Noelle Lee v. Robert Fisher ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
NOELLE LEE, derivatively on behalf No. 21-15923
of The Gap, Inc,
Plaintiff-Appellant, D.C. No.
3:20-cv-06163-
v. SK
ROBERT J. FISHER; SONIA SYNGAL;
ARTHUR PECK; AMY BOHUTINSKY; OPINION
AMY MILES; ISABELLA D. GOREN;
BOB L. MARTIN; CHRIS O'NEILL;
ELIZABETH A. SMITH; JOHN J.
FISHER; JORGE P. MONTOYA; MAYO
A. SHATTUCK III; TRACY GARDNER;
WILLIAM S. FISHER; DORIS F.
FISHER; THE GAP, INC., Nominal
Defendant,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Sallie Kim, Magistrate Judge, Presiding
Argued and Submitted April 14, 2022
San Francisco, California
Filed May 13, 2022
2 LEE V. FISHER
Before: RICHARD R. CLIFTON and MILAN D. SMITH,
JR., Circuit Judges, and CHRISTINA REISS, *
District Judge.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY **
Forum Selection
The panel affirmed the district court’s dismissal of
Noelle Lee’s shareholder derivative action alleging that The
Gap, Inc. and its directors (collectively, Gap) failed to create
meaningful diversity within company leadership roles, and
that Gap made false statements to shareholders in its proxy
statements about the level of diversity it had achieved.
The district court dismissed the complaint based on its
application of the doctrine of forum non conveniens, holding
that Lee was bound by the forum-selection clause in Gap’s
bylaws, which requires any derivative action to be
adjudicated in the Delaware Court of Chancery.
Lee conceded that the forum-selection clause is valid
and, by its terms, applies to her lawsuit. Accordingly, the
only question before this court was whether the clause is
enforceable. Applying the doctrine of forum non
*
The Honorable Christina Reiss, United States District Judge for the
District of Vermont, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
LEE V. FISHER 3
conveniens, the panel wrote that a forum-selection clause
creates a strong presumption in favor of transferring a case,
that the plaintiff bears the burden to establish that transfer is
unwarranted, and that the district court should transfer the
case unless extraordinary circumstances unrelated to the
convenience of the parties clearly disfavor a transfer. Noting
that Lee did not contend that the forum-selection clause is
invalid due to fraud, nor that litigating her derivative claim
in the Delaware forum would be gravely difficult, the panel
considered only the second factor derived from M/S Bremen
v. Zapata Off-Shore Co., 407 U.S. 1 (1972)—whether
enforcement of the clause would contravene strong public
policy. The panel held that Lee did not meet her burden to
show that enforcing Gap’s forum-selection clause
contravenes federal public policy, rejecting as unavailing the
evidence Lee identified as supporting her position: the
Securities Exchange Act’s antiwaiver provision and
exclusive federal jurisdiction provision, Delaware state
caselaw, and a federal court’s obligation to hear cases within
its jurisdiction. The panel therefore concluded that the
district court did not abuse its discretion in dismissing the
complaint.
4 LEE V. FISHER
COUNSEL
Yury A. Kolesnikov (argued) and Francis A. Bottini Jr.,
Bottini & Bottini Inc., La Jolla, California, for Plaintiff-
Appellant.
Roman Martinez (argued), Susan E. Engel, and Michael
Clemente, Latham & Watkins LLP, Washington, D.C.;
Elizabeth L. Deeley and Morgan E. Whitworth, Latham &
Watkins LLP, San Francisco, California; William J. Trach,
Lathan & Watkins LLP, Boston, Massachusetts; for
Defendants-Appellees.
OPINION
M. SMITH, Circuit Judge:
Plaintiff Noelle Lee brought a shareholder derivative
action alleging that The Gap, Inc. and its directors
(collectively, Gap) failed to create meaningful diversity
within company leadership roles, and that Gap made false
statements to shareholders in its proxy statements about the
level of diversity it had achieved. Gap’s bylaws contain a
forum-selection clause that requires “any derivative action
or proceeding brought on behalf of the Corporation” to be
adjudicated in the Delaware Court of Chancery.
Notwithstanding the forum-selection clause, Lee brought her
derivative lawsuit in a federal district court in California,
alleging a violation of Section 14(a) of the Securities
Exchange Act of 1934, 15 U.S.C. § 78n(a), along with
various state law claims. The district court dismissed Lee’s
complaint based on its application of the doctrine of forum
non conveniens, holding that she was bound by the forum-
selection clause. We affirm the district court because Lee
LEE V. FISHER 5
has not carried her heavy burden to show that Gap’s forum-
selection clause is unenforceable.
FACTUAL AND PROCEDURAL BACKGROUND
Section 14(a) and its implementing regulation, Securities
Exchange Commission Rule 14a-9, prohibit material
misstatements or omissions in a proxy statement. 15 U.S.C.
