It was dicta that launched a thousand provisions. In a 2010 decision adjudicating the leadership structure of counsel representing the plaintiff stockholder class challenging a controller stockholder merger, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery proposed that “if boards of directors and stockholders believe that a particular forum would provide an efficient and value-promoting locus for dispute resolution, then [Delaware] corporations are free to respond with charter provisions selecting an exclusive forum for intra-entity disputes.” And respond they did. Facing ubiquitous, multi-forum deal litigation, public Delaware corporations began adopting so-called exclusive forum provisions to require various types of “intra-entity disputes”—typically claims that directors breached their fiduciary duties in approving a sale transaction, often made in the wake of its announcement—be brought exclusively in Delaware courts.
Over the ensuing decade-plus since Vice Chancellor Laster’s dicta, the arms race between stockholder plaintiffs and corporate defendants has shaped these provisions into a customary boilerplate form that now encompasses certain U.S. securities law claims.
Article first published in Deal Lawyers, September – October 2021 Issue.