United States: Oregon Supreme Court Upholds Delaware Corporation's "Exclusive-Forum" Bylaw

In Roberts v. TriQuint Semiconductor, Inc.,1 the Oregon Supreme Court unanimously held that a Delaware corporation's "exclusive-forum" bylaw, which required that all litigation related to corporate governance be pursued exclusively in the Delaware Court of Chancery, was enforceable under both Delaware and Oregon law, even though the bylaw had been adopted just two days before the announcement of a proposed merger that was likely to result in corporate governance litigation.

The court accordingly issued a peremptory writ of mandamus directing the trial court to dismiss two lawsuits that had been filed in part to stop the planned merger of equals—since consummated—between TriQuint Semiconductor, Inc. (TriQuint) and RF Micro Devices, Inc. (RFMD) creating Qorvo, Inc. The writ overturned the only U.S. decision that held an exclusive-forum bylaw was not enforceable following the Delaware Court of Chancery's determination in Boilermakers Local 154 Retirement Fund v. Chevron Corp. ("Chevron")2 that exclusive-forum bylaws are facially valid.

Background on TriQuint's Exclusive-Forum Bylaw

TriQuint was a Delaware corporation headquartered in Oregon. In late February 2014, TriQuint's board of directors amended the company's bylaws to designate the Delaware Court of Chancery as the exclusive forum for the resolution of internal corporate disputes, such as shareholder suits. The board adopted the bylaw pursuant to Section 109(a) of the Delaware Corporations Code and TriQuint's certificate of incorporation, which together empowered the board of directors unilaterally to "adopt, amend, or repeal" the company's bylaws.

Two days after the TriQuint board adopted the exclusive-forum bylaw, TriQuint and RFMD announced that their respective boards had approved a plan of merger. Within days, a shareholder action was filed challenging the TriQuint board's approval of the proposed merger. Ultimately, five shareholder actions were filed: three in the Delaware Court of Chancery and two in the Multnomah County Circuit Court in Oregon.

Oregon Trial Court Held TriQuint's Exclusive-Forum Bylaw Not Enforceable

TriQuint moved to dismiss the two Oregon actions on several grounds, including that the exclusive-forum bylaw deprived the Oregon trial court of subject-matter jurisdiction. TriQuint relied largely on Chevron and its progeny, in which the Delaware Court of Chancery had held that exclusive-forum bylaw provisions adopted by Delaware corporations are valid on their face. While agreeing that TriQuint's bylaw was facially valid under Delaware law, the Oregon trial court nevertheless held that the bylaw was unreasonable and therefore not enforceable as applied, principally because it had been adopted in close proximity to the board's approval of the merger and because, the court concluded, enforcement of the bylaw would deprive TriQuint's shareholders of their statutory right under Delaware law to modify or repeal bylaws adopted by the company's board of directors. In so ruling, the Oregon trial court became the first—and only—court since the Chevron decision to hold that an exclusive-forum bylaw adopted by a Delaware corporation was not enforceable.

Oregon Supreme Court Upholds Validity of TriQuint's Exclusive-Forum Bylaw

TriQuint filed with the Oregon Supreme Court a petition for mandamus review of the Oregon trial court's decision, which the court granted. On December 10, 2015, the court concluded as a matter of law that TriQuint's exclusive-forum bylaw is enforceable and issued a peremptory writ of mandamus directing the trial court to grant TriQuint's motion to dismiss.

Court Considered and Rejected Three Arguments. Starting from the undisputed proposition that exclusive-forum bylaws are facially valid under Delaware law, the court considered the following shareholder plaintiffs' arguments as to why the TriQuint bylaw should not be enforced on an as-applied basis:

  • TriQuint's board adopted the bylaw for an improper purpose inconsistent with the directors' fiduciary duties.
  • The exclusive-forum bylaw is unenforceable or unfair under Delaware and/or Oregon law, "primarily because giving effect to the bylaw would deprive TriQuint's shareholders of their statutory right to amend the bylaws."
  • TriQuint's shareholders did not have an opportunity to consider and approve the new bylaw.

The court rejected all three arguments, holding that TriQuint's exclusive-forum bylaw is enforceable, on an as-applied basis, under both Delaware and Oregon law.

