      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CITY OF PROVIDENCE, on behalf of itself         )
and all others similarly situated,              )
                                                )
                           Plaintiff,           )
                                                )
      v.                                        )   CONSOLIDATED
                                                )   C.A. No. 9795-CB
FIRST CITIZENS BANCSHARES, INC.,                )
FRANK B. HOLDING, JR., JOHN M.                  )
ALEXANDER, JR., VICTOR E. BELL, III,            )
HOPE HOLDING BRYANT, H.M. CRAIG,                )
III, H. LEE DURHAM, JR., DANIEL L.              )
HEAVNER, LUCIUS S. JONES , ROBERT               )
E. MASON, IV, ROBERT T. NEWCOMB,                )
JAMES M. PARKER, and RALPH K.                   )
SHELTON,                                        )
                                                )
                           Defendants.          )

                                        OPINION

                          Date Submitted: September 4, 2014
                           Date Decided: September 8, 2014

Christine S. Azar and Ned C. Weinberger of Labaton Sucharow LLP, Wilmington,
Delaware; Christopher J. Keller, Eric J. Belfi and Michael W. Stocker of Labaton
Sucharow LLP, New York, New York; Jeremy Friedman and Spencer Oster of Friedman
Oster PLLC, New York, New York, Attorneys for Plaintiff.

Gregory P. Williams, John D. Hendershot and Christopher H. Lyons of Richards, Layton
& Finger, P.A., Wilmington, Delaware; Sandra C. Goldstein, J. Wesley Earnhardt, and
Rory A. Leraris of Cravath, Swaine & Moore LLP, New York, New York, Attorneys for
Defendants Frank B. Holding, Jr., John M. Alexander, Jr., Victor E. Bell, III, Hope
Holding Bryant, H.M. Craig, III, H. Lee Durham, Jr., Daniel L. Heavner, Lucius S. Jones,
Robert E. Mason, IV, Robert T. Newcomb, James M. Parker, Ralph K. Shelton and
Nominal Defendant/Defendant First Citizens Bancshares, Inc.
Donald H. Tucker, Jr. and Clifton L. Brinson of Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P., Raleigh, North Carolina, Attorneys for Defendants John M.
Alexander, Jr., Victor E. Bell, III, H.M. Craig, III, H. Lee Durham, Jr., Daniel L.
Heavner, Lucius S. Jones, Robert E. Mason, IV, Robert T. Newcomb, and Ralph K.
Shelton.




BOUCHARD, C.
I.       INTRODUCTION

         This action involves a challenge by plaintiff City of Providence (“Providence”) to

a forum selection bylaw (the “Forum Selection Bylaw”) adopted by defendant First

Citizens BancShares, Inc., (“FC North”), a bank holding company incorporated in

Delaware and based in Raleigh, North Carolina. The Forum Selection Bylaw is virtually

identical to the ones that then-Chancellor, now Chief Justice, Strine found to be facially

valid in Boilermakers Local 154 Retirement Fund v. Chevron Corporation (“Chevron”) 1

except in one respect: it selects as the forum the United States District Court for the

Eastern District of North Carolina, or, if that court lacks jurisdiction, any North Carolina

state court with jurisdiction, instead of the state or federal courts of Delaware.

         FC North adopted the Forum Selection Bylaw the same day it announced it had

entered into a merger agreement to acquire First Citizens Bancorporation, Inc. (“FC

South”), a bank holding company incorporated and based in South Carolina. Providence

filed two separate complaints that have since been consolidated into this action. The first

complaint challenges the facial validity of the Forum Selection Bylaw and asserts a claim

for breach of fiduciary duty in connection with its adoption. The second complaint

asserts claims against the FC North board of directors concerning the proposed merger.

         In this opinion, I conclude that Providence has not stated a claim as to the facial

validity of the Forum Selection Bylaw. This conclusion is compelled by the logic and

reasoning of the Chevron decision. I also conclude that Providence has failed to state a


1
    73 A.3d 934 (Del. Ch. 2013).


                                              1
claim for breach of fiduciary duty in connection with the adoption of the Forum Selection

Bylaw and, further, that Providence has failed to demonstrate that it would be

unreasonable, unjust, or inequitable to enforce the Forum Selection Bylaw here.

Therefore, I grant the defendants’ motions to dismiss both of the complaints in this

action.

II.       BACKGROUND 2

          FC North is a Delaware corporation that is headquartered in Raleigh, North

Carolina. FC North is a holding company for First-Citizens Bank & Trust Company,

which operates in seventeen states 3 but has most of its banking operations—over 70% of

its total deposits and over 60% of its branches—in North Carolina. 4 FC North has two

classes of common stock: Class A shares that are entitled to one vote per share and Class

B shares that are entitled to sixteen votes per share. Providence is a holder of Class A

shares.

          FC South is a bank holding company incorporated and based in South Carolina.

FC South has voting and non-voting common stock.




2
  Unless otherwise noted, the facts recited in this Opinion are based on the well-pled
allegations of the relevant complaint.
3
    Bylaw Compl. ¶ 9.
4
  First Citizens BancShares, Inc., Annual Report (Form 10-K), at 4 (Feb. 26, 2014). I
may consider these publicly available facts at the motion to dismiss stage because they
are not subject to reasonable dispute. See In re Gen. Motors (Hughes) S’holder Litig.,
897 A.2d 162, 170-71 (Del. 2006).


