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James L. Hallowell & Mark H. Mixon Jr. of Gibson Dunn & Crutcher.

The Delaware Court of Chancery’s recent decision in Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL, at *5 (Del. Ch. Dec. 19, 2018), makes clear that forum selection provisions adopted in corporate charters that purport to restrict where plaintiffs may file claims under the Securities Act of 1933 (the Federal Forum Provisions) are “ineffective and invalid.” According to the court, existing Delaware law does not authorize the “constitutive documents of a Delaware corporation to bind a plaintiff to a particular forum” with respect to an “external claim,” e.g., one that “does not involve rights or relationships that were established by or under Delaware’s corporate law.” Claims under the 1933 Act, the court holds, are such “external claims.” In explaining its reasoning, the court detailed that Delaware corporate law lacks the authority to support such provisions because “Delaware’s authority as the creator of the corporation does not extend to its creation’s external relationships, particularly when the laws of other sovereigns govern those relationships.”

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