Seafarers Pension Plan v. Robert Bradway
23 F.4th 714
7th Cir.2022Background
- Two 737 MAX crashes (Oct 2018, Mar 2019) led to global groundings and extensive liability for Boeing; shareholder Seafarers Pension Plan filed a derivative suit on Boeing’s behalf under Section 14(a) alleging materially false proxy statements (2017–2019).
- Seafarers filed in the Northern District of Illinois (Boeing HQ); defendants invoked a Boeing bylaw requiring derivative suits be brought exclusively in the Delaware Court of Chancery and moved to dismiss on forum non conveniens grounds.
- District court dismissed the federal suit, reasoning the bylaw was enforceable and plaintiff could vindicate rights in Delaware state court; parties had dismissed state-law claims pending refiling in Delaware.
- Seventh Circuit panel reversed, holding enforcement of the bylaw as applied would effectively foreclose plaintiff’s derivative Section 14(a) claim because the Exchange Act gives federal courts exclusive jurisdiction and contains an anti‑waiver provision.
- The court concluded Delaware law (8 Del. C. § 115 and related decisions) does not permit bylaws to be used to eliminate federal exclusive jurisdiction over Exchange Act derivative claims, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard of review for enforcing forum bylaws | De novo review of legal question whether bylaw is enforceable | Abuse-of-discretion review because dismissal was on forum non conveniens grounds | De novo review applies because dismissal rested on legal interpretation of the bylaw’s enforceability |
| Whether Boeing’s forum bylaw can be enforced against a derivative §14(a) claim | Bylaw cannot be enforced because Exchange Act grants exclusive federal jurisdiction and §29(a) forbids waiver of Exchange Act rights | Bylaw is valid under Delaware law and can direct derivative suits to Delaware Chancery Court | As applied, bylaw unenforceable: it would conflict with the Exchange Act’s jurisdictional/anti‑waiver scheme and effectively foreclose federal relief |
| Interaction of Delaware GCL §115 and §109(b) (bylaw authority) | §115 prohibits bylaws that would eliminate federal-court jurisdiction; it includes federal courts as "courts in this State" | §109(b) broadly authorizes bylaws; §115 is not a bar and §109(b) permits Boeing’s bylaw | §115 (and Delaware precedent) precludes using forum bylaws to nullify exclusive federal jurisdiction; §109(b) does not authorize such an outcome |
| Applicability of forum-selection precedents (Bremen/Bonny/Mitsubishi) | Federal forum-selection precedents don’t allow using bylaws to avoid federal statutory jurisdiction and anti‑waiver rules | Precedents supporting enforcement of forum clauses (including international cases) justify dismissal | Bremen/Bonny do not compel enforcement here; international-context precedents are distinguishable and Mitsubishi warns against clauses that prospectively waive federal statutory remedies |
Key Cases Cited
- M/S Bremen v. Zapata Offshore Co., 407 U.S. 1 (1972) (forum‑selection clauses are prima facie valid but not to be enforced when unreasonable or to subvert federal law)
- Bonny v. Society of Lloyd’s, 3 F.3d 156 (7th Cir. 1993) (enforced foreign forum clauses where foreign law provided adequate remedies; international context important)
- Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020) (Delaware interprets §115 to include courts located in the State and defers to Delaware statutory limits on bylaws)
- Boilermakers Local 154 Retirement Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) (permitted forum bylaws facially but signaled problems if bylaws were used to foreclose federal statutory rights)
- Kamen v. Kemper Financial Servs., Inc., 500 U.S. 90 (1991) (derivative suits are governed by state law procedures even when alleging federal substantive violations)
- J.I. Case Co. v. Borak, 377 U.S. 426 (1964) (recognized derivative enforcement of proxy‑solicitation rules when denial would negate federal relief)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Corp., 473 U.S. 614 (1985) (upheld arbitration clause only when federal statutory rights would remain enforceable; warned against clauses that prospectively waive federal remedies)
- Atlantic Marine Constr. Co. v. U.S. District Court, 571 U.S. 49 (2013) (forum‑selection clauses should be honored except in unusual circumstances)