Corporate and securities law - Section 14(A) violations - ninth circuit enforces forum selection clause blocking derivative suits: 'Lee ex rel. Gap, Inc. v. Fisher'

As it strives to keep up with trends through its retail business, The Gap, Inc. has also found itself at the forefront of the latest trend in shareholder activism: shareholders pushing for corporate governance reform through derivative securities lawsuits. But Gap's bylaws include a forum selec...

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Bibliographic Details
Published in:Harvard law review 2024-05, Vol.137 (7), p.2080-2087
Format: Article
Language:English
Subjects:
Analysis
Constitutional law
Corporate directors
Corporate governance
Disclosure (Securities law)
Fiduciary duties
Judicial power
Laws, regulations and rules
Professional misconduct
Proxy
Separation of powers
Shareholder activism
Stockholders' derivative actions
Waiver (Civil procedure)
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Summary:As it strives to keep up with trends through its retail business, The Gap, Inc. has also found itself at the forefront of the latest trend in shareholder activism: shareholders pushing for corporate governance reform through derivative securities lawsuits. But Gap's bylaws include a forum selection clause that essentially forces the dismissal of any derivative litigation brought under federal law. Recently, in 'Lee ex rel. Gap, Inc. v. Fisher', the Ninth Circuit split with the Seventh Circuit and held that such clauses are permissible and do not functionally waive compliance with the Securities Exchange Act of 1934. The Ninth Circuit too rigidly deferred to Delaware jurisprudence in distinguishing direct from derivative claims when it should have evaluated whether such deference impedes the federal policy of private enforcement.
ISSN:0017-811X