On Sept. 8, 2014, in City of Providence v. First Citizens
., 2014 BL 250170 (Del. Ch.,
Sept. 8, 2014), Chancellor Andre G. Bouchard of
the Court of Chancery of the State of Delaware dismissed
a derivative action that, among other things,
challenged adoption by a board of directors of a forum
selection bylaw provision (‘‘Forum Selection Bylaw’’).
The Court rejected a claim as to the facial validity of the
Forum Selection Bylaw, even though the bylaw mandated
that litigation be filed not in Delaware (the company’s
state of incorporation), but in North Carolina
(where the corporation was headquartered), and even
though the provision was adopted on the day of announcement
of a merger being challenged in the litigation.
As discussed below, this decision, if respected by
other states, may provide a significant opportunity for
boards of directors to avoid multi-jurisdictional merger
litigation and instead confine litigation challenging
mergers to a single chosen forum.
Reproduced with permission from Securities Regulation & Law Report, 46 SRLR 2272, 11/24/2014. Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com