                                            2
      Both FC North and FC South are allegedly controlled by the members and

affiliates of the Holding family (the “Holding Group”). The Holding Group beneficially

owns shares representing approximately 52.2% of the votes of FC North and

approximately 48.5% of the votes of FC South. 5 As between the two, the Holding

Group’s economic interests are allegedly greater in FC South than FC North.

      On June 10, 2014, the FC North board adopted and approved Amended and

Restated Bylaws, which revised numerous aspects of FC North’s bylaws and added the

Forum Selection Bylaw. 6 That same day, FC North announced that it had entered into a

merger agreement to acquire FC South for a mix of stock and cash. The aggregate value

of the proposed transaction is alleged to be between $636.9 million and $676.4 million.

      On June 19, 2014, Providence filed a complaint (the “Bylaw Complaint”) against

FC North and the twelve members of its board of directors (the “Board”) challenging the

Forum Selection Bylaw as invalid as a matter of Delaware law or public policy (Count I)

and seeking a declaratory judgment that the Forum Section Bylaw is invalid or,

alternatively, that this Court “may nonetheless exercise jurisdiction over this action and




5
  Bylaw Compl. ¶¶ 24, 26; Merger Compl. ¶¶ 32, 36. Providence further alleges that,
when the holdings of other entities in which members of the Holding family are
stockholders and serve as directors and/or officers are included, these voting percentages
increase to approximately 58.2% of votes of FC North and 60.8% of FC South. Merger
Compl. ¶¶ 34, 38.
6
 Bylaw Compl. ¶ 35; see also First Citizens BancShares, Inc., Current Report (Form 8-
K), at Item 5.03 (June 10, 2014) (summarizing material changes made in FC North’s
Amended and Restated Bylaws).


                                            3
any action arising out of or relating to the [proposed merger]” (Count III). 7 In the Bylaw

Complaint, Providence also asserts that the adoption of the Forum Selection Bylaw was

ultra vires and a breach of fiduciary duty (Count II).

        On July 10, 2014, defendants moved to dismiss the Bylaw Complaint in its

entirety under Court of Chancery Rule 12(b)(6) for failure to state a claim. They also

moved to dismiss Count II under Rule 12(b)(3) for improper venue.

        On August 1, 2014, Providence filed its second complaint (the “Merger

Complaint”). In the Merger Complaint, Providence asserts various class and derivative

claims for breach of fiduciary duty against the Board, as well as for breach of fiduciary

duty as a controlling stockholder and for unjust enrichment against certain directors in

their capacity as members of the Holding Group. In essence, Providence contends that

the Holding Group, through its controlling interest, unfairly forced FC North to overpay

for FC South to its own benefit and to the dilution of FC North’s minority stockholders. 8

        On August 4, 2014, the defendants moved to dismiss the Merger Complaint under

Rule 12(b)(3) for improper venue. On August 7, 2014, the two cases were consolidated.

Providence has not filed a consolidated complaint or designated an operative complaint.

Thus, within this consolidated action, there are two complaints containing discrete

claims, as described above.


7
    Bylaw Compl. ¶ 69.
8
 There is no claim challenging the Forum Selection Bylaw in the Merger Complaint.
Rather, Providence’s allegations in the Merger Complaint about the Forum Selection
Bylaw simply rehash its allegations in the Bylaw Complaint. See Merger Compl. ¶¶ 12,
100-03, 114.

                                             4
       On the evening of August 28, Providence filed a motion to expedite and for a

preliminary injunction to enjoin a September 16 vote by FC North stockholders on

several proposals related to the proposed merger, including a charter amendment to

increase the number of authorized shares. 9 The parties do not dispute that the Forum

Selection Bylaw purports to govern the claims Providence asserts in the Merger

Complaint. 10 Were the Forum Selection Bylaw valid, then this Court would not be the

proper venue to hear Providence’s request for injunctive relief.

       As to the timing between the preliminary injunction motion and the pending

motions to dismiss, the parties previously stipulated that the motions to dismiss would be

heard on or as soon as possible after September 3. They stipulated further that the

validity of the Forum Selection Bylaw, including whether it may bar the claims

Providence asserts in the Merger Complaint, should be resolved before any other

substantive issues. 11


9
 Providence was aware of the September 16 stockholder meeting since at least August 6,
2014, when FC North filed an amendment to its registration statement with the Securities
and Exchange Commission, but it did not file its motion for expedition until twenty-two
days later (shortly before the Labor Day weekend) and just nineteen days before the date
of the meeting. The timing of its filing displays a glaring lack of alacrity with which it
seeks to act as class counsel.
10
  The claims against the members of the Board in their capacity as directors of FC North
plainly fall within part (2) of the Forum Selection Bylaw, and, to the extent they are
derivative, part (1). See n. 18, below. Providence did not argue that its claims against
members of the Board in their capacity as members of the Holding Group (an alleged
controlling stockholder) are outside the ambit of the Forum Selection Bylaw.
11
   Stip. Regarding Consolidation and Briefing on Defs.’ Mots. to Dismiss ¶ 1 (Aug. 7,
2014) (“The Parties agree that the issue of the validity of the Bylaw, including as applied
to the Merger Litigation, should be decided before any other substantive issue raised in

                                             5
         In accordance with the parties’ own stipulation, before I consider the merits of

Providence’s motion to expedite to schedule a hearing on its preliminary injunction

motion, I will address the potentially dispositive motions regarding the Forum Selection

Bylaw.

