United States: Trends In Exclusive Forum Bylaws: They're Valid, Now What?

For Delaware corporations facing a rising tide of strike suits, the Delaware Court of Chancery's June 25, 2013 Boilermakers¹ decision upholding the validity of "exclusive forum" bylaws adopted by Chevron Corporation and FedEx Corporation² marked an important milestone. Exclusive forum bylaws require that derivative actions, stockholder class actions and other intra-corporate disputes be litigated exclusively in a specified forum—prior to the decision, almost always the Delaware Court of Chancery. Such provisions are intended to address plaintiff forum shopping and the related phenomenon of plaintiffs' attorneys filing lawsuits arising out of the same facts in multiple jurisdictions to obtain attorneys' fees. In particular, these provisions seek to avoid the cost and uncertainty of parallel litigation, the risk of inconsistent outcomes and the potential for Delaware law, which governs these disputes, to be misinterpreted by other courts. Additionally, they are intended to allow Delaware corporations to have intra-corporate disputes resolved by the courts most familiar with the state's corporate law.³ As suggested in Boilermakers, there is a benefit in having cases "decided in the courts whose Supreme Court has the authoritative final say as to what the governing law means. . . ."⁴

Multi-forum litigation is most well known in the context of mergers and acquisitions. For example, in 2012, 93% of merger and acquisition transactions valued at more than $100 million resulted in litigation, with an average of 4.8 lawsuits per transaction.⁵ For transactions with Delaware-incorporated targets, 65% resulted in multi-forum litigation in Delaware and other jurisdictions, 19% were challenged outside Delaware only and 16% were challenged solely in the Delaware Court of Chancery.⁶ The most common outcome of such lawsuits was a settlement that provided for the payment of attorneys' fees and additional disclosure,⁷ or in some cases, changes in deal protections, but no increase in purchase consideration for stockholders. The entrepreneurial plaintiffs' bar has also been pursuing lawsuits, modeled on merger litigation, alleging fiduciary breaches by boards of directors in connection with executive compensation matters. The current generation of such lawsuits typically seeks to enjoin annual meetings where stockholders are being asked to cast annual non-binding votes on executive compensation ("say on pay") or approve equity compensation plans. Such litigation tends to be brought outside a company's state of incorporation.

This article will provide a brief overview of the history of exclusive forum bylaws, followed by an in-depth analysis of: (a) the extent to which Boilermakers has prompted corporations to adopt exclusive forum bylaws; (b) the specific language being included in such bylaws; (c) litigation testing the enforceability of exclusive forum bylaws and (d) issues to consider before adopting such a provision.

I. HISTORY OF EXCLUSIVE FORUM BYLAWS

As discussed in Exclusive Forum Provisions: Putting on the Brakes, public companies began to adopt exclusive forum bylaws in 2010 through unilateral board action, while companies going public, being spun off, emerging from bankruptcy or otherwise in situations where they were not yet publicly traded, overwhelmingly included provisions in their charters.⁸ Unlike bylaws, charter amendments must be approved by both the board and stockholders. Thus, as a practical matter, bylaws are easier to adopt than charter amendments, and may be easily amended by the board to take into account case law developments and refinements. However, stockholders retain the right to amend or repeal bylaws, including exclusive forum bylaws, and bylaws are generally easier to attack than stockholder-approved charter amendments.

Since 2010, charter adoptions have continued unabated, and have become an accepted norm in initial public offerings (IPOs). However, bylaw adoptions ground to a halt in early 2012 after plaintiffs' firms filed 12 virtually identical lawsuits in the Delaware Court of Chancery challenging the validity of exclusive forum provisions adopted by large, public corporations.⁹ Among other things, the complaints asserted that, under Delaware law, the boards of these companies lacked the power to adopt such bylaws without stockholder approval. While 10 of the 12 companies repealed their bylaws, and nine of those companies paid attorneys' fees as a result, Chevron and FedEx opted to litigate. In Boilermakers, Chancellor Strine unambiguously found that their exclusive forum bylaws were valid both statutorily and contractually.

