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US Corporate Law News: California Court of Appeal enforces Delaware forum selection cause expressed in Delaware company's articles

17 June 2018 | Applicable law: US

On May 25, 2018, the California Court of Appeal in Bushansky v. Soon-Shiong 2018 Cal. App. LEXIS 493 (Cal. App. May 25, 2018) dismissed a shareholder derivative suit on grounds that the defendant company, NantKwest, Inc., a Delaware corporation headquartered in San Diego, California, contained a forum selection clause in its articles of incorporation that designated Delaware as the exclusive jurisdiction for any derivative actions. 

In dismissing the action, the appellate court held that the provision's requirement that a Delaware court have personal jurisdiction over all "indispensable parties named as defendants," can be satisfied by defendant's consent to jurisdiction within a "reasonable" timeframe after the suit is filed. The appellate court's enforcement of the forum selection clause is instructive since these provisions are increasingly common for Delaware corporations based in California, but seek to litigate derivative suits before Delaware courts.

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