III.     LEGAL ANALYSIS

         A.     The Standard of Review under Rule 12(b)(6)

         A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim must be

denied unless, assuming the well-pled allegations to be true and viewing all reasonable

inferences from those allegations in the plaintiff’s favor, I do not find there to be a

“reasonably conceivable set of circumstances” in which the plaintiff could recover. 12 In

this analysis, I do not accept as true any “conclusory allegations unsupported by specific

facts.” 13

         B.     The Statutory Framework for Corporate Bylaws

         “[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 [Delaware General Corporation Law (the “DGCL”)].” 14 Under 8 Del.


the Merger Litigation is decided by the Court, and that Defendants are not required to
submit an opposition to any expedition or injunction motion submitted by Plaintiff before
the Court rules on Defendants’ motions to dismiss[.]”).
12
  See Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536
(Del. 2011).
13
     Gantler v. Stephens, 965 A.2d 695, 704 (Del. 2009).
14
     Chevron, 73 A.3d at 939.


                                              6
C. § 109(a), a corporation may “confer the power to adopt, amend or repeal bylaws upon

the directors.” A corporation’s bylaws, under 8 Del. C. § 109(b), “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.” I evaluate the validity of

the Forum Selection Bylaw, as a bylaw of a Delaware corporation, under Delaware law. 15

         C.      FC North’s Forum Selection Bylaw is Facially Valid

         FC North’s charter grants the power to amend the bylaws to the Board. 16 Chevron

explains the expectation that investors in corporations like FC North should therefore

have: “[s]tockholders are on notice that, as to those subjects that are subject of regulation

by bylaw under 8 Del. C. § 109(b), the board itself may act unilaterally to adopt bylaws

addressing those subjects.” 17

         In all but two respects, the Forum Selection Bylaw is functionally identical to the

bylaws of Chevron Corporation and FedEx Corporation challenged in Chevron. All three

seek to regulate the proper forum for lawsuits against the corporation and its directors,


15
     See id. at 938.
16
   Restated Certificate of Incorporation of First Citizens BancShares, Inc., art. V (“[T]he
Board of Directors shall have the power to make, adopt, alter, amend and repeal, from
time to time, the Bylaws of the corporation, subject to the rights of the shareholders
entitled to vote with respect thereto to alter or repeal Bylaws made by the Board of
Directors.”). I take judicial notice of this provision of FC North’s charter because
Providence does not contest its existence or authenticity. See Malpiede v. Townson, 780
A.2d 1075, 1090-92 (Del. 2001).
17
     Chevron, 73 A.3d at 955-56.


                                              7
officers, and employees asserting (i) any derivative claim; (ii) any claim for breach of

fiduciary duty owed by a director, officer, or employee of the corporation; (iii) any claim

arising under any provision of the DGCL; and (iv) any claim governed by the internal

affairs doctrine. 18 The two distinctions are as follows: first, whereas the boards of

Chevron and FedEx selected Delaware courts as their exclusive forums, the Board of FC

North selected North Carolina courts; and second, FC North’s Forum Selection Bylaw,

unlike that of Chevron or FedEx, is applicable only “to the fullest extent permitted by

law.” These distinctions frame an issue of first impression: whether the board of a

Delaware corporation may adopt a bylaw that designates an exclusive forum other than

Delaware for intra-corporate disputes.




18
     FC North’s Forum Selection Bylaw provides:

         Exclusive Forum for Certain Disputes: Unless the corporation consents in
         writing to the selection of an alternative forum, the United States District
         Court for the Eastern District of North Carolina or, if such court lacks
         jurisdiction, any North Carolina state court that has jurisdiction, shall, to the
         fullest extent permitted by law, be the sole and exclusive forum for (1) any
         derivative action or proceeding brought on behalf of the corporation, (2)
         any action asserting a claim of breach of a fiduciary duty owed by any
         director, officer or other employee of the corporation to the corporation or
         the corporation’s shareholders, (3) any action asserting a claim arising
         pursuant to any provision of the General Corporation Law of the State of
         Delaware, and (4) any action asserting a claim governed by the internal
         affairs doctrine. Any person or entity purchasing or otherwise acquiring or
         holding any interest in shares of capital stock of the Corporation shall be
         deemed to have notice of and consented to the provisions of this Section 8.

Bylaw Compl. ¶ 37.


                                                8
         After carefully interpreting the relevant Delaware statutes and case law implicated

by board-adopted forum selection bylaws, then-Chancellor Strine concluded in Chevron

that these types of bylaws are statutorily and contractually valid under Delaware law:

         As a matter of easy linguistics [in interpreting 8 Del. C. § 109(b) for the
         proper scope of corporate bylaws], the forum selection bylaws address the
         “rights” of the stockholders, because they regulate where stockholders can
         exercise their right to bring certain internal affairs claims against the
         corporation and its directors and officers. . . . That is, because the forum
         selection bylaws address internal affairs claims, the subject matter of the
         actions the bylaws govern relates quintessentially to “the corporation’s
         business, the conduct of its affairs, and the rights of its stockholders [qua
         stockholders].”

         ...

