This year’s Annual F.G. Pileggi Distinguished Lecture in Law, was presented by former SEC Commissioner Joseph Grundfest, the current W.A. Franke Professor of Law and Business at Stanford Law School and a senior faculty member at the law school’s Center for Corporate Governance. His topic for this 26th annual gathering of lawyers and judges in Delaware, named after my father, was: "Choice of Forum in Intra-corporate Litigation".
The event took place today at the Hotel duPont in Wilmington, Delaware, October 8, 2010 at 8:00 a.m., under the auspices of The Delaware Journal of Corporate Law, Widener University Law School. An abstract of the presentation follows:
CHOICE OF FORUM PROVISIONS IN INTRA-CORPORATE LITIGATION:
MANDATORY AND ELECTIVE APPROACHES
Choice of forum provisions are common in commercial agreements. They are also broadly respected and readily enforced, even when characterized as contracts of adhesion. In contrast, choice of forum provisions in charters and bylaws governing intra-corporate disputes are exceedingly rare. Only 38 publicly traded entities–fewer than four tenths of one percent of all publicly traded entities–currently have such provisions.
The incidence of these provisions remains low, even though their number has doubled since Chancery’s decision in Revlon. These provisions also appear in distinct clusters: many can be traced back to the copying of a root provision, and the evolution of the practice can be traced through propagation patterns that explain why specific companies decided to adopt provisions that are, in the aggregate, quite rare. These provisions also currently appear in two distinct forms: mandatory provisions that seek to compel that intra-corporate litigation proceed in the state of incorporation, and elective provisions that compel that the litigation proceed in the chartering state unless the corporation consents in writing to another forum.
In this lecture, I examine whether choice of forum provisions are likely to be enforced by the courts, whether inclusion in the charter or bylaws influences enforceability, as well as the relative merits of the mandatory and elective forms of the provision.
The good professor provides much more detail in his Powerpoint, which is excerpted here, and concludes that both the mandatory and elective provisions should be enforceable. The complete Powerpoint is available on the law review’s website here. The expected law review article based on this Lecture should make for interesting reading.
SUPPLEMENT: Professor J.W. Verret has some very nice things to say about the Annual Lecture here, for which we are very grateful. Professor Larry Ribstein provides scholarly commentary on the topic generally addressed by Professor Grundfest here. Professor Davidoff adds his learned commentary here. Ed Micheletti, a partner in the Wilmington office of the Skadden Arps firm, kindly referenced the Distinguished Lecture series in an article he wrote here.