… but going back to corporations for a moment – a while ago, I speculated that corporate forum-selection bylaws could unfairly work to favor management, because management can choose to invoke them at will – they can deploy them to dismiss cases when it will benefit them, but also can refuse to invoke them when it would work to their advantage to have plaintiffs’ firms compete with each other in different jurisdictions.

Alison Frankel now reports that the FX company is doing just that.  According to her report, FX enacted a forum-selection bylaw choosing Utah as the forum; but now, faced with shareholder lawsuits in Nevada and Utah, it is choosing not to enforce the bylaw – precisely because, according to the Utah plaintiffs, it benefits management to have the plaintiffs compete for the opportunity to settle the case on sweetheart terms.

The basic problem is that these bylaws do not resemble contractual forum selection clauses, in that they can only be invoked by management – not plaintiffs.  And at least according to Delaware, they are only valid because they allow management the freedom to choose whether to invoke them (i.e., they contain a fiduciary out).  As a result, it’s critical that courts police their use, and, in particular, make sure they do not bring about the forum-shopping evil they were intended to prevent.  Better than that – and I realize it’s heresy to suggest  – multiforum litigation perhaps is not a problem that should be addressed privately, but instead should be addressed through coordinated action by the states.