934 del. 73 atlantic reporter, 3d series...934 del. 73 atlantic reporter, 3d series basis, we must...

934 73 ATLANTIC REPORTER, 3d SERIESDel.

basis, we must reject the judicial glossKlug’s ‘‘transportation purposes’’ prongwrongly placed on our PIP statute.49

IV. CONCLUSION

For these reasons, we REVERSE theSuperior Court’s grant of summary judg-ment and REMAND for further proceed-ings consistent with this opinion.

,

BOILERMAKERS LOCAL 154 RE-TIREMENT FUND and Key West Po-lice & Fire Pension Fund, Plaintiffs,

v.

CHEVRON CORPORATION, Samuel H.Armacost, Linnet F. Deily, Robert E.Denham, Robert J. Eaton, Chuck Ha-gel, Enrique Hernandez, Jr., FranklynG. Jenifer, George L. Kirkland, SamNunn, Donald B. Rice, Kevin W. Shar-er, Charles R. Shoemate, John G.Stumpf, Ronald D. Sugar, Carl Ware,and John S. Watson, Defendants.

IClub Investment Partnership,Plaintiff,

v.

FedEx Corporation, James L. Barks-dale, John A. Edwardson, J.R. Hyde,III, Shirley A. Jackson, Steven R. Lor-anger, Gary W. Loveman, Susan C.Schwab, Frederick W. Smith, JoshuaI. Smith, David P. Steiner, and Paul S.Walsh, Defendants.

Civil Action Nos. 7220–CS, 7238–CS.

Court of Chancery of Delaware.

Submitted: April 12, 2013.Decided: June 25, 2013.

Background: Stockholders brought ac-tions against boards of two corporationsfor adopting forum selection bylaws gov-erning disputes relating to the internalaffairs of the corporations, alleging thatthe bylaws were statutorily invalid as be-yond the boards’ authority under DelawareGeneral Corporation Law (DGCL), andthat the bylaws were contractually invalidand thus not enforceable as forum selec-tion clauses. Corporations moved for judg-ment on the pleadings.

49. Because we reverse the trial judge’s grantof summary judgment, we do not reach Kel-ty’s alternative contention that State Farm’s

automobile liability insurance policy settle-ment precluded it from denying PIP benefitsstemming from the same accident.

935Del.BOILERMAKERS LOCAL 154 RET. FUND v. CHEVRONCite as, Del.Ch., 73 A.3d 934 (2013)

Holdings: After consolidation of actions,the Court of Chancery, Strine, Chancellor,held that:(1) bylaws were facially valid under

DGCL, and(2) boards’ unilateral adoption of bylaws

did not render them contractually in-valid on their face.

Judgment for defendants.

1. Corporations and Business Organiza-tions O1263

The bylaws of a corporation constitutepart of a binding broader contract amongthe directors, officers, and stockholdersformed within the statutory framework ofthe Delaware General Corporation Law(DGCL). 8 West’s Del.C. § 101 et seq.

2. Contracts O127(4) Corporations and Business Organiza-

tions O1261A forum selection clause adopted by a

corporate board with the authority toadopt bylaws is valid and enforceable tothe same extent as other contractual forumselection clauses.

3. Action O57(3)Chancery court had the authority, un-

der rule governing consolidation of actions,to consolidate stockholders’ actions againsttwo corporations to address the ripe legalissues of the facial statutory and contrac-tual validity and enforceability of the fo-rum selection bylaws adopted by each cor-poration’s board of directors under theDelaware General Corporation Law(DGCL). 8 West’s Del.C. § 109(b); Courtof Chancery Rule 42(a).

4. Action O58Stockholders waived argument that

chancery court lacked authority to consoli-date actions against two corporations toaddress the issues of the facial statutoryand contractual validity and enforceabilityof board-adopted forum selection bylaws,

where stockholders failed to avail them-selves of the appropriate procedural mech-anism to reargue the court’s ruling inwhich court consolidated the actions toaddress the facial validity claims. Chan-cery Court Rule 59(f).


Stockholders’ filing of a supplementalpleading, which the chancery court author-ized it to do, in response to one corpora-tion’s amended bylaw did not require thecourt to stay its hand and not rule on theripe legal issues of the facial statutory andcontractual validity and enforceability ofthe forum selection bylaws adopted by twocorporations’ board of directors under theDelaware General Corporation Law(DGCL), where the court permitted stock-holders to file supplemental pleadings thatcorporation did not have to answer untilthe consolidated action was resolved, be-cause the supplement would only raise cer-tain additional counts not related to facialstatutory or contractual invalidity, and thecourt’s order was consistent with thecourt’s finding that it would be efficient toresolve the legal questions first, given thatit could moot other claims in both casesand even the new ones raised by the sup-plemental pleadings. 8 West’s Del.C.§ 109(b).


The bylaws of a corporation are pre-sumed to be valid, and the courts willconstrue the bylaws in a manner consistentwith the law rather than strike down thebylaws.


Stockholders’ burden on motion chal-lenging the facial statutory and contractualvalidity of the board-adopted forum selec-tion bylaws of two corporations was a diffi-


cult one: stockholders were required showthat the bylaws could not operate lawfullyor equitably under any circumstances, byshowing that the bylaws did not addressproper subject matters of bylaws as de-fined by the Delaware General Corpora-tion Law (DGCL) and could never operateconsistently with law, and stockholderscould not satisfy their burden by pointingto some future hypothetical application ofthe bylaws that might be impermissible. 8West’s Del.C. § 109(b).


Courts should endeavor to enforcecorporate bylaws to the extent that it ispossible to do so without violating anyone’slegal or equitable rights.


A stockholder can challenge the real-world enforcement of a corporation’s fo-rum selection bylaw; but that review hap-pens when there is a genuine, extantcontroversy in which the forum selectionbylaw is being applied.

10. Corporations and Business Organi-zations O1261

The traditional approach for resolvinga stockholder’s facial challenge to the va-lidity of a corporate bylaw involves judicialreticence to chill corporate freedom bycondemning as invalid a bylaw that is con-sistent with the board’s statutory and con-tractual authority, simply because it mightbe possible to imagine situations when thebylaw might operate unreasonably; suchas-applied challenges are to be raised la-ter, when real-world circumstances giverise to a genuine, concrete dispute requir-ing judicial resolution.


Board-adopted forum selection bylawgoverning disputes relating to the internalaffairs of corporation, which bylaw the

board unilaterally adopted in response tothe inefficient costs of defending againstmultiforum litigation over a single transac-tion or a board decision, was related tocorporation’s business, the conduct of itsaffairs, or the rights of the stockholders,and therefore the bylaw was facially validunder the Delaware General CorporationLaw (DGCL), despite claim that bylaw didnot speak to a ‘‘traditional’’ subject matter;bylaw regulated where stockholders couldexercise their right to bring certain inter-nal affairs claims against corporation andits directors and officers, and bylaw alsorelated to the conduct of the corporationby channeling internal affairs cases intothe courts of the state of incorporation. 8West’s Del.C. § 109(b).


That a corporate board’s action mightinvolve a new use of plain statutory au-thority does not make it invalid under thelaw; boards have the flexibility to respondto changing dynamics in ways that areauthorized by the statutory law.


The real-world application of a corpo-ration’s forum selection bylaw can be chal-lenged by a stockholder as an inequitablebreach of fiduciary duty.


Board-adopted forum selection bylawgoverning disputes relating to the internalaffairs of corporation, which bylaw theboard unilaterally adopted in response tothe inefficient costs of defending againstmultiforum litigation over a single transac-tion or a board decision, was not contractu-ally invalid on its face as a forum selectionclause, on the basis that board adopted thebylaw unilaterally; stockholders were onnotice that, as to those subjects that were


subject of regulation by bylaw under Dela-ware General Corporation Law (DGCL),the board itself could act unilaterally toadopt bylaws addressing those subjects, achange in bylaw was the kind of changethat the overarching statutory and con-tractual regime the stockholders boughtinto explicitly allowed the board to makeon its own, and the statutory regime pro-vided protections for stockholders throughthe indefeasible right of the stockholdersto adopt and amend bylaws themselves. 8West’s Del.C. § 109(b).


Where a corporation’s articles or by-laws put all on notice that the by-laws maybe amended at any time, no vested rightscan arise that would contractually prohibitan amendment.

Michael Hanrahan, Esquire, Paul A.Fioravanti, Jr., Esquire, Tanya E. Pino,Esquire, Kevin H. Davenport, Esquire,Prickett, Jones & Elliott, P.A., Wilming-ton, Delaware; Marc A. Topaz, Esquire,Lee D. Rudy, Esquire, Eric L. Zagar,Esquire, Michael C. Wagner, Esquire,James H. Miller, Esquire, Kessler TopazMeltzer & Check, LLP, Radnor, Pennsyl-vania; Robert D. Klausner, Esquire,Stuart A. Kaufman, Esquire, Klausner,Kaufman, Jensen & Levinson, Plantation,Florida, Attorneys for Plaintiffs Boiler-makers Local 154 Retirement Fund, KeyWest Police & Fire Pension Fund, andIClub Investment Partnership.

William B. Chandler III, Esquire, Tami-ka R. Montgomery, Esquire, Ryan A.McLeod, Esquire, Ian R. Liston, Esquire,Wilson Sonsini Goodrich & Rosati, P.C.,Georgetown, Delaware; David J. Berger,

Esquire, Wilson Sonsini Goodrich & Rosa-ti, P.C., Palo Alto, California, Attorneys forDefendants Chevron Corporation, SamuelH. Armacost, Linnet F. Deily, Robert E.Denham, Robert J. Eaton, Chuck Hagel,Enrique Hernandez, Jr., Franklyn G. Jeni-fer, George L. Kirkland, Sam Nunn, Don-ald B. Rice, Kevin W. Sharer, Charles B.Shoemate, John G. Stumpf, Ronald D.Sugar, Carl Ware, and John S. Watson.

A. Gilchrist Sparks, III, Esquire, Ken-neth J. Nachbar, Esquire, Bradley D.Sorrels, Esquire, Morris, Nichols, Arsht& Tunnell LLP, Wilmington, Delaware,Attorneys for Defendants FedEx Corpo-ration, James L. Barksdale, John A. Ed-wardson, J.R. Hyde, III, Shirley A.Jackson, Steven R. Loranger, Gary W.Loveman, Susan C. Schwab, FrederickW. Smith, Joshua I. Smith, David P.Steiner, and Paul S. Walsh.

OPINION

STRINE, Chancellor.

I. Introduction

The board of Chevron, the oil and gasmajor, has adopted a bylaw providing thatlitigation relating to Chevron’s internal af-fairs should be conducted in Delaware, thestate where Chevron is incorporated andwhose substantive law Chevron’s stock-holders know governs the corporation’s in-ternal affairs. The board of the logisticscompany FedEx, which is also incorporat-ed in Delaware and whose internal affairsare also therefore governed by Delawarelaw, has adopted a similar bylaw providingthat the forum for litigation related toFedEx’s internal affairs should be the De-laware Court of Chancery. The boards ofboth companies have been empowered intheir certificates of incorporation to adoptbylaws under 8 Del. C. § 109(a).1

1. 8 Del. C. § 109(a) (‘‘[A]ny corporation may,in its certificate of incorporation, confer the

power to adopt, amend or repeal bylaws uponthe directorsTTTT’’).


The plaintiffs, stockholders in Chevronand FedEx, have sued the boards foradopting these ‘‘forum selection bylaws.’’The plaintiffs’ complaints are nearly identi-cal and were filed only a few days apart byclients of the same law firm. In Count I,the plaintiffs claim that the bylaws arestatutorily invalid because they are beyondthe board’s authority under the DelawareGeneral Corporation Law (‘‘DGCL’’). InCount IV, the plaintiffs allege that thebylaws are contractually invalid, andtherefore cannot be enforced like othercontractual forum selection clauses underthe test adopted by the Supreme Court ofthe United States in The Bremen v. Zapa-ta Off–Shore Co.,2 because they were uni-laterally adopted by the Chevron and Fe-dEx boards using their power to makebylaws. The plaintiffs have attempted toprove their point by presenting to thiscourt a number of hypothetical situationsin which, they claim, the bylaws mightoperate inconsistently with law or unrea-sonably. The plaintiffs have also claimedthat the boards of Chevron and FedExbreached their fiduciary duties in adoptingthe bylaws.

In this opinion, the court resolves thedefendants’ motion for judgment on thepleadings on the counts relating to the

statutory and contractual validity of thebylaws. Because the two bylaws are simi-lar, present common legal issues, and arethe target of near-identical complaints, thecourt decided to address them together.This is efficient, and is also in the interestsof the parties, because a decision on thelegal validity of the bylaws under theDGCL will moot the plaintiffs’ other chal-lenges if the bylaws are found to be inval-id. And, it also aids the administration ofjustice, because a foreign court that re-spects the internal affairs doctrine, as itmust,3 when faced with a motion to enforcethe bylaws will consider, as a first orderissue, whether the bylaws are valid underthe ‘‘chartering jurisdiction’s domesticlaw.’’ 4 Furthermore, the plaintiffs’ facialstatutory invalidity claim and their relatedcontention that, as a matter of law, thebylaws are not contractually enforceable,have cast a cloud over the defendants’bylaws and those of other corporations. Adecision as to the basic legal questionspresented by the plaintiffs’ complaints willprovide efficiency benefits to not only thedefendants and their stockholders, but toother corporations and their investors.

