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Baker v. Impact Holding, Inc., C.A. No. 4960-VCP (Del. Ch. May 13, 2010) (Parsons, V.C.)

May 13, 2010

In this action, the Delaware Court of Chancery granted the defendant’s motion to dismiss for improper venue on the basis of a forum selection clause, rejecting the plaintiff’s argument that Delaware public policy forbids application of an exclusive forum selection clause that would deprive Delaware courts of jurisdiction over a case involving the internal affairs of a Delaware corporation.

Plaintiff brought this action under 8 Del. C. 225, seeking a declaratory judgment that his removal from the defendant’s board of directors was improper under the terms of a Stockholders Agreement. The Stockholders Agreement contained a forum selection clause mandating that all actions to enforce the terms of the agreement, or otherwise pertaining to the agreement, be brought in Dallas, Texas. When the defendant moved to dismiss for improper venue, the plaintiff asserted that the forum selection was unenforceable because the Delaware legislature’s enactment of Section 18-109(d) of the Delaware Limited Liability Company Act (“LLC Act”) and Section 17-109(d) of the Delaware Revised Uniform Limited Partnership Act (“DRULPA”) reflect a clear public policy forbidding the enforcement of forum selection clauses that mandate exclusive foreign jurisdiction over matters involving the internal affairs of Delaware entities. The Court rejected that argument, reasoning that the legislature could have amended the Delaware General Corporation Law to contain limitations similar to those in the LLC Act and the DRULPA, but did not do so. In the absence of a statute or other clear indication of legislative intent to limit forum selection clauses with respect to corporations, the Court reasoned that Delaware public policy did not invalidate the forum selection clause contained in the Stockholders Agreement.

The full opinion is available here