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Litigation: How to Control Venue for Shareholder Derivative Actions

Gaining shareholder consent is the key.

Judge Richard Seeborg of the Northern District of California recently denied Oracle Corp.’s motion to dismiss a shareholder derivative lawsuit for improper venue because the company’s forum-selection clause was unilaterally adopted by the Board of Directors (the “Board”) after the alleged wrongdoing had occurred.

Specifically, the court observed that “the venue provision was unilaterally adopted by the directors who are defendants in this action, after the majority of the purported wrongdoing is alleged to have occurred and without consent of the existing shareholders who acquired their shares when no such bylaw was in effect.” Prince v. Berg, 3:10-cv-094233 (N.D. Cal. Jan. 3, 2011)

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Matthew Ingber

Matthew Ingber is a litigation partner at Mayer Brown.

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