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Court of Chancery Limits Forum Selection

Posted In Jurisdiction

Troy Corporation v. Schoon, C.A. No. 1959-VCL (Del. Ch. March 26, 2007).

Forum selection clauses will be upheld by Delaware courts. However, when the dispute that is the subject of litigation in Delaware is not clearly subject to a contract clause requiring the dispute to be litigated elsewhere, the Delaware courts will not enforce such an unclear contract provision to bar litigation here.

In this decision, the contract required any litigation to be filed in federal court in New York. However, the federal courts lacked jurisdiction over the dispute set out in the complaint filed in Delaware. Thus, the Court of Chancery held that the forum selection clause was not enforceable.

This result illustrates the need to carefully draft forum selection clauses as they will not be read expansively.

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