For these reasons, the court consolidat-ed the Chevron and FedEx cases to ad-dress the purely facial legal challenges to

2. The Bremen v. Zapata Off–Shore Co., 407U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

3. See CTS Corp. v. Dynamics Corp., 481 U.S.69, 90, 107 S.Ct. 1637, 95 L.Ed.2d 67 (1987)(‘‘[A] corporation—except in the rarest situa-tions—is organized under, and governed by,the law of a single jurisdiction, traditionallythe corporate law of the State of its incorpo-ration.’’); Edgar v. MITE Corp., 457 U.S. 624,645, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982)(‘‘The internal affairs doctrine is a conflict oflaws principle which recognizes that only oneState should have the authority to regulate acorporation’s internal affairs—matters pecu-liar to the relationships among or between thecorporation and its current officers, directors,and shareholders—because otherwise a cor-poration could be faced with conflicting de-

mands.’’ (citation omitted)); see also Kamenv. Kemper Fin. Servs., Inc., 500 U.S. 90, 92,111 S.Ct. 1711, 114 L.Ed.2d 152 (1991) (hold-ing that in a derivative suit ‘‘the scope of thedemand requirement embodies the incorpo-rating State’s allocation of governing powerswithin the corporation’’); Burks v. Lasker, 441U.S. 471, 478, 99 S.Ct. 1831, 60 L.Ed.2d 404(1979) (‘‘[T]he first place one must look todetermine the powers of corporate directorsis in the relevant State’s corporation law.’’(citations omitted)).

4. Joseph A. Grundfest & Kristen A. Savelle,The Brouhaha over Intra–Corporate Forum Se-lection Provisions: A Legal, Economic, andPolitical Analysis, 68 Bus. Law. 325, 330(2013) [hereinafter Grundfest & Savelle, Fo-rum Selection Provisions ].


the statutory and contractual validity ofthe bylaws raised by Counts I and IV ofthe plaintiffs’ complaints. The defendantsfiled a motion for judgment on the plead-ings, seeking a dismissal of Counts I andIV, and this is the motion before the courttoday.

After considering the parties’ contend-ing arguments on Count I of the com-plaints, the court finds that the bylaws arevalid under our statutory law. 8 Del. C.§ 109(b) provides that the bylaws of acorporation ‘‘may contain any provision,not inconsistent with law or with the certif-icate of incorporation, relating to the busi-ness of the corporation, the conduct of itsaffairs, and its rights or powers or therights or powers of its stockholders, di-rectors, officers or employees.’’ The fo-rum selection bylaws, which govern dis-putes related to the ‘‘internal affairs’’ ofthe corporations, easily meet these re-quirements.5 The bylaws regulate the fo-rum in which stockholders may bring suit,either directly or on behalf of the corpora-tion in a derivative suit, to obtain redressfor breaches of fiduciary duty by the boardof directors and officers. The bylaws alsoregulate the forum in which stockholdersmay bring claims arising under the DGCLor other internal affairs claims. In otherwords, the bylaws only regulate suitsbrought by stockholders as stockholders incases governed by the internal affairs doc-trine. Thus, the bylaws, by establishingthese procedural rules for the operation ofthe corporation, plainly relate to the ‘‘busi-ness of the corporation[s],’’ the ‘‘conduct of

[their] affairs,’’ and regulate the ‘‘rights orpowers of [their] stockholders.’’ BecauseDelaware law, like federal law, respectsand enforces forum selection clauses, theforum selection bylaws are also not incon-sistent with the law.6 For these reasons,the forum selection bylaws are not faciallyinvalid as a matter of statutory law.

[1] As to Count IV of the complaints,the court finds that the bylaws are validand enforceable contractual forum selec-tion clauses. As our Supreme Court hasmade clear, the bylaws of a Delaware cor-poration constitute part of a bindingbroader contract among the directors, offi-cers, and stockholders formed within thestatutory framework of the DGCL.7 Thiscontract is, by design, flexible and subjectto change in the manner that the DGCLspells out and that investors know aboutwhen they purchase stock in a Delawarecorporation. The DGCL allows the corpo-ration, through the certificate of incorpo-ration, to grant the directors the power toadopt and amend the bylaws unilaterally.8

The certificates of incorporation ofChevron and FedEx authorize their boardsto amend the bylaws. Thus, when inves-tors bought stock in Chevron and FedEx,they knew (i) that consistent with 8 Del. C.§ 109(a), the certificates of incorporationgave the boards the power to adopt andamend bylaws unilaterally; (ii) that 8 Del.C. § 109(b) allows bylaws to regulate thebusiness of the corporation, the conduct ofits affairs, and the rights or powers of itsstockholders; and (iii) that board-adopted

5. See Edgar, 457 U.S. at 645, 102 S.Ct. 2629;VantagePoint Venture P’rs 1996 v. Examen,Inc., 871 A.2d 1108, 1113 (Del.2005).

6. See 8 Del. C. § 109(b) (‘‘The bylaws maycontain any provision, not inconsistent withlawTTTT’’); Ingres Corp. v. CA, Inc., 8 A.3d1143 (Del.2010) (holding that forum selectionclauses are presumptively valid and enforce-able under Delaware law).

7. For two cases making this clear, eightyyears apart, see Airgas, Inc. v. Air Products &Chemicals, Inc., 8 A.3d 1182, 1188 (Del.2010),and Lawson v. Household Finance Corp., 152A. 723, 726 (Del.1930).

8. 8 Del. C. § 109(a).


bylaws are binding on the stockholders.In other words, an essential part of thecontract stockholders assent to when theybuy stock in Chevron and FedEx is onethat presupposes the board’s authority toadopt binding bylaws consistent with 8Del. C. § 109. For that reason, our Su-preme Court has long noted that bylaws,together with the certificate of incorpo-ration and the broader DGCL, form partof a flexible contract between corporationsand stockholders, in the sense that thecertificate of incorporation may authorizethe board to amend the bylaws’ terms andthat stockholders who invest in such corpo-rations assent to be bound by board-adopted bylaws when they buy stock inthose corporations.9

[2] The plaintiffs’ argument to the con-trary—that stockholders’ rights may notbe regulated by board-adopted bylaws—misunderstands the relationship betweenthe corporation and stockholders estab-lished by the DGCL, and attempts to re-vive the outdated ‘‘vested rights’’ doctrine.As cases like Kidsco Inc. v. Dinsmoreshow, that doctrine is inconsistent with thefundamental structure of Delaware’s cor-porate law.10 Thus, a forum selectionclause adopted by a board with the author-ity to adopt bylaws is valid and enforceableunder Delaware law to the same extent asother contractual forum selection clauses.Therefore, this court will enforce the fo-rum selection bylaws in the same way it

enforces any other forum selection clause,in accordance with the principles set downby the United States Supreme Court inBremen 11 and adopted explicitly by ourSupreme Court in Ingres Corp. v. CA,Inc.12

In an attempt to defeat the defendants’motion, the plaintiffs have conjured up anarray of purely hypothetical situations inwhich they say that the bylaws of Chevronand FedEx might operate unreasonably.As the court explains, it would be impru-dent and inappropriate to address thesehypotheticals in the absence of a genuinecontroversy with concrete facts. Delawarecourts ‘‘typically decline to decide issuesthat may not have to be decided or thatcreate hypothetical harm.’’ 13 Under thesettled authority of cases such as FrantzManufacturing Co. v. EAC Industries 14

and Stroud v. Grace,15 there is a presump-tion that bylaws are valid. By challengingthe facial statutory and contractual validityof the forum selection bylaws, the plaintiffstook on the stringent task of showing thatthe bylaws cannot operate validly in anyconceivable circumstance.16 The plaintiffscannot evade this burden by conjuring upimagined future situations where the by-laws might operate unreasonably, especial-ly when they acknowledge that in mostinternal affairs cases the bylaws will notoperate in an unreasonable manner.17

9. See, e.g., Centaur P’rs, IV v. Nat’l Intergp.,Inc., 582 A.2d 923, 928 (Del.1990).

10. 674 A.2d 483 (Del.Ch.1995).

11. The Bremen v. Zapata Off–Shore Co., 407U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

12. 8 A.3d 1143 (Del.2010).

13. 3 Stephen A. Radin, The Business Judg-ment Rule: Fiduciary Duties of Corporate Offi-cers 3498 (6th ed. 2009) (discussing suits overbylaws).

14. 501 A.2d 401, 407 (Del.1985).

15. 606 A.2d 75, 96 (Del.1992) (citing STAARSurgical Co. v. Waggoner, 588 A.2d 1130, 1137n. 2 (Del.1991); Ala. By–Prods. Corp. v. Neal,588 A.2d 255, 258 n. 1 (Del.1991)).

16. E.g., Frantz, 501 A.2d at 407.

17. Tr. of Oral Arg. 64:13–65:6.


Nor does the adherence to the accept-ed standard of review in addressing facialinvalidity claims work any unfairness.Under Bremen and its progeny, like ourSupreme Court’s recent Carlyle deci-sion,18 as-applied challenges to the rea-sonableness of a forum selection clauseshould be made by a real plaintiff whosereal case is affected by the operation ofthe forum selection clause. If a plaintifffaces a motion to dismiss because it filedoutside the forum identified in the forumselection clause, the plaintiff can argueunder Bremen that enforcing the clausein the circumstances of that case wouldbe unreasonable. In addition, if a plain-tiff-stockholder believes that a board isbreaching its fiduciary duties by applyinga forum selection clause to obtain dis-missal of an actual case filed outside theforum designated by the bylaws, it maysue at that time. But the plaintiffs here,who have no separate claims pending thatare affected by the bylaws, may not avoidtheir obligation to show that the bylawsare invalid in all circumstances by imag-ining circumstances in which the bylawsmight not operate in a situationally rea-sonable manner. Such circumstantialchallenges are required to be made basedon real-world circumstances by real par-ties, and are not a proper basis for thesurvival of the plaintiffs’ claims that thebylaws are facially invalid under theDGCL.

Therefore, the defendants’ motion forjudgment on the pleadings on Counts Iand IV is granted.

II. Background And Procedural Posture

A. The Chevron And FedExForum Selection Bylaws

Critical to the resolution of this motionis an understanding of who has the powerto adopt, amend, and repeal the bylaws,and what subjects the bylaws may address

under the DGCL. 8 Del. C. § 109(a) identi-fies who has the power to adopt, amend,and repeal the bylaws:

[T]he power to adopt, amend or repealbylaws shall be in the stockholders enti-tled to voteTTTT Notwithstanding theforegoing, any corporation may, in itscertificate of incorporation, confer thepower to adopt, amend or repeal bylawsupon the directorsTTTT The fact thatsuch power has been so conferred uponthe directors TTT shall not divest thestockholders TTT of the power, nor limittheir power to adopt, amend or repealbylaws.

8 Del. C. § 109(b) states the subjectmatter the bylaws may address:

The bylaws may contain any provision,not inconsistent with law or with thecertificate of incorporation, relating tothe business of the corporation, the con-duct of its affairs, and its rights or pow-ers or the rights or powers of its stock-holders, directors, officers or employees.

Both Chevron’s and FedEx’s certificatesof incorporation conferred on the boardsthe power to adopt bylaws under 8 Del. C.§ 109(a). Thus, all investors who boughtstock in the corporations whose forum se-lection bylaws are at stake knew that (i)the DGCL allows for bylaws to addressthe subjects identified in 8 Del. C.§ 109(b), (ii) the DGCL permits the certifi-cate of incorporation to contain a provisionallowing directors to adopt bylaws unilat-erally, and (iii) the certificates of incorpo-ration of Chevron and FedEx contained aprovision conferring this power on theboards.

Acting consistent with the power con-ferred to the board in Chevron’s certificateof incorporation, the board amended thebylaws and adopted a forum selection by-law. Generally speaking, a forum selec-

18. Nat’l Indus. Gp. (Hldg.) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373 (Del.2013).


tion bylaw is a provision in a corporation’sbylaws that designates a forum as theexclusive venue for certain stockholdersuits against the corporation, either as anactual or nominal defendant, and its di-rectors and employees. On September 29,2010, the board of Chevron, a Delawarecorporation headquartered in California,adopted a forum selection bylaw that pro-vided:

Unless the Corporation consents in writ-ing to the selection of an alternativeforum, the Court of Chancery of theState of Delaware shall be the sole andexclusive forum for (i) any derivativeaction or proceeding brought on behalfof the Corporation, (ii) any action assert-ing a claim of breach of a fiduciary dutyowed by any director, officer or otheremployee of the Corporation to the Cor-poration or the Corporation’s stockhold-ers, (iii) any action asserting a claimarising pursuant to any provision of theDelaware General Corporation Law, or(iv) any action asserting a claim gov-erned by the internal affairs doctrine.Any person or entity purchasing or oth-erwise acquiring any interest in sharesof capital stock of the Corporation shallbe deemed to have notice of and con-sented to the provisions of this [bylaw].19

Several months later, on March 14, 2011,the board of FedEx, a Delaware corpora-tion headquartered in Tennessee, adopteda forum selection bylaw identical to Chev-ron’s.20 Like Chevron, FedEx’s board hadbeen authorized by the certificate of incor-poration to adopt bylaws without a stock-holder vote, and the FedEx board adoptedthe bylaw unilaterally.

