Delaware
Bylaws may generally be amended by the Board if the Certificate of
Incorporation says so. But now shareholders have brought nine lawsuits
against companies incorporated in Delaware seeking to invalidate Bylaws
provisions that say that litigation has to be brought in Delaware. The rush toward Bylaws
provisions requiring exclusive venue for shareholder litigation finds its roots
in a 2010 idea from Stanford Law School professor Joseph Grundfest that
corporations create such restrictions to make M&A litigation across several
venues more difficult. There are many costs, risks and problems associated
with such multi-jurisdictional litigation, and many plaintiffs seek to create
these sorts of problems to encourage settlement. Some of the companies
sued for their Bylaws are Navistar International Corp., Chevron Corp., and
Franklin Resources, Inc. And dicta in a footnote in In Re Revlon, Inc. Shareholders
Litigation, Consol. C.A. No. 4578-VCL (Del. Ch. March 16, 2010)
gave such provisions some weight. The new litigants argue that such
provisions should only be adopted following a shareholder vote, like an
amendment to a company’s Certificate of Incorporation. They also argue
that the challenged provisions require shareholders, but not companies, to sue
in Delaware. We think these new provisions will withstand this scrutiny,
in part, because this multi-jurisdictional litigation is a problem in need of a
solution and no better solution seems available at this time.
Tuesday, February 21, 2012
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment