M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Wednesday, April 4, 2012

Chevron forum bylaw challenged

A new shareholder challenge to Chevron's exclusive forum bylaw has been filed in Federal district court in the northern district of California.  You'll remeber that last year in Galaviz v Berg, shareholders succesfully challenged a similar exclusive forum bylaw in Oracle's bylaws.  Federal coruts are not opposed to forum selection provisions in principle.  In fact, the policy of the Federal courts since Bremen v Zapata is to defer to the selection of a forum in a contract.  In Galaviz, the court looked at a bylaw that was  unilaterally by a board after the acts challenged in the lawsuit and found that such a bylaw lacked suffcient indicia of consent to establish a contract and therefore the selection of Delaware as an exclusive forum was not binding on the shareholders.  The court pointed out that had the forum provision been included in the firm's certificate of incorporation that the court would likely have reached a different result.

In this case, the court is asked to look at a narrower question than in Galaviz, namely absent bad acts, does a unilaterally adopted forum bylaw exhibit suffficient indicia of consent to be considered a contract.  My guess is that the court will follow Galaviz in this case. 

-bjmq

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