Chevron’s board amended its bylaw onMarch 28, 2012 to provide that suits couldbe filed in any state or federal court inDelaware with jurisdiction over the subjectmatter and the parties. The amended by-law also provides that the bylaw would notapply unless the court in Delaware hadpersonal jurisdiction over all the partiesthat were ‘‘indispensable’’ to the action.21

The amended bylaw, with the changes initalics, states:

Unless the Corporation consents in writ-ing to the selection of an alternativeforum, the sole and exclusive forum for(i) any derivative action or proceedingbrought on behalf of the Corporation, (ii)any action asserting a claim of breach ofa fiduciary duty owed by any director,officer or other employee of the Corpo-ration to the Corporation or the Corpo-ration’s stockholders, (iii) any action as-serting a claim arising pursuant to anyprovision of the Delaware General Cor-poration Law, or (iv) any action assert-ing a claim governed by the internalaffairs doctrine shall be a state or feder-al court located within the state of Dela-ware, in all cases subject to the court’shaving personal jurisdiction over theindispensible parties named as defen-dants. Any person or entity purchasingor otherwise acquiring any interest inshares of capital stock of the Corpora-tion shall be deemed to have notice ofand consented to the provisions of this[bylaw].22

In their briefing, the boards of Chevronand FedEx state that the forum selectionbylaws are intended to cover four types ofsuit, all relating to internal corporate gov-ernance:

19. Chevron Compl. ¶ 21.

20. FedEx Compl. ¶ 20.

21. Pls.’ Revised Supplement to Compl. ¶¶ 1–2[hereinafter ‘‘Chevron Supp.’’] (quoting Chev-

ron Corp., Current Report (Form 8–K) (Mar.28, 2012)).

22. Id.


1 Derivative suits. The issue ofwhether a derivative plaintiff is qual-ified to sue on behalf of the corpora-tion and whether that derivativeplaintiff has or is excused from mak-ing demand on the board is a matterof corporate governance, because itgoes to the very nature of who mayspeak for the corporation.

1 Fiduciary duty suits. The law offiduciary duties regulates the rela-tionships between directors, officers,the corporation, and its stockholders.

1 D.G.C.L. suits. The Delaware Gen-eral Corporation Law provides theunderpinning framework for all De-laware corporations. That statutegoes to the core of how such corpora-tions are governed.

1 Internal affairs suits. As the U.S.Supreme Court has explained, ‘‘inter-nal affairs,’’ in the context of corpo-rate law, are those ‘‘matters peculiarto the relationships among or be-tween the corporation and its currentofficers, directors, and sharehold-ers.’’ 23

That is, the description of the forumselection bylaws by the Chevron and Fe-dEx boards is consistent with what theplain language of the bylaws suggests:that these bylaws are not intended to reg-ulate what suits may be brought againstthe corporations, only where internal gov-ernance suits may be brought.24

B. The Defendant Boards Have Identi-fied Multiforum Litigation Over Sin-gle Corporate Transactions Or Deci-sions As The Reason Why TheyAdopted The Bylaws

The Chevron and FedEx boards saythat they have adopted forum selectionbylaws in response to corporations beingsubject to litigation over a single transac-tion or a board decision in more than oneforum simultaneously, so-called ‘‘multifo-rum litigation.’’ 25 The defendants’ open-ing brief argues that the boards adoptedthe forum selection bylaws to address whatthey perceive to be the inefficient costs ofdefending against the same claim in multi-ple courts at one time.26 The brief de-scribes how, for jurisdictional purposes, acorporation is a citizen both of the statewhere it is incorporated and of the statewhere it has its principal place of busi-ness.27 Because a corporation need not be,and frequently is not, headquartered in thestate where it is incorporated, a corpora-tion may be subject to personal jurisdic-tion as a defendant in a suit involvingcorporate governance matters in twostates.28 Therefore, any act that the cor-poration or its directors undertake is po-tentially subject to litigation in at least twostates.29 Furthermore, both state and fed-eral courts may have jurisdiction over theclaims against the corporation. The resultis that any act that the corporation or itsdirectors undertake may be challenged invarious forums within those states simulta-neously.30 The boards of Chevron and Fe-

23. Defs.’ Opening Br. 30–31 (quoting Edgar v.MITE Corp., 457 U.S. 624, 645, 102 S.Ct.2629, 73 L.Ed.2d 269 (1982)) (other citationsomitted).

24. See also Grundfest & Savelle, Forum Selec-tion Provisions, at 370–73.

25. Defs.’ Opening Br. at 6–9.

26. Id. at 9–22.

27. Id.; see also 28 U.S.C. § 1332(c)(1) (defin-ing corporate citizenship for the purposes offederal diversity jurisdiction).

28. Defs.’ Opening Br. 6–9.

29. Id.

30. Id.


dEx argue that multiforum litigation, whenit is brought by dispersed stockholders indifferent forums, directly or derivatively,to challenge a single corporate action, im-poses high costs on the corporations andhurts investors by causing needless coststhat are ultimately born by stockholders,and that these costs are not justified byrational benefits for stockholders frommultiforum filings.31

Thus, the boards of Chevron and FedExclaim to have tried to minimize or elimi-nate the risk of what they view as wastefulduplicative litigation by adopting the fo-rum selection bylaws.32 Chevron and Fe-dEx are not the only boards to have re-cently unilaterally adopted these clauses:in the last three years, over 250 publiclytraded corporations have adopted suchprovisions.33

As the court next explains, neither thewisdom of the Chevron and FedEx boardsin adopting the forum selection bylaws toaddress the prevalence of multiforum liti-gation, or in proceeding by way of a bylaw,rather than proposing an amendment tothe certificate of incorporation, are propermatters for this court to address. Thosequestions are not relevant on this motion.34

C. The Plaintiffs Challenge TheForum Selection Bylaws

Within the course of three weeks inFebruary 2012, a dozen complaints werefiled in this court against Delaware corpo-rations, including Chevron and FedEx,whose boards had adopted forum selectionbylaws without stockholder votes.35 As athreshold issue, these complaints, whichwere all substantively identical and filedby clients of the same accomplished law

31. Id. at 9–22 (citing Frederick H. Alexander& Daniel D. Matthews, The Multi–Jurisdic-tional Stockholder Litigation Problem and theForum Selection Solution, 26 Corporate Coun-sel Weekly 19 (May 11, 2011); Grundfest &Savelle, Forum Selection Provisions; EdwardB. Micheletti & Jenness E. Parker, Multi–Jurisdictional Litigation: Who Caused ThisProblem, and Can It Be Fixed?, 37 Del. J.Corp. L. 1 (2012); Mark Lebovitch et al.,Chaos: A Proposal To Improve Organizationand Coordination in Multi–JurisdictionalMerger–Related Litigation (Dec. 1, 2011),http://www.blbglaw.com/misc files/MakingOrderoutofChaos).

32. Defs.’ Opening Br. 9 (‘‘The detriments ofmulti-jurisdictional duplicative litigation aresignificant.’’).

33. Id. at 21 (citing Grundfest & Savelle, Fo-rum Selection Provisions, at 326).

34. Cf. CA, Inc. v. AFSCME Emps. PensionPlan, 953 A.2d 227, 240 (Del.2008) (‘‘[W]eexpress no view on whether the [b]ylaw ascurrently drafted, would create a better gover-nance scheme from a policy standpoint.’’).

35. Boilermakers Local 154 Ret. Fund v. Price-line.com, Inc., C.A. No. 7216–CS (Del. Ch.

Feb. 6, 2012); Boilermakers Local 154 Ret.Fund v. Danaher Corp., C.A. No. 7218–CS(Del. Ch. Feb. 6, 2012); Boilermakers Local154 Ret. Fund v. CurtissWright Corp., C.A. No.7219–CS (Del. Ch. Feb. 6, 2012); Boilermak-ers Local 154 Ret. Fund v. Chevron Corp., C.A.No. 7220–CS (Del. Ch. Feb. 6, 2012); Suttonv. AutoNation, Inc., C.A. No. 7221–CS (Del.Ch. Feb. 6, 2012); Singh v. Navistar Int’lCorp., C.A. No. 7222–CS (Del. Ch. Feb. 6,2012); Stead v. Franklin Res., Inc., C.A. No.7223–CS (Del. Ch. Feb. 7, 2012); City ofSunrise Gen. Emps.’ Pension Plan v. Super.Energy Servs., Inc., C.A. No. 7224–CS (Del.Ch. Feb. 7, 2012); Laborers’ Local No. 1174Pension Fund v. SPX Corp., C.A. No. 7225–CS(Del. Ch. Feb. 7, 2012); IClub Inv. P’ship v.FedEx Corp., C.A. No. 7238–CS (Del. Ch. Feb.13, 2012); Neighbors v. Air Prods. & Chems.,Inc., C.A. No. 7240–CS (Del.Ch. Feb. 13,2012); Schellman v. Jack in the Box, Inc., C.A.No. 7274–CS (Del. Ch. Feb. 23, 2012).

A separate derivative complaint against theboard of directors of Chevron, relating to theboard’s enactment of the forum selection by-law, was filed in the United States DistrictCourt for the Northern District of Californiaon March 30, 2012. That action was stayedin favor of this Delaware litigation. Bushan-sky v. Armacost, 2012 WL 3276937 (N.D.Cal.Aug. 9, 2012).


firm, alleged that the boards of the defen-dant corporations had no authority toadopt the bylaws, and sought a declarationthat the bylaws were invalid and a breachof fiduciary duty. The complaints alsobrought a salmagundi of other claims, al-leging hypothetical ways in which the fo-rum selection bylaws could potentially beenforced in an unreasonable and unfairmanner, and accusing the directors ofbreaching their fiduciary duties by adopt-ing them.

Ten of the twelve defendant corpora-tions repealed their bylaws, and the com-plaints against them were dismissed.Chevron and FedEx did not repeal theirbylaws and answered the plaintiffs’ com-plaints. The defendants then asked thecourt to hear a consolidated action on thefacial validity of the forum selection by-laws, not only because the plaintiffs’ law-suits were chilling the adoption of suchbylaws under the DGCL, but, most im-portantly, because the ‘‘fundamentalquestion[s]’’ of statutory validity and con-tractual enforceability were ‘‘ripe for ad-judication now[.]’’ 36 The plaintiffs wrotein response that they objected to the de-fendants’ ‘‘attempt to truncate discoveryand abruptly seek an advisory opinion onthe theoretical permissibility of the di-rector-adopted exclusive forum bylaws.’’ 37

Shortly after the receipt of those letters,the court held an office conference on howthe case should proceed. The defendantcorporations argued that the statutory va-lidity and contractual enforceability oftheir forum selection bylaws—as chal-lenged by Counts I and IV—were impor-tant legal questions that could be ad-dressed by dealing with these counts on

motion practice now. The defendants be-lieved that an adjudication of those purelylegal issues would benefit the stockholdersof Delaware corporations, because thestatutory validity and contractual enforce-ability of the companies’ bylaws in actual,real-world situations involving their effecton substantive internal affairs litigationhad been clouded by the present case. Onthe other hand, the plaintiffs’ other counts,which involve their fiduciary duty claimsand arguments about the ways in whichthe forum selection clauses could be ine-quitably adopted or applied in particularsituations, could be determined after thecore questions of facial statutory validityand contractual enforceability had been re-solved. The defendants pointed out that,if they lose, the legal issues are settledagainst them, and if the bylaws are invalid,then the plaintiffs’ other as-applied claimsare moot. But, if the bylaws are statutori-ly and contractually valid and enforceableas a facial matter, then there would be amore concrete legal context for consider-ation of whether the plaintiffs’ fiduciaryduty and as-applied claims are meritoriousor even, on account of the purely hypothet-ical nature of the latter arguments, justici-able.

