In In Re Pilgrim’s Pride Corporation, Consol. C.A. No. 2018-0058-JTL (Mar. 15, 2019), minority stockholders sued the controlling stockholder which was a Brazilian entity in connection with the corporation’s acquisition of subsidiaries owned by the controlling stockholder. The minority stockholders alleged that the acquisitions were not at arm’s length with the controlling stockholder. On the same day as the committee of independent directors gave the final approval for the acquisition, the board of directors adopted a forum-selection bylaw which mandated the Chancery Court as the exclusive forum for any claims of breach of fiduciary duty owed by any “stockholder of the Corporation or the Corporation’s stockholders.” The controlling stockholder moved to dismiss the complaint for lack of personal jurisdiction.
The Court denied the motion to dismiss. While the forum-selection bylaw contained no explicit reference to personal jurisdiction, the Court emphasized that the controlling stockholder implicitly consented to the Court’s personal jurisdiction because it had substantial control over the board of directors that adopted the forum-selection bylaw. In addition, it noted that had the forum-selection bylaw included a provision limiting its coverage to cases where the courts had personal jurisdiction over the defendants as in Boilermakers Local 154 Retirement Fund v. Chevron Corporation, there would have been no implied consent.
BOTTOM LINE: To eliminate implied consent to personal jurisdiction in a forum-selection bylaw, use the following language from a 2013 decision by our current chief justice when he was the chancellor:
“Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the state of Delaware, in all cases subject to the court’s having personal jurisdiction over the indispensible parties named as defendants.”