City of Providence v. First Citizens Bancshares, Inc.
2014 Del. Ch. LEXIS 168
| Del. Ch. | 2014Background
- Providence challenged FC North's Amended and Restated Bylaws adding a Forum Selection Bylaw.
- Forum Selection Bylaw designates exclusive NC courts (Eastern District of NC or NC state courts) for intra-corporate disputes.
- FC North announced a merger with FC South on June 10, 2014; transaction valued about $637–676 million; Holding Group controls both entities.
- Two complaints were filed—Bylaw Complaint challenging facial validity and fiduciary duty, and Merger Complaint against the FC North board regarding the merger—consolidated thereafter.
- Defendants moved to dismiss the Bylaw Complaint (12(b)(6)) and the Merger Complaint (12(b)(3)); expedited hearing on related injunction was contemplated but stayed pending threshold rulings.
- Court analyzed whether the bylaw is facially valid under Delaware law and whether it can be applied to dismiss the Merger Complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the Forum Selection Bylaw facially valid under Delaware law? | Providence argues the bylaw violates DGCL and public policy. | FC North contends the bylaw is consistent with Chevron and DGCL authority and is facially valid. | Yes; the bylaw is facially valid. |
| Does the bylaw give rise to a fiduciary-duty claim for adopting it? | Providence claims self-interested adoption to benefit directors/Holding Group. | Board acted within business judgment and no facts show improper motive. | No; Count II fails to state a fiduciary-duty claim. |
| Is the Merger Complaint properly dismissed as to venue under the bylaw as applied? | Delaware interest in adjudicating novel Delaware-law issues and timing render dismissal inappropriate. | Forum Selection Bylaw is enforceable as-applied; Bremen/Schnell/Federal comity support dismissal in NC forums. | Yes; the bylaw is valid as-applied, and the Merger Complaint is dismissed under Rule 12(b)(3). |
Key Cases Cited
- Chevron Corp. v. Texaco, Inc., 73 A.3d 934 (Del. Ch. 2013) (forum bylaws facial validity and contract-like nature under DGCL)
- Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. Supreme Court, 1972) (validity of forum selection clauses when not undermined by fraud or overreach)
- Ingres Corp. v. CA, Inc., 8 A.3d 1143 (Del. 2010) (presumptive enforceability of forum selection clauses; Bremen as-applied review)
- Gentile v. Rossette, 906 A.2d 91 (Del. 2006) (direct and derivative standing in controlling-shareholder contexts)
- Datapoint Corp. v. Plaza Sec. Co., 496 A.2d 1031 (Del. 1985) (jurisdictional considerations in forum-related disputes)
- Kidsco Inc. v. Dinsmore, 674 A.2d 483 (Del. Ch. 1995) (vested rights doctrine; bylaw amendments and authority to amend)
- Revlon, Inc. S’holders Litig., 990 A.2d 940 (Del. Ch. 2010) (Delaware court authority considerations in fiduciary-duty contexts)