         In an unbroken line of decisions dating back several generations, our
         Supreme Court has made clear that the bylaws constitute a binding part of
         the contract between a Delaware corporation and its stockholders. . . . [A]
         change by the board [to the bylaws pursuant to 8 Del. C. § 109(a)] is not
         extra-contractual simply because the board acts unilaterally; rather it is the
         kind of change that the overarching statutory and contractual regime the
         stockholders buy into explicitly allows the board to make on its own. In
         other words, the Chevron and FedEx stockholders have assented to a
         contractual framework established by the DGCL and the certificates of
         incorporation that explicitly recognizes that stockholders will be bound by
         bylaws adopted unilaterally by their boards. Under that clear contractual
         framework, the stockholders assent to not having to assent to board-adopted
         bylaws. 19

In my opinion, the same analysis of Delaware law outlined in Chevron validates the

Forum Selection Bylaw here. Although then-Chancellor Strine in Chevron commented

that Delaware, as the state of incorporation, “was the most obviously reasonable forum”

for internal affairs cases because those “cases will be decided in the courts whose


19
     Chevron, 73 A.3d at 950-51, 955-56.


                                               9
Supreme Court has the authoritative final say as to what the governing law means,” 20

nothing in the text or reasoning of Chevron can be said to prohibit directors of a

Delaware corporation from designating an exclusive forum other than Delaware in its
           21
bylaws.         Thus, the fact that the Board selected the federal and state courts of North

Carolina—the second most obviously reasonable forum given that FC North is

headquartered and has most of its operations there—rather than those of Delaware as the

exclusive forums for intra-corporate disputes does not, in my view, call into question the

facial validity of the Forum Selection Bylaw. 22

          Providence also challenges the facial validity of the Forum Selection Bylaw on the

theory that it improperly deprives this Court of the “exclusive jurisdiction” vested upon it

by the General Assembly under various provisions of the DGCL.                  For example,

Providence argues that because 8 Del. C. § 203(e) vests this Court with “exclusive

jurisdiction to hear and determine all matters with respect to [that] section [i.e., 8 Del. C.

§ 203],” the Forum Selection Bylaw must be contrary to Delaware law and public policy



20
     Id. at 953.
21
   See also In re IBP, Inc. S’holders Litig., 2001 WL 406292, at *9 n.21 (Del. Ch. Apr.
18, 2001) (“Delaware courts have not hesitated to enforce forum selection clauses that
operate to divest the courts of this State of the power they would otherwise have to hear a
dispute.”).
22
   Nothing in this Opinion should be construed as taking any position on the wisdom of
selecting the forums designated in the Forum Selection Bylaw. See CA, Inc. v. AFSCME
Emps. Pension Plan, 953 A.2d 227, 240 (Del. 2008) (“[W]e express no view on whether
the Bylaw as currently drafted, would create a better governance scheme from a policy
standpoint. We decide only what is, and is not, legally permitted under the DGCL.”).


                                              10
because it would improperly strip this Court of that jurisdiction. 23            In addition,

Providence contends that the Board’s designation of an exclusive forum other than this

Court was unlawful because it has a substantive right to assert in this Court certain claims

arising under 8 Del. C. § 111 and other provisions of the DGCL.

       As an initial matter, I question Providence’s interpretation of these provisions of

the DGCL. Vice Chancellor Laster recently, and quite thoroughly, addressed a similar

jurisdictional question and concluded that a grant by the General Assembly of

“exclusive” jurisdiction to this Court for claims arising under a particular statute does not

preclude a party from asserting a claim arising under that statute in a different

jurisdiction. 24 He further concluded that any attempt by the General Assembly to bestow,



23
   Providence raises this or similar arguments with respect to a litany of other DGCL
provisions that vest jurisdiction in the Court of Chancery, some of which use the phrase
“exclusive jurisdiction” and others of which do not: 8 Del. C. §§ 168, 205, 211, 219, 220,
223, 225, 226, 227, 231, 262, 283, 291, 322. The primary case upon which Providence
relies, Datapoint Corp. v. Plaza Sec. Co., 496 A.2d 1031 (Del. 1985), is clearly
distinguishable. In Datapoint, the Delaware Supreme Court affirmed the issuance of a
preliminary injunction enjoining the board’s ability to enforce a bylaw that regulated the
effective time of action taken by stockholder written consent because the bylaw was
“clearly in conflict with the letter and intent” of 8 Del. C. § 228. Id. at 1035-36. Nothing
in Datapoint concerns the jurisdiction of this Court or controls the validity of a forum
selection bylaw.
24
   See IMO Daniel Kloiber Dynasty Trust, — A.3d —, 2014 WL 4071326, at *13 (Del.
Ch. Aug. 6, 2014) (“When a Delaware state statute assigns exclusive jurisdiction to a
particular Delaware court, the statute is allocating jurisdiction among the Delaware
courts. The state is not making a claim against the world that no court outside of
Delaware can exercise jurisdiction over that type of case. Nor, as a matter of power
within our federal republic, could the State of Delaware arrogate that authority to itself. . .
. In my view, Delaware also cannot unilaterally preclude a sister state from hearing
claims under its laws.”); see also Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 295
(Del. 1999) (“For the purpose of designating a more convenient forum, we find no reason

                                              11
in Providence’s words, a “substantive right” to bring a claim only in this Court would

conflict with the Supremacy Clause of the United States Constitution and federal

diversity jurisdiction. 25

         I need not decide these questions, however. In Chevron, then-Chancellor Strine

declined to resolve each of the plaintiffs’ “hypothetical as-applied challenges” in finding

the Chevron and FedEx forum bylaws to be facially valid. 26 Similarly, it is not necessary

for me to resolve Providence’s “exclusive jurisdiction” or “substantive right” arguments

to determine the facial validity of the Forum Selection Bylaw because they are purely

hypothetical. Providence has not asserted a claim in either of its complaints under any of

the statutes it has identified.