Delaware Courts' Determinations Govern Internal Affairs of Delaware Corporations. As the Oregon Supreme Court recognized with respect to the first argument, whether directors of a Delaware corporation have breached fiduciary duties is an issue of Delaware law. In rejecting the plaintiffs' fiduciary duty argument, the court relied principally on City of Providence v. First Citizens BankShares, Inc. ("First Citizens"),3 in which the Delaware Court of Chancery had found enforceable an exclusive-forum bylaw that the defendant corporation's board of directors had adopted on the same day that it announced agreement to a merger, which demonstrated that Delaware courts did not consider it improper for a board to adopt an exclusive-forum bylaw in close temporal proximity to its approval of a merger transaction.

Timing for Adopting Exclusive-Forum Bylaw Does Not Show Improper Purpose. As in First Citizens, the only evidence the plaintiffs in the TriQuint litigation offered to show an improper purpose in adopting the bylaw was its timing in relation to the board's approval of the proposed merger. Therefore, the Oregon Supreme Court rejected the plaintiffs' fiduciary duty argument, as the bylaw did not protect the interests of the directors by insulating their approval of the proposed merger from judicial review, but merely affected where that judicial review could take place. Furthermore, the court observed, adopting the exclusive-forum bylaw was consistent with a proper exercise of the directors' business judgment, as it served the beneficial purpose of "keep[ing] TriQuint's assets from being diluted by a multiplicity of suits in various states" while placing exclusive jurisdiction over lawsuits challenging the merger in the courts of TriQuint's state of incorporation, which was the "most obviously reasonable forum" for decision of internal affairs cases where the law of the state of incorporation would govern.

TriQuint's Exclusive-Forum Bylaw Not Unreasonable or Unfair. The plaintiffs' second argument fared no better. Again relying on First Citizens, the Oregon Supreme Court concluded that shareholders' inability to repeal TriQuint's exclusive-forum bylaw before the shareholder vote on the proposed merger was not so unreasonable or unfair as to cause the bylaw to be unenforceable, and in fact, it was consistent with the powers bestowed on the board of directors by Delaware law and TriQuint's bylaws. The Court stated:

As a matter of Delaware law, a board-adopted bylaw will be given effect until the shareholders modify or repeal it, unless the board lacked authority to adopt it or the board breached its fiduciary duty in adopting it. To hold otherwise would effectively read out of Delaware law a corporate board's authority to adopt bylaws unilaterally because there always will be a gap between the time that a board adopts a bylaw and the time that shareholders have an opportunity to modify or repeal it.

The Court observed that any contrary conclusion effectively would revive the vested rights doctrine, which Delaware abandoned years earlier.

Court Concluded That Governing Oregon Law Was Similar to Delaware Law. The court next concluded that it would be neither unreasonable nor unfair to enforce TriQuint's exclusive-forum bylaw in this case. The Court first conducted an as-applied analysis under Delaware law, which uses the test developed by the United States Supreme Court in The Bremen v. Zapata Off-Shore Co.4 Concluding that TriQuint's bylaw was enforceable under the factors employed in Bremen, the court emphasized that the Delaware Court of Chancery already had determined that "a shareholder's inability to exercise [Delaware's] statutory right [to amend or modify bylaws] does not provide a basis for refusing to give effect to a forum-selection bylaw" and that Oregon public policy did not require non-enforcement of the bylaw, as "Oregon has no interest in giving greater effect to a Delaware corporation shareholder's right to modify or repeal board-adopted bylaws than Delaware would."

While the court ultimately concluded that Oregon law, not Delaware law or the Bremen test, controls the determination of whether an exclusive-forum bylaw is enforceable in an Oregon court, it acknowledged that the factors considered under Oregon law are similar to those evaluated in Bremen and rejected plaintiffs' arguments under Oregon law as well.

