For Delaware corporations facing a rising tide of strike suits, the Delaware Court of Chancery’s June 25, 2013 Boilermakers decision upholding the validity of “exclusive forum” bylaws adopted by Chevron Corporation and FedEx Corporation marked an important milestone. Exclusive forum bylaws require that derivative actions, stockholder class actions and other intra-corporate disputes be litigated exclusively in a specified forum — prior to the decision, almost always the Delaware Court of Chancery. Such provisions are intended to address plaintiff forum shopping and the related phenomenon of plaintiffs’ attorneys filing lawsuits arising out of the same facts in multiple jurisdictions to obtain attorneys’ fees. In particular, these provisions seek to avoid the cost and uncertainty of parallel litigation, the risk of inconsistent outcomes and the potential for Delaware law, which governs these disputes, to be misinterpreted by other courts. Additionally, they are intended to allow Delaware corporations to have intra-corporate disputes resolved by the courts most familiar with the state’s corporate law. As suggested in Boilermakers, there is a benefit in having cases “decided in the courts whose Supreme Court has the authoritative final say as to what the governing law means. . . .”

Multi-forum litigation is most well known in the context of mergers and acquisitions. For example, in 2012, 93% of merger and acquisition transactions valued at more than $100 million resulted in litigation, with an average of 4.8 lawsuits per transaction.5 For transactions with Delaware-incorporated targets, 65% resulted in multi-forum litigation in Delaware and other jurisdictions, 19% were challenged outside Delaware only and 16% were challenged solely in the Delaware Court of Chancery. The most common outcome of such lawsuits was a settlement that provided for the payment of attorneys’ fees and additional disclosure, or in some cases, changes in deal protections, but no increase in purchase consideration for stockholders. The entrepreneurial plaintiffs’ bar has also been pursuing lawsuits, modeled on merger litigation, alleging fiduciary breaches by boards of directors in connection with executive compensation matters. The current generation of such lawsuits typically seeks to enjoin annual meetings where stockholders are being asked to cast annual non-binding votes on executive compensation (“say on pay”) or approve equity compensation plans. Such litigation tends to be brought outside a company’s state of incorporation.