May 6, 2010
A New "Must Have" - Exclusive Delaware Jurisdiction?
Delaware courts and corporate lawyers seem to be paying a lot of attention to the recent paper by John Armour, Bernie Black and Brian Cheffins entitled "Is Delaware Losing its Cases?" We've blogged previously about this paper. Now it looks like some firms may be advising clients to select "the Delaware Court of Chancery as the exclusive forum for the resolution of all intra-corporate disputes including claims asserting breach of fiduciary duty or seeking, under state law, to overturn directors’ business judgments concerning matters ranging from the routine to potential M&A or other transformative transactions." According to a recent memo by Latham and Watkins, the firm is recommending that "Delaware companies consider adopting mandatory Delaware Chancery forum selection provisions in their charter or bylaws in connection with their regular review of governance practices." The Latham memo argues that, given Delaware's substantial expertise in corporate law, mandatory Delaware jurisdiction for intra-corporate suits benefits both public companies and their shareholders. Latham's memo is based in part on dicta by Chancellor Laster in the recent In re Revlon, Inc. Shareholders Litig. Scholar Faith Stevelman in a recent 2009 paper addressed some of the issues with this type of provision.
Are other firms doing the same? And, will there be a backlash by plaintiffs' lawyers outside of Delaware?
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