Last year, the Delaware Court of Chancery in Boilermakers Local 154 Retirement Fund v. Chevron Corp.1 confirmed the facial validity of board-adopted bylaws designating an exclusive forum for intra-corporate litigation. The court’s influential decision has accelerated the rate of adoption of exclusive forum provisions among public companies seeking to reduce or eliminate the threat of multi-jurisdictional litigation. Since Chevron, more than 100 corporations have added exclusive forum provisions to their bylaws, and newly public companies are increasingly including these provisions in their charters prior to their initial public offering.
Post-Chevron decisions from other state courts—which, until August 2014, all upheld exclusive forum provisions—have provided additional reassurance about the enforceability of forum bylaws. In the last two months, however, two state courts addressing “as-applied” challenges to exclusive forum bylaws reached conflicting conclusions, reminding practitioners that some uncertainty remains regarding the enforceability of exclusive forum provisions. This column analyzes the recent Delaware and Oregon decisions, which demonstrate that the enforceability of an exclusive forum bylaw adopted concurrently with a significant transaction may hinge on a court’s assessment of whether the complaint pleads facts indicating an improper motive behind the adoption of the provision.
