The Chancery Court contrasted forum selection bylaws with substance-oriented bylaws, which would involve whether a shareholder is barred from suing or the type of remedy a shareholder may recover, and could not be unilaterally adopted by a board of directors. The Chancery Court held that process-oriented bylaws were matters concerning the rights of shareholders that bylaws properly may address under 8 Del. C. Section 109(b).Id. at 952. Moreover, the Chancery Court in Boilermakers found that the forum selection bylaws were contractually valid and enforceable, rejecting plaintiffs’ argument that the board-adopted bylaws could not be a contractual forum selection clause because the stockholders had not approved such provisions.

The Chancery Court contrasted forum selection bylaws with substance-oriented bylaws, which would involve whether a holder is barred from suing or the type of remedy a holder may recover, and could not be unilaterally adopted by a board of directors. The Chancery Court held that process-oriented bylaws were matters concerning the rights of holders that bylaws properly may address under 8 Del. C. Section 109(b). Id. at 952.Moreover, the Chancery Court in Boilermakers found that the forum selection bylaws were contractually valid and enforceable, rejecting plaintiffs’ argument that the board-adopted bylaws could not be a contractual forum selection clause because the stockholders had not approved such provisions.

In addition, the court ruled that the bylaws are not facially invalid under contractual principles. The court rejected the notion that a stockholder’s ability to choose a venue for litigation, unhindered by a forum selection bylaw, is a vested right. Rather, stockholders are on notice that, as to those subjects that may be regulated by bylaw under 8 Del. C. § 109(b), the board may act unilaterally: [T]he bylaws of a Delaware corporation constitute part of a binding broader contract among the directors, officers, and stockholders formed within the statutory framework of the DGCL. This contract is, by design, flexible and subject to change in the manner that the DGCL spells out and that investors know about when they purchase stock in a Delaware corporation.

The plaintiffs in this particular lawsuit claimed that the forum selection bylaws were statutorily invalid because they were beyond the scope of the board's authority under the Delaware General Corporation Law (DGCL) and that the bylaws were contractually invalid because they were unilaterally adopted by the board without shareholder approval. First, the court held that the forum selection bylaws are statutorily valid exercises of board authority under 8 Del. C. §109(b). Section 109(b) provides that the bylaws of a corporation "may contain any provision, not inconsistent with law or with the certificate of incorporation, relating to the business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers or employees."

In Delaware, challenges to the facial validity of bylaws require that plaintiffs demonstrate that they cannot operate lawfully or equitably under any circumstances.The Chancellor’s RulingAs to the statutory challenge, Chancellor Strine ruled that the bylaw provisions, which were limited to directing where suits (such as direct or derivative fiduciary duty actions or special proceedings under the DGCL) implicating the internal affairs of the corporations could be brought, are within the scope of 8 Del. C. § 109(b). Section 109(b) provides that the bylaws “may contain any provision, not inconsistent with law or with the certificate of incorporation, relating to the business of the corporation, the conduct of its affairs, and its rights or powers and the rights of powers of its stockholders, directors, officers or employees.”

That suit presented a facial challenge to bylaws adopted by two public company boards designating Delaware as the exclusive forum for disputes related to “internal affairs” ― those “matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders.”In holding that the bylaws were valid, Chancellor Strine explained that 8 Del. C. §109(b) “has long been understood to allow the corporation to set ‘self-imposed rules and regulations [that are] deemed expedient for its convenient functioning.’” Forum selection bylaws, which “regulate where stockholders may file suit, not whether the stockholder may file suit or the kind of remedy that the stockholder may obtain on behalf of herself or the corporation,” govern disputes related to the “internal affairs” of the corporation, which is a proper subject matter under Section 109(b).

At the same time, the Court affirmed the importance of books and records actions for plaintiffs seeking to challenge a board’s decision on the grounds of bad faith: “[i]t was within plaintiff’s power to explore [the] board’s internal deliberations through a books and records inspection, but there is no indication in the record that he attempted to do so.” [14]Notes:[1] 91 A.3d 554 (Del. 2014).[2] 8 Del. C. § 109(b). Section 102(f) similarly provides that “[t]he certificate of incorporation may not contain any provision that would impose liability on a stockholder for the attorneys’ fees or expenses of the corporation or any other party in connection with an internal corporate claim, as defined in § 115 of this title.”

He noted that the certificates of incorporation of both Chevron and FedEx authorize their boards to amend the companies’ respective bylaws. Thus, Chancellor Strine found that the stockholders had assented to the bylaw change: [W]hen investors bought stock in Chevron and FedEx, they knew (i) that consistent with 8 Del. C. § 109(a), the certificates of incorporation gave the boards the power to adopt and amend bylaws unilaterally; (ii) that 8 Del. C. §109(b) allows bylaws to regulate the business of the corporation, the conduct of its affairs and the rights or powers of its stockholders; and (iii) that board-adopted bylaws are binding on the stockholders. ... Under that clear contractual framework, the stockholders assent to not having to assent to board-adopted bylaws.

HoldingChancellor Strine held that the DGCL authorized the board of directors of those two companies to adopt unilaterally forum selection bylaw provisions. 8 Del. C. § 109(a) states that "any corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors …." The companies' charters granted their boards the power to adopt bylaws.

First, the Court found that the DGCL permits an exclusive forum selection bylaw. Specifically, 8 Del. C. § 109(b) allows a corporation’s bylaws to “contain any provision, not inconsistent with law or with the certificate of incorporation, relating to the business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers, or employees.” The Court held that forum selection bylaws “easily meet these requirements.”