Use of Forum Selection Clauses to Avoid California Courts

Earlier this year, Stanford Professor Joseph Grunfest surveyed corporate charters and by-laws for forum selection clauses relating to intra-corporate disputes. The incidence of these clauses remains very small and their enforceability is thus not yet established. Interestingly, however, corporations with California headquarters chartered in Delaware were by far the most common users of the forum selection clauses. This reflects an apparent strong desire to avoid California’s court system, which was recently ranked again near the bottom for “fairness and reasonableness” in business disputes by the U.S. Chamber of Commerce’s Institute for Legal Reform. For those corporations unprepared to flee the jurisdiction or which simply have not included a forum selection provision in their founding documents, the reputation of the California courts highlights the need for experienced counsel in intra-corporate disputes in California courts. Knowledge of judges and the ability to determine avenues such as the courts focused on complex matters can make the difference. The undersigned has successfully litigated derivative and intra-corporate disputes in multiple California state courts.