On December 10, 2015, the Oregon Supreme Court held that an exclusive forum bylaw provision adopted unilaterally by a Delaware company's board was a valid and enforceable contractual forum selection clause. Importantly, the Oregon decision is the only reported non-Delaware appellate court decision to date addressing the validity of exclusive forum bylaws on the merits.
The decision, Roberts v. TriQuint Semiconductor, Inc., comes on the heels of the Delaware Court of Chancery's forum bylaw ruling in Boilermakers Local 154 Retirement Fund v. Chevron Corporation. As previously noted on this blog, in Chevron, then-Chancellor Strine of the Delaware Court of Chancery held that an exclusive forum bylaw provision adopted unilaterally by a board was both facially valid under the Delaware General Corporation Law ("DGCL") and an enforceable contractual forum selection clause. Citing Chevron, the Oregon Supreme Court similarly concluded that an exclusive forum bylaw adopted only two days prior to the announcement of a merger was permissible and did not render the bylaw unenforceable in the shareholder merger litigation that followed.
The facts of the case are as follows: In late February 2014, TriQuint's board amended the company's bylaws to designate the Delaware Court of Chancery as the exclusive forum for internal corporate disputes, including shareholder derivative suits, claims for breach of fiduciary duty, violations of the DGCL, violations of TriQuint's bylaws, and claims governed by the internal affairs doctrine. Two days after the board adopted the forum bylaw, the company announced a pending merger. Shareholders subsequently filed suit in both Oregon and Delaware. TriQuint moved to dismiss the Oregon litigation, arguing that its corporate bylaws established Delaware as the exclusive forum for shareholder derivative suits. Following the lower court's refusal to grant TriQuint's motion, the company petitioned for an alternate writ of mandamus with the Oregon Supreme Court. Granting a peremptory write, the Oregon Supreme Court reversed the lower court and held that the bylaw provision was not invalid or unenforceable. The bylaw did not prohibit shareholders from challenging the merger, prevented the company's assets from dilution resulting from multi-forum litigation, and was not unreasonable, a result of fraud or unequal bargaining power, or in contravention of Oregon public policy. The court also found that Delaware was the "most obviously reasonable forum" for litigation involving a Delaware's corporation's internal disputes.
As previously noted, following Chevron, over 100 corporations moved to pass or reinstate similar forum exclusivity bylaws. With Roberts and Chevron representing what appears to be a trend to uphold exclusive bylaw provisions governing Delaware companies, Delaware public companies now have even greater incentives to adopt similar bylaw provision, thereby protecting themselves against multi-forum shareholder litigation.
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