Contract Drafters: Consider the Scope of Your Consent to Jurisdiction Clauses!

A new decision from Delaware’s Court of Chancery highlights how transactional lawyers are granted wide latitude to seek, by contract, to invoke the jurisdiction of Delaware’s renowned business and commercial courts, where jurisdiction might not otherwise lie, through the use of a consent to jurisdiction clause in a contract or agreement.  But in doing so, practitioners should consider carefully how the parties will ultimately define the scope and reach of such consent.  In ActiGraph Holdings, LLC, et al. v. Cyntech, Inc. et al., C.A. No. 2021-0507-KSJM (February 14, 2023), the Chancellor found that a consent to jurisdiction clause in a purchase agreement for the sale of a business (a Florida LLC) did not subject the former CEO of the sold business to the jurisdiction of the Delaware courts for purposes of claims of breach of fiduciary duty in the management and affairs of the Florida LLC.

The pertinent language in the consent to jurisdiction clause stated: “Each party hereby irrevocably submits to the jurisdiction of the Court of Chancery of the state of Delaware or any federal court of competent jurisdiction in the state of Delaware, solely in respect of the interpretation and enforcement of the provisions of this agreement and of the documents referred to in this agreement . . . .” (emphasis added by Court)  The Court held that the the emphasized language in the consent to jurisdiction clause did not cover claims for breach of fiduciary duty, and therefore found that the Court did not have personal jurisdiction over the former CEO (a Florida resident) for such claims.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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