LIMITS ON DAMAGES FOR BREACH OF A FORUM SELECTION CLAUSE

Abstract:

When a plaintiff sues in a court other than the one designated in a forum selection clause, the

defendant’s remedial options are limited. It can ask the court to dismiss the case outright. Or it can ask

the court to transfer the case to the designated forum. The defendant typically cannot, however, recover

money damages—in the form of attorneys’ fees and related expenses—that it incurs in the course of

persuading the court that transfer or dismissal is appropriate. This is because the conventional wisdom

among judges has long been that damages are not available for breach of a forum selection clause.

This Article challenges that conventional wisdom. It argues that damages can, and generally

should, be awarded when a party breaches a forum selection clause for three reasons. First, as a doctrinal

matter, and despite routine arguments to the contrary, the American Rule and the election of remedies

doctrine pose no bar to awarding damages in these cases. Second, as a matter of contract theory, attorneys’

fees in this context are a form of direct damages that are necessary to put the non-breaching party in as

good a position as if the contract had been fully performed. Third, as a matter of policy, if damages are not

awarded, then opportunistic plaintiffs can breach forum selection clauses with impunity.

After arguing that damages should, as a rule, be awarded for breach of a forum selection clause,

the Article identifies several limits on this principle. First, it argues that damages should not be awarded when a motion to dismiss or transfer is denied on public interest grounds. Second, it argues that non-

parties to the contract should not be able to collect damages. Third, it argues that damages should not be available in cases involving consumer contracts. Finally, it argues that courts should generally refrain

from awarding damages when there are conflicting judgments as to whether the forum selection clause is

enforceable.

LIMITS ON DAMAGES FOR BREACH OF A FORUM SELECTION CLAUSE - John F. Coyle and Tanya Monesti

Download COYLE AND TANYA MONESTI • 644KB