American Motorists Insurance Co. v. Starnes

Background

A McLennan County resident sued an Illinois insurance company, claiming uninsured‑motorist coverage after a car crash in Tarrant County. The insurer, authorized to do business in Texas with a Dallas principal office, asked to be sued in its home county. Under Texas law, Exception 27 lets plaintiffs sue qualified out‑of‑state companies in any county where the company has an agent, while Exception 23 imposes a preliminary proof requirement when suing domestic corporations. At a venue hearing the plaintiff relied on Exception 27 and a stipulation that the insurer had a local agent; the court denied the insurer’s plea to transfer venue.

Reasoning

The Court asked whether Exception 27 discriminates against foreign corporations in violation of the Constitution’s guarantee of equal treatment. It concluded there was no unconstitutional discrimination because, in practice, plaintiffs usually meet only a prima facie showing at venue hearings and domestic defendants gain little meaningful procedural advantage. The Court also noted that Texas provides other procedures—broad pretrial discovery and summary judgment—that are equally available to foreign defendants, so fundamental rights remain protected despite differences in chosen forums.

Real world impact

The ruling means Texas plaintiffs may sue qualified out‑of‑state companies where those companies maintain local agents without first proving the substance of their claims at the venue stage. The decision affirms existing Texas venue practice and leaves the broader venue options for foreign corporations intact. Because the Court rejected an equal‑protection challenge rather than deciding the underlying claim, the merits of the insurance dispute remain to be resolved later.

Dissents or concurrances

Chief Justice Burger, joined by Justice Rehnquist, concurred in the judgment but rested on a different ground: he viewed the distinction as having a rational basis tied to state control over domestic versus foreign corporations and criticized relying on representations about local court practice.