February 6, 2014

Exclusive Forum Bylaws: Chevron Seeks Delaware Supreme Court Certification

Even though the plaintiffs have decided not to appeal the Delaware Chancery Court’s decision that upheld the use of exclusive forum bylaws, as noted in this article, Chevron asked a California judge last week for a similar case to be certified to the Delaware Supreme Court to bring more certainty to the use of exclusive forum bylaws. A hearing on this certification case is scheduled for March 13th.

Our recent webcast – “Exclusive Forum Bylaws: What Now?” – was superb and the audio archive is available (with the transcript coming soon); plus we have lots in our “Exclusive Forum Bylaws” Practice Area. Meanwhile, Katten Muchin’s Claudia Allen has put together this report for The Conference Board that examines the trends in exclusive forum bylaw adoption since the Chevron/Fed Ex cases in June ’13 to the end of October ’13, finding:

Companies adopted (the report contains a list):
– 112 Delaware companies adopted or have announced they will (19 were S&P 500 companies), 18 Maryland companies or REITs, 4 in PA, 2 in Nevada, 2 in Oregon and 1 each in Florida, S. Carolina, Tx and VA.

Specific provisions analyzed:
– 65% included elective language (the board may consent to an alternate forum)
– 43% provided that the Delaware Court of Chancery is the exclusive forum; 34% provide that if the specified court (usually the Delaware Court of Chancery or a “state court” in Delaware) lacks subject matter jurisdiction, jurisdiction will vest in another Delaware state or federal court; and 23 percent take the Chevron approach of specifying the state and federal courts in Delaware.
– 35% require that the court have “personal jurisdiction over the indispensable parties named as defendants.” 13% state that the specified court or courts shall have exclusive jurisdiction “to the fullest extent permitted by law.”
– 65% provided for deemed consent (anyone having stock in the company are deemed to have consented to the provision)
– 4% provide that a company shall be entitled to injunctive relief and specific enforcement; 4% include severability language; 1 provision specifies that the forum provision is solely procedural in nature.

IPO companies:
– 11% were adopted in connection with IPOs, 2% in connection with reincorporation, 1% with a spin-off and 1% during emergence from bankruptcy.
– Of the 12 IPO companies analyzed, surprisingly only 4 included the provision in both the charters and bylaws. 1 announced it will ask shareholders to vote on it.

Stats: Reg A & Reg A+ Offerings

This MoFo blog by Daniel Gorfine provides a nice analysis of how rarely Reg A has been used in the past – and predicts how Reg A+ mini-IPOs might provide a capital solution for small companies that are not yet able to meet the costs or size requirements of today’s IPO market.

SEC Approves PCAOB’s ’14 Budget

As noted in FEI’s Financial Reporting Blog, the SEC approved the PCAOB’s budget yesterday. SEC Commissioner Aquilar delivered this speech urging auditors to provide better quality audits…

Notes from San Diego: JOBS Act & More

In his blog, Mike Gettelman has been providing a number of entries covering last week’s Northwestern’s Securities Law Institute in San Diego. Check it out!

– Broc Romanek