Editors:
Andrew Clark
Latham & Watkins LLP
Andrew.Clark@lw.com

Alex Voxman
Latham & Watkin LLP
Alex.Voxman@lw.com

The California Court of Appeal joined Delaware and Oregon courts in recognizing the enforceability of forum-selection bylaws adopted by Delaware corporations. Drulias v. 1st Century Bancshares, Inc., No. H045049 (Cal. Ct. App. 6th Dist. Dec. 21, 2018) (full decision here). See also Boilermakers Local 154 Retirement Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) (holding that exclusive forum bylaws are facially valid under Delaware law); Roberts v. TriQuint Semiconductor, Inc., 358 Or. 413 (Dec. 10, 2015) (holding that forum bylaws are valid). Exclusive forum bylaws, which require state corporate law claims to be brought in a designated venue, have gained significant traction in recent years, especially among Delaware corporations. Stockholder plaintiffs have sought to invalidate Delaware forum-selection bylaws to gain the ability to sue Delaware corporations in other states. The decision in Drulias, is the first controlling statement of California law on the issue.

In Drulias v. 1st Century Bancshares, Inc., a stockholder of a Delaware corporation sued the corporation in a California court, alleging that the board had breached its duties by approving a merger. On defendants’ motion, the trial court stayed the action on the basis of the company’s forum-selection bylaw, which designated Delaware as “the sole and exclusive forum” for intra-corporate disputes, including any action asserting a claim for breach of fiduciary duty. Plaintiff appealed, arguing that the enforcement of the bylaw was unreasonable because the bylaw conflicted with California statute and had been adopted unilaterally by the board after the alleged breach of duty.

Rejecting plaintiff’s arguments, the appeals court held that although the California Corporations Code allows a California resident to bring a suit against foreign corporations transacting business in the state, “nothing in the provision requires a California court to exercise jurisdiction over such a case.” The court further noted that “Forum selection bylaws have the effect of consolidating such litigation into a single forum, thereby reducing litigation expenses and avoiding duplication of effort (not to mention promoting efficient use of judicial resources), which is beneficial to corporations and their shareholders alike.”

We are excited to announce that it’s official! On February 27, 2019, in connection with the combination of the Business and Corporations Law Section and the Corporate Law Departments Section, we adopted new Amended and Restated Bylaws for the Business Law Section. Our Section members include attorneys that practice all types of business law, whether as a private practitioner or in-house at a company. The Business Law Section is committed to providing business law attorneys and in-house counsel with programs, resources, and information relative to their practices and their companies as well as opportunities to network and engage with others in the Los Angeles legal community. We will continue to provide outstanding webinars, events, and programs, including our Annual Securities Regulation Seminar, FINRA Arbitration and Enforcement series, and the California and Delaware Law Annual Update. In addition, we will offer programs that are particularly important to in-house counsel, including the General Counsel Roundtables and the Outstanding Corporate Counsel Awards Dinner. Together, our combined Executive Committee will seek to create more opportunities for our members to benefit from our diverse offerings. Also, be on the lookout for our new Business Law Section page on the LACBA website!

On February 21, LACBA and MSK co-hosted a networking mixer to celebrate the combination of the Business and Corporations Law Section and the Corporate Law Departments Section into the new Business Law Section. The event was a great success and attended by many current and prospective Section members. We look forward to hosting further successful networking mixers in the near future.