Delaware Supreme Court Rules Federal-Forum Provisions Survive Facial Challenge Under Delaware Corporate Law
On March 18, 2020, the Delaware Supreme Court unanimously held in Salzberg v. Sciabacucchi, 2020 WL 1280785 (Del. Mar. 18, 2020), that federal-forum provisions — clauses in a corporation’s certificate of incorporation requiring that any cause of action against the corporation arising under the federal Securities Act of 1933, as amended (the Securities Act), be brought in a federal district court — do not violate Delaware corporate law, overruling a previous decision by the Delaware Court of Chancery. Writing for the Court, Justice Karen Valihura held that such provisions fall within 8 Del. C. § 102(b)(1) and do not frustrate state public policy. The closely-watched decision is likely to increase the number of Delaware corporations adopting federal-forum provisions to reduce parallel securities litigation in state courts.