“Exclusive forum” bylaws and charter provisions are a powerful tool for managing the risk of parallel corporate governance litigation against a company and its directors in multiple forums, allowing stockholders to bring such litigation but requiring that they bring it in one specified jurisdiction, typically the company’s state of incorporation. The Delaware Chancery Court, in its 2013 Chevron decision, held that such provisions are generally enforceable, and courts in several other states have dismissed stockholder litigation based on Delaware forum selection provisions. As a result, more companies are adopting such provisions.
Public companies may wish to consider adopting such provisions, either as part of their general corporate governance regime or when they see events on the horizon — such as a potential merger and acquisition process — that may spur intracorporate litigation, taking into account several factors, including potential stockholder reaction. This article highlights a recent development in the enforceability of exclusive forum provisions that may be affected by the timing of their adoption.
Originally published in Law360 on September 17, 2014.
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