X’s new terms steer lawsuits to Texas court where judge owns Tesla stock

Vladeck questioned the ethics of X’s terms in comments quoted by NPR. “For X to say we want all of our litigation to go into a forum that may have no connection to where we’re located, to where plaintiffs are located, runs headlong into the federal system’s preference for convenience,” Vladeck was quoted as saying. “Are we going to allow companies to override that principle of convenience in the name of trying to stack the deck in their favor whenever they have the power to get you to agree to terms of service?”

Legal precedents help X

Fitzpatrick said that legal precedents support the enforceability of X’s terms. He pointed to Carnival Cruise Lines, Inc. v. Shute, in which the Supreme Court ruled that a non-negotiated forum-selection clause requiring disputes to be handled in Florida was valid.

The Supreme Court’s 1991 ruling said the clauses “are subject to judicial scrutiny for fundamental fairness.” That means companies can’t select certain venues to discourage people from pursuing legitimate claims and can’t obtain consent to terms through fraud or overreaching. Parties bound by such terms must also be given sufficient notice of the forum clause.

Fitzpatrick said that “courts have upheld particular districts” named in forum-selection clauses and that business-to-business “contracts often say you have to sue in New York City.”

Fitzpatrick said users could argue that terms are unconscionable, but he described this as a longshot. “If the forum has no connection to either party and there is no other good faith reason for picking the forum, there might be an argument the terms are unconscionable; the Court in Shute left open that possibility,” he said. “Likewise, if you are poor and the dispute small, there might be an argument that it is unconscionable to make you travel to Texas to sue. But… my understanding is that unconscionability is still a very disfavored doctrine.”

Media Matters’ argument that the Northern District of Texas lacked jurisdiction was rejected even before X moved its headquarters. Media Matters argued that Texas is an improper forum for the dispute because “X is organized under Nevada law and maintains its principal place of business in San Francisco, California, where its own terms of service require users of its platform to litigate any disputes.”

O’Connor ruled that his court has jurisdiction because Media Matters articles “targeted” Texas-based companies that advertised on X, even though those companies were not parties to the lawsuit.