June 26, 2013

Delaware Chancery Upholds Forum Selection Bylaws

Yesterday, Delaware Chancellor Strine delivered this eagerly awaited decision on forum selection bylaws. I’m posting memos in our “Exclusive Forum Bylaws” Practice Area. Here’s a brief summary from Claudia Allen of Neal Gerber:

Chancellor Strine’s opinion upholds the facial validity under the DGCL of the forum selection bylaws adopted by Chevron and Fed Ex, and holds that such bylaws are contractually valid even though adopted without shareholder consent. This is an important decision since it will help corporations address the inevitable strike suits and associated forum battles that follow the announcement of mergers and acquisitions. Both parties indicated during oral argument that any decision would be appealed, so the Delaware Supreme Court will likely have the last say.

If the decision is upheld on appeal, we can expect to see more public companies adopt forum selection bylaws providing for intra-corporate disputes to be litigated exclusively in the Court of Chancery (or any state or federal court located in Delaware). The court acknowledged that a plaintiff might still chose to sue in a different jurisdiction and then argue in response to a motion to dismiss that enforcing the forum selection bylaw would be unreasonable or that the forum selection provision is being for an inequitable purpose in inconsistent with the directors’ fiduciary duties.

Here’s Kevin LaCroix’s blog about the case – and Keith Bishop’s blog about why a California Court might not follow Delaware. And for a “bigger picture” perspective, this blog by Prof. Brian Quinn predicts that this decision – combined with arbitration provisions in bylaws – could ultimately harm Delaware’s position as a corporate law leader in the long run.

SEC’s Money Fund Proposals May Significantly Impact Corporate Treasuries & Commercial Paper Issuers

Most of the law firm memos on the SEC’s proposed rule on money market funds have been authored by our cousins in the 1940 Act bar and focus on the regulatory impact on the funds themselves. So far, this Hunton & Williams memo is the only one I have seen that tackles the potential impact on public companies that either use the product for cash management or look to “prime” institutional money funds to buy their commercial paper.

Transcript: “Conflicts of Interest: How to Handle in Deals”

We have posted the transcript for our recent webcast: “Conflicts of Interest: How to Handle in Deals.”

– Broc Romanek