Parties to transaction agreements often choose Delaware as the exclusive forum for disputes arising out of their transactions. This is common, where the parties are from diffuse geographic locations, but desire a single forum well-versed in corporate and commercial law—like Delaware—to resolve their disputes. Also common in this setting, is that there are multiple parties involved in a transaction beyond just the business entities, which are the actual parties to the agreement—for example, the managers, principals, or owners of the contracting-entity party to an agreement. If relations between the parties subsequently sour—for instance, where one party believes it was fraudulently induced into entering the transaction—the aggrieved party often targets not only its contractual counterparty, but also the related individuals, who negotiated the agreement.

While Delaware may be the exclusive jurisdiction for the claims against the contractual counterparty, the forum selection clause will rarely extend to the claims against the nonsignatory managers, principals or owners. As the Delaware Superior Court’s recent decision in Chumash Capital Investments v. Grand Mesa Partners, C.A. No. N23C-07-209 SKR CCLD (Del. Super. Ct. Apr. 10, 2024) demonstrates, Delaware courts respect the corporate form and, absent limited circumstances, such as when the individuals receive a direct benefit under the contract or the foreseeability of Delaware as a forum, Delaware courts will not bind the contracting party’s managers, principals, or owners to the forum selection clause.

Background and The Superior Court’s Decision