Strategic Adoption of Forum-Selection Bylaws
September 3, 2014
It is well known that more than 90 percent of proposed mergers valued at over $100 million result in stockholder litigation. In most cases, such litigation is commenced in more than one forum, which led to the advent of the now widely adopted forum-selection bylaw. The suggestion in In re Revlon Shareholders Litigation, 990 A.2d 940 (Del. Ch. 2010), that forum-selection bylaws may be enforceable and the subsequent enforcement of such bylaws in Boilermakers Local 154 Retirement Fund v. Chevron, 73 A.3d 934, 937, 939 (Del. Ch. 2013), has resulted in the strategic adoption of forum-selection bylaws in connection with major transactions, such as mergers. For example, Consolidated Communications Holdings Inc.’s Form 8-K approved a forum-selection bylaw and merger the same day on June 30; Hittite Microwave Corp.’s Form 8-K approved a forum-selection bylaw one day before approving merger on June 8; Protective Life Corp.’s Form 8-K approved a forum-selection bylaw and merger the same day on June 3; and Material Sciences Corp.’s Form 8-K did the same on Jan. 8. The most recent non-Delaware court decision addressing the enforceability of forum-selection bylaws has brought this practice into question.