Consistent with prior statements, the plaintiffs appealed the decision to the Delaware Supreme Court. It appeared likely that the well-reasoned Boilermakers opinion would be upheld. However, on October 15, 2013, the plaintiffs unexpectedly withdrew the appeal. They seemingly concluded that the Delaware Supreme Court would affirm, creating a binding precedent from a higher level court. Compared to the opinion from the Court of Chancery, such a precedent would make it more difficult to successfully mount an "as applied" challenge to the enforcement of a forum selection bylaw in a non-Delaware court. While the plaintiffs in Boilermakers asserted a number of other claims, including breaches of fiduciary duty,¹⁰ the opinion only addressed the facial validity of the bylaws. On October 28, 2013, the plaintiffs moved for an order voluntarily dismissing all remaining claims without prejudice, an option that was not attractive to either defendant. Ultimately, the lawsuit against FedEx was dismissed with prejudice on November 1, 2013,¹¹ while the case against Chevron remains pending. Chevron is in a different position from FedEx since it is facing a parallel case in the United States District Court for the Northern District of California that had been stayed pending the outcome of a Delaware appeal.¹² According to the Delaware plaintiffs' October 28 motion, Chevron wanted to "certify a class and litigate all of the remaining claims."¹³ Chevron may also be considering whether it is possible to obtain binding precedent.

II. ANALYZING COMPANY RESPONSES TO BOILERMAKERS

A. Level of Bylaw Adoptions. The plaintiffs' appeal to the Delaware Supreme Court raised the question of whether corporations interested in adopting an exclusive forum bylaw would await a determination from the Delaware Supreme Court or view Boilermakers as a sufficient basis for stepping off the sidelines. Based on the author's research, many companies were comfortable acting. The chart below illustrates bylaw adoptions from June 25, 2013–October 31, 2013:

Additionally, five companies planning to go public and two corporations seeking to reincorporate in Delaware announced plans to adopt exclusive forum bylaws during this period. In total, 112 Delaware corporations (listed on Appendix A) adopted or announced plans to adopt exclusive forum bylaws from June 25, 2013 through October 31, 2013.¹⁴ To put these numbers in perspective, during the comparable period in 2012, only one company adopted an exclusive forum bylaw.¹⁵

While the statistics above relate to bylaws adopted by Delaware corporations, corporations in other states also appear to be responding to Boilermakers, although to a lesser degree. In Maryland,¹⁶ 18 corporations or real estate investment trusts adopted (or announced plans to adopt) exclusive forum bylaws during the same period, followed by four corporations in Pennsylvania, two in each of Nevada and Oregon and one in each of Florida, South Carolina, Texas and Virginia. Of these 30 corporations (listed on Appendix B), three are S&P 500 constituents.¹⁷

B. Circumstances of Adoption. Largely consistent with past patterns, 85% of the exclusive forum bylaws analyzed were adopted or proposed by corporations that were already public. In addition, 11% of the bylaws analyzed were (or are being) adopted in connection with IPOs, 2% are being adopted in connection with reincorporation in Delaware, and 1% were (or are being) adopted in connection with each of a spin-off and emergence from bankruptcy. The percentage of bylaws being adopted in connection with IPOs reflects an increase from 6.6% as of January 1, 2013.¹⁸ It is unclear whether more IPO companies are opting for an exclusive forum bylaw, rather than a charter provision, to provide the board with the unilateral ability to effect future amendments, to appear more stockholder-friendly by providing stockholders with the means to repeal or amend such provisions, or for other reasons. Of the 12 IPO companies analyzed, four included (or plan to include) exclusive forum provisions in both their charters and bylaws, thereby lessening the significance of their exclusive forum bylaws for purposes of this analysis. Additionally, one company that adopted an exclusive forum bylaw announced that it will present the bylaw for approval at its next annual meeting of stockholders. The ratification approach is reminiscent of the ratification approach many companies have taken when adopting poison pills, in response to the policies of Institutional Shareholder Services, Inc. (ISS), the influential proxy advisor.¹⁹

C. Consenting to an Alternate Forum. In Boilermakers, the Court noted that the boards of directors of Chevron and FedEx may consent to being sued in another jurisdiction under their exclusive forum bylaws. Bylaws that permit such optionality are viewed as "elective" and generally begin with the language: "Unless the Corporation consents in writing to the selection of an alternative forum . . . ." The Court in Boilermakers stated that the elective consent language allows boards "to meet their obligation to use their power only for proper corporate purposes."²⁰ In other words, whenever a lawsuit otherwise covered by an exclusive forum bylaw is brought outside the specified forum, the board must make a determination as to whether it is in the best interests of the corporation for the lawsuit to proceed in that alternate forum.²¹ In some cases, a board might determine that the other forum serves the best interests of the corporation. While some academics and practitioners questioned whether the elective language inequitably allows only the board to select among fora, from the point of view of corporations, that issue has effectively been eliminated by Chancellor Strine's endorsement. Of the Delaware exclusive forum bylaws adopted after Boilermakers, 97% provide that the board may consent to an alternate forum. The remaining companies adopted "mandatory" forum selection provisions, which do not provide flexibility. As of January 2012, only 64% of exclusive forum bylaws included elective language.²²

