Securities Update - June 2013

EXCLUSIVE FORUM BYLAWS UPHELD BY DELAWARE COURT

By Todd C. Schiltz

Chancellor Leo E. Strine Jr., on June 25, 2013, rejected statutory and contractual challenges to exclusive forum bylaws adopted unilaterally by the boards of directors of Chevron Corporation and Federal Express Corporation. See Boilermakers Local 154 Retirement Fund, et al. v. Chevron Corp., et al., C.A. No. 7220-CS and Iclub Inv. v. FedEx Corp., C.A. No. 7238 (Del. Ch. June 25, 2013).

The Chancellor determined that, if a board of directors has been granted the authority to adopt bylaws without the approval of shareholders under the certificate of incorporation, then the board has the power under the Delaware General Corporation Law to adopt exclusive forum bylaw provisions and that such a bylaw becomes part of the contractual agreement between the corporation and its shareholders despite the fact the stockholders did not vote to approve it. The Court made clear that shareholder plaintiffs