Lee v. Fisher

Lee v. Fisher

Opinion

M. SMITH, Circuit Judge:

Plaintiff Noelle Lee brought a shareholder derivative action alleging that The Gap, Inc. and its directors (collectively, Gap) failed to create meaningful diversity within company leadership roles, and that Gap made false statements to shareholders in its proxy statements about the level of diversity it had achieved. Gap's bylaws contain a forum-selection clause that requires "any derivative action or proceeding brought on behalf of the Corporation" to be adjudicated in the Delaware Court of Chancery. Notwithstanding the forum-selection clause, Lee brought her derivative lawsuit in a federal district court in California, alleging a violation of Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a), along with various state law claims. The district court dismissed Lee's complaint based on its application of the doctrine of forum non conveniens, holding [*4]  that she was bound by the forum-selection clause. We affirm the district court because Lee has not carried her heavy burden to show that Gap's forum-selection clause is unenforceable.

FACTUAL AND PROCEDURAL BACKGROUND

Section 14(a) and its implementing regulation, Securities Exchange Commission Rule 14a-9, prohibit material misstatements or omissions in a proxy statement. 15 U.S.C. § 78n(a); 17 C.F.R. § 240.14a-9(a). Section 14(a) may be enforced by direct actions, in which shareholders assert their own rights, or by derivative actions, in which shareholders assert the rights of the corporation. Federal courts have exclusive jurisdiction over these claims, 15 U.S.C. § 78aa, but Gap's bylaws include a forum-selection clause designating the Delaware Court of Chancery as the exclusive forum for all derivative claims. Gap acknowledges that if its forum-selection clause is enforced, Lee will not be able to bring her derivative Section 14(a) claim in the Delaware Court of Chancery. See 15 U.S.C. § 78aa.

Defendants moved to dismiss this action based on the doctrine of forum non conveniens, citing Gap's forum-selection clause. The district court agreed that the clause was enforceable and dismissed the lawsuit. On appeal, Lee argues that Gap's forum-selection clause violates public policy and is unenforceable [*5]  because it prevents her from bringing a derivative Section 14(a) claim in any court.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.