Delaware Chancery Court Rejects Corporate Forum Selection Clauses, With Potential Implications for Forced Shareholder Arbitration (Amended)

Alison Frankel of Reuters reports that the Delaware Chancery Court has held that Delaware corporations lack authority to include in their charters "forum selection clauses" applicable to federal securities fraud claims asserted by shareholders. Put more simply, the ruling limits corporate power to tell shareholders where they have to file their claims. As Frankel's article explains, the decision may imply that corporations can't include provisions that would force shareholders to arbitrate federal securities claims. Reuters has posted the opinion here. The ruling is subject to appeal to the Delaware Supreme Court. If sustained, and if applied to arbitration clauses as well, the ruling will be a major victory for shareholder rights.

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