One of the hot topics in the world of corporate and securities litigation in recent years has been the use of forum selection bylaws as a way for companies to try to manage their litigation risk by steering corporate and securities litigation to a specified forum. Courts have largely upheld these provisions. For example, as noted in a recent post, an en banc ruling of the Ninth Circuit dismissed a plaintiff’s claim against the board of The Gap in reliance on a forum selection clause in the company’s bylaws, even though the dismissal effectively deprived the plaintiff of a forum for its derivative Section 14(a) claims.

Now in a further development, a federal district court judge, again in a reliance on a forum selection clause, has granted the defendants’ motion to dismiss in a SolarWinds cyber incident-related derivative suit, even though the dismissal means that the plaintiff has no forum in which to assert his derivative Exchange Act claims – most notably including the plaintiff’s derivative claims under Section 10(b). At a minimum, the ruling expands the reach of what a forum selection clause may achieve, and it possibly could increase the chances that these issues ultimately wind up before the U.S. Supreme Court. A copy of the court’s July 12, 2023, order in the federal court derivative lawsuit can be found here. A July 14, 2023, post on about the ruling can be found here.


SolarWInds is technology company that provides products to monitor the performance of information-technology networds. In December 2020, the company disclosed a cyberattack affecting one or more of its products. Attackers allegedly used the vulnerability to monitor email traffic and access sensitive information from many company clients, including several U.S. government agencies. This cyber incident have been the subject of several other related lawsuits, including a securities class action lawsuit (here), which ultimately settled for $26 million, and a separate Delaware state court breach of fiduciary duty lawsuit (here), which ultimately was dismissed (here), and the dismissal was affirmed by the Delaware Supreme Court.

In addition to the separate securities class action lawsuit and the Delaware state court lawsuit, a plaintiff shareholder also filed a derivative lawsuit in the Western District of Texas against certain directors and officers of Solar Winds, as well as against the company itself as nominal defendant. In the federal court derivative lawsuit, the plaintiff alleged that in connection with the cyber incident the defendants had breached their fiduciary duties; violated Section 14(a) of the ’34 Act; violated Sections 10(b) and Section 21(D) of the ’34 Act; and misappropriated material non-public information of the Company.

The parties to the federal court derivative lawsuit initially agreed to stay the lawsuit in light of the pendency of the other litigation. Following developments in the other cases, the defendants moved to dismiss the federal court derivative lawsuit in reliance on the forum selection clause in the Company’s Restated Certificate of Incorporation (“COI”).

The COI provides in relevant part that “Unless the Corporation consents in writing otherwise … the Court of Chancery of the State of Delaware shall be the sole and exclusive forum” for “any derivative action or proceeding brought on behalf of the Corporation.”

The plaintiff opposed the motions, arguing first, that the defendants had waived the forum selection provision, and second, because the securities laws provide an exclusive federal court forum for Exchange Act violation cases, a dismissal of a federal court forum for the plaintiff’s derivative claims under the Exchange Act in favor of the designated Delaware state court forum would effectively deprive the plaintiff of a forum for the Exchange Act derivative claims.

The July 5, 2023, Order

In a July 5, 2023, order, Western District of Texas Judge Robert L. Pitman granted the defendants’ motion, dismissing the plaintiff’s federal court derivative complaint without prejudice, on forum non conveniens grounds, in reliance on the forum selection provision.

In granting the motion, Judge Pitman rejected the plaintiff’s waiver argument in reliance on a fact-based analysis.

Judge Pitman also rejected the plaintiff’s argument that federal policy prohibits enforcement of the forum provision. The plaintiff had argued that because enforcement of provision would effectively deprive him from asserting his derivative Exchange Act claims in any forum (since, owing to the exclusive federal court jurisdiction provisions in the Exchange Act, the designated Delaware forum could not hear those claims), the forum provision violated public policy.

Judge Pitman first reviewed extensive case authority in which federal courts had enforced forum selection provisions despite the impact the enforcement had on the plaintiff’s ability to assert claims. Judge Pitman said that “given the similar remedies available in Delaware and the fact that Plaintiff retains his right to assert direct Exchange Act claims in federal court, Plaintiff has not shown that enforcing the COI’s venue provision violates a strong federal policy.”

Judge Pitman also rejected the plaintiff’s attempt to rely on the Seventh Circuit’s 2022 decision in Seafarers Pension Plan on behalf of Boeing v. Bradway, in which the appellate court had refused to enforce a similar forum selection provision in Boeing’s bylaws, because enforcing it would effectively deprive the plaintiff from the ability to assert Exchange Act claims in federal court. The Seafarers decision is of course in direct conflict with the Ninth Circuit’s recent en banc ruling in The Gap case that I mentioned in the opening paragraph above. Judge Pitman declined to follow the Seafarers case because, he said, it was contrary to the authority on which he relied, which held that enforcement of a forum selection provision is not contrary to the anti-waiver provision in the federal securities laws.


