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Salzberg v. Sciabacucchi

Supreme Court of Delaware

January 8, 2020, Submitted; March 18, 2020, Decided

No. 346, 2019

Opinion

VALIHURA, Justice:

We are asked to determine the validity of a provision in several Delaware corporations' charters requiring actions arising under the federal Securities Act of 1933 (the "Securities Act" or "1933 Act") to be filed in a federal court. Blue Apron Holdings, Inc., Roku, Inc., and Stitch Fix, Inc. are all Delaware corporations that launched initial public offerings in 2017. Before filing their registration statements with the United States Securities and Exchange Commission (the "SEC"), each company adopted a federal-forum provision. An example of such a federal-forum provision (or "FFP") provides:

Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United [*3]  States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in any security of [the Company] shall be deemed to have notice of and consented to [this provision].2

Appellee Matthew Sciabacucchi ("Appellee") bought shares of each company in its initial public offering or a short time later. He then sought a declaratory judgment in the Court of Chancery that the FFPs are invalid under Delaware law. The Court of Chancery held that the FFPs are invalid because the "constitutive documents of a Delaware corporation cannot bind a plaintiff to a particular forum when the claim does not involve rights or relationships that were established by or under Delaware's corporate law."3 Because such a provision can survive a facial challenge under our law, we REVERSE.

I. Overview

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2020 Del. LEXIS 100 *

MATTHEW B. SALZBERG, JULIE M.B. BRADLEY, TRACY BRITT COOL, KENNETH A. FOX, ROBERT P. GOODMAN, GARY R. HIRSHBERG, BRIAN P. KELLEY, KATRINA LAKE, STEVEN ANDERSON, J. WILLIAM GURLEY, MARKA HANSEN, SHARON MCCOLLAM, ANTHONY WOOD, RAVI AHUJA, SHAWN CAROLAN, JEFFREY HASTINGS, ALAN HENDRICKS, NEIL HUNT, DANIEL LEFF, and RAY ROTHROCK, Defendants Below, Appellants, and BLUE APRON HOLDINGS, INC., STITCH FIX, INC., and ROKU, INC., Nominal Defendants Below, Appellants, v. MATTHEW SCIABACUCCHI, on behalf of himself and all others similarly situated, Plaintiff Below, Appellee.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Prior History:  [*1] Court Below: Court of Chancery of the State of Delaware. C.A. No. 2017-0931.

Disposition: Upon appeal from the Court of Chancery. REVERSED.

CORE TERMS

internal affairs, stockholders, provisions, matters, bylaw, forum-selection, federal court, external, charter, state court, intra-corporate, fee-shifting, filings, courts, certificate of incorporation, principles, facial challenge, stock, facially valid, Securities Act, powers, rights, Outer, state law, offering, fiduciary, charter provision, federal law, shareholders, narrowed

Securities Law, Civil Liability Considerations, Securities Litigation Reform & Standards, Removal, Blue Sky Laws, Securities Registration, Secondary Liability, Civil Procedure, Appeals, Standards of Review, De Novo Review, Governments, Legislation, Interpretation, Summary Judgment Review, Standards of Review, State & Territorial Governments, Legislatures, Business & Corporate Law, Corporate Formation, Corporate Existence, Powers & Purpose, Powers, Federal Preemption, Business & Corporate Compliance, Business & Corporate Law, Corporations, Articles of Incorporation & Bylaws, Contracts Law, Contract Conditions & Provisions, Forum Selection Clauses, Corporate Formation, Corporate Governance, Contracts Law, Contract Interpretation, Expiration, Repeal & Suspension, Preliminary Considerations, Federal & State Interrelationships, Choice of Law, Corporate Finance, Initial Capitalization & Stock Subscriptions