Noelle Lee v. Robert FisherNoelle Lee v. Robert Fisher
Before: RICHARD R. CLIFTON and MILAN D. SMITH, JR., Circuit Judges, and CHRISTINA REISS,* District Judge.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY**
Forum Selection
The panel affirmed the district court‘s dismissal of Noelle Lee‘s shareholder derivative action alleging that The Gap, Inc. and its directors (collectively, Gap) failed to create meaningful diversity within company leadership roles, and that Gap made false statements to shareholders in its proxy statements about the level of diversity it had achieved.
The district court dismissed the complaint based on its application of the doctrine of forum non conveniens, holding that Lee was bound by the forum-selection clause in Gap‘s bylaws, which requires any derivative action to be adjudicated in the Delaware Court of Chancery.
Lee conceded that the forum-selection clause is valid and, by its terms, applies to her lawsuit. Accordingly, the only question before this court was whether the clause is enforceable. Applying the doctrine of forum non conveniens, the panel wrote that a forum-selection clause creates a strong presumption in favor of transferring a case, that the plaintiff bears the burden to establish that transfer is unwarranted, and that the district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer. Noting that Lee did not contend that the forum-selection clause is invalid due to fraud, nor that litigating her derivative claim in the Delaware forum would be gravely difficult, the panel considered only the second factor derived from M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972)—whether enforcement of the clause would contravene strong public policy. The panel held that Lee did not meet her burden to show that enforcing Gap‘s forum-selection clause contravenes federal public policy, rejecting as unavailing the evidence Lee identified as supporting her position: the Securities Exchange Act‘s antiwaiver provision and exclusive federal jurisdiction provision, Delaware state caselaw, and a federal court‘s obligation to hear cases within its jurisdiction. The panel therefore concluded that the district court did not abuse its discretion in dismissing the complaint.
COUNSEL
Yury A. Kolesnikov (argued) and Francis A. Bottini Jr., Bottini & Bottini Inc., La Jolla, California, for Plaintiff-Appellant.
Roman Martinez (argued), Susan E. Engel, and Michael Clemente, Latham & Watkins LLP, Washington, D.C.; Elizabeth L. Deeley and Morgan E. Whitworth, Latham & Watkins LLP, San Francisco, California; William J. Trach, Lathan & Watkins LLP, Boston, Massachusetts; for Defendants-Appellees.
M. SMITH, Circuit Judge:
Plaintiff Noelle Lee brought a shareholder derivative action alleging that The Gap, Inc. and its directors (collectively, Gap) failed to create meaningful diversity within company leadership roles, and that Gap made false statements to shareholders in its proxy statements about the level of diversity it had achieved. Gap‘s bylaws contain a forum-selection clause that requires “any derivative action or proceeding brought on behalf of the Corporation” to be adjudicated in the Delaware Court of Chancery. Notwithstanding the forum-selection clause, Lee brought her derivative lawsuit in a federal district court in California, alleging a violation of Section 14(a) of the Securities Exchange Act of 1934,
FACTUAL AND PROCEDURAL BACKGROUND
Section 14(a) and its implementing regulation, Securities Exchange Commission Rule 14a-9, prohibit material misstatements or omissions in a proxy statement.
Defendants moved to dismiss this action based on the doctrine of forum non conveniens, citing Gap‘s forum-selection clause. The district court agreed that the clause was enforceable and dismissed the lawsuit. On appeal, Lee argues that Gap‘s forum-selection clause violates public policy and is unenforceable because it prevents her from bringing a derivative Section 14(a) claim in any court.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction pursuant to
ANALYSIS
I.
Lee concedes that Gap‘s forum-selection clause is valid and, by its terms, applies to her lawsuit. Accordingly, the only question before us is whether the clause is enforceable. “[T]he appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens.” Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49, 60 (2013). In a “typical case not involving a forum-selection clause,” courts evaluate factors such as convenience of the parties when conducting a forum non conveniens analysis. Id. at 62–63. “The calculus changes, however, when the parties’ contract contains a valid forum-selection clause, which ‘represents the parties’ agreement as to the most proper forum.‘” Id. at 63 (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988)). A forum-selection clause, therefore, creates a strong presumption in favor of transferring a case, and the plaintiff “bears the burden” to establish that transfer is unwarranted. Id.