In the wake of the Ninth Circuit’s en banc ruling in the case involving The Gap, in which the appellate court enforced a forum selection provision even though it effectively meant that the plaintiff had no forum to hear its derivative Section 14 claim, commentators noted that the Ninth Circuit’s ruling was in direct conflict with the Seventh Circuit’s ruling in the Seafarers case, in which the appellate court had refused to enforce a forum selection clause precisely because it would deprive the claimant of a forum to hear the plaintiff’s Section 14 claim. Commentators also speculated that this apparent Circuit split might be enough to cause the U.S. Supreme Court to take up the issue of forum selection clause enforceability.

If the prior apparent circuit split might have been enough to attract the U.S. Supreme Court’s interest, then this decision will add further fuel to the fire. In this case, the plaintiff was not only left without a forum for his derivative Section 14(a) claim, but he was also left without a forum for his derivative Section 10(b) claim. This incremental extension of the reach of the seemingly preclusive effect of forum selection clauses underscores the concerns and questions that surround the enforcement of these kinds of forum selection clauses.

Readers will recall that these kinds of corporate charter provisions began to proliferate in the early 2010’s, as companies involved in M&A transactions sought to avoid having to fight a multifront war as plaintiffs’ lawyers launched platoons of parallel merger objection lawsuits in different courts. In 2013, the Delaware Chancery Court upheld the validity of a forum selection bylaw designating the Delaware courts as the forum for corporate disputes. Later, in 2018, after the U.S. Supreme Court in the Cyan case held that state courts retain concurrent jurisdiction over ’33 Act liability actions, companies began adopting additional forum provisions designating a federal court forum for these kinds of actions. In March 2020, the Delaware Supreme Court upheld the facial validity of these kinds of federal forum provisions. Since that time, many companies have moved to adopt these kinds of forum selection provisions – and the courts have largely upheld the enforceability of these kinds of provisions.

These more recent cases, including the SolarWinds federal court derivative action, raise the question whether these clauses should be enforceable even if the enforcement of the provision has the practical effect of depriving plaintiffs of certain federal law causes of action because the designated state court forum has no jurisdiction to hear certain federal law claims. The ruling in the SolarWInds case raises the stakes on these issues because it appears, as Alison Frankel noted in her July 10, 2023, post on her On the Case blog about the SolarWinds ruling (here), to be the “first ruling to address the enforcement of a forum selection clause in connection with a derivative claim alleging a violation of the Exchange Act’s anti-fraud provision, Section 10(b).”

To be sure, as Frankel noted in her post, quoting Tulane Law School Professor Ann Lipton, derivative 10(b) actions are rare, so “the ruling may not foreclose many cases.” (Some readers may recall that in the early 2000’s plaintiffs’ lawyers filed a host of derivative suits alleging 10(b) claims in connection with the stock options backdating scandal.) And, to be sure, the forum selection provisions, which only apply to derivative suits, would not preclude the same plaintiffs from filing direct (rather than derivative) actions under Section 10(b).

Frankel quotes Lipton as saying that the concern is the “creeping effect of forum selection clauses.” They represent, according to Lipton, “a gradual ability of corporations to opt out of the securities laws.”

On the other hand, according to Stanford Law Professor Joseph Grundfest, whom Frankel also quotes in her post, there is no remedy shareholders can obtain from derivative Exchange Act suits that they can’t get from Delaware breach-of-a-duty suits and direct Exchange Act class actions. Frankel quotes Grundfest as saying “Why do these cases exist? Because law firms want a piece of the action.”

From my perspective, this forum selection provision here operated exactly as it should and for all of the right reasons as well. SolarWInds has been hit by lawsuits from every direction, on multiple and numerous legal theories, and it has already litigated these theories in multiple proceedings. It settled the securities class action lawsuit. It defeated the Delaware state court derivative lawsuit and had the dismissal affirmed by the Delaware Supreme Court. The mere fact that this one set of plaintiffs’ lawyers thinks they have a different theory that justifies their right to proceed with yet another lawsuit in yet another forum signifies nothing except the excesses of litigation in modern American culture. The whole point of the forum selection provision was to make sure the company did not have to fight a multifront war in multiple different courts. The cause of judicial efficiency is served if this proliferation of litigation is stopped. No one – no one, that is, other than plaintiffs’ lawyers – is harmed if the duplicative litigation is suppressed.