The plaintiffs resisted this approach, ar-guing that their facial challenges inCounts I and IV should not be resolveduntil discovery was completed on all theirother claims. But, because Chevron andFedEx had made persuasive argumentsthat addressing the facial challenges tothe bylaws would avoid unnecessary costsor delay, especially given the doubt theplaintiffs themselves created about a cor-poration’s statutory power to adopt forumselection bylaws at all,38 the court consoli-

36. Letter to the Ct. from Counsel for Defs.(Oct. 9, 2012).

37. Letter to the Ct. from Counsel for Pls. (Oct.11, 2012).

38. Compare Galaviz v. Berg, 763 F.Supp.2d1170, 1174–75 (N.D.Cal.2011) (ruling that aboard-adopted forum selection clause was un-enforceable), with In re Revlon, Inc. S’holdersLitig., 990 A.2d 940, 960 & n. 8 (Del.Ch.2010)(suggesting that corporations could adopt‘‘charter provisions selecting an exclusive fo-


dated their cases to resolve those commonand narrow questions of law: (i) whetherthe forum selection bylaws are facially in-valid under the DGCL (Count I); and (ii)whether the board-adopted forum selec-tion bylaws are facially invalid as a matterof contract law (Count IV). For thosereasons, a scheduling order was enteredthat specifically contemplated motion prac-tice on the statutory and contractual valid-ity issues common to both cases in CountsI and IV.39

But the plaintiffs have taken the positionthat the court cannot consolidate the casesto address purely legal issues, because, asthey say, it is improper for this court tomake ‘‘a determination of the validity ofthe [b]ylaw[s] in the abstract.’’ 40 Thecourt’s power to consolidate cases to ad-dress purely legal issues is codified in De-laware Court of Chancery Rule 42(a),which provides that:

When actions involving a common ques-tion of law or fact are pending beforethe Court, it may order a joint hearingor trial of any or all the matters in issuein the actions; it may order all theactions consolidated; and it may makesuch orders concerning proceedingstherein as may tend to avoid unneces-sary costs or delay.[3, 4] Under that rule, the court may

consolidate any cases involving a ‘‘commonquestion of law’’ to decide ‘‘any or all thematters.’’ And, here, the order to consoli-

date these actions to address the ripe legalissues—the facial statutory and contractu-al validity and enforceability of the forumselection bylaws adopted by Chevron’s andFedEx’s board of directors under theDGCL—rests on that clear authority.41

[5] Even more surprising still was thatthe plaintiffs also argued in their brief thatthe pleadings had not been closed yet, andfor that reason alone, the court must stayits hand, and not rule on the purely legalissues presented by their own Counts Iand IV.42 The basis for the plaintiffs’ claimwas that they had filed a supplementalpleading (which this court had authorizedit to do) in response to Chevron’s amendedbylaw.43

But the schedule that the court enteredon this consolidated action specifically con-templated that the court would address thecounts contesting the facial statutory valid-ity and contractual enforceability of theforum selection bylaws in a consolidatedaction, and as part and parcel of thatdecision, permitted the plaintiffs to filesupplemental pleadings in the Chevroncase that Chevron did not have to answeruntil this consolidated action was resolved,because the supplement would only raisecertain additional counts not related tofacial statutory or contractual invalidity.44

That order was consistent with the court’sfinding that it would be efficient to resolvethe legal questions first, given that it couldmoot other claims in both cases and even

rum for intra-entity disputes,’’ but properlynoting that ‘‘[t]he issues implicated by anexclusive forum selection provision mustawait resolution in an appropriate case’’).

39. See Order Regarding Limited Coordination& Scheduling (Nov. 19, 2012).

40. Pls.’ Br. in Opp’n 30 (citation omitted).

41. The plaintiffs have also ignored the appro-priate procedural mechanism, Court of Chan-cery Rule 59(f), to reargue the court’s Octoberruling in which it consolidated the cases toaddress the facial validity claims. Havingfailed to avail themselves of the appropriateprocedural mechanism, the plaintiffs have

waived this procedural argument. SeeMcDaniel v. DaimlerChrysler Corp., 860 A.2d321, 323 (Del.2004). For that reason alone,the plaintiffs’ argument that the court cannotaddress the consolidated legal issues mustfail.

42. Pls.’ Br. in Opp’n 29–30.

43. See Order Regarding Limited Coordination& Scheduling (Nov. 19, 2012) (‘‘Plaintiffsshall file their revised Supplement to theComplaintTTTT The Chevron Defendants willagree that the Revised Supplement shall be-come part of the Complaint[.]’’).

44. Id. (providing a schedule for a motion forjudgment on the pleadings and permitting the


the new ones raised by the supplementalpleadings in the Chevron case. By order,a briefing schedule was put in place for theresolution of this motion, which addressesonly Counts I and IV of the plaintiffs’complaints, for which the pleadings areclosed.45 These counts allege that the by-laws are statutorily invalid because theyare beyond the board’s authority under theDGCL, and that board-adopted forum se-lection bylaws are contractually invalid andtherefore not enforceable.46 The plaintiffs’claims that the boards breached their fidu-ciary duties in adopting the bylaws havebeen stayed.47 The plaintiffs understoodthis, and their argument in their brief, thatthis motion addressing their counts relat-ing to purely legal, facial challenges to theforum selection bylaws cannot be consid-ered until their fact-intensive counts areaddressed, contradicts the clear order ofthis court and has no support in the law.If this novel contention were adopted,plaintiffs could cast corporate action indoubt and impair the functioning of a cor-poration, while not allowing a corporationto clear up the doubt by means of tradi-tional motion practice often used to resolvepurely legal questions in a timely manner.Rather, the corporation would not be ableto get a ruling on the purely legal chal-

lenge of facial validity until the court ad-dressed all the more fact-laden counts inthe complaint. Our law does not requirethat approach. Rather, ‘‘[f]acial challengesto the legality of provisions in corporateinstruments are regularly resolved by thisCourt.’’ 48

III. The Standard Of Review

The standard of review on this motion isimportant in framing this consolidated mo-tion. The two sides approach this issuedifferently. The plaintiffs, for their part,simply recite the basic procedural stan-dard, by noting that this court may onlygrant judgment on the pleadings if thereare no material facts in dispute, and oneparty is entitled to judgment as a matterof law.49 Thus, the plaintiffs say, ‘‘[t]heCourt can grant Defendants’ [motion] onlyif unambiguous and unmistakably clearlanguage of the Bylaws renders Defen-dants’ constructions the only reasonableinterpretation.’’ 50 The plaintiffs then de-vote much of their complaints and briefingto arguing that the bylaws are ambiguous,because, they say, the forum selection by-laws could be applied in different ways indifferent factual situations.51

But, the plaintiffs ignore the nature ofthis motion, and the counts of their own

plaintiffs to file supplemental pleadings); seealso Tr. of Office Conf. (Oct. 31, 2012) (grant-ing the defendants’ request to consolidate thecases to address the facial validity of the fo-rum selection bylaws before proceeding withthe other claims).

45. Order Regarding Limited Coordination &Scheduling (Nov. 19, 2012).

46. Chevron Compl. ¶¶ 48–56, FedEx Compl.¶¶ 49–57 (Count I); Chevron Compl. ¶¶ 73–81, FedEx Compl. ¶¶ 72–80 (Count IV).

47. See Tr. of Office Conf. 24–26, 44–45 (Oct.31, 2012).

48. Lions Gate Entm’t Corp. v. Image Entm’tInc., 2006 WL 1668051, at *6–7 (Del.Ch. June5, 2006).

49. Pls.’ Br. in Opp’n 29.

50. Id. (citing JANA Master Fund, Ltd. v. CNETNetworks, Inc., 954 A.2d 335, 338 (Del.Ch.2008); United Rentals, Inc. v. RAM Hldgs.,Inc., 937 A.2d 810, 830 (Del.Ch.2007)).

51. E.g., Pls.’ Br. in Opp’n 5–24, 32–36; Chev-ron Compl. ¶¶ 59–67, FedEx Compl. ¶¶ 58–66 (Count II) (the bylaws conflict with Dela-ware statutes); Chevron Compl. ¶¶ 68–72, Fe-dEx Compl. ¶¶ 67–71 (Count III) (the bylawsimproperly grant jurisdiction over all stock-holders); Chevron Compl. ¶¶ 82–87, FedExCompl. ¶¶ 81–86 (Count V) (the bylaws re-quire claims to be brought where the courtdoes not have jurisdiction over all defen-dants); Chevron Compl. ¶¶ 88–99, FedExCompl. ¶¶ 87–98 (Count VI) (the bylaws im-


complaints to which the defendants’ motionis directed. This motion concerns Count I,in which the plaintiffs alleged that ‘‘thebylaw[s are] invalid because [they are] be-yond the authority granted in 8 Del. C.§ 109(b),’’ and Count IV, in which theplaintiffs claim that ‘‘the bylaw[s are] not[ ] valid and enforceable forum selectionprovision[s].’’ 52 Thus, this motion is onlyconcerned with the facial statutory andcontractual validity of the bylaws, and themotion is expressly not concerned withhow the bylaws might be applied in anyfuture, real-world situation. The plaintiffs’proposed standard, by contrast, is basedon a case in which this court resolved anactual, live controversy over whether a

bylaw could be applied to the real humanevents underlying that case.53

[6, 7] The defendants correctly pointout this error in the plaintiffs’ approach.As our Supreme Court held in the FrantzManufacturing case, ‘‘[t]he bylaws of acorporation are presumed to be valid, andthe courts will construe the bylaws in amanner consistent with the law ratherthan strike down the bylaws.’’ 54 Thus, theplaintiffs’ burden on this motion challeng-ing the facial statutory and contractualvalidity of the bylaws is a difficult one:they must show that the bylaws cannotoperate lawfully or equitably under anycircumstances.55 So, the plaintiffs must

pinge on jurisdiction of federal courts); Chev-ron Supp. ¶¶ 51–52 (Count IX) (the amendedChevron bylaw impinges on federal jurisdic-tion).

52. Chevron Compl. ¶¶ 48–56, FedEx Compl.¶¶ 49–57 (Count I); Chevron Compl. ¶¶ 73–81, FedEx Compl. ¶¶ 72–80 (Count IV) (capi-talization omitted).

53. See JANA, 954 A.2d at 344.

54. Frantz, 501 A.2d at 407 (citation omitted);see also Hollinger Int’l, Inc. v. Black, 844 A.2d1022, 1080–83 (Del.Ch.2004) (distinguishingbetween the board’s legal authority to adopt abylaw and the board’s equitable use of thatauthority), aff’d, 872 A.2d 559 (Del.2005); R.Franklin Balotti & Jesse A. Finkelstein, TheDelaware Law of Corporations & Business Or-ganizations § 1.10 [hereinafter Balotti &Finkelstein, Corporations ] (explaining thatcourts attempt to interpret ‘‘by-laws in har-mony’’ with the corporation’s certificate ofincorporation and positive law, and thus holda bylaw to be invalid when a ‘‘conflict isunavoidable’’).

55. Frantz, 501 A.2d at 407; Edward P.Welch et al., Folk on the Delaware GeneralCorporation Law § 109.4 (2009) [hereinafterWelch et al., Folk on the DGCL ] (‘‘Bylawsare presumed to be valid. Courts will inter-pret a bylaw in a manner consistent with thelaw rather than striking it down. The rulesof construction used to interpret statutes,contracts, and other written instruments ap-

ply to bylaws.’’ (citations omitted)). Ofcourse, often, claims about the facial invalidi-ty of a provision come to the courts when aparty challenges the legislature’s power toenact a statute. Those principles are equallyapplicable here. See, e.g., Hibbert v. Holly-wood Park, Inc., 457 A.2d 339, 342–43 (Del.1983) (noting that ‘‘the rules which are usedto interpret statutes, contracts, and otherwritten instruments are applicable when con-struing corporate charters and bylaws ’’ (em-phasis added)); Downs v. Jacobs, 272 A.2d706, 707 (Del.1970) (‘‘Courts presume everylegislative act constitutional and indulge ev-ery intendment in favor of validity.’’); Statev. Hobson, 83 A.2d 846, 851 (Del.1951)(‘‘Even if the Delaware statute, read literally,were susceptible of the construction whichdefendant urges, it would be our duty to re-ject that construction, since we are required,as between two possible constructions, toadopt the one which will uphold its validi-ty.’’); see also, e.g., R.M. v. V.H., 2006 WL1389864, at *8 (Del.Fam.Ct. Jan. 19, 2006)(‘‘A party may challenge a statute as uncon-stitutional on its face or as applied to a par-ticular set of facts. A facial challenge is themost difficult to bring successfully becausethe challenger must establish that there is noset of circumstances under which the statutewould be valid.’’); accord United States v.Salerno, 481 U.S. 739, 745, 107 S.Ct. 2095,95 L.Ed.2d 697 (1987) (describing a facialchallenge as the ‘‘most difficult’’ challenge tosucceed on because the statute must not op-erate lawfully in any circumstances).


show that the bylaws do not address prop-er subject matters of bylaws as defined bythe DGCL in 8 Del. C. § 109(b), and cannever operate consistently with law.56 Theplaintiffs voluntarily assumed this burdenby making a facial validity challenge,57 andcannot satisfy it by pointing to some futurehypothetical application of the bylaws thatmight be impermissible.58

[8–10] The answer to the possibilitythat a statutorily and contractually validbylaw may operate inequitably in a partic-ular scenario is for the party facing aconcrete situation to challenge the case-specific application of the bylaw, as in thelandmark case of Schnell v. Chris–CraftIndustries.59 The settled approach of ourlaw regarding bylaws is that courts shouldendeavor to enforce them to the extentthat it is possible to do so without violat-ing anyone’s legal or equitable rights.60

This is also consistent with the doctrinelaid down by the U.S. Supreme Court de-cision in Bremen and its progeny, whichrequires courts to give as much effect as ispossible to forum selection clauses andonly deny enforcement of them to the lim-ited extent necessary to avoid some funda-mentally inequitable result or a result con-trary to positive law.61 Thus, a plaintiffcan challenge the real-world enforcementof a forum selection bylaw. But that re-view happens when there is a genuine,extant controversy in which the forum se-lection bylaw is being applied. Under ourSupreme Court’s precedent in Stroud andFrantz, which this court must follow, theappropriate question now is simply wheth-er the bylaws are valid under the DGCL,and whether they form facially valid con-tracts between the stockholders, the di-rectors and officers, and the corporation.62

56. Stroud v. Grace, 606 A.2d 75, 79 (Del.1992); Frantz, 501 A.2d at 407.

57. Welch et al., Folk on the DGCL § 109.3.1(‘‘The party asserting that bylaws were notproperly adopted bears the burden to proveit.’’).