In connection with future as-applied challenges, plaintiffs may argue that a board has breached its fiduciary duty by seeking to enforce an exclusive forum bylaw rather than consenting to litigation in the forum chosen by the plaintiffs. In that regard, clearly documenting the board's rationale for not proceeding in a foreign jurisdiction should be helpful if the issue is raised.

D. Forum and Jurisdiction. Prior to the wave of lawsuits that began in February 2012, 96% of exclusive forum bylaws adopted by Delaware corporations specified the Delaware Court of Chancery as the exclusive forum.²³ After the lawsuits challenging exclusive forum bylaws were filed, and seemingly in response to some of the arguments advanced in the complaint, Chevron amended its bylaw to specify that intra-corporate claims may be brought in any state or federal court in Delaware, and to include a carve-out for situations in which the court does not have jurisdiction over the indispensable parties. Although Fed Ex chose not to amend its bylaw, the Chancellor upheld the validity of both companies' bylaws.

Of the 112 post-Boilermakers bylaws, only 43% provide that the Delaware Court of Chancery is the exclusive forum, 34% provide that if the specified court (usually the Delaware Court of Chancery or a "state court" in Delaware) lacks subject matter jurisdiction, jurisdiction will vest in another Delaware state or federal court, and 23% take the Chevron approach of specifying the state and federal courts in Delaware. The alternatives highlight a potential downside of only specifying the Court of Chancery—the Court may not have jurisdiction. For example, the federal courts or a different Delaware state court, such as the Superior Court, might have jurisdiction. If the federal courts have jurisdiction, plaintiffs could elect to sue the corporation in the federal district court where it is headquartered or otherwise has sufficient contacts. Those federal courts might not have as deep an understanding of Delaware law as the United States District Court for the District of Delaware. In view of these issues, companies should consider describing the exclusive forum as:

As to potential personal jurisdiction issues,²⁴ 35% of the exclusive forum bylaws adopted after Boilermakers require that the court have "personal jurisdiction over the indispensable parties named as defendants." The comparable percentage in January 2012 was 19%.²⁵ Similarly, 13% of post- Boilermakers bylaws state that the specified court or courts shall have exclusive jurisdiction "to the fullest extent permitted by law," in contrast to less than 1% in January 2012.²⁶ Both of these increases reflect heightened sensitivity to jurisdictional arguments made by the plaintiffs.

In connection with the facial challenge in Boilermakers, Chancellor Strine quickly dispensed with plaintiffs' arguments as to defects in subject matter or personal jurisdiction:

However, in the context of future "as-applied" challenges to the enforceability of exclusive forum bylaws, any defects in jurisdiction will not be "hypothetical." While including additional language addressing potential defects in personal or subject matter jurisdiction may not make a difference in the majority of cases, it could in others. Accordingly, it is important to consider these issues when crafting an exclusive forum provision.

E. Deemed Consent. Sixty-six percent of the exclusive forum bylaws analyzed specify that any person or entity owning, purchasing or otherwise acquiring any interest in shares of the corporation's stock "shall be deemed to have notice of and consented to the provisions of this bylaw." This percentage contrasts with 33% as of January 2012.²⁸ Under Delaware law, each of the charter and bylaws is deemed a contract that binds all stockholders.²⁹ Thus, the language appears to be a belt and suspenders effort to ensure that stockholders are bound by the bylaw and that non-Delaware courts where the corporation may be sued are on notice of such consent.³⁰ This language; however, raises potential contract interpretation questions. For example, other important process-oriented bylaw provisions, such as those relating to advance notice of stockholder nominations and business, do not include "deemed consent" language.³¹ Accordingly, a stockholder could argue that it is not bound by bylaws that do not include "deemed consent" language. Such an argument would, however, conflict with the precept that all stockholders are bound by all bylaws, regardless of when the bylaws are adopted. Arguably, a better solution would be to include a deemed consent clause that covers the bylaws in their entirety.

