United States: Forum Selection Bylaws Help Combat Multijurisdictional Shareholder Litigation: State Courts Are Increasingly Upholding Forum Selection Provisions In Corporate Bylaws

Last Updated: September 4 2014
Article by Robert A. Friedel and Melissa L. Nuñez

When almost 98 percent of takeover transactions valued at more than $100 million result in shareholder litigation,1 and often such transactions are the subject of multiple lawsuits filed in multiple jurisdictions, it is no surprise that companies are looking for ways to make such litigation more manageable and efficient. In 2010, Delaware Court of Chancery Vice Chancellor J. Travis Laster proposed one such method, writing in an opinion that "corporations are free to respond with charter provisions selecting an exclusive forum for intra-entity disputes"2 if boards believe this would benefit the corporation. Thus began a rapid upswing in the number of adoptions of forum selection bylaws by public companies.

After an early move by a California court in opposition to the enforceability of forum selection bylaws in a 2011 decision, the recent case of Groen v. Safeway3 represents a clear move by California to join the growing list of states going on record to endorse the enforceability of such clauses.

What Is a Bylaw Forum Selection Provision?

In general, a forum selection provision in a corporation's charter or bylaws names a particular state – typically the state of incorporation – that will be the sole and exclusive forum for derivative lawsuits, breach of fiduciary duty lawsuits, claims arising under the state's corporate law, and claims relating to the internal affairs of the company. Forum selection provisions are typically contained in a corporation's bylaws given that, in contrast to charter amendments, which typically require stockholder approval, bylaws may routinely be amended by action of the board of directors alone. Given the substantial percentage of U.S. public companies that are incorporated in Delaware, most of the litigation thus far concerning the enforceability of forum selection bylaw provisions has involved bylaw provisions selecting Delaware as the exclusive jurisdiction.

Why Adopt a Bylaw Forum Selection Provision?

The principal benefit of adopting a forum selection provision is to minimize the risk of multi-jurisdictional litigation, which can otherwise force a company to litigate the same claims at the same time in two or more different jurisdictions. An added benefit for Delaware corporations is that the Delaware Court of Chancery is generally more experienced at dealing with intra-corporate disputes in comparison to a court of another state that may be unfamiliar with these types of disputes and even less familiar with the applicable Delaware law underlying the claim.

Delaware's Position

In 2013, the Delaware Court of Chancery upheld forum selection bylaw provisions in Boilermakers Local 154 Retirement Fund v. Chevron Corporation,4 holding that forum selection bylaw provisions are valid under Delaware law. And if the bylaws authorize amendments by the board of directors without shareholder approval, a forum selection provision adopted by board action alone is enforceable against shareholders, including those who own shares at the time of the adoption.

The court noted that although a forum selection provision would be presumptively valid, a plaintiff burdened by such a provision could still challenge the application of such a provision on a case-by-case basis for breach of fiduciary duty or under general rules of contract law as set forth by the U.S. Supreme Court in The Bremen v. Zapata Off-Shore Company.5 Delaware case law follows the general rule set forth by Bremen that a forum selection provision should be specifically enforced unless the party seeking to invalidate the clause could clearly show that enforcement would be unreasonable and unjust, or that the forum selection clause was invalid due to fraud or overreaching. Nevertheless, this potential risk of unenforceability in specific applications has not slowed the wave of adoptions of forum selection provisions by companies that has followed the Boilermakers decision.

California Case Law

In 2011 (two years before the Boilermakers decision), the U.S. District Court for the Northern District of California refused to enforce a forum selection provision in Galaviz v. Berg.6 In Galaviz, the forum selection provision in question was adopted by the board, without shareholder approval, after a majority of the alleged wrongdoing at issue in the underlying litigation had already occurred. As a result, the court declined to enforce the provision.

Three years later, in May 2014, in Groen v. Safeway, Inc.,7 a California court followed Delaware's lead in Boilermakers and upheld the enforceability of Safeway's forum selection provision adopted by the board without shareholder approval and, as a result, dismissed shareholder derivative actions filed in California arising from Safeway's merger announcement. In its decision, the court noted that Galaviz was decided before Boilermakers, implying that Galaviz was no longer good law. Ultimately, the court determined that the provision withstood a facial challenge and that, because there was not support for the plaintiffs' claim that the provision was adopted after wrongdoing had occurred, it also withstood an as-applied challenge.


Acceptance of forum selection provisions in bylaws is growing, as illustrated by Groen. Groen's implication that Galaviz is no longer good law adds further momentum to the legal strength of such provisions. Because the law of bylaw forum selection provisions is relatively new and is still evolving, courts in many states have not yet weighed in on their enforceability, and a state court in Oregon has recently signaled a move counter to the trend of enforceability of such provisions.8 Nevertheless, Groen adds California to the growing list of states that have upheld such provisions, following Delaware, New York,9 Illinois,10 Louisiana11 and Texas.12

Boards of directors of public companies should now consider adopting bylaw forum selection provisions in order to guard against having to defend future fiduciary duty or other internal affairs litigation matters simultaneously in multiple jurisdictions.

Pepper Point: Because forum selection provisions are not effective to deny the ability of stockholders to seek the judicial resolution of disputes, it is advisable for the board of directors to consider the adoption of such provisions at a time when the company is not anticipating any litigation that would be subject to such a provision. Before amending bylaws to include a forum selection provision, companies should thoroughly review all relevant corporate governance documents to ensure compliance with applicable approval processes and should consult counsel with respect to the method and necessity of disclosing any such adoption.


1 Matthew D. Cain and Steven M. Davidoff, Takeover Litigation in 2013 (January 9, 2014).

2 In re Revlon, Inc. Shareholders Litigation, 990 A.2d 940 (Del. Ch. 2010).

3 No. RG14716641 (Super. Ct. of Cal., Alameda County, May 14, 2014).

4 73 A.3d 934 (Del. Ch. 2013).

5 407 U.S. 1 (1972).

6 763 F.Supp.2d 1170 (N.D. Cal. 2011).

7 No. RG14716641 (Super. Ct. of Cal., Alameda County, May 14, 2014).

8 See Roberts v. TriQuint Semiconductor, Inc., No. 1402-02441 (Cir. Ct. Or., Aug 14, 2014), in which the court held that a bylaw forum selection provision was unenforceable where the provision was adopted by the board, without shareholder approval, after the board's alleged wrongdoing, in a fact pattern similar to that in Galaviz.

9 See Hemg Inc. v. Aspen University, No. 650457/13, 2013 WL 5958388 (N.Y. Sup. Ct., Nov. 4, 2013).

10 See Miller v. Beam Inc., No. 2014 CH 00932 (March 5, 2014).

11 See Genoud v. Edgen Group Inc., et al., Case No. 625,244 (19th Dist. Ct., Parish of E. Baton Rouge).

12 See In re MetroPCS Commc'ns, Inc., 391 S.W.3d 329 (Tex. App. 2013).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Melissa L. Nuñez
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.