58. E.g., Stroud, 606 A.2d at 79 (‘‘The validityof corporate action under [a bylaw] mustawait its actual use.’’).

59. Schnell v. Chris–Craft Indus., Inc., 285A.2d 437 (Del.1971); see also Moran v. House-hold Int’l, Inc., 500 A.2d 1346, 1357 (Del.1985) (concluding that although the boardhad the power to adopt a poison pill, the‘‘ultimate response’’ of the board to a take-over must be judged by the ‘‘[d]irectors’ ac-tions at that time’’); accord Stroud, 606 A.2dat 96 (‘‘It is not an overstatement to suggestthat every valid by-law is always susceptibleto potential misuse. Without a showing ofabuse TTT we must TTT uphold the validity of[a bylaw].’’).

60. Welch et al., Folk on the DGCL § 109.4;Balotti & Finkelstein, Corporations § 1.10.

61. The Bremen v. Zapata Off–Shore Co., 407U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513(1972).

62. The Frantz and Stroud approach is thetraditional one. Although it differs from theapproach taken by the Supreme Court in the2008 CA case, the Supreme Court in that casecited Frantz and Stroud approvingly and asgood law, stating that the novel posture of thecase dictated the different standard of review.CA, Inc. v. AFSCME Emps. Pension Plan, 953A.2d 227, 238 (Del.2008) (‘‘Were this issuebeing presented in the course of litigationinvolving the application of the Bylaw to aspecific set of facts, we would start with thepresumption that the Bylaw is valid and, ifpossible, construe it in a manner consistentwith the law. The factual context in whichthe Bylaw was challenged would inform ouranalysis, and we would ‘exercise caution [be-fore] invalidating corporate acts based uponhypothetical injuriesTTTT’ ’’ (citing Frantz, 501A.2d at 407, and quoting Stroud, 606 A.2d at79)). The reason for this different approachmay be intuited. In CA, the Supreme Courtwas operating under a novel constitutionalamendment that gave it the authority to an-swer questions posed to it by the Securitiesand Exchange Commission on a limited paperrecord, without the full benefit of context thatcomes from traditional adversarial litigation.See 76 Del. Laws ch. 37, § 1 (2007) (amend-ing Del. Const. art. IV, § 11(8)). The Su-preme Court may have feared that by giving a


The court turns to these questions now.

IV. Legal Analysis

A. The Board–Adopted Forum SelectionBylaws Are Statutorily Valid

Given this procedural context, the courtstructures its analysis to mirror the twofacial claims of invalidity as they have beenpresented in the complaints. First, thecourt looks at Count I’s challenge that the‘‘bylaw[s are] invalid because [they are]beyond the authority granted in 8 Del. C.§ 109(b).’’ 63 As to that claim, the courtmust determine whether the adoption ofthe forum selection bylaws was beyond theboard’s authority in the sense that they donot address a proper subject matter under8 Del. C. § 109(b), which provides that:

The bylaws may contain any provision,not inconsistent with law or with thecertificate of incorporation, relating tothe business of the corporation, the con-duct of its affairs, and its rights or pow-ers or the rights or powers of its stock-holders, directors, officers or employees.

Thus, the court must decide if the bylawsare facially invalid under the DGCL be-cause they do not relate to the business ofthe corporations, the conduct of their af-fairs, or the rights of the stockholders.

After first making that determination,the court then addresses Count IV’s chal-lenge that ‘‘the bylaw[s are] not a validand enforceable forum selection provi-sion.’’ 64 That is, even if forum selectionbylaws regulate proper subject matter un-der 8 Del. C. § 109(b), the plaintiffs allegethat forum selection bylaws are contractu-ally invalid because they have been unilat-erally adopted by the board.65

1. The Forum Selection Bylaws Reg-ulate A Proper Subject Matter

Under 8 Del. C. § 109(b)

[11] Having challenged whether thebylaws are authorized by 8 Del. C.§ 109(b), the plaintiffs have to confront thebroad subjects that § 109(b) permits by-laws to address. The DGCL provides thatbylaws may address any subject, ‘‘not in-consistent with law or with the certificateof incorporation, relating to the business ofthe corporation, the conduct of its affairs,and its rights or powers or the rights orpowers of its stockholders, directors, offi-cers or employees.’’ 66 The most impor-tant consideration for a court in interpret-ing a statute is the words the GeneralAssembly used in writing it.67 As a matterof easy linguistics, the forum selection by-

federal regulatory body a flat indication that abylaw was ‘‘valid’’ or not based on a recordconsisting of a long letter, it would create thefalse impression that bylaws of the kind atissue were immune from challenge in all cir-cumstances. Thus, rather than risk such anoverbroad implication, the court took a differ-ent approach, finding that in that unusualcontext the variance from the settled standardwas the more modest approach. In the moretraditional context here of a facial challengeto the validity of a bylaw, the more modest,restrained, and prudent approach is the tradi-tional one under Frantz and Stroud. Thatapproach involves judicial reticence to chillcorporate freedom by condemning as invalida bylaw that is consistent with the board’sstatutory and contractual authority, simplybecause it might be possible to imagine situa-tions when the bylaw might operate unrea-sonably. By long-standing, settled law, such

as-applied challenges are to be raised later,when real-world circumstances give rise to agenuine, concrete dispute requiring judicialresolution.

63. Chevron Compl. ¶¶ 50–58, FedEx Compl.¶¶ 49–57.

64. Chevron Compl. ¶¶ 73–81, FedEx Compl.¶¶ 72–80.

65. Chevron Compl. ¶ 74; FedEx Compl. ¶ 73.

66. 8 Del. C. § 109(b).

67. E.g., New Cingular Wireless PCS v. SussexCty. Bd. of Adjustment, 65 A.3d 607, 611 (Del.2013) (‘‘It is axiomatic that a statute TTT is tobe interpreted according to its plain and ordi-nary meaning.’’ (citation omitted)); ScatteredCorp. v. Chi. Stock Exch., Inc., 671 A.2d 874,877 (Del.Ch.1994) (‘‘A determination of the


laws address the ‘‘rights’’ of the stockhold-ers, because they regulate where stock-holders can exercise their right to bringcertain internal affairs claims against thecorporation and its directors and officers.68

They also plainly relate to the conduct ofthe corporation by channeling internal af-fairs cases into the courts of the state ofincorporation, providing for the opportuni-ty to have internal affairs cases resolvedauthoritatively by our Supreme Court ifany party wishes to take an appeal.69

That is, because the forum selection by-laws address internal affairs claims, thesubject matter of the actions the bylawsgovern relates quintessentially to ‘‘the cor-poration’s business, the conduct of its af-fairs, and the rights of its stockholders[qua stockholders].’’

Perhaps recognizing the weakness ofany argument that the forum selection by-laws fall outside the plain language of 8Del. C. § 109(b), the plaintiffs try to arguethat judicial gloss put on the language ofthe statute renders the bylaws facially in-valid.70 The plaintiffs contend that thebylaws do not regulate permissible subjectmatters under 8 Del. C. § 109(b), because

they attempt to regulate an ‘‘external’’matter, as opposed to, an ‘‘internal’’ matterof corporate governance.71 The plaintiffsattempt to support this argument with aclaim that traditionally there have onlybeen three appropriate subject matters ofbylaws: stockholder meetings, the boardof directors and its committees, and offi-cerships.72

But even if one assumes that judicialstatements could limit the plain statutorywords in the way the plaintiffs claim(which is dubious), the judicial decisions donot aid the plaintiffs. The plaintiffs take acramped view of the proper subject matterof bylaws.73 The bylaws of Delaware cor-porations have a ‘‘procedural, process-ori-ented nature.’’ 74 It is doubtless true thatour courts have said that bylaws typicallydo not contain substantive mandates, butdirect how the corporation, the board, andits stockholders may take certain actions.75

8 Del. C. § 109(b) has long been under-stood to allow the corporation to set ‘‘self-imposed rules and regulations [that are]deemed expedient for its convenient func-tioning.’’ 76 The forum selection bylawshere fit this description. They are pro-

General Assembly’s intent must, where possi-ble, be based on the language of the statuteitself. In divining the legislative intent, statu-tory language, where possible, should be ac-corded its plain meaning.’’ (citations omit-ted)).

68. CA, Inc. v. AFSCME Emps. Pension Plan,953 A.2d 227, 236–37 (Del.2008).

69. See Grundfest & Savelle, Forum SelectionProvisions, at 374.

70. E.g., CA, Inc., 953 A.2d at 235 & n. 15Hollinger Int’l, Inc. v. Black, 844 A.2d 1022,1078–79 & n. 128 (Del.Ch.2004), aff’d, 872A.2d 559 (Del.2005); Gow v. Consol. Copper-mines Corp., 165 A. 136, 140 (Del.Ch.1933).

71. Pls.’ Br. in Opp’n 39–40.

72. Id. at 44.

73. See, e.g., Hollinger, 844 A.2d at 1078 (‘‘TheDGCL is intentionally designed to provide di-rectors and stockholders with flexible authori-ty [to adopt bylaws], permitting great discre-tion for private ordering and adaptation.That capacious grant of power is policed inlarge part by the common law of equity, inthe form of fiduciary duty principles.’’); Bal-otti & Finkelstein, Corporations § 1.10 (‘‘By-laws that reasonably regulate broader [stock-holder] rights may be valid, especially ifcourts follow the general rule of constructionand attempt to harmonize the by-law regula-tion and the broader right.’’ (citation omit-ted)).

74. CA, Inc. v. AFSCME Emps. Pension Plan,953 A.2d 227, 236–37 (Del.2008).

75. Id.

76. Gow v. Consol. Coppermines Corp., 165 A.136, 140 (Del.Ch.1933).


cess-oriented, because they regulate wherestockholders may file suit, not whether thestockholder may file suit or the kind ofremedy that the stockholder may obtain onbehalf of herself or the corporation. Thebylaws also clearly address cases of thekind that address ‘‘the business of thecorporation, the conduct of its affairs, andTTT the rights or powers of its stockhold-ers, directors, officers or employees,’’ be-cause they govern where internal affairscases governed by state corporate law maybe heard.77 These are the kind of claimsmost central to the relationship betweenthose who manage the corporation and thecorporation’s stockholders.

By contrast, the bylaws would be regu-lating external matters if the boardadopted a bylaw that purported to bind aplaintiff, even a stockholder plaintiff, whosought to bring a tort claim against thecompany based on a personal injury shesuffered that occurred on the company’spremises or a contract claim based on acommercial contract with the corporation.The reason why those kinds of bylawswould be beyond the statutory language of8 Del. C. § 109(b) is obvious: the bylaws

would not deal with the rights and powersof the plaintiff-stockholder as a stockhold-er.78 As noted earlier, the defendantsthemselves read the forum selection by-laws in a natural way to cover only inter-nal affairs claims brought by stockholdersqua stockholders.

Nor is it novel for bylaws to regulatehow stockholders may exercise their rightsas stockholders. For example, an advancenotice bylaw ‘‘requires stockholders wish-ing to make nominations or proposals at acorporation’s annual meeting to give noticeof their intention in advance of so doing.’’ 79

Like such bylaws, which help organizewhat could otherwise be a chaotic stock-holder meeting, the forum selection bylawsare designed to bring order to what theboards of Chevron and FedEx say theyperceive to be a chaotic filing of duplicativeand inefficient derivative and corporatesuits against the directors and the corpora-tions. The similar purpose of the advancenotice bylaws and the forum selection by-laws reinforce that forum selection bylawshave a proper relationship to the businessof the corporation and the conduct of itsaffairs under 8 Del. C. § 109(b).80

77. 8 Del. C. § 109(b).

78. See also Grundfest & Savelle, Forum Selec-tion Provisions, at 369–70 (‘‘[A]s much ascontract rights can legitimately be regulatedthrough forum selection provisions, it followsthat stockholders’ rights to pursue intra-cor-porate claims can also be regulated by [forumselection] provisions. To be sure, this conclu-sion would arguably not follow (or not hold asstrongly) if the forum selection provisionsought to regulate the right to pursue causesof action that were not intra-corporate innature because then the provision would notbe seeking to regulate the stockholder’s rightsas a stockholder and would be extended beyondthe contract that defines and governs the stock-holders’ rights.’’ (emphasis added)).

79. JANA Master Fund, Ltd. v. CNET Networks,Inc., 954 A.2d 335, 344 (Del.Ch.2008) (cita-tion omitted), aff’d, 947 A.2d 1120 (Del.2008)(Table).

