NCPPR v. United Airlines: Shareholder Inspection Rights versus Exclusive Forum Bylaws

Would the Illinois Court have Thrown the Case to Delaware?

In a series of posts, I’ve been discussing the National Center for Public Policy Research’s (NCPPR) lawsuit against United Airlines. NCPPR asked the U.S. District Court for Northern Illinois to compel United to produce for inspection a variety of internal corporate documents related to the airline’s decision to suspect flights between Newark and Tel Aviv.

In the first post of the series, I discussed NCPPR’s decision to file in Illinois federal court under Illinois law instead of filing under Delaware law in Delaware—where United is incorporated. As I explained, the big reform bill Delaware passed in the spring—SB 21—was a game changer that made it much harder to get access to the sorts of documents NCPPR wanted to inspect.

In the second post in the series, I took up the choice of law issue NCPPR’s suit raised: Why would Illinois law apply to a dispute involving a Delaware corporation and one of its shareholders? Most corporate governance disputes are subject to the law of the state of incorporation under the internal affairs doctrine. As we saw, however, shareholder inspection rights are a well established exception to that rule.

In the third post, I turned to the question of whether NCPPR had a proper purpose for seeking to inspect the specified books and records.

In this post, which likely will be the last of the series, I take up the potential conflict between NCPPR’s decision to sue under Illinois law in an Illinois federal court and United’s exclusive forum bylaw.

United is a Delaware corporation. DGCL § 115 provides that:

The certificate of incorporation or the bylaws may require, consistent with applicable jurisdictional requirements, that any or all internal corporate claims shall be brought solely and exclusively in any or all of the courts in this State, and no provision of the certificate of incorporation or the bylaws may prohibit bringing such claims in the courts of this State. “Internal corporate claims” means claims, including claims in the right of the corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity, or (ii) as to which this title confers jurisdiction upon the Court of Chancery.

Pursuant to § 115, United’s bylaws include a provision selecting the Delaware Chancery Court as the exclusive forum in which internal corporate claims may be litigated.

The question is whether shareholder inspection rights fall within the meaning of “internal corporate claims.”