Lennar Incorporated adopted an exclusive forum bylaw³² with deemed consent language that goes a step further. That bylaw states that stockholders will be deemed to have consented to personal jurisdiction in the Court of Chancery (and other specified Delaware courts) "in any proceeding brought to enjoin any action by that person or entity that is inconsistent with the exclusive jurisdiction provided for" in the bylaw.³³ Thus, the Lennar language contemplates that, in the event a stockholder sues outside Delaware, the corporation may also seek an anti-suit injunction against the stockholder in the specified Delaware court. The underlying theory is that any such injunction should be respected in the non-Delaware court. However, the strategy of seeking an anti-suit injunction in Delaware, whether or not the exclusive forum provision explicitly provides for consent to personal jurisdiction in the specified court, may not always work, as exemplified by recent proceedings in a merger lawsuit against Edgen Corporation, discussed in Section III below.

The additional language employed by Lennar raises the question of whether the standard "deemed consent" language in most exclusive forum provisions is sufficient to confer personal jurisdiction. The Delaware Supreme Court has held that where: "the parties to the forum selection clause have consented freely and knowingly to the court's exercise of jurisdiction, the clause is sufficient to confer personal jurisdiction on a court."³⁴ However, it is not clear whether the standard language reflects the type of free and knowing submission to jurisdiction contemplated by the Delaware Supreme Court, again as evidenced in the Edgen merger litigation.

F. Sole Bylaw Amendment. Of the 112 companies that have adopted (or indicated an intention to adopt) an exclusive forum bylaw subsequent to Boilermakers, 54% amended their bylaws for the sole purpose of adopting an exclusive forum provision. By contrast, as of January 2012, only 8% of the companies that adopted exclusive forum bylaws did so on a stand-alone basis—generally preferring to bundle exclusive forum amendments with other bylaw amendments.³⁵ The current percentage appears to be another indicator of the relative comfort of public corporations in adopting exclusive forum bylaws.

G. Adoption Prior to Significant Event. Some companies continue to adopt exclusive forum bylaws in advance of, or concurrently with, public announcements of a merger or other event that could result in litigation. For example, on August 26, 2013, HiTech Pharmacal Co., Inc. agreed to be acquired. On the same day, the board amended the company's bylaws to include a forum selection provision, likely in anticipation of the lawsuits that follow such announcements.³⁶ Air Products and Chemicals, Inc. adopted an exclusive forum bylaw on July 18, 2013.³⁷ On July 31, Pershing Square Capital Management, L.P., the hedge fund, together with affiliated entities, announced that they had acquired a 9.8% beneficial interest in the company.³⁸ Notably, Air Products was one of the ten companies that had repealed a forum selection bylaw after being sued in 2012. Illustrating the changes in practice, Air Products' new bylaw, unlike the original, specifies that if the Delaware Court of Chancery lacks subject matter jurisdiction, the Superior Court of Delaware, followed by the United States District Court for the District of Delaware will have exclusive jurisdiction. In addition, the bylaw specifies that the board may consent to being sued in another jurisdiction.

H. Experimentation. As companies continue to experiment with exclusive forum provisions, a number of other clauses have appeared. For example, 4% of the exclusive forum bylaws analyzed specify that a company shall be entitled to injunctive relief and specific enforcement; 4% include severability language, likely with a view toward as-applied challenges; one provision specifies that the forum provision is solely procedural in nature, seemingly in anticipation of arguments that the bylaw deprives stockholders of substantive rights; and, as discussed above, one company has stated that it will present its exclusive forum bylaw to its stockholders for ratification at the next annual meeting.

I. Size of Companies Adopting Provisions. The market capitalization of companies adopting exclusive forum bylaws ranges from less than $100 million to more than $85 billion, indicating interest from both the smallest and largest public companies. Market capitalizations for 100 of the 112 companies analyzed are available on Yahoo Finance. As shown below, the bulk of those companies have market capitalizations below $5 billion:

J. Principal Place of Business. The largest percentage of the 112 companies are headquartered in California (26%), followed by Texas (12%), New York (10%), and Arkansas, Illinois, Massachusetts and New Jersey (each, 4%). Corporations headquartered in 21 other states have adopted exclusive forum bylaws since June 25, 2013. The high percentage of corporations headquartered in California is consistent with the high percentage identified in previous analyses of exclusive forum provisions.³⁹ The extent to which these percentages correlate with perceived litigation climates is unclear.⁴⁰

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Footnotes

1 Boilermakers Local 154 Ret. Fund v. Chevron Corp.,73 A.3d 934 (Del. Ch. 2013) judgment entered sub nom. Boilermakers Local 154 Ret. Fund & Key W. Police & Fire Pension Fund v. Chevron Corp., 7220-CS, 2013 WL3810127 (Del. Ch. June 25, 2013) [hereinafter Boilermakers].

