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California Superior Court Refuses to Enforce Forum Selection Clause Requiring Litigation in Delaware Chancery Court Over Jury Trial Rights

Delaware entities have increasingly relied on forum selection clauses mandating litigation in the Delaware Court of Chancery, in recognition of the Chancery Court’s expertise and consistency in its application of corporate law. A recent California trial court decision may threaten that reliance. On July 29, 2020, a judge of the California Superior Court ruled in West v. Access Control Related Enterprises, LLC that a forum selection clause mandating litigation in Delaware was unenforceable in California because the site of the expected litigation in Delaware—the Chancery Court—did not provide for civil jury trials. The court held that the enforcement of the forum selection clause would have abridged the right to a civil jury trial under California law. This decision should not apply to equitable and derivative claims, so many of the actions that currently are litigated in the Court of Chancery would not be affected by this ruling. That said, the decision invites litigation over whether specific types of claims are subject to its holding, adding uncertainty as to whether Delaware entities can rely on the Court of Chancery being their forum of choice. Further, the decision may spur other courts to push back on the frequent enforcement of such forum selection clauses, especially where enforcement of those clauses may implicate the interests of other states.

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Practices: Corporate & Securities Litigation, Securities & Public Companies

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