Tesla obtained the dismissal of two derivative actions filed in Delaware on the eve of Tesla’s redomestication from Delaware to Texas in 2024 on forum-selection grounds.
After Tesla announced its plan to redomesticate from Delaware to Texas in April 2024—and submitted for a stockholder vote its proposed Texas bylaws containing a Texas forum-selection provision for derivative actions—three sets of Tesla stockholders rushed to the Delaware Court of Chancery to file derivative actions ahead of that planned redomestication.
After two of the actions were consolidated, and the third coordinated with the consolidated action for the purposes of any motions to dismiss, Tesla advanced three arguments for dismissal of the operative complaints.
Dismissing both of the actions, Vice Chancellor Bonnie W. David held that Tesla’s Texas forum-selection bylaw adopted upon stockholder approval of the redomestication should be enforced as to both sets of plaintiffs. The Court found the bylaw enforceable despite the plaintiffs’ pre-redomestication rush to the courthouse as the Court was not required to assess venue as of the date the actions were filed, and Tesla’s then-existing Delaware forum-selection bylaw was subject to amendment, which occurred when stockholders approved Tesla’s move to Texas.
The S&C team representing Tesla in the litigation consisted of Brian Frawley (who argued the motions), Matt Schwartz, Michael Lemanski and Will Weinberg.