2 The Chevron bylaw is representative of the current generation of provisions, and provides as follows:

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the state of Delaware, in all cases subject to the court's having personal jurisdiction over the indispensible parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VII.

Chevron Corporation, Bylaws, as amended Mar. 28, 2012. Filed as Exhibit 3.1 to Current Report on Form 8-K filed on Mar. 28, 2012, available at http://www.sec.gov/Archives/edgar/data/93410/000119312512139980/d326116dex31.htm. The FedEx bylaw differs from the Chevron bylaw in that: (a) the exclusive forum specified is limited to the Delaware Court of Chancery and (b) it does not include a carve-out for situations in which the court lacks personal jurisdiction over indispensable parties. Both of these features were added to Chevron's bylaw after it was sued in the Court of Chancery.

3 See John Armour, Bernard Black & Brian Cheffins, Delaware's Balancing Act, 87 INDIANA L.J. 1345, 1347 (2012) ("An extensive body of precedent, developed by expert judges, has been a key part of Delaware's 'value-added' for firms, which has helped to sustain its high share in the market for corporate law, despite premium pricing in the form of sizeable 'franchise taxes' levied on firms that incorporate there.").

4 Boilermakers at 953.

5 Robert M. Daines & Olga Koumrian, Shareholder Litigation Involving Mergers and Acquisitions, CORNERSTONE RESEARCH, February 2013, at 1-3, available at http://www.cornerstone.com/getattachment/199b1351-aba0-4f6d-92f0-24b50f4a4b29/Shareholder-Litigation-Involving-Mergers-and-Acqui.aspx. See also Matthew D. Cain & Steven M. Davidoff, Takeover Litigation in 2012, February 1, 2013, at 1-3, available at http://ssrn.com/abstract=2216727. Similar to Daines and Koumrian, Cain and Davidoff found that 91.7% of 2012 deals resulted in litigation, and the average number of lawsuits per transaction was five.

6 Shareholder Litigation Involving Mergers and Acquisitions, supra note 5, at 3.

7 Id. at 6 (indicating that in 81% of settlements, stockholders received only supplemental disclosures "and the parties in only one settlement acknowledged that litigation contributed to an increase in the merger price.")

8 Claudia H. Allen, Exclusive Forum Provisions: Putting on the Brakes, 10 CORP. ACCOUNTABILITY REP. 1286, (December 14, 2012) [hereinafter Putting on the Brakes], available at http://65.17.213.81/Files/45101_BNA_121412_Exclusive_Forum_Provisions.pdf. In order to adopt a bylaw, the board must be granted authority to do so under the charter. Such a grant is customary. Only a small number of public companies have put exclusive forum charter amendment proposals to a stockholder vote. Id. Institutional Shareholder Services, Inc. and Glass Lewis & Co., Inc., the influential proxy advisory firms, have recommended against approval of such management proposals. See infra note 61.

9 Putting on the Brakes, supra note 8.

10 The opinion in Boilermakers noted that Chevron and FedEx had argued that multi-forum litigation "imposes high costs on the corporations and hurts investors by causing needless costs that are ultimately born by stockholders, and that these costs are not justified by rational benefits for stockholders from multiforum filings." Boilermakers at 944. Essentially, both companies argued that adopting such a bylaw was a rational response to a known problem, and thus their boards should be protected by the deferential business judgment rule.

