Boilermakers Local 154 Retirement Fund v. Chevron Corp.
73 A.3d 934
| Del. Ch. | 2013Background
- Chevron and FedEx (both Delaware corporations) had board-adopted bylaws designating Delaware courts (Chancery or state/federal courts in Delaware) as the exclusive forum for suits asserting derivative claims, fiduciary-duty claims, DGCL claims, or other "internal affairs" claims.
- Both corporations’ certificates of incorporation expressly empower their boards to adopt and amend bylaws under 8 Del. C. § 109(a).
- Stockholder plaintiffs filed nearly identical suits challenging the bylaws as (Count I) statutorily invalid under § 109(b) and (Count IV) contractually unenforceable because they were unilaterally adopted by the boards; other fiduciary-duty and as-applied claims were also pled but stayed.
- The Court consolidated the Chevron and FedEx cases to decide the facial statutory and contractual issues and the defendants moved for judgment on the pleadings as to Counts I and IV.
- Chancellor Strine held the forum-selection bylaws are facially valid under § 109(b) and are contractually enforceable as forum-selection clauses subject to the usual Bremen/Ingres reasonableness/as-applied review; plaintiffs’ hypotheticals do not defeat a facial challenge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statutory authority under 8 Del. C. § 109(b) | Bylaws exceed § 109(b) because forum-selection bylaws regulate an "external" subject beyond traditional bylaw matters | § 109(b) authorizes bylaws relating to the business, conduct of affairs, and stockholder rights — forum-selection bylaws govern where stockholders sue on internal-affairs claims and thus fit § 109(b) | Court: Bylaws are statutorily valid; they regulate rights of stockholders qua stockholders and the conduct of corporate affairs, so they fall within § 109(b) |
| Contractual enforceability of board-adopted bylaws | Board-adopted forum clauses are not valid contracts because stockholders did not vote to approve them | DGCL and certificates put stockholders on notice that boards may adopt bylaws; stockholders consent to that governance regime when buying stock | Court: Board-adopted bylaws are contractually binding under Delaware law and will be enforced as forum-selection clauses |
| Enforceability standard and hypothetical abuses | Facial review required because plaintiffs imagine scenarios where bylaws might be unreasonable or conflict with federal jurisdiction | Bylaws are presumptively valid; alleged as-applied/unreasonable applications should be litigated in real cases under Bremen and fiduciary-duty doctrines | Court: Plaintiffs’ speculative "parade of horribles" fails a facial challenge burden; as-applied and fiduciary-duty routes remain available later |
| Procedural posture: consolidation and ripeness | Plaintiffs argued it was premature/advisory to decide facial claims before discovery/as-applied facts | Defendants sought prompt adjudication to resolve legal uncertainty and avoid chilling lawful bylaw adoption | Court: Consolidation and judgment on the pleadings for Counts I and IV were proper; facial legal questions ripe and decided now |
Key Cases Cited
- The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (establishes enforceability/reasonableness test for forum-selection clauses)
- Ingres Corp. v. CA, Inc., 8 A.3d 1143 (Del. 2010) (Delaware adopts Bremen framework for forum-selection clauses)
- Frantz Mfg. Co. v. EAC Indus., 501 A.2d 401 (Del. 1985) (bylaws presumptively valid; courts construe to preserve validity)
- Stroud v. Grace, 606 A.2d 75 (Del. 1992) (facial challenges to bylaws disfavored; validity often awaits actual use)
- Moran v. Household Int’l, Inc., 500 A.2d 1346 (Del. 1985) (boards may use statutory powers for novel defenses; corporate law adapts to new governance tools)
- Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) (upholds non-negotiated forum clause on reasonableness grounds)
- Kidsco Inc. v. Dinsmore, 674 A.2d 483 (Del. Ch. 1995) (rejects vested-rights doctrine; bylaws may be amended where notice exists)
- CA, Inc. v. AFSCME Employees’ Pension Plan, 953 A.3d 227 (Del. 2008) (discusses standards for bylaw review and cautions against invalidating bylaws on hypothetical harms)