80. The plaintiffs seek to bolster their argu-ment that the forum selection bylaws go be-yond the board’s statutory authority under 8Del. C. § 109(b) by claiming that the bylawsregulate not only the ‘‘rights and powers of[the] stockholders,’’ as is permitted under thestatutory text, but also the rights and powersof former stockholders. Chevron Compl. ¶ 51;FedEx Compl. ¶ 50. The plaintiffs cite theexample of stockholders who are cashed outin a short-form merger, and, having beencashed out, sue the board for a breach offiduciary duty. As with many of the plaintiffs’challenges to the bylaws, this is properly seenas an as-applied challenge, which should beaddressed when the issue is actually ripe. Butin any case, the plaintiffs do not cite any ruleof statutory construction that justifies reading8 Del. C. § 109(b) in the contorted fashionthey propose. The only reason that so-called‘‘former stockholders’’ can sue under 8 Del. C.§ 253 is because they were stockholders atthe time of the merger. In other words, it is


The plaintiffs’ argument, then, reducesto the claim that the bylaws do not speakto a ‘‘traditional’’ subject matter, andshould be ruled invalid for that reasonalone. For starters, the factual premise ofthis argument is not convincing. The by-laws cannot fairly be argued to regulate anovel subject matter: the plaintiffs ignorethat, in the analogous contexts of LLCagreements and stockholder agreements,the Supreme Court and this court haveheld that forum selection clauses are val-id.81 But in any case, the Supreme Courtlong ago rejected the position that boardaction should be invalidated or enjoinedsimply because it involves a novel use ofstatutory authority. In Moran v. House-hold International in 1985, the plaintiffargued that a corporation could not use itspowers to issue rights to purchase sharesof preferred stock in the form of a share-holder rights plan—a.k.a. poison pill—thesole purpose of which was to allow theboard to defend against tender offers ad-dressed solely to stockholders.82 The Su-preme Court rejected the appellants’ argu-ment that 8 Del. C. § 157 had never beenused to authorize the issuance of rights forthe purpose of defeating a hostile take-over.83 Rather, echoing its recent iconicdecision in Unocal, the court reiteratedthat ‘‘our corporate law is not static. Itmust grow and develop in response to,indeed in anticipation of, evolving concepts

and needs. Merely because the GeneralCorporation Law is silent as to a specificmatter does not mean that it is prohibit-ed.’’ 84

[12] Just as the board of Householdwas permitted to adopt the pill to addressa future tender offer that might threatenthe corporation’s best interests, so too dothe boards of Chevron and FedEx havethe statutory authority to adopt a bylaw toprotect against what they claim is a threatto their corporations and stockholders, thepotential for duplicative law suits in multi-ple jurisdictions over single events. AsMoran makes clear, that a board’s actionmight involve a new use of plain statutoryauthority does not make it invalid underour law, and the boards of Delaware corpo-rations have the flexibility to respond tochanging dynamics in ways that are au-thorized by our statutory law. Nor, inaddressing this facial challenge, is it possi-ble to conceive that choosing the mostobviously reasonable forum—the state ofincorporation, Delaware—so that internalaffairs cases will be decided in the courtswhose Supreme Court has the authorita-tive final say as to what the governing lawmeans, somehow takes the forum selectionbylaws outside of 8 Del. C. § 109(b)’sbroad authorizing language.85

not the case that a bylaw in effect at the timethat a stockholder’s internal affairs claimarose cannot bind that stockholder simply be-cause the transaction she is challenging re-sulted in her no longer being a stockholder.That bylaw continues to bind her because herright to sue continues to be based on herstatus as a stockholder.

81. Elf Atochem N. Am., Inc. v. Jaffari, 727A.2d 286 (Del.1999); Baker v. Impact Hldg.,Inc., 2010 WL 1931032 (Del.Ch. May 13,2010).

82. Moran v. Household Int’l, Inc., 500 A.2d1346 (Del.1985).

83. Id. at 1351.

84. Id. (quoting Unocal Corp. v. Mesa Petro-leum Co., 493 A.2d 946, 957 (Del.1985)).

85. See Edgar v. MITE Corp., 457 U.S. 624,645, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982)(‘‘The internal affairs doctrine is a conflict oflaws principle which recognizes that only oneState should have the authority to regulate acorporation’s internal affairs—matters pecu-liar to the relationships among or between thecorporation and its current officers, directors,and shareholdersTTTT’’).


[13] Furthermore, the bylaws here aresubject to the same, plus even more, con-trols on their misuse than the pill foundvalid in Moran. Like a board that hasadopted a poison pill in case of some futurethreat and can redeem it when a tenderoffer poses no threat, the boards of thecompanies in this case have reserved theright in the bylaw itself—as is traditionalfor any party affected by a contractualforum provision—to waive the corpora-tion’s rights under the bylaw in a particu-lar circumstance in order to meet theirobligation to use their power only for prop-er corporate purposes.86 And as with allexercises of fiduciary authority, the real-world application of a forum selection by-law can be challenged as an inequitablebreach of fiduciary duty.87 But, as a dis-tinguished scholar has noted, ‘‘[t]he pre-sumption is not that the [bylaw] is invalidupon adoption because it might, undersome undefined and hypothetical set oflater-evolving circumstances, be improper-ly applied.’’ 88

And forum selection clauses have addi-tional safeguards that poison pills do nothave. For starters, unlike typical poisonpills, board-adopted forum selection by-laws are subject, as will be discussed morelater, to the most direct form of attack bystockholders who do not favor them:stockholders can simply repeal them by amajority vote.89 In addition, because thecorporation must raise the forum selection

clause as a jurisdictional defense if itwishes to obtain dismissal of a case filed ina different forum outside of the state se-lected in the bylaws, the enforceability ofthe forum selection bylaws will be ana-lyzed under the Bremen test in any casewhere an affected stockholder plaintiff re-sists compliance, as the court will explainin more depth later.90 That is, the boardmust voluntarily submit the forum selec-tion clause to the scrutiny of the courts if aplaintiff does not comply with it.

Therefore, the court concludes that fo-rum selection bylaws are statutorily validunder Delaware law, and Count I of theplaintiffs’ complaints is dismissed. Thecourt now considers whether a forum se-lection bylaw is contractually invalid whenadopted by the board unilaterally.

2. The Board–Adopted Bylaws Are NotContractually Invalid As Forum Se-lection Clauses Because They WereAdopted Unilaterally By The Board

[14] Despite the contractual nature ofthe stockholders’ relationship with the cor-poration under our law, the plaintiffs ar-gue, in Count IV of their complaints, thatthe forum selection bylaws by their natureare different and cannot be adopted by theboard unilaterally. The plaintiffs’ argumentis grounded in the contention that a board-adopted forum selection bylaw cannot be acontractual forum selection clause because

86. Both bylaws begin: ‘‘Unless the Corpora-tion consents in writing to the selection of analternative forumTTTT’’ Chevron Supp. ¶ 1;FedEx Compl. ¶ 20.

87. Schnell v. Chris–Craft Indus., Inc., 285A.2d 437, 439 (Del.1971).

88. Grundfest & Savelle, Forum Selection Pro-visions, at 331.

89. See 8 Del. C. § 109(a).

90. See The Bremen v. Zapata Off–Shore Co.,407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513

(1972); Ingres Corp. v. CA, Inc., 8 A.3d 1143(Del.2010); see also Grundfest & Savelle, Fo-rum Selection Provisions, at 378 (‘‘[F]orumselection bylaws are perhaps unique amongall bylaws in that they can never be enforcedby the corporation unless the corporationtriggers prior judicial scrutiny designed toassure that the provision does not violate anylegitimate stockholder right. This fact standsin sharp contrast to all other bylaw provisionsthat allow boards to act without first petition-ing for judicial relief.’’).


the stockholders do not vote in advance ofits adoption to approve it.91 The plaintiffsacknowledge that contractual forum selec-tion clauses are ‘‘prima facie valid’’ underThe Bremen v. Zapata Off–Shore Co. andIngres Corp. v. CA, Inc., and that they arepresumptively enforceable.92 But, theplaintiffs say, the forum selection bylawsare contractually invalid in this case, be-cause they were adopted by a board, rath-er than by Chevron’s and FedEx’s dis-persed stockholders. The plaintiffs arguethat this method of adopting a forum selec-tion clause is invalid as a matter of con-tract law, because it does not require theassent of the stockholders who will beaffected by it. Thus, in the plaintiffs’ view,there are two types of bylaws: (i) contrac-tually binding bylaws that are adopted bystockholders; (ii) non-contractually bind-ing bylaws that are adopted by boardsusing their statutory authority conferredby the certificate of incorporation.93

[15] By this artificial bifurcation, theplaintiffs misapprehend fundamental prin-ciples of Delaware corporate law. Ourcorporate law has long rejected the so-called ‘‘vested rights’’ doctrine.94 Thatvested rights view, which the plaintiffshave adopted as their own, ‘‘asserts thatboards cannot modify bylaws in a mannerthat arguably diminishes or divests pre-existing shareholder rights absent stock-holder consent.’’ 95 As then-Vice Chancel-lor, now Justice, Jacobs explained in theKidsco case, under Delaware law, where acorporation’s articles or bylaws ‘‘put all onnotice that the by-laws may be amended atany time, no vested rights can arise thatwould contractually prohibit an amend-ment.’’ 96

In an unbroken line of decisions datingback several generations, our SupremeCourt has made clear that the bylaws con-stitute a binding part of the contract be-tween a Delaware corporation and itsstockholders.97 Stockholders are on notice

91. Pls.’ Br. in Opp’n 49–50.

92. Bremen, 407 U.S. at 10, 92 S.Ct. 1907;Ingres, 8 A.3d 1143.

93. Although the plaintiffs’ argument suggeststhat a forum selection provision accomplishedby a certificate amendment would be morelegitimate in some normative sense becausestockholders approved the amendment, theplaintiffs ignore that a certificate provision isharder for stockholders to reverse. See 8 Del.C. § 242(b)(1) (requiring a board resolutionand stockholder vote for a proper amendmentto the corporation’s certificate of incorpo-ration). By contrast, in the case of a board-adopted forum selection bylaw, the stockhold-ers can act unilaterally to amend or repeal theprovision. Id. § 109(a) (‘‘After a corporationother than a nonstock corporation has re-ceived any payment for any of its stock, thepower to adopt, amend or repeal bylaws shallbe in the stockholders entitled to vote.’’). Forpresent purposes, however, the issue is notwhether someone might deem it more legiti-mate in some sense to proceed by an amend-ment to the certificate of incorporation ratherthan by a bylaw. That decision was for theChevron and FedEx boards in the first in-

stance, and the stockholders have multipletools to hold the boards accountable if thestockholders disagree with it.

94. See, e.g., Fed. United Corp. v. Havender, 11A.2d 331, 335 (Del.1940) (holding that pre-ferred stockholders did not have a ‘‘vested’’right to accrued dividends).

95. Grundfest & Savelle, Forum Selection Pro-visions, at 376.

96. Kidsco Inc. v. Dinsmore, 674 A.2d 483, 492(Del.Ch.1995) (emphasis added) (citing Rovenv. Cotter, 547 A.2d 603, 608 (Del.Ch.1988));see also Willam Meade Fletcher, Fletcher Cy-clopedia of the Law of Corporations § 4176(updated 2012) (‘‘It is presumed that a personwho becomes a shareholder in, or a memberof, a corporation does so with knowledge andimplied assent that its bylaws may be amend-ed.’’ (citations omitted)).

97. Airgas, Inc. v. Air Prods. & Chems., Inc., 8A.3d 1182, 1188 (Del.2010); Centaur P’rs, IVv. Nat’l Intergp., Inc., 582 A.2d 923, 928 (Del.1990); Hibbert v. Hollywood Park, Inc., 457A.2d 339, 342–43 (Del.1983); Lawson v.


that, as to those subjects that are subjectof regulation by bylaw under 8 Del. C.§ 109(b), the board itself may act unilater-ally to adopt bylaws addressing those sub-jects.98 Such a change by the board is notextra-contractual simply because the boardacts unilaterally; rather it is the kind ofchange that the overarching statutory andcontractual regime the stockholders buyinto explicitly allows the board to make onits own.99 In other words, the Chevronand FedEx stockholders have assented toa contractual framework established bythe DGCL and the certificates of incorpo-ration that explicitly recognizes that stock-holders will be bound by bylaws adoptedunilaterally by their boards.100 Under thatclear contractual framework, the stock-holders assent to not having to assent toboard-adopted bylaws.101 The plaintiffs’argument that stockholders must approvea forum selection bylaw for it to be con-tractually binding is an interpretation thatcontradicts the plain terms of the contrac-tual framework chosen by stockholderswho buy stock in Chevron and FedEx.Therefore, when stockholders have author-ized a board to unilaterally adopt bylaws,it follows that the bylaws are not contrac-tually invalid simply because the board-

adopted bylaw lacks the contemporaneousassent of the stockholders.102 Accordingly,the conclusion reached by the UnitedStates District Court for the NorthernDistrict of California in Galaviz v. Berg, acase on which the plaintiffs rely heavily—that board-adopted bylaws are not likeother contracts because they lack thestockholders’ assent—rests on a failure toappreciate the contractual framework es-tablished by the DGCL for Delaware cor-porations and their stockholders.103

Even so, the statutory regime providesprotections for the stockholders, throughthe indefeasible right of the stockholdersto adopt and amend bylaws themselves.‘‘[B]y its terms Section 109(a) vests in theshareholders a power to adopt, amend orrepeal bylaws that is legally sacrosanct,i.e., the power cannot be non-consensuallyeliminated or limited by anyone other thanthe legislature itself.’’ 104 Thus, eventhough a board may, as is the case here,be granted authority to adopt bylaws,stockholders can check that authority byrepealing board-adopted bylaws. And, ofcourse, because the DGCL gives stock-holders an annual opportunity to elect di-rectors,105 stockholders have a potent toolto discipline boards who refuse to accede

Household Fin. Corp., 152 A. 723, 726 (Del.1930).

98. Kidsco, 674 A.2d at 492–93.

99. Stockholders likewise agree that a requi-site majority of other stockholders may adoptbylaws with which they do not agree. Adissenting stockholder can no more object tothe authority of a board to adopt a bylaw thanit could object to the requisite majority ofstockholders adopting a bylaw.

100. Kidsco, 674 A.2d at 492–93 (‘‘[T]his Courthas held that where a corporation’s by-lawsput all on notice that the by-laws may beamended at any time, no vested rights canarise that would contractually prohibit anamendment.’’); see also Roven, 547 A.2d at608; accord Centaur P’rs, 582 A.2d at 928(‘‘Corporate charters and by-laws are con-

tracts among the shareholders of a corpora-tionTTTT’’).

