Boilermakers Local 154 Retirement Fund v. Chevron Corp.
Facts
Chevron and FedEx are Delaware corporations whose certificates of incorporation authorized their boards under DGCL § 109(a) to adopt and amend bylaws unilaterally. Each board adopted a bylaw selecting Delaware as the exclusive forum for derivative suits, fiduciary duty suits, DGCL claims, and other internal-affairs claims, subject to corporate consent to another forum; Chevron later amended its bylaw to allow any state or federal court in Delaware with jurisdiction over indispensable parties. The boards stated that the bylaws were intended to reduce duplicative multiforum litigation over internal corporate disputes. Plaintiffs, who were stockholders, brought facial challenges contending the bylaws exceeded statutory authority and were not contractually enforceable because stockholders had not specifically assented to them.
Issue
Whether board-adopted bylaws selecting Delaware as the exclusive forum for specified internal-affairs litigation are facially invalid under DGCL § 109(b). Whether such bylaws are contractually unenforceable merely because the boards, rather than the stockholders, adopted them unilaterally pursuant to authority granted in the certificates of incorporation.
Rule
Under Delaware law, a bylaw adopted by a board authorized under DGCL § 109(a) is facially valid if it is not inconsistent with law or the certificate of incorporation and relates to the business of the corporation, the conduct of its affairs, or the rights or powers of stockholders, directors, officers, or employees under DGCL § 109(b). Forum selection bylaws that regulate where stockholders may bring internal-affairs claims are process-oriented regulations of internal corporate affairs and are contractually binding as part of the flexible corporate contract among the corporation, directors, officers, and stockholders. A facial challenge to a bylaw fails unless the challenger shows the bylaw cannot operate lawfully or equitably in any conceivable circumstance; case-specific objections must be raised as as-applied challenges under Bremen or fiduciary-duty principles.
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A stockholder files a facial challenge arguing that the bylaw exceeds the board’s authority because it regulates litigation rather than corporate affairs. How should a Delaware court rule?