         Moreover, the Forum Selection Bylaw, by its terms, is only enforceable “to the

fullest extent permitted by law.” This qualification appears to carve out from the ambit

of the Forum Selection Bylaw a claim for relief, if any, that may be asserted only in the

Court of Chancery. Here, all of the claims pled in the Merger Complaint (i.e., breach of

fiduciary duty and unjust enrichment) are Delaware common law claims that can be (and

frequently have been) asserted in non-Delaware forums, including North Carolina courts.




why the members [of an LLC] cannot alter the default jurisdictional provisions of the
statute and contract away their right to file suit in Delaware”).
25
     See Kloiber, 2014 WL 4071326, at *13.
26
  See Chevron, 73 A.3d at 958-63; see also XL Specialty Ins. Co. v. WMI Liquidating
Trust, 93 A.3d 1208, 1217 (Del. 2014) (“Delaware courts do not render advisory or
hypothetical opinions.”).


                                             12
       For the foregoing reasons, I conclude that the Forum Selection Bylaw is facially

valid as a matter of law and, thus, that Counts I and III of the Bylaw Complaint should be

dismissed for failure to state a claim upon which relief may be granted.

       D.     Providence Has Failed to State a Claim for Breach of Fiduciary Duty
              in Connection with the Adoption of the Forum Selection Bylaw

       Count II of the Bylaw Complaint asserts that “[t]he self-interested adoption of the

Forum Selection Bylaw” was a breach of fiduciary duty. In this regard, Providence

argues that the Board’s adoption of the Forum Selection Bylaw was part and parcel of its

self-interested, disloyal conduct in approving the merger with FC South. It also implies

that the Board selected courts in North Carolina (as opposed to courts in Delaware or any

other State) because the directors thought they might receive favorable treatment there.

In support of its position, Providence cites two allegations of the Bylaw Complaint: (i)

the Forum Selection Bylaw “was motivated by a desire to protect the interests of the

individual members of the Board and other affiliates of the Holding Group, including

officers of the Company”; and (ii) the Board adopted the Forum Selection Bylaw “to

insulate itself from the jurisdiction of Delaware courts.”

       These allegations are wholly conclusory. They provide no basis to infer, even

under the reasonable conceivability standard, that the Forum Selection Bylaw was the

product of a breach of fiduciary duty.

       The Forum Selection Bylaw plainly does not insulate the Board’s approval of the

proposed merger from judicial review. It simply requires that such review take place in a

court based in North Carolina. In that regard, Providence has not provided any well-pled



                                             13
facts to call into question the integrity of the federal and state courts of North Carolina or

to explain how the defendants are advancing their “self-interests” by having claims

arising from their approval of the proposed merger adjudicated in those courts as opposed

to the courts of Delaware. Nor has Providence alleged that the relevant federal or state

courts in North Carolina would not have jurisdiction over FC North, the Board, or the

company’s officers and employees. 27 Given the absence of any such facts and the wholly

conclusory allegations upon which Count II of the Bylaw Complaint is predicated,

Providence has failed to rebut the presumption of the business judgment standard of

review that attaches to the Board’s adoption of the Forum Selection Bylaw 28 or to show

that the Board’s selection of North Carolina as the exclusive forum was irrational.

       Accordingly, Count II of the Bylaw Complaint fails to state a claim upon which

relief may be granted.

       E.     The Standard of Review under Rule 12(b)(3)

       A stockholder plaintiff’s claims that are governed by a valid forum selection

bylaw designating an exclusive jurisdiction other than this Court may be dismissed under




27
   Separately, the defendants represented that FC North’s directors and executive officers
all live in North Carolina. Defs.’ Reply Br. 3, 7.
28
  See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled on other grounds by
Brehm v. Eisner, 746 A.2d 244 (Del. 2000).


                                             14
Rule 12(b)(3) for improper venue. 29 The bylaw must be valid on its face and as-applied.

I have already concluded that the Forum Selection Bylaw is facially valid.

         F.     FC North’s Forum Selection Bylaw is Valid As-Applied Here

         The remaining question is whether the Forum Selection Bylaw is valid as-applied.

Chevron did not reach this question because it only considered the facial validity of

Chevron’s and FedEx’s forum selection bylaws. 30 Here, by contrast, FC North and the

Board request that I enforce the Forum Selection Bylaw to dismiss the Merger

Complaint. Chevron is nonetheless instructive on the proper framework to consider the

defendants’ motion to dismiss for improper venue. 31

         My decision on whether the Forum Selection Bylaw is valid as-applied to

Providence’s remaining claims is guided by the United States Supreme Court’s analysis

in The Bremen v. Zapata Off-Shore Company, 32 which the Delaware Supreme Court



29
   See, e.g., Baker v. Impact Hldg., Inc., 2010 WL 1931032, at *2 (Del. Ch. May 13,
2010) (“The proper procedural rubric for addressing a motion to dismiss based on a
forum selection clause is found under Rule 12(b)(3), improper venue.”).
30
   See Chevron, 73 A.3d at 940 (“In an attempt to defeat the defendants’ motion, the
plaintiffs have conjured up an array of purely hypothetical situations in which they say
that the bylaws of Chevron and FedEx might operate unreasonably. . . . [I]t would be
imprudent and inappropriate to address these hypotheticals in the absence of a genuine
controversy with concrete facts.”).
31
   See id. at 959 (“[T]he time for a plaintiff to make an as-applied challenge to the forum
selection clauses is when the plaintiff wishes to, and does, file a lawsuit outside the
chosen forum. At that time, a court will have a concrete factual situation against which to
apply the Bremen test, or analyze, à la Schnell, whether the directors’ use of the bylaws is
a breach of fiduciary duty.”).
32
     407 U.S. 1 (1972).


