On March 18, 2020, the Delaware Supreme Court reversed the Delaware Court of Chancery and held that Delaware corporations can adopt federal-forum selection provisions (FFPs) requiring that claims arising under the federal Securities Act of 1933 (1933 Act) be brought in federal court. The case is styled Salzberg et. al v. Sciabacucchi, No. 346, 2019, 2020 WL 1280785 (Del. Mar. 18, 2020). Companies should strongly consider using the Salzberg decision as an opportunity to adopt an FFP. Absent such a provision, 1933 Act class actions – which are frequently filed after initial and secondary public offerings – may be brought in state court and cannot be removed to federal court. Because the prospects for obtaining an early dismissal are typically far greater in federal court than in state court, adopting an FFP can provide a significant litigation advantage.
Norton Rose Fulbright has prepared a legal update that discusses the background of the case and the Delaware Supreme Court’s decision in more detail.