Thursday, October 31, 2013

Sneaking business law into civil procedure

Although I blog on business issues, I spent most of my professional life as a litigator and this semester I teach civil procedure. A few weeks ago I asked my students to draft a forum selection clause and then discussed the Boilermakers v. Chevron forum selection bylaw case, which at the time was up on appeal to the Delaware Supreme Court.  The bylaws at issue required Delaware to be the exclusive venue for matters related to derivative actions brought on behalf of the corporation; actions alleging a breach of fiduciary duties by directors or officers of the corporation; actions asserting claims pursuant to the Delaware General Corporation Law; and actions implicating the internal affairs of the corporation.  

While I was not surprised that some institutional investors I had spoken to objected to Chevron’s actions, I was stunned by the vitriolic reactions I received from my students. I explained that Chevron and FedEx, who was also sued, were trying to avoid various types of multijurisdictional litigation, which could be expensive, and I even used it as a teachable moment to review what we had learned about the domiciles of corporations, but the students weren’t buying it.

Perhaps in anticipation of the likelihood of an affirmance from Delaware’s high court, the plaintiffs voluntarily dismissed their appeal, which may have been a smart tactical move. Now let’s see how many Delaware corporations move from the wait and see mode and join the 250 companies that already have these kinds of bylaws.  Interestingly, prior to the dismissal, only 1% of those surveyed by Broc Romanek indicated that they would never institute a forum selection bylaw. Given how broad some of these bylaws are, it may stem the tide of some of the litigation that I blogged about here as plaintiffs’ lawyers are forced to face Delaware jurists.  Yesterday, as we were discussing venue, I broke the news about the dismissal of the appeal to my students. Needless to say, many were disappointed. Perhaps they will feel differently after they have taken business associations next year.

Business Associations, Corporate Governance, Corporations, Marcia Narine Weldon, Teaching | Permalink


It must be difficult to understand, especially as a 1L, the race to the bottom plaintiffs attorneys that bring this merger litigation suit without experiencing it in practice.

Posted by: Andrew | Nov 1, 2013 7:01:11 AM

Andrew, I think you're right. Many of my students claim that they want to take Business Associations with me next year and I look forward to trying to give them a somewhat balanced view of business organizations with the benefit of someone who has also defended securities cases as well. In any event, the discussion was lively and it definitely added some real world context to civil procedure class. Thanks for your comment

Posted by: MARCIA NARINE | Nov 1, 2013 6:06:53 PM

Post a comment