When a company does business across state lines, it may need to consider questions about jurisdiction over various potential disputes. An extensive and complicated body of law addresses when and how courts may exercise personal jurisdiction over defendants. Many contracts include “choice of law” or “forum selection” provisions, which identify a specific state and county as the proper jurisdiction and venue for lawsuits. The Delaware Court of Chancery recently ruled on a dispute over a choice of law provision, in which the defendant argued that the plaintiffs’ consent to jurisdiction in Kentucky required them to bring their lawsuit there. The court disagreed, noting that the contract did not “contain clear language indicating that litigation will proceed exclusively in the designated forum.” In re Bay Hills Emerging Partners I, L.P., et al, C.A. No. 2018-0234-JRS, mem. op. at 13 (Del. Ct. Chanc., Jul. 2, 2018).
Forum selection is an important part of any contract that involves parties in different jurisdictions, especially when relevant laws significantly differ from one another. This includes conflicts between the laws of two or more states, and conflicts between federal and state law. The parties to a contract need to know which laws will apply. Courts have developed rules and procedures for determining which jurisdiction’s laws apply in a particular situation, but that procedure is never simple or easy. Agreeing in advance to jurisdiction and venue can save a great deal of headache in many situations.
The defendant in Bay Hills is the official administrator of the Commonwealth of Kentucky’s retirement system. Through investments, it became the sole limited partner in four Delaware-based limited partnerships (LPs). It executed limited partnership agreements (LPAs) that included provisions allowing it to remove general partners “for cause.” Bay Hills at 4. In May 2017, the defendant exercised this right as to the general partners of all four LPs. It later withdrew its notice of removal, but served a second notice of removal on all four general partners in February 2018.