In the transcript ruling of Niedermayer v. Kriegsman, C.A. No. 11800-VCMR (May 2, 2016), the Delaware Court of Chancery granted a motion to stay filed by the individual defendants in favor of a settlement of a related action that is pending approval by the Central District of California. Underlying the dispute over the motion to stay is a forum selection bylaw of the company, CytRx Corp., which states that “unless the corporation consents in writing to the selection of an alternate forum, the Court of Chancery shall be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the corporation” and for certain other actions (including those for breach of fiduciary duty by any director, officer, employee or agent of the company). Previously, in seeking dismissal of other litigation pending against it and its directors in California, CytRx Corp. relied on the forum selection bylaw, arguing that such litigation must be brought in Delaware. During subsequent settlement negotiations, however, the company agreed to waive the forum selection bylaw’s selected forum of Delaware and agreed to submit to the jurisdiction of the Central District of California for purposes of furthering settlement and obtaining approval of any final settlement agreement. In this action, the plaintiffs argued that the decision to waive the forum selection bylaw and agree to the jurisdiction of a different forum, after previously invoking the forum selection bylaw’s chosen forum of Delaware to dismiss litigation, constitutes a breach of fiduciary duty.
This case presents a complicated procedural history involving multiple related actions within and outside of Delaware, including: three federal securities class actions filed in the Central District of California in or around March 2014, consolidated in June 2014; three derivative actions filed in the Delaware Court of Chancery in July 2014, which were consolidated (the first Delaware action); two derivative actions filed in the Central District of California in August 2014, which were consolidated; and this action filed in the Court of Chancery in December 2015 (the Niedermayer action).