§ 78n(a); 17 C.F.R. § 240.14a-9(a). Section 14(a) may be
enforced by direct actions, in which shareholders assert their
own rights, or by derivative actions, in which shareholders
assert the rights of the corporation. Federal courts have
exclusive jurisdiction over these claims, 15 U.S.C. § 78aa,
but Gap’s bylaws include a forum-selection clause
designating the Delaware Court of Chancery as the exclusive
forum for all derivative claims. Gap acknowledges that if its
forum-selection clause is enforced, Lee will not be able to
bring her derivative Section 14(a) claim in the Delaware
Court of Chancery. See 15 U.S.C. § 78aa.
Defendants moved to dismiss this action based on the
doctrine of forum non conveniens, citing Gap’s forum-
selection clause. The district court agreed that the clause
was enforceable and dismissed the lawsuit. On appeal, Lee
argues that Gap’s forum-selection clause violates public
policy and is unenforceable because it prevents her from
bringing a derivative Section 14(a) claim in any court.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction pursuant to 28 U.S.C. § 1291. We
review for abuse of discretion the district court’s dismissal
of a complaint for failure to comply with an enforceable
forum-selection clause. Yei A. Sun v. Advanced China
Healthcare, Inc., 901 F.3d 1081, 1086 (9th Cir. 2018).
6 LEE V. FISHER
ANALYSIS
I.
Lee concedes that Gap’s forum-selection clause is valid
and, by its terms, applies to her lawsuit. Accordingly, the
only question before us is whether the clause is enforceable.
“[T]he appropriate way to enforce a forum-selection clause
pointing to a state or foreign forum is through the doctrine
of forum non conveniens.” Atl. Marine Constr. Co. v. U.S.
Dist. Ct. for W. Dist. of Tex., 571 U.S. 49, 60 (2013). In a
“typical case not involving a forum-selection clause,” courts
evaluate factors such as convenience of the parties when
conducting a forum non conveniens analysis. Id. at 62–63.
“The calculus changes, however, when the parties’ contract
contains a valid forum-selection clause, which ‘represents
the parties’ agreement as to the most proper forum.’” Id.
at 63 (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S.
22, 31 (1988)). A forum-selection clause, therefore, creates
a strong presumption in favor of transferring a case, and the
plaintiff “bears the burden” to establish that transfer is
unwarranted. Id.In Atlantic Marine, the Supreme Court established the
general rule that “a district court should transfer the case
unless extraordinary circumstances unrelated to the
convenience of the parties clearly disfavor a transfer.” Id.
at 52. 1 The Court did not define the term “extraordinary
circumstances” in Atlantic Marine, and so we looked to its
earlier decision in M/S Bremen v. Zapata Off-Shore Co.,
1
Although the Supreme Court set forth this rule in context of a
28 U.S.C. § 1404(a) motion to transfer, “the same standards should apply
to motions to dismiss for forum non conveniens” even though “a
successful motion under forum non conveniens requires dismissal of the
case.” See Atl. Marine, 571 U.S. at 66 n.8.
LEE V. FISHER 7
407 U.S. 1 (1972) for guidance. See Advanced China
Healthcare, 901 F.3d at 1088; see also Gemini Techs., Inc.
v. Smith & Wesson Corp., 931 F.3d 911, 914–15 (9th Cir.
2019). From Bremen, we identified three general principles
that establish extraordinary circumstances, namely: (1) when
the forum-selection clause is invalid because of “fraud or
overreaching,” (2) when enforcement of the clause “would
contravene a strong public policy of the forum in which suit
is brought, whether declared by statute or by judicial
decision,” or (3) when the forum would be “so gravely
difficult and inconvenient” that the plaintiff “will for all
practical purposes be deprived of his day in court.”
Advanced China Healthcare, 901 F.3d at 1088 (quoting
Bremen, 407 U.S. at 15, 18).
On appeal, Lee does not contend that the forum-selection
clause is invalid due to fraud, nor that litigating her
derivative claim in the Delaware forum would be gravely
difficult. Therefore, we consider only the second Bremen
factor and ask whether enforcement of the clause would
contravene strong public policy. We have developed a
straightforward test to decide whether a forum-selection
clause contravenes public policy. See Advanced China
Healthcare, 901 F.3d at 1090; Gemini Techs, 931 F.3d
at 915–16. First, we look to “the forum in which suit is
brought.” Advanced China Healthcare, 901 F.3d at 1090.
Then we determine whether the plaintiff has identified “a
statute or judicial decision” in that forum that “clearly states”
strong public policy rendering the clause unenforceable. Id.
II.
Lee brought her lawsuit in a federal forum and identified
the following as evidence of clear public policy supporting
her position: (1) the Exchange Act’s antiwaiver provision,
15 U.S.C. § 78cc(a); (2) the Exchange Act’s exclusive
8 LEE V. FISHER
federal jurisdiction provision, 15 U.S.C. § 78aa;
(3) Delaware state caselaw; and (4) a federal court’s
obligation to hear cases within its jurisdiction. Lee has not
met her burden to show that the forum-selection clause is
unenforceable.