11 Stipulation and Order of Dismissal, IClub Partnership v. FedEx Corporation, C.A. No. 7238-CS (Del. Ch. Nov. 1, 2013).

12 The parallel suit, largely copied from the Delaware complaint, was filed in March 2012. Bushansky v. Armacost, No. CV 12 1597 (N.D. Cal. 2012). This is the same court that refused to dismiss the case against Oracle Corporation discussed infra in note 45. On August 9, 2012, the United States District Court for the Northern District of California stayed the Bushansky case until August 8, 2013, pending the outcome of the litigation in the Court of Chancery. Order Granting in Part and Denying in Part Defendants' Motion to Abstain or Stay and Setting Case Management Conference, Bushansky v. Armacost, No. CV 12 1597 (N.D. Cal. Aug. 9, 2012). Then on August 20, 2013, the action was stayed "until the Supreme Court of Delaware decides the likely appeal of the Delaware Decision." Stipulation and Order to Continue Stay, Bushansky v. Armacost, No. CV 12 1597 (N.D. Cal. Aug. 20, 2013). The case remains pending.

13 Motion for Dismissal Without Prejudice, Boilermakers Local 154 Ret. Fund v Chevron Corp., C.A. No. 7220-CS (Del. Ch. Oct. 28, 2013).

14 The total does not include THL Credit Senior Loan Fund, a Delaware statutory trust, that adopted an exclusive forum bylaw in August 2013 designating the state or federal courts in Delaware.

15 See Putting on the Brakes, supra note 8.

16 The provisions of the Maryland General Corporation law relating to the permissible scope of a bylaw are similar to the parallel provisions in the Delaware General Corporation Law, and Maryland courts "have historically found Delaware law in matters involving business law highly persuasive." Venable LLP, Exclusive Forum Selection Bylaws in Maryland, July 9, 2013 (citing In re Nationwide Health Properties, Inc. Shareholder Litigation, No 24-C-11-001476, slip op. at 16 (Md. Cir. Ct. May 27, 2011)).

17 The total does not include Genco Shipping & Trading Limited, a Marshall Islands corporation, that adopted an exclusive forum bylaw in October, 2013, designating the state or federal courts in the State of New York.

18 This percentage is derived from data gathered in connection with preparing Claudia H. Allen, Study of Delaware Forum Selection in Charters and Bylaws, January 25, 2012 [hereinafter, Study of Delaware Forum Selection], available at http://65.17.213.81/Files/45103_Jan_%202012_ Forum_Study.pdf.

19 See, e.g., Institutional Shareholder Services, Inc., 2013 U.S. Proxy Voting Summary Guidelines, January 31, 2013, available at http://www.issgovernance.com/files/2013ISSUSSummaryGuidelines1312013.pdf. ISS recommends voting against or withholding votes form the entire board of directors (other than new nominees, who it evaluates on a case-by-case basis) if: "The board adopts a poison pill with a term of more than 12 months ("long-term pill"), or renews any existing pill, including any "short-term" pill (12 months or less), without shareholder approval."

20 Boilermakers at 954.

21 If the defendant corporation asserts that the lawsuit should be dismissed or stayed on the basis of its exclusive forum bylaw, the foreign court must make a determination as to whether to enforce that bylaw. That determination involves a three part analysis under which the foreign court: (a) applies the laws of the state of incorporation to evaluate the validity of adoption, (b) applies the foreign jurisdiction's laws to determine whether the motion should be granted and (c) applies the laws of the state of incorporation to determine whether enforcing the bylaw would lead to a breach of the board's fiduciary duty or an inequitable result. See Joseph A. Grundfest & Kristen A. Savelle, The Brouhaha Over Intra-Corporate Forum Selection Provisions: a Legal, Economic, and Political Analysis, 68 THE BUS. LAWYER 325, 330 (2013).

22 This statistic was derived from the data gathered in connection with preparing the Study of Delaware Forum Selection, supra note 18. The first generation of exclusive forum provisions were largely mandatory, unlike the current generation. See Study of Delaware Forum Selection, supra note 18, at 7-8.

23 This percentage is derived from data gathered in connection with preparing the Study of Delaware Forum Selection, supra note 18. According to that data, the remaining 4% specified a court of competent jurisdiction in Delaware or the state and federal courts in Delaware. Note that the latter formulation is the same as Chevron's amended formulation. The data also indicate that as of December 31, 2011, 13% of companies with exclusive forum bylaws included language recognizing the potential for federal courts to have exclusive jurisdiction.

24 Chancellor Strine suggested a practical solution to ensuring that the Court would have jurisdiction over officers, employees and affiliates not subject to 10 Del. C. § 3114, concerning service of process on non-residents—namely, conditioning advancement and indemnification on assent to jurisdiction in Delaware over the categories of claims covered by an exclusive forum bylaw, or including consent to jurisdiction provisions in employment agreements.

