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Dec. 18 — TriQuint Semiconductor Inc. investors challenging the company's merger with RF Micro Devices Inc. must take their claims to Delaware, after the Oregon Supreme Court Dec. 10 ruled that the company's forum selection bylaw is enforceable.
In August 2014, the Oregon Circuit Court said the bylaw cannot be enforced because it was adopted around the same time as the merger.
However, the state's high court disagreed, citing a Delaware Chancery Court decision that was issued less than a month after the Oregon Circuit Court's ruling—City of Providence v. First Citizens BancShares Inc., 99 A.3d 229 (29 CCW 285, 9/17/14).
“[T]he Delaware courts have concluded, in an analogous context, that a shareholder's inability to exercise that statutory right does not provide a basis for refusing to give effect to a forum-selection bylaw,” Judge Rives Kistler wrote on behalf of the en banc Oregon Supreme Court. “Plaintiffs have identified no persuasive basis for this court to second-guess the Delaware court's assessment of that Delaware statutory right, nor is it our role to instruct the Delaware courts on the meaning of Delaware law.”
Ronald L. Berenstain, a Seattle-based partner at Perkins Coie LLP who represented Triquint, told Bloomberg BNA that to his knowledge, the Oregon Supreme Court's decision marks the first time that a state high court outside of Delaware has considered the validity and enforceability of a Delaware exclusive forum provision.
Berenstain also said the Oregon Circuit Court's ruling is the only state court decision declining to enforce an exclusive venue provision since the Delaware Supreme Court held that such provisions are valid in Boilermakers Local 154 Retirement Fund v. Chevron Corp., 73 A.3d 934.
Scott A. Shorr, a Portland, Ore.-based managing shareholder at Stoll Stoll Berne Lokting & Shlachter PC who argued the case for the plaintiffs, didn't immediately respond to a request for comment.
Two days before TriQuint announced its merger plans with RF Micro Devices in 2014, the company's board unilaterally amended its bylaws to designate the Delaware Chancery Court as the exclusive forum for resolving internal company disputes. After each company's board approved the merger, shareholders filed derivative suits in both Oregon and Delaware challenging the transactions.
The Oregon Circuit Court declined to dismiss the action, concluding that it would be unreasonable to enforce the bylaw because the timing of its adoption effectively deprived shareholders of their right to repeal the clause.
In reversing, the Oregon Supreme Court found that TriQuint's directors hadn't breached their fiduciary duties by adopting the bylaw.
The state high court reasoned that the bylaw didn't prevent shareholders from challenging the transaction, but merely directed where they may bring a lawsuit.
“Not only does the forum-selection bylaw keep TriQuint's assets from being diluted by a multiplicity of suits in various states, but Delaware, the state in which TriQuint is incorporated, is the ‘most obviously reasonable forum'” for the dispute,” the Oregon Supreme Court held.
The court rejected the plaintiffs' argument that the bylaw violated an Oregon public policy that requires mutual assent between contracting parties.
The court found that the investors had bought into Delaware's legal framework that allows corporate directors to unilaterally amend bylaws.
“Comity and respect for Delaware's corporate law lead us to conclude that, in the absence of compelling public policies to the contrary, we should not interfere with that framework or attempt to regulate the relationship between TriQuint's directors and its shareholders,” Kistler wrote.
Berenstain said that the Oregon court's decision reinforces that when Delaware corporations appropriately adopt exclusive venue provisions, such provisions will be enforceable.
In First Citizens, the decision cited by the Oregon Supreme Court, the Delaware Chancery Court enforced a North Carolina forum selection clause that was adopted the same day of a merger's announcement.
After the ruling, there was an increase in the number of companies that adopted exclusive forum bylaws, Gibson Dunn & Crutcher LLP said in a report in May.
Subsequently, Delaware lawmakers in summer enacted legislation that endorsed Delaware forum selection clauses (30 CCW 199, 7/1/15). However, the legislation partially overruled First Citizens by barring Delaware corporations from adopting bylaws that designate an exclusive forum outside of the state.
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The opinion is available at http://www.bloomberglaw.com/public/document/Roberts_v_TriQuint_Semiconductor_Inc_358_Or_413_2015_Court_Opinio.
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