litigation reform bylaws

For a while a few years ago, litigation reform bylaws were all the rage – including forum selection bylaws, fee shifting bylaws, even mandatory arbitration bylaws. More recently, discussion of the topic quieted down, in part because the Delaware legislature enacted legislation allowing Delaware corporations to adopt forum selection bylaws while also prohibiting fee-shifting bylaws. However, the topic of litigation reform bylaws may be back on the docket again. In a speech earlier this week, SEC Commissioner Michael Piwowar invited companies heading toward an IPO to adopt arbitration provisions in their corporate bylaws.
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oregonsealAs readers of this blog will recall, Delaware’s courts have held that under Delaware law bylaws designating Delaware’s courts as the exclusive forum for corporate and shareholder disputes are facially valid. Last summer, Delaware’s legislature adopted a statutory provision adding the permissibility of forum selection bylaws to the Delaware Corporations Code. In response to these judicial and legislative developments, many Delaware corporations have adopted forum selection bylaws. But whether these new bylaw provisions will have their intended effects will depend in part on what the courts in other jurisdictions do. If an action in another jurisdiction is permitted to go forward notwithstanding the bylaw specifying Delaware’s courts as the designated forum, the bylaw’s purpose would be frustrated. A recent decision from the Oregon’s highest court suggests that this potentially frustrating outcome is less likely.
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floridaIn prior posts, I have noted the growing phenomenon of companies adopting various types of bylaws as a self-help version of litigation reform. Delaware’s courts have already approved the facially validity of both forum-selection bylaws and of fee-shifting bylaws, although measures pending in Delaware legislature in 2015 could address the fee-shifting bylaw. Other