Photo provided by Cravath.
Cravath, Swaine & Moore litigation partners Sandra Goldstein and Wes Earnhardt (pictured below) won a significant precedent-setting decision in Delaware last week when Chancellor Andre G. Bouchard ruled that First Citizens BancShares could require lawsuits against it to be filed in North Carolina.
Goldstein, who was lead counsel for First Citizens, explained: "It's an important decision because boards of directors now have a powerful tool to combat multi-forum litigation, particularly in the merger context where multiple suits in multiple forums have become all too common.” In addition, she said “the decision should save companies (and stockholders) time and money, and should lead to more predictable and consistent outcomes in deal litigationby funnelling that litigation to a single forum."
Bouchard granted Cravath’s motion to dismiss a class action filed by the City of Providence on behalf of shareholders of First Citizens BancShares. The shareholders were represented by Labaton Sucharow. (The decision was also covered by The Wall Street Journal and Reuters.)
First Citizens BancShares, headquartered in North Carolina and incorporated in Delaware, entered into a merger agreement with South Carolina.-based First Citizens Bancorporation. Both are controlled by the Holding Family. The same day, First Citizens BancShares adopted a forum-selection bylaw requiring shareholder disputes be litigated in North Carolina.
"The decision resolved two issues of first impression: First, it is now clear that the board of a Delaware corporation can adopt a bylaw requiring that intra-corporate disputes be brought in a forum outside of Delaware; and, second, whether the board makes that decision on a so-called 'cloudy day' or 'clear day' is immaterial as a matter of law," said Earnhardt.
In his decision, Chancellor Bouchard ruled that Delaware corporations may adopt bylaws that designate an exclusive forum other than Delaware for intra-corporate disputes, citing former Chancellor, and now Delaware Supreme Court Chief Justice Leo Strine’s decision in Boilermakers Local 154 Retirement Fund v. Chevron Corporation, 73 A.3d 934 (Del. Ch. 2013).
As stated in the firm's press release, joining Goldstein and Earnhardt on the Cravath team were associates Rory A. Leraris and Sarah M. Colombo. The case is City of Providence v. First Citizens BancShares Inc. et al., No. 9795 (Del. Ch. Ct.)