SAN FRANCISCO (CN) - Shareholders say in a federal derivative complaint that Chevron's board of directors adopted an improper forum-shopping bylaw to stop them from suing the company outside of Delaware.
Lead plaintiff-shareholder Stephen Bushansky claims the Chevron board directors approved a "forum shopping bylaw which 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."
He claims that the improper bylaw "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."
Bushansky adds: "In adopting the bylaw, defendants have breached their fiduciary duties of loyalty, due care, candor, independence, good faith and fair dealing to the Company and its public shareholders, and/or have aided and abetted such breaches. Moreover, the board breached its fiduciary duties of loyalty and care by enacting the self-interested bylaw on an uninformed basis.
"The bylaw permits the directors to control the forum for litigation against them and thereby reduces their risk of liability to the Company for their breaches of fiduciary duties, among other things. The bylaw is not fair to Chevron or its public stockholders. It was initiated, timed, structured and approved to benefit the directors at the expense of Chevron and its public stockholders."
Bushansky wants the board enjoined from enforcing the bylaw, and declaratory judgment that the bylaw is invalid.
"If one stockholder brings an action in the Delaware Court of Chancery and another stockholder files an action in another forum, the board can choose whichever forum the directors believe presents the least chance of liability against themselves or the best prospects for a cheap settlement. Moreover, because the bylaw allows the board to choose the forum, they can force the stockholder who filed in Delaware to litigate in a different forum," the complaint states.
"The bylaw is not a mutual 'forum selection' provision, but a one-sided 'heads I win, tails you lose' provision giving the Company the choice of forum."
Bushansky is represented Leigh Parker of New York City-based Weiss & Lurie's Los Angeles office.