Chancery Awards Fees for Breach of Forum Selection Clause

Disclaimer: This article is for general informational purposes only and is not legal advice. If you have a real dispute, talk to a qualified attorney in your jurisdiction.

Forum selection clauses are supposed to be the grown-up, responsible part of a contract. They’re the sentence that says, “If we ever fight, we fight there.” No drama. No surprise road trips. No multi-state scavenger hunt for the friendliest judge.

And yetpeople still breach them. Sometimes it’s strategic. Sometimes it’s panic. Sometimes it’s the legal equivalent of “new phone, who dis?” But when a party files in a forum the contract forecloses, Delaware’s Court of Chancery has increasingly treated that move as more than a procedural oops. In the right setup, it can become a billable eventwhere the non-breaching party can pursue litigation expenses as contract damages, and potentially recover additional fees if the contract includes a fee-shifting provision.

This is where “American Rule” meets “you promised,” and the Court of ChanceryDelaware’s famously business-savvy equity courtstarts asking a very practical question: What was the benefit of the bargain? If the bargain included “don’t sue me in Puerto Rico / Texas / California,” then forcing someone to spend money defending there can look like classic expectation damages.

What Is a Forum Selection Clause, Really?

A forum selection clause is a contract provision designating where disputes must be litigated (and sometimes which court systemstate, federal, or both). Businesses love them for one big reason: predictability. Predictability reduces risk, and reducing risk makes everyone pretend they’re calm during negotiations.

Exclusive vs. permissive clauses

• Exclusive: “Must be brought only in Delaware.”
• Permissive: “May be brought in Delaware.” (Which can mean Delaware is allowed, not required.)

When you see the phrase “only,” “exclusive,” or “shall be brought,” you’re usually in exclusive-forum territorythe kind that triggers consequences when someone tries to litigate elsewhere.

Why a Breach Can Turn Into a Fee Award

In the U.S., the default is the American Rule: each side generally pays its own attorneys’ fees unless a statute or contract provides otherwise. So you might assume that even if someone sues you in the wrong place, you can get the case dismissedbut you’re stuck paying your lawyers for that detour.

Delaware decisions have drawn an important distinction between:

• Primary relief (what you lost because the contract was breached), and
• Enforcement expenses (what you spent to win the lawsuit that enforces the contract).

If the “loss” from the breach is that you were forced to litigate in the wrong forumincurring attorneys’ fees and related expenses thereDelaware has treated those foreclosed-forum costs as expectation damages in certain circumstances. That’s the conceptual bridge: the damages are not “fees because you won,” but “money you wouldn’t have spent if the other side had kept its promise.”

The Delaware Roadmap: Key Decisions That Shaped the Rule

El Paso: “You can recover the costs of that litigation”

One of the most-cited starting points is the Delaware Supreme Court’s decision in El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp. There, the court discussed raising a forum selection clause as a defense in a first-filed action and, if successful, recovering the costs of that litigation. The case later became part of a larger Delaware conversation about how to enforce forum clauses and which court has jurisdiction to grant what relief.

Ingres: strong enforcement and the anti-suit injunction toolbox

In Ingres Corp. v. CA, Inc., Delaware’s Supreme Court reinforced that forum selection clauses are generally presumptively valid and should be enforced, unless enforcement would be unreasonable, unjust, or invalid due to fraud/overreaching. The remedy conversation in Delaware then leaned heavily into specific enforcementincluding anti-suit injunctionsespecially where a party is trying to litigate elsewhere in defiance of an exclusive clause.

Carlyle: Delaware won’t make you beg a foreign court for the bargain you paid for

In National Industries Group v. Carlyle Investment Management, the Supreme Court addressed enforcement of an exclusive Delaware forum clause where parallel litigation was filed abroad. The court emphasized that forcing the non-breaching party to litigate in the prohibited forum can deprive it of the benefit of its bargainsupporting Chancery’s ability to grant injunctive relief to stop the foreign proceeding.

Cornerstone Brands: Chancery recognizes damages for violating a forum clause

In Cornerstone Brands, Inc. v. O’Steen, the Court of Chancery addressed claims that included damages tied to violating a forum selection clause. The case is often cited in Delaware’s later discussions as an example of Chancery treating a forum-selection breach as capable of supporting a damages theory, not just a motion to dismiss somewhere else.

Namdar v. Fried: foreclosed-forum expenses as expectation damages

The modern headline-grabber is Namdar v. Fried. In that dispute, a settlement-style agreement contained a mandatory forum selection clause pointing to Delaware courts. The plaintiff filed suit in Puerto Rico anyway. After the Puerto Rico action was dismissed based on the forum selection clause, the defendants pursued a Delaware counterclaim seeking damages measured by the expenses incurred in the Puerto Rico litigation.