101. CA, Inc. v. AFSCME Emps. Pension Plan,953 A.2d 227, 231 (Del.2008) (discussing thepower of a board to adopt bylaws withoutstockholder assent under the contractualframework of the DGCL).

102. Kidsco, 674 A.2d at 492–93; see also 8Del. C. § 109(b).

103. 763 F.Supp.2d 1170, 1174 (N.D.Cal.2011); see Grundfest & Savelle, Forum Selec-tion Provisions, at 407 (‘‘[I]f the Galaviz anal-ysis stands then much of standard corporatelaw practice regarding the amendment of by-laws must fall, and much larger bodies ofcorporate law must be rewritten.’’).

104. CA, Inc., 953 A.2d at 232.

105. See 8 Del. C. § 211.


to a stockholder vote repealing a forumselection clause.106 Thus, a corporation’sbylaws are part of an inherently flexiblecontract between the stockholders and thecorporation under which the stockholdershave powerful rights they can use to pro-tect themselves if they do not want board-adopted forum selection bylaws to be partof the contract between themselves andthe corporation.

And, as noted, precisely because forumselection bylaws are part of a larger con-tract between the corporation and itsstockholders,107 and because bylaws are in-terpreted using contractual principles,108

the bylaws will also be subject to scrutinyunder the principles for evaluating con-tractual forum selection clauses estab-lished by the Supreme Court of the UnitedStates in The Bremen v. Zapata Off–ShoreCo., and adopted by our Supreme Court.109

In Bremen, the Court held that forumselection clauses are valid provided thatthey are ‘‘unaffected by fraud, undue influ-ence, or overweening bargaining power,’’and that the provisions ‘‘should be en-forced unless enforcement is shown by theresisting party to be ‘unreasonable.’ ’’ 110 InIngres, our Supreme Court explicitlyadopted this ruling, and held not only that

forum selection clauses are presumptivelyenforceable, but also that such clauses aresubject to as-applied review under Bremenin real-world situations to ensure that theyare not used ‘‘unreasonabl[y] and un-just[ly].’’ 111 The forum selection bylawswill therefore be construed like any othercontractual forum selection clause and areconsidered presumptively, but not neces-sarily, situationally enforceable.112

In fact, U.S. Supreme Court precedentreinforces the conclusion that forum selec-tion bylaws are, as a facial matter of law,contractually binding. In Carnival CruiseLines v. Shute, the respondent, a cruiseship passenger from Washington State,was injured during the ship’s travel be-tween Los Angeles and Mexico.113 Mrs.Shute tried suing the company in Wash-ington.114 But the fine print on the ticketcontained a forum selection clause desig-nating the courts of Florida as an exclusiveforum for disputes.115 The Supreme Courtheld that the forum selection provision,although it was not subject to negotiationand was printed on the ticket she receivedafter she purchased the passage, was rea-sonable, and thus enforceable.116

Unlike cruise ship passengers, who haveno mechanism by which to change their

106. E.g., MM Cos., Inc. v. Liquid Audio, Inc.,813 A.2d 1118, 1127 (Del.2003) (‘‘This Courthas repeatedly stated that, if the stockholdersare not satisfied with the management or ac-tions of their elected representatives on theboard of directors, the power of corporatedemocracy is available to the stockholders toreplace the incumbent directors when theystand for re-election.’’ (citations omitted)).

107. E.g., Airgas, Inc. v. Air Prods. & Chems.,Inc., 8 A.3d 1182, 1188 (Del.2010).

108. E.g., Centaur P’rs, IV v. Nat’l Intergp.,Inc., 582 A.2d 923, 928 (Del.1990).

109. The Bremen v. Zapata Off–Shore Co., 407U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972);Nat’l Indus. Gp. (Hldg.) v. Carlyle Inv. Mgmt.L.L.C., 67 A.3d 373, 381–82 (Del.2013) (apply-

ing the Bremen test); Ingres Corp. v. CA, Inc.,8 A.3d 1143, 1146 (Del.2010) (same).

110. Bremen, 407 U.S. at 10, 92 S.Ct. 1907(citations omitted).

111. Ingres, 8 A.3d at 1146 (internal quotationmarks and citations omitted).

112. Bremen, 407 U.S. at 15, 92 S.Ct. 1907.

113. Carnival Cruise Lines, Inc. v. Shute, 499U.S. 585, 588, 111 S.Ct. 1522, 113 L.Ed.2d622 (1991).

114. Id.

115. Id. at 587–88, 111 S.Ct. 1522.

116. Id. at 594–95, 111 S.Ct. 1522.


tickets’ terms and conditions, stockholdersretain the right to modify the corporation’sbylaws.117 That plaintiffs did not vote onthe bylaws at the time of their adoption isnot relevant to the question of whether thebylaws are valid or contractually bindingunder Delaware law. Like any other by-law, which may be unilaterally adopted bythe board and subsequently modified bystockholders, these bylaws are enforcedaccording to their terms. Thus, they willbe enforced just like any other forum se-lection clause.118

In sum, stockholders contractually as-sent to be bound by bylaws that are validunder the DGCL—that is an essential partof the contract agreed to when an investorbuys stock in a Delaware corporation.Where, as here, the certificate of incorpo-ration has conferred on the board the pow-er to adopt bylaws, and the board hasadopted a bylaw consistent with 8 Del. C.§ 109(b), the stockholders have assentedto that new bylaw being contractuallybinding. Thus, Count IV of the complaintscannot survive and the bylaws are contrac-tually valid as a facial matter.

B. The Plaintiffs’ Parade Of HorriblesAre Not Facial Challenges To TheBylaws And Do Not Make The By-laws Inconsistent With Law

The plaintiffs try to show that the forumselection bylaws are inconsistent with lawand thus facially invalid by expendingmuch effort on conjuring up hypotheticalas-applied challenges in which a literal ap-plication of the bylaws might be unreason-

able. For reasons the court has explained,these hypotheticals are not appropriatelyposed. Rather, if a plaintiff believes that aforum selection clause cannot be equitablyenforced in a particular situation, theplaintiff may sue in her preferred forumand respond to the defendant’s motion todismiss for improper venue by arguingthat, under Bremen, the forum selectionclause should not be respected because itsapplication would be unreasonable.119 Theplaintiff may also argue that, underSchnell, the forum selection clause shouldnot be enforced because the bylaw wasbeing used for improper purposes inconsis-tent with the directors’ fiduciary duties.The plaintiffs argue that following regularorder in this manner puts a potential plain-tiff in the predicament of potentiallybreaching the bylaws and suffering if thecourt upholds the forum selection clauseand dismisses her case, rendering theplaintiff liable for damages. But that pre-dicament is the same as is faced by anyparty that seeks to bring a case outsidethe forum designated in an applicable fo-rum selection clause. And if a potentialplaintiff does not have confidence in thestrength of her argument under Brementhat the forum selection clause does notreasonably apply to the case she seeks tobring, she can always choose to file thecase in the forum designated in the by-laws.

Review under Bremen and its progenyis genuine, not toothless.120 Indeed, theBremen doctrine exists precisely to ensure

117. Grundfest & Savelle, Forum SelectionProvisions, at 407.

118. See Nat’l Indus. Gp. (Hldg.) v. Carlyle Inv.Mgmt. L.L.C., 67 A.3d 373, 381–82 (Del.2013).

119. See The Bremen v. Zapata Off–Shore Co.,407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513(1972).

120. See, e.g., Doe 1 v. AOL, LLC, 552 F.3d1077 (9th Cir.2009) (holding that a forum

selection clause was unenforceable, because itbarred plaintiffs from bringing a consumerclass action under California law); Cent.Nat’l–Gottesman, Inc. v. M.V. ‘‘GERTRUDEOLDENDORFF,’’ 204 F.Supp.2d 675(S.D.N.Y.2002) (holding that a forum selec-tion clause requiring the plaintiff to litigateabroad was unenforceable because the plain-tiff would be deprived of statutory remedies).See generally 14D Charles Alan Wright et al.,Federal Practice & Procedure § 3803.1 n.5 (3d


that facially valid forum selection clausesare not used in an unreasonable manner inparticular circumstances.121 Our SupremeCourt and this court have in the pastapplied an analysis similar to Bremen tohold that forum selection clauses are situa-tionally unenforceable. For example, inthe TransAmerican Natural Gas case,Justice Berger, then-Vice Chancellor, de-clined to issue an injunction to enforce aforum selection clause designating thiscourt as the exclusive forum for a contractdispute, because this court did not, as amatter of positive Delaware law, have sub-ject matter jurisdiction over the controver-sy.122 The Supreme Court affirmed, hold-ing that the litigation could proceed in theforum that the plaintiff in the non-Dela-ware action had chosen, which was a courtof general jurisdiction.123

But, the plaintiffs seek to undermineBremen by using a facial challenge as away to get this court to address conjured-up scenarios. Under our law, our courtsdo not render advisory opinions abouthypothetical situations that may not oc-

cur.124 Rather, as in other contexts, thetime for a plaintiff to make an as-appliedchallenge to the forum selection clauses iswhen the plaintiff wishes to, and does, filea lawsuit outside the chosen forum. Atthat time, a court will have a concretefactual situation against which to apply theBremen test, or analyze, a la Schnell,125

whether the directors’ use of the bylaws isa breach of fiduciary duty.

The absence of any principled basis tocomplete the law school hypotheticalsposed by the plaintiffs is also made clearby the reality that the plaintiffs concede,as they must, that in the main, the forumselection bylaws will work without anyproblem.126 As noted earlier, in theiropening brief, the defendants outlined thetypes of claims that the forum selectionbylaws cover.127 Consistent with the plainlanguage of the bylaws and the plaintiffs’own description of the covered claims intheir complaints,128 the defendants’ briefmakes clear that the forum selection by-laws are addressed solely to internal af-fairs claims governed by state corporate

ed. updated 2013) (collecting federal caseswhere forum selection clauses were not en-forced).

121. Bremen, 407 U.S. at 17–18, 92 S.Ct. 1907.

122. El Paso Natural Gas Co. v. TransAm. Nat-ural Gas Corp., 1994 WL 248195 (Del.Ch.May 31, 1994).

123. El Paso Natural Gas Co. v. TransAm. Nat-ural Gas Corp., 669 A.2d 36 (Del.1995). Forother cases in which the courts of this statehave declined to enforce forum selectionclauses, see Aveta, Inc. v. Colon, 942 A.2d 603,607 n. 7 (Del.Ch.2008), in which the Court ofChancery held that a forum selection clausewas unenforceable, applying a standard‘‘probably tantamount to the federal [Bremen ]standard’’; and Brandywine Balloons, Inc. v.Custom Computer Service, Inc., 1989 WL63968, at *4 (Del.Super.Ct. June 13, 1989), inwhich the Superior Court denied a motion todismiss a suit under a forum selection clause,on the ground that enforcing the clause‘‘would seriously impair the plaintiff’s abilityto pursue his cause of action’’ (citation andinternal quotation marks omitted).

124. See, e.g., Paramount Commc’ns Inc. v.QVC Network Inc., 637 A.2d 34, 51 (Del.1993)(‘‘It is the nature of the judicial process thatwe decide only the case before usTTTT’’);Stroud v. Milliken Enters., Inc., 552 A.2d 476,479 (Del.1989) (‘‘[T]his Court’s jurisdictionTTT does not require us to entertain suitsseeking an advisory opinion or an adjudica-tion of hypothetical questionsTTTT’’ (citationand internal quotation marks omitted)); seealso Opinion of the Justices, 314 A.2d 419(Del.1973) (declining to issue an advisoryopinion on the ground that such an opinionwas not authorized under 10 Del. C. § 141).

125. Schnell v. Chris–Craft Indus., Inc., 285A.2d 437 (Del.1971).

126. Tr. of Oral Arg. 64:13–65:6.

127. Defs.’ Opening Br. 30–31.

128. Chevron Supp. ¶¶ 1, 28–31; FedExCompl. ¶¶ 20–22; see also Pls.’ Br. in Opp’n4–5.


law. In other words, the forum selectionbylaws only regulate where a certain set ofclaims, relating to the internal affairs ofthe corporation and governed by the law ofthe state of incorporation, may be brought,not what claims.129

In other words, the plaintiffs cannoteven reasonably contend that the bylawsare intended to do more than addresswhere claims clearly involving the internalaffairs of the corporation and thus gov-erned by the law of the state of incorpo-ration must be brought. And the plaintiffsfail to make any reasoned argument thatthe forum selection bylaws cannot operatesensibly as to the bulk of typical internalaffairs cases, where the traditional defen-dants are the directors and top officers ofthe corporations, subject to jurisdiction un-der 10 Del. C. § 3114.130

Perhaps recognizing this weakness intheir position, the plaintiffs conjure upsituations where there might be a straydefendant or two who is not subject topersonal jurisdiction in the state of incor-poration, but may be susceptible to ser-vice elsewhere.131 In that situation, theysay, the bylaws might not operate reason-ably. But, of course, the plaintiffs ignore

the reality that the bylaws might operatereasonably even then. For example,there may be no forum anywhere inwhich all possible defendants would besubject to personal jurisdiction. Nor is itapparent that it would be unreasonable torequire a plaintiff to bring an internalaffairs claim in the courts of the state ofincorporation against the numerous corpo-rate defendants who will be indisputablysubject to the state’s personal jurisdiction,simply because a few other defendantshave to be sued elsewhere. And in thecase of the most common type of litiga-tion where filing of internal affairs claimsin corporate litigation occurs—those in-volving challenges to proposed mergers—the plaintiffs ignore the multiple toolsthat exist to allow the courts of the stateof incorporation to hold parties accounta-ble to stockholders claiming that theirrights were violated. This includes thebroad reach of 10 Del. C. § 3114, whichnow covers not only all directors, but, asmentioned, also key officers,132 and otherjurisdictional doctrines that usually makeit possible for a plaintiff to hale all thekey defendants before this state’scourts.133 Not only that, the plaintiffs ig-nore that corporations such as Chevron

129. See Grundfest & Savelle, Forum SelectionProvisions, at 370 (‘‘[Forum selection] provi-sions do not purport to regulate a stockhold-er’s ability to bring a securities fraud claim orany other claim that is not an intra-corporatematter, and the dominant forms of [forumselection] provisions are drafted expressly topreclude such applications.’’); id. at 373(‘‘Because the substantive resolution of theseintra-corporate disputes are, pursuant to theinternal affairs doctrine, governed by the lawsof the chartering state, [forum selection] pro-visions cannot at all influence the substantivelaw governing the resolution of the underly-ing disputes.’’).

