528 P.3d 327
Utah Ct. App.2023Background
- Domo, Inc., a Delaware corporation headquartered in Utah, included a federal forum provision (FFP) in its IPO offering documents/bylaws specifying federal district courts as the exclusive forum for Securities Act claims.
- The Delaware Court of Chancery invalidated such FFPs in Sciabacucchi; Domo filed an 8-K saying it did not "currently intend to enforce" the FFP unless Delaware Supreme Court reversed.
- Volonte purchased Domo IPO shares and filed a Securities Act class action in Utah state court alleging misrepresentations in the offering documents; he sued Domo, certain officers, and underwriters.
- The Delaware Supreme Court reversed Sciabacucchi in Salzberg, upholding the facial validity of FFPs; Domo then moved to dismiss Volonte’s state suit for improper venue based on the FFP; underwriters joined the motion.
- The Utah district court concluded the FFP was a binding bylaw, rejected Volonte’s challenges (assent/notice, Form 8-K, estoppel, conflict with the Securities Act, forum non conveniens, and underwriters’ standing), and dismissed the case; the court of appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of FFP (assent/notice) | Volonte: FFP was "buried" in lengthy offering docs and lacked mutual assent/notice. | Domo: Bylaws bind shareholders; purchasers are deemed on notice and consent. | Court: FFP enforceable; bylaws are binding under Delaware and Utah law; notice/assent argument fails. |
| Effect of Form 8-K | Volonte: 8-K constituted a public commitment/contract not to enforce FFP, so FFP was not in effect. | Domo: 8-K was conditional ("unless" Delaware reverses) and did not bar enforcement after reversal. | Court: 8-K was conditional; did not create a binding bar to enforcement after Salzberg. |
| Estoppel (promissory/equitable) | Volonte: Relied on 8-K and was prejudiced by filing in state court. | Domo: 8-K made no clear unconditional promise; reversal of Sciabacucchi made dismissal consistent with 8-K; reliance was unreasonable. | Court: Promissory and equitable estoppel fail; promise not clear/definite and reliance not reasonable. |
| Securities Act conflict (anti-removal/anti-waiver) | Volonte: FFP conflicts with §77v(a) anti-removal and §77n anti-waiver. | Domo: FFP does not remove a case; anti-waiver does not bar forum-selection waivers of procedural forum. | Court: No conflict—dismissal via FFP not barred by anti-removal; anti-waiver does not invalidate forum-selection clause. |
| Forum non conveniens | Volonte: Dismissal would leave no adequate federal forum due to SOL tolling; thus FFP enforcement is unreasonable. | Domo: Plaintiff bears burden to show enforcement is unfair; Volonte failed to present record showing federal forum unavailable. | Court: District court did not abuse discretion; Volonte failed to carry burden and raised argument too late/without record. |
| Underwriters' ability to invoke FFP | Volonte: Underwriters are nonsignatories to bylaws and cannot enforce FFP. | Underwriters: Foreseeable beneficiaries and closely related to IPO conduct; can enforce under Delaware doctrines. | Court: Applied Delaware law and Ashall Homes/related precedent; underwriters could invoke FFP; dismissal as to them was proper. |
Key Cases Cited
- Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020) (Delaware Supreme Court upheld facial validity of federal-forum provisions in corporate charters/bylaws).
- Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018) (U.S. Supreme Court: concurrent state and federal jurisdiction over Securities Act claims).
- Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989) (Securities Act anti-waiver provision not construed to bar waiver of procedural forum-selection rights).
- Atlantic Marine Construction Co. v. United States District Court, 571 U.S. 49 (2013) (forum-selection clauses control forum non conveniens analysis and should be given substantial weight).
- Boilermakers Local 154 Retirement Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) (bylaws are a binding contractual part of corporation–stockholder relationship).
- Ashall Homes Ltd. v. Rok Entertainment Group Inc., 992 A.2d 1239 (Del. Ch. 2010) (nonsignatories may enforce forum-selection clauses when plaintiff's claims closely relate to contractual obligations).