Delaware Business Litigation Report

Chancery Holds That Controlling Stockholder Approving Exclusive Forum Selection Clause In Charter Amendment Impliedly Consented To Personal Jurisdiction

In Re Carvana Co. S’holders Litig., C.A. No. 2020-0415-KSJM (Del. Ch. Aug. 31, 2022)
In Delaware, parties may waive the requirement of personal jurisdiction either expressly or impliedly. The Court of Chancery applied this waiver principle in In re Pilgrim’s Corporations Derivative Litigation (2019), finding that a controlling stockholder impliedly consented to personal jurisdiction when his Board appointees approved a bylaw selecting the Court of Chancery as the exclusive jurisdiction for certain stockholder disputes. This decision extends and applies Pilgrim’s ruling to a controlling stockholder who personally voted to approve a charter amendment that granted exclusive jurisdiction in the Court of Chancery.

Here, the controlling stockholder executed a written consent approving an exclusive Court of Chancery forum selection charter provision for, among other things, “any action asserting a claim of breach of fiduciary duty owed by any stockholder of the Corporation.” In response to a derivative breach of fiduciary duty action against the controlling stockholder for breach of fiduciary duty in an allegedly self-interested transaction, the controlling stockholder moved to dismiss on several grounds, including a lack of personal jurisdiction. Looking to its previous decision in Pilgrim’s, the Court of Chancery denied the motion. First, like the bylaw amendment in Pilgrim’s, the Court found that the exclusive forum clause in the charter amendment here was intended to apply to actions filed against a controlling stockholder because the language expressly referred to breaches of fiduciary duty by stockholders, and only controlling stockholders owe fiduciary duties. Second, even more directly than the Pilgrim’s controlling stockholder whose Board appointees approved the exclusive forum selection clause, the controlling stockholder here personally approved the clause by executing a written consent. The Court thus found that the controlling stockholder had impliedly consented to jurisdiction.

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