On June 25, 2013, then-Chancellor Leo E. Strine Jr. of the Delaware Court of Chancery issued a widely discussed ruling in Boilermakers Local 154 Retirement Fund v. Chevron, 73 A.3d 934 (Del. Ch. 2013), in which he upheld as statutorily valid and contractually enforceable so-called “forum selection” bylaws that were unilaterally adopted by the boards of Chevron Corp. and Federal Express. The bylaws require all stockholder litigation relating to each company’s internal affairs to be brought in Delaware, the state of incorporation for both. Given the explosion of multijurisdictional stockholder litigation over the past few years, many commentators predicted that Boilermakers would lead the boards of large and midsized corporations everywhere to adopt similar forum-selection bylaws and drive stockholder litigation away from other jurisdictions and into Delaware’s courts. So what has happened in the year since Strine’s decision?
As an initial matter, it is worth understanding the recent proliferation of stockholder suits, particularly attendant to M&A transactions, and why corporate boards may want to enact forum selection bylaws. Put simply, litigation regarding M&A transactions is now commonplace almost to the point of absurdity. According to a recent Cornerstone Research study, stockholders now challenge virtually all significant M&A transactions: 94 percent of M&A deals valued over $100 million were litigated in 2013. Sixty-two percent of that litigation was multijurisdictional, with Delaware, New York, California and Texas being the most popular forums. Corporations and their counsel face significant costs in coordinating and defending suits across multiple jurisdictions, and it is easy to see the appeal of requiring stockholders to file suits in a single forum, particularly where the highest reviewing court of that forum will have the ultimate ability to adjudicate the law governing the corporation at issue.
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