In Atlantic Marine, the Supreme Court established the general rule that “a district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer.” Id. at 52.1 The Court did not define the term “extraordinary circumstances” in Atlantic Marine, and so we looked to its earlier decision in M/S Bremen v. Zapata Off-Shore Co.,
407 U.S. 1 (1972) for guidance. See Advanced China Healthcare, 901 F.3d at 1088; see also Gemini Techs., Inc. v. Smith & Wesson Corp., 931 F.3d 911, 914–15 (9th Cir. 2019). From Bremen, we identified three general principles that establish extraordinary circumstances, namely: (1) when the forum-selection clause is invalid because of “fraud or overreaching,” (2) when enforcement of the clause “would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision,” or (3) when the forum would be “so gravely difficult and inconvenient” that the plaintiff “will for all practical purposes be deprived of his day in court.” Advanced China Healthcare, 901 F.3d at 1088 (quoting Bremen, 407 U.S. at 15, 18).
On appeal, Lee does not contend that the forum-selection clause is invalid due to fraud, nor that litigating her derivative claim in the Delaware forum would be gravely difficult. Therefore, we consider only the second Bremen factor and ask whether enforcement of the clause would contravene strong public policy. We have developed a straightforward test to decide whether a forum-selection clause contravenes public policy. See Advanced China Healthcare, 901 F.3d at 1090; Gemini Techs, 931 F.3d at 915–16. First, we look to “the forum in which suit is brought.” Advanced China Healthcare, 901 F.3d at 1090. Then we determine whether the plaintiff has identified “a statute or judicial decision” in that forum that “clearly states” strong public policy rendering the clause unenforceable. Id.
II.
Lee brought her lawsuit in a federal forum and identified the following as evidence of clear public policy supporting her position: (1) the Exchange Act‘s antiwaiver provision,
Lee first points to the Exchange Act‘s antiwaiver provision as proof of strong public policy. This argument is unavailing because “the strong federal policy in favor of enforcing forum-selection clauses ... supersede[s] antiwaiver provisions in state statutes as well as federal statutes, regardless whether the clause points to a state court, a foreign court, or another federal court.” Advanced China Healthcare, 901 F.3d at 1090. Unlike the provision the plaintiffs in Gemini identified, explicitly stating any waiver of statutory rights “is void as it is against the public policy of Idaho,” Gemini, 931 F.3d at 916, the Exchange Act‘s antiwaiver provision does not contain a clear declaration of federal policy.
Similarly, the Exchange Act‘s exclusive federal jurisdiction provision,
Lee also identifies Delaware caselaw in support of her public policy argument,
In her reply brief, Lee cites the Seventh Circuit‘s recent decision in Seafarers Pension Plan ex rel. Boeing Co. v. Bradway, 23 F.4th 714 (7th Cir. 2022). In Seafarers, a divided panel held that an identical Boeing forum-selection clause was unenforceable because it was “contrary to Delaware corporation law and federal securities law.” Id. at 718. The Seventh Circuit held that Section 115 of the Delaware General Corporation Law,
Finally, Lee argues that federal courts have a “virtually unflagging obligation” to hear cases within their exclusive jurisdiction, citing abstention doctrine cases. See, e.g., Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). But this obligation is overcome by the strong presumption in favor of enforcing forum-selection clauses “regardless whether the clause points to a state court, a foreign court, or another federal court.” Advanced China Healthcare, 901 F.3d at 1090.
CONCLUSION
Lee has not met her heavy burden to show that enforcing Gap‘s forum-selection clause contravenes strong federal public policy. We therefore conclude that the district court did not abuse its discretion in dismissing the complaint.
AFFIRMED.