In Cornerstone Brands, Inc. v. O’Steen, read opinion here , the Chancellor discussed, among other things, the topic of forum selection clauses, which are routinely upheld in Delaware. The most noteworthy aspect of this opinion, which I predict will be an often cited opinion for this reason, held that a claim for attorneys’ fees could proceed based on the breach of a forum selection clause, and an award of such damages would not contravene the American rule (which is that everyone pays their own attorneys’ fees, despite prevailing). Thus, a motion to dismiss that claim was denied. The Chancery Court cited for support of this proposition the Delaware Supreme Court decision in El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp., 669 A.2d 36, 40 (Del. 1995). The Court also cited other decisions from other jurisdictions for support of the view that attorneys’ fees for breach of a forum selection clause may be awarded–and that is not deemed to be in contravention of the American rule. This letter opinion also discussed the elements of promissory estoppel, as well as equitable estoppel.
In addition, especially notable about this case is a footnote indicating that an oral ruling in this matter was made from the bench on January 23, 2006, in which the Chancellor denied a motion to dismiss based on the following reasoning: the defendant here was a third-party beneficiary to the merger agreement in dispute, and therefore would be deemed to have consented to the forum selection clause in that agreement being litigated in the case.
Also of importance was the Court’s discussion of subject matter jurisdiction with reference to DGCL Section 111(a)(2) (granting jurisdiction for interpretation of the validity of any documents relating to the sale or creation of stock or options relating thereto); as well as 10 Del .C. Section 341 (granting the Chancery Court jurisdiction to hear and determine all matters and causes in equity); and 10 Del. C. Section 342 (the Court of Chancery shall not have jurisdiction to determine any matter wherein sufficient remedy may be had by common law or statute before any other Court or jurisdiction of this state).
The Court noted three basic ways in which it can have subject matter jurisdiction: (1) One or more of the claims is equitable in character; (2) The plaintiff requests relief that is equitable in nature; or (3) If subject matter jurisdiction is conferred by statute.
UPDATE: Dan Tin, Esq. just brought to my attention the following article he wrote about forum selection clauses: Tan, Daniel S., "Damages for Breach of Forum Selection Clauses, Principled Remedies, and Control of International Litigation" . Texas International Law Journal, Vol. 40, p. 623, 2005. Available at SSRN: http://ssrn.com/abstract=628581