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Forum Selection Bylaws Upheld by the Delaware Chancery Court

June 28, 2013

Summary: This week, Chancellor Leo E. Strine of the Delaware Court of Chancery upheld forum selection bylaws unilaterally adopted by the board of directors of two Delaware corporations, Chevron and FedEx, in the consolidated case Boilermakers Local 154 Retirement Fund, et al. v. Chevron Corp., et al., C.A. No. 7220-CS, and Iclub Inv. P’ship v. FedEx Corp., et al., C.A. No. 7238-CS. The ruling answers previously unresolved questions regarding the enforceability of board adopted forum selection bylaws that designate Delaware courts as the exclusive forum for stockholder derivative litigation. Chancellor Strine held that such clauses are statutorily and contractually valid and refused to entertain hypothetical iterations of their harmful effect. Boilermakers paves the way for boards of directors of Delaware corporations to unilaterally adopt forum selection bylaws in order to combat the costs and inefficiency of multi-forum litigation.

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