No Compelling Policy in Oregon to Meddle in Relationship Between Delaware Corporation and Its Shareholders. The court also rejected an additional argument, made by certain amici curiae, that the court should not enforce the TriQuint bylaw because TriQuint's shareholders did not have an opportunity to provide "mutual assent" to the new bylaw. Recognizing that this argument would require it to interfere with the contractual and statutory relationship between a Delaware corporation and its shareholders, the court concluded that it would be improper for it to do so absent a "compelling" public policy. The court found no public policy in Oregon that would warrant "subjecting the internal relationship between TriQuint and its shareholders to the possibility of inconsistent regulation in different forums," particularly because

  • there was no basis to conclude that litigating their claims in Delaware would be "seriously inconvenient" for the plaintiffs,
  • Delaware courts "are well-equipped to resolve intra-corporate disputes involving Delaware corporations,"
  • there was no evidence that requiring plaintiffs to pursue their claims in Delaware would infringe any of the shareholders' substantive rights, and
  • TriQuint "has the authority to 'protect against' the 'potential for duplicative law suits in multiple jurisdictions over single events' by channeling those suits to a single forum."

Oregon Supreme Court's Conclusion

Accordingly, the Oregon Supreme Court held that TriQuint's exclusive-forum bylaw was not "unfair or unreasonable" under Oregon law, because it did not deprive plaintiffs of their substantive right to challenge the merger between TriQuint and RFMD but affected only where they could challenge that merger, and the court ordered that a peremptory writ of mandamus be issued to direct the trial court to dismiss the plaintiffs' shareholder actions challenging the proposed merger. In this manner, the Oregon Supreme Court brought Oregon law in line with decisions of every other court to address the validity and enforceability of a board-adopted exclusive-forum bylaw post-Chevron, all of which (except for the overturned Multnomah County Circuit Court decision) had upheld such provisions as valid and enforceable.

Key Takeaways:Significant Implications for Delaware Corporations

The Oregon Supreme Court's opinion is an important corporate governance decision that has already received national attention, for several reasons.

Upheld Enforceability of Exclusive-Forum Bylaw and Addressed Timing Issue. It is the only state appellate court decision outside of Delaware to address the enforceability of a Delaware corporation's exclusive forum bylaw. Moreover, it is one of the few cases that addresses the issue of the enforceability of such a bylaw adopted at or near the time of a transaction that will be likely to result in immediate litigation that will be subject to the provisions of the bylaw.

Confirms That Oregon Courts Recognize That Delaware Law Governs Internal Affairs of Delaware Corporations Based in Oregon. It rejects the concept that the decision to enact such a bylaw by a board of directors of a Delaware corporation operating in Oregon may be open to challenge on the basis that the decision did not comply with Oregon public policy. This aspect of the decision should provide comfort to Delaware corporations with their principal place of business in Oregon that Oregon courts recognize that the internal affairs of Delaware corporations are subject to Delaware law.

Should Deter Plaintiffs from Pursuing Corporate Governance Litigation Outside of Delaware. The opinion also has significant implications for Delaware corporations with principal places of business outside of Delaware. Such corporations are typically subject to corporate governance litigation in the courts of the state in which the corporation is organized or in the state in which the corporation has its principal place of business. One key advantage of a Delaware exclusive-forum bylaw for these corporations is that it requires such lawsuits to be litigated in Delaware courts, which have arguably the most well-developed body of corporate governance jurisprudence. To the extent that plaintiff shareholders or their lawyers seek to assert corporate governance claims concerning these corporations or their directors in state courts outside of Delaware, the now-unanimous body of non-Delaware case law upholding the validity of these exclusive-forum bylaws and enforcing them to dismiss cases brought outside of Delaware should be a very powerful deterrent.


[1] 358 Or. 413, __ P.3d ___, 2015 WL 8539902 (Dec. 10, 2015).

[2] 73 A.3d 934 (Del. Ch. 2013).

[3] 99 A.3d 229 (Del. Ch. 2014).

[4] 407 U.S. 1 (1972).

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This article is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law. It is not intended to provide specific legal advice. By reading this article you understand that no attorney-client relationship exists between you and the article author(s). This article should not be used as a substitute for competent legal advice from a professional attorney licensed in your state. Originally published by Perkins Coie; © 2016 Perkins Coie LLP.

Author Information:

The authors of the article (principal author listed first) are:

  • Joseph E. Bringman, Perkins Coie LLP, Senior Counsel
  • Ronald L. Berenstain, Perkins Coie LLP, Partner
  • Sean C. Knowles, Perkins Coie LLP, Partner
  • Sarah J. Crooks, Perkins Coie LLP, Partner

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