Forum Selection Clause Enforceable If Written Well
In Troy Corp. v. Schoon, (Del. Ch., March 26, 2007), 2007 WL 949441, read opinion here, the Chancery Court reiterated the settled Delaware jurisprudence that forum selection clauses are enforceable but that in order to achieve their purpose, if they are meant to be exclusive, they must clearly express that intent unequivocally. The clause in this case was unequivocal in stating that the parties agreed to choose as an exclusive forum the federal court for the Southern District of New York. In this Motion to Dismiss under Rule 12(b)(3), however, the issue was joined because the complaint filed did not raise an issue of federal jurisdiction. The Chancery Court was compelled to make an unusual analysis--for a state court--about whether a federal court had jurisdiction over a particular dispute. Reasoning that there was no federal court jurisdiction (based on diversity or otherwise), and the agreement not having provided for an alternative forum, the court concluded based on the facts presented that Delaware state court was a permissible forum to adjudicate the dispute.
One lesson to be learned from this decision, especially for those drafting forum selection clauses, is that they must provide for an alternative court in the chosen state if, as in this case, the only court chosen did not have subject matter jurisdiction over the dispute. Another example for avoiding the result in this case arises from the following hypothetical: if an agreement only provided for Chancery Court as a forum, it would be possible, depending on the type of claim asserted, that the court would not have equitable jurisdiction--which cannot be created by consent of the parties--as opposed to personal jurisdiction--much like federal subject matter jurisdiction cannot be conferred by the parties. Thus, if the drafter wanted to be certain that all disputes would remain in Delaware courts, the drafter should allow for an alternative Delaware court if Chancery did not have equitable jurisdiction.