                                            15
explicitly adopted in Ingres Corporation v. CA, Inc. 33 Chevron cogently articulated the

lessons of this case law:

         In Bremen, the Court held that forum selection clauses are valid provided
         that they are “unaffected by fraud, undue influence, or overweening
         bargaining power,” and that the provisions “should be enforced unless
         enforcement is shown by the resisting party to be ‘unreasonable.’” In
         Ingres, our Supreme Court explicitly adopted this ruling, and held not only
         that forum selection clauses are presumptively enforceable, but also that
         such clauses are subject to as-applied review under Bremen in real-world
         situations to ensure that they are not used “unreasonabl[y] and unjust[ly].” 34

An additional lens through which the enforceability of the Forum Selection Bylaw may

be reviewed is under Schnell v. Chris-Craft Industries, Inc. 35 and its teaching that

“inequitable action does not become permissible simply because it is legally possible.” 36

         Providence asserts several arguments in opposition to the defendants’ invocation

of the Forum Selection Bylaw to dismiss the Merger Complaint. These arguments can be

generalized as raising three as-applied challenges under Bremen and, to a lesser extent,

Schnell. First, Providence asserts that Delaware has an overriding interest in resolving

what it describes as the “novel and substantial” issues raised in the Merger Complaint.



33
     8 A.3d 1143, 1145 (Del. 2010).
34
   Chevron, 73 A.3d at 957 (citing Bremen, 407 U.S. at 10; Ingres, 8 A.3d at 1146); see
also Nat’l Indus. Gp. (Hldg.) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373, 381 (Del. 2013)
(same).
35
     285 A.2d 437 (Del. 1971).
36
   Id. at 439; see also Black v. Hollinger Int’l Inc., 872 A.2d 559, 564 (Del. 2005)
(affirming then-Vice Chancellor Strine’s decision that found certain bylaw amendments
adopted by a controlling stock to be “invalid in equity and of no force and effect, because
they had been adopted for an inequitable purpose and had an inequitable effect”).


                                               16
Second, Providence contends that the timing of the Board’s adoption of the Forum

Selection Bylaw—simultaneous with the adoption of the merger agreement—renders

applying the bylaw to dismiss the Merger Complaint unreasonable. Third, Providence

argues that the circumstances here, in which the Forum Selection Bylaw cannot be

repealed without the support of FC North’s majority stockholder, the Holding Group,

make enforcement of the bylaw unjust. Providence does not allege fraud or overreaching

on behalf of the Board in adopting the Forum Selection Bylaw.

               1.     Delaware’s Purported Interest in the Claims
                      Raised in the Merger Complaint

         Providence describes its challenge to the merger between FC North and FC South

as a “novel” equity dilution claim under the framework of Gentile v. Rossette. 37 It then

draws on case law resolving disputes involving multi-forum litigation (primarily under

the standard of McWane Cast Iron Pipe Corporation v. McDowell-Wellman Engineering

Company 38 or on forum non conveniens grounds) to assert that Delaware has strong

public policy in favor of this Court deciding novel questions of Delaware corporate law




37
   906 A.2d 91 (Del. 2006). In Gentile, the Delaware Supreme Court concluded that a
stockholder plaintiff may have direct and derivative standing to assert a breach of
fiduciary duty claim against a controlling stockholder where “(1) a stockholder having
majority or effective control causes the corporation to issue ‘excessive’ shares of its stock
in exchange for assets of the controlling stockholder that have a lesser value; and (2) the
exchange causes an increase in the percentage of the outstanding shares owned by the
controlling stockholder, and a corresponding decrease in the share percentage owned by
the public (minority) shareholders.” Id. at 100.
38
     263 A.2d 281 (Del. 1970).


                                             17
uniformly and authoritatively. 39 Although considerations of Delaware’ interest in having

the Court of Chancery resolve breach of fiduciary duty claims properly may be

considered in a McWane or forum non conveniens analysis, that case law is inapposite to

the circumstances here, where there is a designated forum for resolving intra-corporate

disputes: a North Carolina court. The whole point of adopting the Forum Selection

Bylaw was to solve the issue of multi-forum litigation such that this Court (and courts in

other jurisdictions) would not need to divine the appropriate forum. 40

       The DGCL does not express any preference of the General Assembly one way or

the other on whether it is permissible for boards of directors to require stockholders to

litigate intra-corporate disputes in the courts of foreign jurisdictions. In contrast, in 2000,

the General Assembly explicitly amended § 18-109(d) of the Limited Liability Company

Act to prevent a Delaware LLC from mandating a foreign court as the exclusive forum

for intra-entity disputes asserted by its non-manager members, the LLC analogue to

stockholders. 41 This dichotomy led this Court to conclude, when determining the validity


