We typically focus on summarizing corporate and
commercial decisions of Delaware's Supreme Court and Court of
Chancery, but today we find noteworthy a bevy of new lawsuits just filed
in the Delaware Court of Chancery. These new suits challenge bylaws in several
companies that require shareholder suits to be filed exclusively in the
Delaware Court of Chancery. If suits are filed elsewhere, the company
threatens to sue those shareholders to recoup fees for breach of the bylaw
provision. The challenge is based on the alleged violation of due process
rights because there was no mutual consent by the shareholders. The suits were
filed by the highly-regarded corporate litigator Michael Hanrahan of the Prickett
Jones firm in Wilmington. Among the companies sued by shareholders challenging
the exclusive forum bylaw provision, in separate lawsuits, are the following
Navistar International Corp., AutoNation, Inc. Chevron
Corp., SPX Corp., Superior Energy Services, Inc., Franklin Resources, Inc.,
Curtiss-Wright Corp., Danaher Corp., and Solutia Inc.
Scholarship on the Topic
Corporate law scholars have written extensively about
this topic and we have featured much of that scholarship on these pages.
For example, Professor Joseph Grundfest of Stanford, who is credited
by many as originating the idea of adding a charter provision (as compared
with a bylaw provision), with an exclusive forum selection clause for
shareholder suits, presented a lecture in Delaware before the Bench and Bar on
the issue, as discussed on these pages here .
Prof. Steven Davidoff provided insights on the topic here.
Although Delaware Courts have not squarely decided the
issue of a forum selection clause in a bylaw provision, that is not voted on by
the shareholders, a California court struck down a provision in a case noted on
these pages here. Professor
Bainbridge comments on the topic here. Prof.
Brian J.M. Quinn wrote a law review article on the issue, available here.
Our post here
on this topic and related issues, includes commentary by the late,
great scholar Prof. Larry Ribstein and others who have addressed the
related problems with multi-jurisdictional litigation and
the challenges that arise with an apparent increase in the number
of non-Delaware courts deciding issues of Delaware corporate law. A
ruling on these new cases by the Delaware Court of Chancery, which will
likely be appealed to the Delaware Supreme Court, will be a welcome addition to
provide a measure of certainty on this cutting edge topic.
Read more Delaware business
litigation case summaries and commentary on Delaware
Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X.
Pileggi, of Eckert Seamans.
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