December 06, 2018

MONTH-IN-BRIEF: Business Litigation & Dispute Resolution

Mac R. McCoy, Sara Bussiere

Business Litigation

Delaware Court of Chancery Invalidates Federal Forum Charter Provisions

By Benjamin M. Potts

In Sciabacucchi v. Salzberg et al., C.A. No. 2017-0931-JTL (Dec. 19, 2018) (“Mem. Op.”), Vice Chancellor Laster found invalid several Delaware corporations’ charter provisions that required lawsuits filed under the Securities Act of 1933 to be brought exclusively in federal district court.  The invalidated provisions were from the charters of several well-known companies that recently commenced initial public offerings:  Blue Apron Holdings, Inc., Roku, Inc., and Stitch Fix, Inc.  The crux of the Court’s reasoning was that Section 102(b)(1) of the Delaware General Corporation Law permits Delaware corporations’ charters to regulate those entities’ internal affairs, but does not authorize a Delaware corporation to “regulate external relationships” (Mem. Op. at 2) (emphasis added).  Because a claim under the Securities Act of 1933 does not flow from the internal affairs of a corporation, but rather from the federal government’s regulation of offerings and sales of securities, such a claim cannot be regulated by “the constitutive documents of a Delaware corporation.”  (Mem. Op. at 5).  The Court’s decision provides a reminder and useful guidance for practitioners considering what subject matter a corporation’s governing documents can validly address and regulate.

Mac R. McCoy

United States Magistrate Judge, Middle District of Florida

Mac R. McCoy is a United States Magistrate Judge in the Fort Myers Division of the United States District Court for the Middle District of Florida.  Prior to his federal judicial appointment on July 1, 2015, Judge McCoy was a Shareholder in the National Trial and National Class Actions Practice Groups at Carlton Fields, P.A. in Tampa, Florida.

Sara Bussiere

Associate, Bayard

Sara E. Bussiere is an associate in Bayard’s Litigation Department. Sara concentrates her practice on corporate and commercial litigation in the Delaware Court of Chancery, Delaware Superior Court, and the United States District Court for the District of Delaware. Sara counsels clients concerning the General Corporation Law of the State of Delaware and Delaware’s alternative entity statutes. Sara has experience in a broad range of corporate matters, including fiduciary duty claims, corporate and alternative entity control disputes, advancement and indemnification claims, trade secret and noncompetition agreement disputes, and other breach of contract claims. Sara also has experience advising corporate entities in receivership or seeking dissolution.