Dueling Claims of Forum Shopping Favor Chevron

(CN) - Chevron shareholders cannot sue the oil giant in California while a similar case plays out in Delaware, a federal judge ruled, weighing dueling claims of forum shopping.

Lead plaintiff Stephen Bushansky sued the Chevron board directors this year in the Northern District of California over a forum-shopping bylaw. He claims that the bylaw "purports to divest this court of jurisdiction and mandates that any shareholder action that includes a claim falling within four broad categories can only be litigated in the Delaware Court of Chancery."

The improper bylaw allegedly "provides that any stockholder who sues in any forum other than the Delaware Court of Chancery may be sued by the company for breach of the exclusive forum bylaw and held liable for the company's expenses in the other forum. The defendants are the members of the board who unilaterally adopted the improper bylaw."

But Chevron said Bushansky's case should be dismissed or stayed since several sections of the complaint mirror those in a Delaware action filed two months earlier.

Chevron says the Delaware case has progressed to discovery and class certification, though Bushansky described it as still "only at the motion to dismiss stage."

U.S. District Judge William Alsup stayed the California action last week in favor of the pending Delaware case.

There are concerns about "piecemeal litigation" that weigh in favor of keeping the action in Delaware and not California, according to the 12-page decision.

"The Delaware action is slightly procedurally advanced, it contains substantially similar parties and identical underlying issues - which could possibly lead to inconsistent results, and different results could potentially affect thousands of individuals due to the class nature of the Delaware action," Alsup wrote.

The Delaware action was filed in February 2012, and is in the middle of litigation, whereas Chevron's pending motion to stay or dismiss the California action was the "first substantive motion," according to the ruling.

There are also "sufficient concerns" that Bushansky was engaging in forum shopping, Alsup added.

"There are potential reasons to suspect this action is vexatious and reactive: the complaint lifts identical text from the earlier-filed Delaware action, filed here with only minor modifications to the claims and relief; defendants argue that the prior lawsuits challenging forum-selection bylaws were highly publicized and plaintiff is attempting to 'pile on' to the existing litigation; and plaintiff filed this substantially similar suit rather than challenge the bylaw through the Delaware action, where he appears to already be a putative class member," the judge wrote.

Of the eight factors considered, Alsup found that five of them weigh against the Northern District of California exercising jurisdiction in this case.

"If the Delaware action is delayed unreasonably despite diligence by plaintiff, then the stay will be lifted and plaintiff will be allowed to litigate here. If there is undue delay (not due to plaintiff) in the Delaware action, then either side may ask that the stay be lifted," the decision states.

Bushansky's action is stayed until Aug. 8, 2013, at which time the parties will face a case-management conference.

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