39
  See, e.g., Ryan v. Gifford, 918 A.2d 341, 349-51 (Del. Ch. 2007); In re Topps Co.
S’holders Litig., 924 A.2d 951, 956-61 (Del. Ch. 2007); In re Chambers Dev. Co., Inc.
S’holders Litig., 1993 WL 179335, at *3 (Del. Ch. May 20, 1993).
40
  See Chevron, 73 A.3d at 952 (“[F]orum selection bylaws are designed to bring order to
what . . . boards . . . say they perceive to be a chaotic filing of duplicative and inefficient
derivative and corporate suits against the directors and the corporations.”).
41
   6 Del. C. § 18-109(d). (“Except by agreeing to arbitrate any arbitrable matter in a
specified jurisdiction or in the State of Delaware, a member who is not a manager may
not waive its right to maintain a legal action or proceeding in the courts of the State of
Delaware with respect to matters relating to the organization or internal affairs of a
limited liability company.”).


                                              18
of a foreign forum selection clause in a stockholder agreement, that “Delaware does not

have an overarching public policy that prevents the stockholders of Delaware

corporations from agreeing to exclusive foreign jurisdiction of any matter involving the

internal affairs of such entities.” 42 Similarly here, I do not discern an overarching public

policy of this State that prevents boards of directors of Delaware corporations from

adopting bylaws to require stockholders to litigate intra-corporate disputes in a foreign

jurisdiction.

         Providence also overstates the novelty raised by its claims in the Merger

Complaint. At its core, the Merger Complaint alleges that the Board of FC North, under

the control of the Holding Group, overpaid for FC South because the Holding Group has

greater economic interests in FC South than FC North. These claims constitute self-

dealing or waste claims governed by well-established principles of Delaware law.

Gentile and its progeny may be implicated in determining whether such claims are direct,

derivative, or both in nature. The issues of Delaware law involved in that inquiry,

however, are far from the type of unprecedented claims that might theoretically43




42
     Baker, 2010 WL 1931032, at *2.
43
  Accord In re Revlon, Inc. S’holders Litig., 990 A.2d 940, 961 n.8 (Del. Ch. 2010) (“I
can envision that the Delaware courts would retain some measure of inherent residual
authority so that entities created under the authority of Delaware law could not wholly
exempt themselves from Delaware oversight.”).


                                             19
outweigh Delaware’s substantial interest in enforcing a facially valid forum selection

bylaw designating a federal or state court outside Delaware as the exclusive forum. 44

         FC North is based in North Carolina, most of its deposits are held there, most of its

branches are located there, no contention is made that jurisdiction cannot be obtained

there over FC North’s directors, and no legitimate contention can be made that complete

relief cannot be afforded there. Under these circumstances, and given the lack of any

Delaware public policy mandating that claims of the nature asserted in the Merger

Complaint be litigated in Delaware, I conclude it is not unreasonable to apply the Forum

Selection Bylaw in this case.

                 2.     The Timing of the Adoption of the Forum Selection Bylaw

         Providence argues that “enforcing the Forum Selection Bylaw against [it] would

be unjust because the Board’s adoption of the Bylaw, which occurred simultaneously

with the announcement of the unfair [proposed merger], goes well beyond [its]

reasonable expectations.” 45 I disagree. As explained in Chevron, “an essential part of the

contract stockholders [like Providence] assent to when they buy stock in [FC North] is

one that presupposes the board’s authority to adopt binding bylaws consistent with 8 Del.

C. § 109.” 46 Thus, the reasonable expectation a stockholder of FC North should have is


44
   If a genuinely novel issue of Delaware law were to arise, the Delaware Constitution
expressly provides for a United States District Court or the highest appellate court of any
state, among other tribunals, to certify questions to the Delaware Supreme Court. See
Del. Const. art. IV, § 11(8); see also Supr. Ct. R. 41(a)(ii).
45
     Pl.’s Ans. Br. at 30.
46
     Chevron, 73 A.3d at 940.


                                              20
that its Board may adopt a forum selection bylaw that, subject to challenge on an as-

applied basis, designates a court outside Delaware as the exclusive forum for intra-

corporate disputes.

         Providence also argues it would be inequitable to apply the Forum Selection

Bylaw under Schnell because it was adopted in connection with a self-interested

transaction that disproportionately benefits an alleged controlling stockholder. 47 This is a

reprise of Count II of the Bylaw Complaint, discussed above, and fails for the same

reason: Providence has not alleged any well-pled facts calling into question the integrity

of the federal or state courts of North Carolina or explaining how the defendants have

advanced their “self-interests” by having the claims in the Merger Complaint adjudicated

in those courts instead of a Delaware court. The conduct of the FC North Board in

approving the proposed merger will not be absolved from judicial review; that review

simply must occur in a North Carolina court.

         In sum, the Forum Selection Bylaw merely regulates “where stockholders may file

suit, not whether the stockholder may file suit or the kind of remedy that the stockholder

may obtain.” 48 That the Board adopted it on an allegedly “cloudy” day when it entered

into the merger agreement with FC South rather than on a “clear” day is immaterial given

the lack of any well-pled allegations in either of Providence’s demonstrating any

impropriety in this timing.


