The Short Road Home to Delaware: Boilermakers Local 154 Retirement Fund v. Chevron

Abstract

One of the biggest Delaware Supreme Court cases of 2013 wasn’t. The Delaware Court of Chancery opinion in Boilermakers Local 154 Retirement Fund v. Chevron Corp., upheld the enforceability of Delaware forum selection clause bylaws unilaterally adopted by corporate boards of directors. It was widely expected that the Delaware Supreme Court would uphold the Court of Chancery’s opinion. However, Plaintiffs dismissed their appeal and moved to dismiss their remaining claims in the Court of Chancery, leaving intact Chancellor Strine’s strong support of forum selection clauses. National Industries Group (Holding) v. Carlyle Investment Managements L.L.C. and TC Group, L.L.C., a 2013 Delaware Supreme Court opinion, preceded Chevron and addressed the contractual enforceability of forum selection clauses. Chevron was followed by a late 2013 Court of Chancery action, Genoud v. Edgen Group Inc., which highlighted the interplay between Chevron and Carlyle, foreshadowing the impact of these cases on future litigation.

These three cases pave the short road home to Delaware. Chevron confirms three scenarios by which corporate boards can enact forum selection clauses - unilateral board bylaw amendments, shareholder-ratified bylaw amendments, and inclusion in corporate charters before an IPO. Carlyle supports the contractual validity of forum selection clauses by limiting enforceability challenges to claims of fraud or unreasonableness of the provision, rather than the contract as a whole. Construing a breach of a forum selection clause as a grounds for personal jurisdiction and a possible basis of irreparable harm for purposes of an injunction, Carlyle further supports the enforceability of forum selection clauses. Finally, Edgen signals how forum selection clauses should be enforced articulating that the first line of defense is to petition the foreign court for dismissal.

Keywords: contract, forum selection, corporate boards, corporate law, forum selection clauses, board of directors, Delaware, corporate bylaws, corporate charters

JEL Classification: K12, K19, K22, K40, K41, K49