Chancery’s reasoning (in plain English): the non-breaching party had two expectations(1) it would not have to litigate in the prohibited forum, and (2) it would not have to pay to litigate there. Dismissal in Puerto Rico satisfied the first expectation, but only a damages award could address the second. The court also distinguished between foreclosed-forum costs (treated as primary contract damages) and the separate category of fees incurred enforcing the contract in Delaware (which generally implicates the American Rule unless a fee-shifting clause applies).

XRI v. Holifield: a cousin conceptrecovering litigation expenditures tied to a breach

While not a forum-selection case in the same way, XRI Investment Holdings LLC v. Holifield shows Delaware’s willingness to treat certain litigation-related expenditures as recoverable damages when they are the foreseeable result of a contract breach. It’s a reminder that Delaware courts don’t treat “lawyer bills” as magical, untouchable artifacts. If the contract and causation line up, those bills can be part of a damages calculation.

So What “Fees” Are We Talking About?

1) Fees and expenses from the foreclosed forum

These are the costs you incurred because the other side sued where they promised not to sue. Think: local counsel in the wrong forum, motion practice to enforce the clause, hearings, translations, travel, and all the other joys that show up on invoices when someone turns your neat contract clause into a surprise itinerary.

Under the logic applied in cases like Namdar, those costs can be framed as the measure of damages for breach of a contractual right not to be sued therei.e., expectation damages.

2) Fees incurred enforcing the clause in Delaware

Even if Delaware treats foreclosed-forum expenses as damages, the separate bucketfees spent pursuing the Delaware damages claim itselfoften runs into the American Rule. That’s why sophisticated contracts frequently include a fee-shifting provision (for example, awarding fees to the prevailing party in an action to enforce the agreement). If that language exists, Chancery may have a clear contractual path to shifting enforcement fees too.

Drafting Tips: How to Make Your Forum Clause Actually Work

Pick “Delaware courts,” not “the Court of Chancery,” unless you mean it

This is an easy drafting mistake with a big practical consequence. Chancery is a court of limited jurisdiction. Some claims belong in Delaware Superior Court (law) or in federal court. A clause that tries to force everything into Chancery can invite arguments about jurisdiction and enforceability. Many Delaware-focused clauses designate state and federal courts located in Delaware, which gives the dispute a proper home even if Chancery isn’t the right venue for every claim.

Be explicit about exclusivity

If you want “Delaware or bust,” say so. Words like “only” and “exclusive” reduce room for later creative writing.

Define scope broadly enough to cover real disputes

Litigants love to re-label claims as “tort,” “fraud,” or “statutory” to argue they fall outside the clause. Many enforceable clauses cover disputes “arising out of or relating to” the agreementlanguage that is commonly used to capture contract and related non-contract claims.

Consider an enforcement and fee-shifting package

If you want the clause to have teeth, consider pairing it with:

• Consent to jurisdiction and waiver of inconvenient forum defenses,
• Injunctive relief language (acknowledging irreparable harm and entitlement to equitable relief), and
• Fee-shifting for actions to enforce the clause or the agreement.

Done carefully, this reduces the odds that enforcement becomes a two-step: first win the dismissal, then pay for it anyway.

Litigation Playbook: If the Other Side Files in the Wrong Forum

Move fast (and document everything)

Speed matters. Courts notice whether you treated the forum selection clause like a real right or like a decorative throw pillow. Practical steps often include:

• Raise the forum clause immediately in the foreign forum (dismissal/transfer motion).
• Consider Delaware injunctive relief where appropriate (anti-suit injunction), especially if the foreign forum is unlikely to enforce the clause promptly.
• Track and preserve invoices and time entries tied to the wrong-forum defensebecause damages theories live or die on proof.

Think about damages elements early

To recover foreclosed-forum expenses as damages, you typically need to show the usual contract elements: a valid clause, breach, causation, and reasonably proven damages. That means building a clean record connecting the wrong-forum filing to the specific expenses you had to incur to get out of that forum.

Common Defense Arguments (and Why Delaware Is Often Unmoved)

“American Rule means you can’t recover any attorneys’ fees”

Delaware’s response in the relevant line of cases is essentially: “American Rule is about shifting fees as a litigation penalty. Contract damages are about the benefit of the bargain.” If the bargain included not being sued in a foreclosed forum, then the costs of being sued there may be treated as the harm caused by breachi.e., primary relief.

