After the Delaware Supreme Court’s March 2020 decision in Salzberg v. Sciabacucchi upholding the facial validity of corporate charter provisions designating federal court as the forum for Securities Act liability claims, several questions remained. Among the questions is whether others’ states courts will recognize and enforce federal forum provisions in Delaware corporations’ charters. This issue has been teed up for decision in a Section 11 lawsuit pending in San Mateo County court in California, in a case involving Dropbox. Dropbox has filed a motion urging the California state court to dismiss the action, in reliance on the federal forum provision in its corporate charter.

As discussed Alison Frankel’s July 13 post on her On the Case blog (here), a group of six ex-judges from Delaware has now entered an amicus brief on the issue in the case, urging the California court to recognize Delaware legal authority and enforce the federal forum provision in Dropbox’s charter. The Dropbox case, according to Frankel, is “shaping up as an early test of the application of the [Sciabacucchi decision] that forum selection clauses requiring shareholders to litigate Securities Act claims in federal court are facially valid because they concern the corporation’s internal affairs.”
Continue Reading California Court to Address Enforceability of Delaware Corporation’s Federal Forum Provision

After the U.S. Supreme Court’s March 2018 decision in the Cyan case that state courts retain concurrent jurisdiction for ’33 Act liability actions, one idea that circulated was that companies could avoid securities class action lawsuits in state court by adopting a charter provision designating a federal forum for these kinds of suits. Unfortunately, in December 2018, Delaware Chancery Court Vice Chancellor Travis Laster held in Sciabacucchi v. Salzburg that under Delaware law federal forum provisions are invalid and ineffective, as discussed here. The Sciabacucchi decision, which is now on appeal, is the subject of a comprehensive critique in a recent article by Stanford Law Professor Joseph Grundfest, entitled “The Limits of Delaware Corporate Law: Internal Affairs, Federal Forum Provisions, and Sciabacucchi” (here). Professor Grundfest argues that Sciabacucchi was wrongly decided and that a under a “straightforward” application of applicable Delaware statutory law, federal forum provisions are valid and permitted.
Continue Reading A Critique of the Delaware Chancery Court Decision on Federal Forum Provisions