47
     Pl.’s Ans. Br. 34-36.
48
     Chevron, 73 A.3d at 952.


                                             21
         Separately, Providence’s contention that the Forum Selection Bylaw cannot be

enforced because it seeks to regulate the forum for asserting claims that arose before it

was adopted is unpersuasive. This argument is simply a dressed-up version of the

“vested right” doctrine that was soundly rejected in Kidsco Inc. v. Dinsmore 49 and

Chevron. 50 This too is not a basis to not apply the Forum Selection Bylaw here.

                3.     The Alleged Inability to Repeal the Forum Selection Bylaw

         In its final Bremen argument, Providence argues it is unjust to apply the Forum

Selection Bylaw here because the stockholders of FC North effectively lack the ability to

repeal it since FC North is controlled by the Holding Group.         This issue was not

addressed in Chevron because neither of the corporations whose forum selection bylaw

was being challenged there had a controlling stockholder.

         Then-Chancellor Strine noted in Chevron that a board-adopted forum selection

bylaw, much like any board-adopted bylaw, is “subject . . . to the most direct form of

attack by stockholders who do not favor them: stockholders can simply repeal them by a

majority vote.” 51 His discussion of the relationship between the ability of a board of

directors and the ability of stockholders to amend a corporation’s bylaws appears to


49
     674 A.2d 483 (Del. Ch. 1995), aff’d, 670 A.2d 1338 (TABLE).
50
   See Chevron, 73 A.3d at 955 (quoting Kidsco, 674 A.2d at 492) (“As then-Vice
Chancellor, now [former-]Justice, Jacobs explained in the Kidsco case, under Delaware
law, where a corporation’s articles or bylaws ‘put all on notice that the by-laws may be
amended at any time, no vested rights can arise that would contractually prohibit an
amendment.’”).
51
     Chevron, 73 A.3d at 954 (citing 8 Del. C. § 109(a)).


                                              22
consider the statutory framework in the abstract. I do not interpret either the DGCL or

Chevron to mandate that a board-adopted forum selection bylaw can be applied only if it

is realistically possible that stockholders may repeal it. In other words, that there is

currently a controlling stockholder who may favor a board-adopted forum selection

bylaw, as appears to be the case with FC North, does not make it per se unreasonable to

enforce the bylaw. For me to conclude otherwise would, as the defendants note, “be

tantamount to rendering questionable all board-adopted bylaws of controlled

corporations.” 52

         Reaching this conclusion does not leave minority stockholders of controlled

corporations without recourse. Schnell is a powerful lens through which this Court

evaluates the as-applied validity of forum selection bylaws. In the appropriate case, a

foreign forum selection bylaw may not withstand Schnell scrutiny.             For reasons

previously discussed, however, Providence has not convinced me that it would be

inequitable here to require Providence to litigate the claims asserted in the Merger

Complaint in the United States District Court for the Eastern District of North Carolina or

in a North Carolina state court.

                                         *****

         For the reasons discussed above, I conclude that it is not unreasonable or unjust

under Bremen or inequitable under Schnell to enforce the Forum Selection Bylaw here.

FC North and the majority of its operations are based in North Carolina. It stands to


52
     Defs.’ Reply Br. 21.


                                            23
reason, under the presumption of Delaware law that directors will act in good faith, 53 that

the Board determined that the most efficient courts in which to defend against the claims

governed by the Forum Selection Bylaw, such as those raised in the Merger Complaint,

are the federal and state courts in North Carolina. Under Delaware law and FC North’s

governing documents, the Board was entitled to designate those courts for this purpose.

Providence has not sufficiently alleged or argued any grounds that give me pause in

enforcing the Forum Selection Bylaw, and, accordingly, I will enforce it.

         Further supporting my conclusion are important interests of judicial comity. If

Delaware corporations are to expect, after Chevron, that foreign courts will enforce valid

bylaws that designate Delaware as the exclusive forum for intra-corporate disputes, 54

then, as a matter of comity, so too should this Court enforce a Delaware corporation’s

bylaw that does not designate Delaware as the exclusive forum. In my opinion, to

conclude otherwise would stray too far from the harmony that fundamental principles of

judicial comity seek to maintain.




53
     See Aronson, 473 A.2d at 812.
54
  See, e.g., Groen v. Safeway Inc., No. RG14716641 (Cal. Super. Ct. May 14, 2014);
Miller v. Beam, Inc., No. 2014 CH 00932 (Ill. Cir. Ct. Mar. 5, 2014); Hemg Inc. v. Aspen
Univ., 2013 WL 5958388 (N.Y. Sup. Ct. Nov. 14, 2013); contra Roberts v. TriQuint
SemiConductor, Inc., No. 1402-02441 (Or. Cir. Ct. Aug. 14 2014); Galaviz v. Berg, 763
F. Supp. 2d 1170 (N.D. Cal. 2011). For the reasons set forth in Chevron and this
Opinion, the Galaviz and TriQuint decisions, to the extent they purport to apply Delaware
law, are based on a misapprehension of Delaware law regarding the facial validity and as-
applied analysis of forum selection bylaws.


                                            24
IV.   CONCLUSION

      For the foregoing reasons, defendants’ motion to dismiss the Bylaw Complaint

under Court of Chancery Rule 12(b)(6) is GRANTED. Defendants’ motion to dismiss

the Merger Complaint under Court of Chancery Rule 12(b)(3) also is GRANTED. 55

      IT IS SO ORDERED.




55
   Based on this conclusion, Providence’s motions for expedition and a preliminary
injunction are moot.


                                        25