“You should have asked the foreign court for fees”

Another argument is that the foreign forum should award costs if it dismisses. But that’s not always available, and even where it is, it may not fully compensate the non-breaching party for the harm of being dragged into the wrong forum in the first place. Delaware’s analysis tends to focus on what the contract promised, not what a different court might have been willing to award as a procedural courtesy.

“The clause doesn’t cover these claims”

This is why scope drafting matters. Delaware courts often enforce broad “arising out of or relating to” language, and they are skeptical of artful pleading designed to escape a clear forum bargainparticularly between sophisticated parties.

Quick FAQ

Is Chancery “fee shifting” or awarding “damages”?

It depends on the bucket. Foreclosed-forum expenses can be treated as damages (primary relief for breach). Fees incurred enforcing the agreement in Delaware are more like classic fee shifting and often require a contract provision or recognized exception.

Do I always need an anti-suit injunction?

No. Sometimes dismissal or transfer in the foreign forum solves the immediate problem. But injunctions can matter where the foreign forum is slow to enforce the clause, the proceedings are multiplying, or the contract specifically contemplates equitable relief.

Does this apply only to corporations?

No. The reasoning shows up across contracts, including LLC agreements, employment-related settlements, merger agreements, and other business arrangementsespecially where the parties are sophisticated and the clause is clear.

Field Notes: Practical “Experience” Patterns Parties Run Into (About )

Because this topic is so procedural, it’s easy to underestimate how messy it gets in real life. Here are several common, real-world patterns that litigators and deal teams frequently report when forum selection clauses are breachedshared here as generalized observations, not as anyone’s confidential story.

1) The “we’ll just file and see what happens” gambit. A party files in a preferred forum hoping the other side will panic, settle, or miss a deadline. Sometimes it’s sold internally as a “low-cost pressure tactic.” The irony is that if Delaware treats foreclosed-forum expenses as damages, that “pressure tactic” can become a line item the breaching party may have to reimburse. Even when the wrong-forum case gets dismissed quickly, the non-breaching party still paid for local counsel, briefing, and hearings. Those early invoices can end up being the centerpiece of a later Delaware damages claim.

2) The “parallel proceedings snowball.” Wrong-forum filings often spawn additional skirmishes: temporary restraining order requests, expedited discovery fights, or emergency motions that force the non-breaching party to respond on nights and weekends. From a damages perspective, the practical lesson is boring but crucial: tag your time. If counsel can credibly separate “expenses caused by the wrong-forum breach” from “expenses we would have spent anyway,” the damages proof tends to look cleaner and more persuasive.

3) The “Chancery-only” drafting trap. Some contracts mistakenly say disputes must be brought “in the Court of Chancery” rather than in Delaware state/federal courts. Then a party sues elsewhere and argues, “Chancery can’t hear all claims, so the clause is defective.” Even if that argument doesn’t win, it creates friction, delays, and extra briefing. Deal teams that live through this once rarely make the same mistake twice; they usually broaden the clause to “state or federal courts located in Delaware” and add consent-to-jurisdiction language.

4) The “fees as damages” surprise. Executives sometimes understand “we can get it dismissed” but don’t anticipate “we might recover the money we spent getting it dismissed.” When that possibility becomes real, strategy changes: the non-breaching party may become more willing to invest in a fast, high-quality dismissal effort because the costs are potentially recoverable later. Conversely, the party considering a wrong-forum filing may reconsider once they realize the downside could include writing a check for the other side’s detour costs.

5) The “one clause, two remedies” moment. A mature approach often uses a sequence: first, stop the bleeding (dismiss/transfer or injunctive relief), then evaluate damages. This helps avoid the tactical mistake of arguing only about procedure and forgetting the economic harm. In practice, the best outcomes usually happen when the contract is drafted with this two-step in mindclear exclusivity, clear scope, and (where appropriate) a fee-shifting enforcement clause that reduces ambiguity about what can be recovered.

Bottom line: a forum selection clause isn’t just a signpostit can be a financial allocation of risk. Delaware Chancery’s approach reflects that business reality: if you promised not to drag someone into a certain forum, and you do it anyway, the contract may treat the resulting litigation spend as damagenot destiny.

Conclusion

Delaware’s Court of Chancery has taken a practical, contract-first view of forum selection clauses: they’re not polite suggestions; they’re part of the deal. When a party breaches by filing in a foreclosed forum, the consequences can go beyond dismissal or transfer. Depending on the clause and the surrounding contract language, the non-breaching party may be able to pursue damages measured by the litigation expenses incurred in the wrong forumand, with the right fee-shifting provision, potentially recover the costs of enforcing the bargain in Delaware too.