are facing a pending lawsuit, assessing risk, or planning expansion, the Sul Lee Law Firm is ready to assist.
[1] https://www.sba.gov/sites/default/files/files/rs265tot.pdf
[2] http://www.fulbright.com/mediaroom/files/FJ0536-US-V13.pdf
[3] See Tex. Civ. Prac. & Rem. Code §15.002(a)(1)
[4] See Tex. Civ. Prac. & Rem. Code §§ 25.003; 25.592
[5] Tex. Civ. Prac. & Rem. Code §15.002(a)(1)
[6] Walden v. Fiore, 571 U.S. 277, 134 S. Ct. 1115 (2014).