47 F. Supp. 3d 635
S.D. Ohio2014Background
- Shareholder Mildred North filed a derivative action on Chemed Corporation and Twelve Individuals over alleged breaches related to the VITAS hospice segment.
- Chemed adopted a bylaw (8.07) declaring Delaware courts the exclusive forum for certain actions, including derivative actions, subject to personal jurisdiction over indispensable parties.
- Chemed is a Delaware corporation with principal place in Ohio; VITAS operates in 16 states, with principal business in Florida for VITAS but multiple facilities nationwide.
- Plaintiff purchased Chemed stock in 2010 and has continued as a shareholder; a Delaware derivative action by KBC Asset Management was filed in 2013 asserting related claims.
- Defendants moved to transfer this action to Delaware under § 1404(a) arguing the forum-selection clause should govern; the court must decide enforceability of the clause and the § 1404(a) transfer.
- The Court ultimately grants transfer to the District of Delaware, holding the forum-selection clause enforceable and § 1404(a) transfer proper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Bylaw 8.07 as forum clause | Bylaw adopted post-claims; unconsented and thus unenforceable. | Boilermakers supports board-adopted bylaws binding shareholders who bought in; notice and Delaware framework valid. | Bylaw 8.07 enforceable; consent implied by Delaware corporate framework. |
| Proper remedy under § 1404(a) given enforceable clause | Forum clause should not force Delaware venue; plaintiff burden to avoid transfer. | Clause controls; private factors waived; public interests favor Delaware. | Transfer to the District of Delaware proper under § 1404(a) due to enforceable forum clause and public-interest considerations. |
Key Cases Cited
- Wong v. Party-Gaming, Ltd., 589 F.3d 821 (6th Cir. 2009) (forum-selection clause enforceability governed by three-prong test)
- Sec. Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369 (6th Cir. 1999) (three-factor test for enforceability of forum clauses)
- Boilermakers Local 154 Retirement Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) (upheld unilateral board-adopted forum bylaws under DGCL framework)
- Carnival Cruise Lines v. Shute, 499 U.S. 585 (U.S. 1991) (forum-clause binding even in form contracts)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses should be enforced absent strong contrary circumstances)
- City of Providence v. First Citizens Bancshares, Inc., 99 A.3d 229 (Del. Ch. 2014) (vested rights/ forum bylaw enforceability considerations in Delaware)
- Preferred Capital, Inc. v. Assocs. in Urology, 453 F.3d 718 (6th Cir. 2006) (serious inconvenience standard for forum clauses)