130. 10 Del. C. § 3114(a)-(b) (providing thatnonresident directors and top officers of Dela-ware corporations consent to the appointmentof the corporation’s agent or the Secretary ofState to receive service of process).

131. Chevron Compl. ¶¶ 82–87, FedEx Compl.¶¶ 81–86 (Count V).

132. See 74 Del. Laws ch. 83, § 3 (2003) (codi-fied at 10 Del. C. § 3114(b)).

133. These doctrines include the aiding andabetting and conspiracy theories used in con-junction with the long-arm statute, 10 Del. C.§ 3104. See, e.g., Matthew v. Flakt Woods Gp.SA, 56 A.3d 1023, 1027–28 (Del.2012) (apply-ing the conspiracy theory of jurisdiction inconjunction with 10 Del. C. § 3104); HerculesInc. v. Leu Trust & Banking (Bahs.) Ltd., 611A.2d 476, 481–82 (Del.1992) (same); In reAm. Int’l Gp., Inc., 965 A.2d 763, 814 (Del.Ch.2009) (‘‘The conspiracy theory of jurisdictionhas often been used by plaintiffs in concertwith TTT 10 Del. C. § 3104.’’); see alsoHMG/Courtland Props., Inc. v. Gray, 729 A.2d


and FedEx that have adopted forum se-lection bylaws will have an incentive toencourage officers, employees and affili-ates not covered by § 3114 to consent tojurisdiction in the forum identified by thebylaws, and can accomplish that easily byconditioning the provision of advancementand indemnification on assent to jurisdic-tion in Delaware over the types of claimscovered by the bylaws, or by includingconsent-to-jurisdiction provisions in em-ployment agreements.

Similarly, the plaintiffs’ attempts toshow that there might be situations whenthe forum selection bylaws would not oper-ate reasonably because they could some-how preclude a plaintiff from bringing aclaim that must be brought exclusively in afederal court also is inappropriate and un-convincing as a way to show that the fo-rum selection bylaws are facially invalid.For one thing, these arguments do noteven pertain to the Chevron bylaw, whichwas amended to allow a filing in the feder-

al courts of the state of incorporation.For another thing, it bears repeating thatin the main, and as the plaintiffs them-selves concede,134 the kind of cases inwhich claims covered by the forum selec-tion clause predominate are already over-whelmingly likely to be resolved by astate, not federal, court. And as with theissue of personal jurisdiction, the plaintiffsignore a number of factors that suggestthat their hypothetical concern that theforum selection clause will operate unrea-sonably is overstated. For example, it iscommon for derivative actions to be filed instate court on behalf of corporations coin-cident to the filing of federal securitiesclaims exclusively within the jurisdiction ofthe federal courts.135 And with good rea-son. The corporation is usually a defen-dant in the federal action. Any stockhold-er seeking to bring a derivative suit onbehalf of the corporation has to act in thebest interest of the corporation and cannottherefore sue it for damages simultaneous-ly.136 In these situations, the derivative

300, 308 (Del.Ch.1999) (noting that the agen-cy, alter ego, and conspiracy theories can beused in conjunction with 10 Del. C. § 3104‘‘to advance Delaware’s interest in holdingaiders and abettors accountable’’). Many oth-er potential defendants, such as merger part-ners, investment banks, and law firms, areoften either domiciled in Delaware or havesufficient contacts with the state to be suscep-tible to personal jurisdiction. See, e.g., Sam-ple v. Morgan, 935 A.2d 1046, 1063–65 (Del.Ch.2007) (finding that Delaware had jurisdic-tion over a law firm that prepared an amend-ment to a Delaware corporation’s certificatethat was the subject of the lawsuit); Derdigerv. Tallman, 773 A.2d 1005 (Del.Ch.2000) (suitagainst target board for breach of fiduciaryduty, and acquiring corporation for aidingand abetting breach of fiduciary duty); FinalOrder & J., In re El Paso Corp. S’holdersLitig., C.A. No. 6949–CS (Del.Ch. Dec. 3,2012) (settlement of law suit against targetcompany board for breach of fiduciary duty,and financial advisor for aiding and abettingbreach of duty, in which the financial advisorcontributed to the settlement payment); FinalOrder & J., In re Del Monte Foods Co. S’hold-

ers Litig., C.A. No. 6027–VCL (Del. Ch. Dec. 1,2011) (same).

134. Tr. of Oral Arg. 64:8–65:6.

135. See, e.g., In re Groupon Deriv. Litig., 882F.Supp.2d 1043 (N.D.Ill.2012) (staying a de-rivative suit pending the resolution of a mo-tion to dismiss a related securities suit); Bachv. Amedisys, Inc., 2010 WL 4318755 (M.D.La.Oct. 22, 2010) (describing four securities classactions and four derivative suits that aroseout of the same facts); Cucci v. Edwards,2007 WL 3396234 (C.D.Cal. Oct. 31, 2007)(staying derivative action during prosecutionof securities class action); Brenner v. Albrecht,2012 WL 252286 (Del.Ch. Jan. 27, 2012)(same); Brudno v. Wise, 2003 WL 1874750(Del.Ch. Apr. 1, 2003) (same).

136. See, e.g., Ruggiero v. Am. Bioculture, Inc.,56 F.R.D. 93, 95 (S.D.N.Y.1972) (‘‘[I]t is diffi-cult to see how the TTT plaintiffs can reconciletheir existing duties to [the company] and itspresent shareholders as derivative plaintiffswith the duties which they seek to assume onbehalf of a class which attacks [the compa-


suits typically seek recompense from thedirectors on behalf of the corporation forany harm the corporation may suffer if ithas to pay damages or incur other lossbecause the directors caused the corpora-tion to breach the securities laws.137 It isnot at all evident that in these situations,the application of the bylaws would oper-ate unreasonably. Indeed, the strength ofBremen and situational fiduciary duty re-view is that any such argument is present-ed in an actual case with concrete facts.

On their face, neither of the forum selec-tion bylaws purports in any way to fore-close a plaintiff from exercising any statu-tory right of action created by the federalgovernment. Rather, the forum selectionbylaws plainly focus on claims governed bythe internal affairs doctrine and thus thelaw of the state of incorporation. In theevent that a plaintiff seeking to bring aclaim within the exclusive jurisdiction ofthe federal courts is met with a motion todismiss because of the forum selectionclause, the plaintiff will have the mosthospitable forum possible to address themotion by pressing an argument that thebylaw cannot operate to foreclose hersuit—a federal court. For example, if aclaim under SEC Rule 14a–9 was broughtagainst FedEx and its board of directorsin federal court and the defendants moved

to dismiss because of the forum selectionclause, they would have trouble for tworeasons.138 First, a claim by a stockholderunder federal law for falsely solicitingproxies does not fit within any category ofclaim enumerated in FedEx’s forum selec-tion bylaw. Thus, FedEx’s bylaw is con-sistent with what has been written aboutsimilar forum selection clauses addressinginternal affairs cases: ‘‘[Forum selection]provisions do not purport to regulate astockholder’s ability to bring a securitiesfraud claim or any other claim that is notan intra-corporate matter.’’ 139 Second, theplaintiff could argue that if the board tookthe position that the bylaw waived thestockholder’s rights under the SecuritiesExchange Act, such a waiver would beinconsistent with the antiwaiver provisionsof that Act, codified at 15 U.S.C. § 78cc.140

But, the court declines to wade deeper intoimagined situations involving multiple ‘‘ifs’’because rulings on these situationally spe-cific kind of issues should occur if andwhen the need for rulings is actually nec-essary.141

As a distinguished scholar has pointedout, there likely are pragmatic solutions tothe imagined scenarios that the plaintiffscite, which would both respect the forumselection bylaws’ requirement that statelaw internal affairs claims be adjudicated

ny].’’); see also Fed. R. Civ. Pro. 23.1(a) (‘‘Thederivative action may not be maintained if itappears that the plaintiff does not fairly andadequately represent the interests of share-holders or members who are similarly situat-ed in enforcing the right of the corporation orassociation.’’).

137. E.g., Brenner, 2012 WL 252286; Brudno,2003 WL 1874750.

138. 17 C.F.R. § 240.14a–9.

139. Grundfest & Savelle, Forum SelectionProvisions, at 370.

140. See 15 U.S.C. § 78cc(a) (corresponding toSecurities Exchange Act of 1934, ch. 404,

§ 29(a), 48 Stat. 881, 903) (‘‘Any condition,stipulation, or provision binding any personto waive compliance with any provision ofthis chapter or of any rule or regulation there-under, or of any rule of a self-regulatory or-ganization, shall be void.’’); see also 15U.S.C. § 77n (codifying Securities Act of1933, ch. 38, § 14, 48 Stat. 74, 84) (antiwaiv-er provision of the Securities Act of 1933); 15U.S.C. § 80a–46(a) (codifying InvestmentCompany Act of 1940, ch. 686, § 47, 54 Stat.789, 845) (antiwaiver provision of the Invest-ment Company Act of 1940).

141. See Moran v. Household Int’l, Inc., 500A.2d 1346, 1357 (Del.1985) (stating that cor-porate action ‘‘must be evaluated when and ifthe issue arises’’).


in the courts of the state of incorporation,while preserving any substantive claimsthat must be brought in federal court.142

But, for present purposes, the key is thatforum selection bylaws, like other forumselection clauses, are not facially invalidbecause they might operate in a proble-matic way in some future situation. Thesituational review Bremen requires, andthe analogous protections of fiduciary dutyreview under cases like Schnell, exist todeal with real-world concerns when theyarise in real-world and extant disputes,rather than hypothetical and imagined fu-ture ones.

The wisdom of declining to opine onhypothetical situations that might or mightnot come to pass is evident. The waiverprovision in the bylaws also counselsagainst the need to do that, as by that tool,the board, as the statutory instrumentalitycharged with advancing the corporation’sbest interests, is empowered to permit aplaintiff with a claim within the exclusivejurisdiction of a federal court, but whicharguably falls within the reach of the by-law’s language, to proceed. And, the pro-spective plaintiff may also ask the board towaive the bylaw in a particular circum-stance, and if the prospective plaintiff be-lieves that the board’s refusal to waiveamounts to a breach of fiduciary duty, theplaintiff may sue for an injunction seekingthe board to be required to waive thebylaw’s application. But, under Delawarelaw, the presumption is not that the Chev-ron and FedEx directors will not use theirwaiver authority in good faith and for the

best interests of the corporations and theirstockholders; it is that they will.143 Inview of that reality, and the fact thatChevron’s and FedEx’s stated reasons forthe bylaws have nothing to do with fore-closing anyone from exercising any sub-stantive federal rights, but only with chan-neling internal affairs cases governed bystate law to the state of incorporation’scourts, there is no basis on a facial chal-lenge to assume that the bylaws can neveroperate reasonably.144

But the main point remains the mun-dane but important one. As with otherforum selection clauses, Bremen providesprotection in the event that a plaintiff be-lieves that the clause is operating in asituationally unreasonable or unlawfulmanner.145 And as with the case of bylawsgenerally, the board’s use of its powersunder the bylaw is subject to challenge asinconsistent with its fiduciary duties in theevent of an actual dispute.146

V. Conclusion

For these reasons, the court finds thatthe challenged bylaws are statutorily validunder 8 Del. C. § 109(b), and are contrac-tually valid and enforceable as forum selec-tion clauses. Judgment is entered for thedefendants dismissing Counts I and IV ofthe plaintiffs’ complaints against Chevronand FedEx, with prejudice. IT IS SOORDERED.

,

142. John Coffee, Forum Selection Clauses andthe Market for Settlements, N.Y. L.J., May 17,2012, at 4.

143. See Aronson v. Lewis, 473 A.2d 805, 812(Del.1984) (citations omitted).

144. See Grundfest & Savelle, Forum SelectionProvisions, at 363–67 (discussing facial chal-lenges to forum selection provisions).

145. The Bremen v. Zapata Off–Shore Co., 407U.S. 1, 15–17, 92 S.Ct. 1907, 32 L.Ed.2d 513(1972).

146. Stroud v. Grace, 606 A.2d 75, 79, 96 (Del.1992).

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