25 This percentage is derived from data gathered in connection with preparing the Study of Delaware Forum Selection, supra note 18.

26 Id.

27 Boilermakers at 961 (citations omitted).

28 This percentage is derived from data gathered in connection with preparing the Study of Delaware Forum Selection, supra note 18.

29 See Airgas, Inc. v. Air Prods. & Chems., Inc., 8 A.3d 1182, 1188 (Del. 2010) ("Corporate charters and bylaws are contracts among a corporation's shareholders."); Centaur Partners, IV v. Nat'l Intergroup, Inc., 582 A.2d 923, 938 (Del. 1990) ("Corporate charters and by-laws are contracts among the shareholders of a corporation and the general rules of contract interpretation are held to apply."); Boilermakers at 955 ("In an unbroken line of decisions dating back several generations, [the Delaware] Supreme Court has made clear that bylaws constitute a binding part of the contract between a Delaware corporation and its shareholders.").

30 This percentage is derived from data gathered in connection with preparing the Study of Delaware Forum Selection, supra note 18.

31 Moreover, the Delaware courts have rejected the notion that stockholders have "vested rights" that may not be changed through board-adopted bylaw amendments. Boilermakers at 940; Kidsco v. Dinsmore, 953 A.2d 227, 234 (Del. 2008).

32 Lennar Corporation, Bylaws as amended as of October 3, 2013. Filed as Exhibit 3.6 to Current Report on Form 8-K filed on October 4, 2013, available at http://www.sec.gov/Archives/edgar/data/920760/000119312513391695/d607840dex36.htm.

33 Explicitly providing that investors are deemed to have submitted to the exclusive jurisdiction of a specified court has been more common in the context of publicly traded limited partnerships and limited liability companies. See e.g., LRR Energy, L.P., Section 16.9 of First Amended and Restated Agreement of Limited Partnership Agreement, dated as of Nov. 16, 2011. Filed as Exhibit 3.1 to Current Report on Form 8-K filed on Nov. 22, 2011, available at http://www.sec.gov/Archives/edgar/data/1519632/000110465911065590/a11-30123_1ex3d1.htm; Vanguard Natural Resources, LLC., Section 15.8 of Amendment No. 1 to Third Amended and Restated Limited Liability Company Agreement, filed as Exhibit 3.1 to Current Report on Form 8-K filed on August 5, 2013, available at http://www.sec.gov./Archives/edgar/data/1384072/000138407213000075/vnr-amendmentno1tollcagree.htm.

34 Nat'l Indus. Grp. (Holding) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373, 381 (Del. 2013).

35 This statistic is derived from the data collected in connection with preparing the Study of Delaware Forum Selection, supra note 18.

36 See Items 1.01 and 5.03 of Current Report on Form 8-K filed on Aug. 27, 2013, available at http://www.sec.gov/Archives/edgar/data/887497/000114420413047928/v353808_8k.htm.

37 Air Products and Chemicals, Inc., Amended and Restated Bylaws. Filed as Exhibit 3.1 to Current Report on Form 8-K filed on July 23, 2012, available at http://www.sec.gov/Archives/edgar/data/2969/000119312513298998/d571094dex31.htm.

38 Schedule 13D filed on July 31, 2013, available at http://www.sec.gov/Archives/edgar/data/2969/000119312513311732/d576548dsc13d.htm.

39 Study of Delaware Forum Selection, supra note 18, at 8; Joseph A. Grundfest, The History and Evolution of Intra-Corporate Forum Selection Clauses: An Empirical Analysis, 37 DEL. J. CORP. LAW, 333, 354, 368-369 (2012) (noting that Delaware chartered corporations headquartered in California were over-represented in the group of entities that had adopted exclusive forum provisions, and that previous research indicated approximately 23.8% of Delaware corporations are headquartered in California). Since the cited statistic is from 2003, and the pool of companies analyzed in this article is modest, it is unclear whether California remains over-represented.

40 For example, the 2012 edition of State Liability Systems Survey: Lawsuit Climate, Ranking the States, U.S. CHAMBER INSTITUTE FOR LEGAL REFORM (conducted by Harris Interactive Inc.), September 2012, available at http://www.instituteforlegalreform.com/uploads/sites/1/Lawsuit_Climate_Report_2012.pdf, ranked California-47, Texas-36, New York-18, Arkansas-35, Illinois-46, Massachusetts-19 and New Jersey-32.

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