Lee first points to the Exchange Act’s antiwaiver
provision as proof of strong public policy. This argument is
unavailing because “the strong federal policy in favor of
enforcing forum-selection clauses . . . supersede[s]
antiwaiver provisions in state statutes as well as federal
statutes, regardless whether the clause points to a state court,
a foreign court, or another federal court.” Advanced China
Healthcare, 901 F.3d at 1090. Unlike the provision the
plaintiffs in Gemini identified, explicitly stating any waiver
of statutory rights “is void as it is against the public policy
of Idaho,” 931 F.3d at 916, the Exchange Act’s antiwaiver
provision does not contain a clear declaration of federal
policy.
Similarly, the Exchange Act’s exclusive federal
jurisdiction provision, 15 U.S.C. § 78aa, does not provide us
with a clear statutory declaration. That section states: “[t]he
district courts of the United States and the United States
courts of any Territory or other place subject to the
jurisdiction of the United States shall have exclusive
jurisdiction of violations of this chapter.” 15 U.S.C. § 78aa.
It further provides that “[a]ny suit or action . . . may be
brought in any such district or in the district wherein the
defendant is found.” Id. By its terms, this section forbids
non-federal courts from adjudicating Section 14(a) claims.
Gap’s bylaws do not force the Delaware Court of Chancery
to adjudicate Lee’s derivative Section 14(a) claim. Rather,
the bylaws result in this claim being dismissed in federal
court. Therefore, enforcement of the forum-selection clause
LEE V. FISHER 9
does not violate any express statutory policy of the Exchange
Act’s exclusive federal jurisdiction provision. Moreover,
the Supreme Court has held that the Exchange Act’s
exclusivity provision is waivable. See Shearson/Am.
Express, Inc. v. McMahon, 482 U.S. 220, 228 (1987)
(explaining that “[b]ecause [the Exchange Act’s exclusive
jurisdiction provision] does not impose any statutory duties,
its waiver does not constitute a waiver of ‘compliance with
any provision’ of the Exchange Act.”).
Lee also identifies Delaware caselaw in support of her
public policy argument, citing Boilermakers Loc. 154 Ret.
Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013).
Defendants contend that “Delaware law is irrelevant” to our
inquiry because it is not federal law. It is true that we look
for a strong public policy reflected in judicial decisions and
statutes from “the forum in which suit is brought.”
Advanced China Healthcare, 901 F.3d at 1090 (quoting
Bremen, 407 U.S. at 15). However, the law of the forum
identified in the forum-selection clause is not “irrelevant” in
determining whether the clause is enforceable. For example,
under the second prong of the Bremen test, we consider the
law of the forum identified in the forum-selection clause to
determine whether plaintiffs have some “reasonable
recourse” in that forum. See Advanced China Healthcare,
901 F.3d at 1089 & n.6 (“We note that we would give more
weight to Washington’s public policy interests if plaintiffs
would be denied any relief in a California forum.”). If Lee
identified Delaware law clearly stating that she could not get
any relief in the Delaware Court of Chancery, we would
have little trouble considering the effect of that law as part
of our public policy analysis. She has not done so.
10 LEE V. FISHER
In her reply brief, Lee cites the Seventh Circuit’s recent
decision in Seafarers Pension Plan ex rel. Boeing Co. v.
Bradway, 23 F.4th 714 (7th Cir. 2022). In Seafarers, a
divided panel held that an identical Boeing forum-selection
clause was unenforceable because it was “contrary to
Delaware corporation law and federal securities law.” Id.
at 718. The Seventh Circuit held that Section 115 of the
Delaware General Corporation Law, 8 Del. Code § 115,
“reject[ed] Boeing’s use of its forum bylaw to foreclose
entirely plaintiff’s derivative action under Section 14(a).”
Id. at 720. Although the bulk of the Seventh Circuit’s
reasoning focused on Delaware law, the court also held that
Boeing’s bylaw violated the Exchange Act’s antiwaiver
provision. Id. at 727. Lee did not identify Section 115 of
Delaware corporate law in the district court or in her opening
brief on appeal, and so has waived any reliance on that
provision. Moreover, for the reasons previously discussed,
our binding precedent forecloses reliance on the Exchange
Act’s antiwaiver provision. See Advanced China
Healthcare, 901 F.3d at 1089–90.
Finally, Lee argues that federal courts have a “virtually
unflagging obligation” to hear cases within their exclusive
jurisdiction, citing abstention doctrine cases. See, e.g., Colo.
River Water Conservation Dist. v. United States, 424 U.S.
800, 817 (1976). But this obligation is overcome by the
strong presumption in favor of enforcing forum-selection
clauses “regardless whether the clause points to a state court,
a foreign court, or another federal court.” Advanced China
Healthcare, 901 F.3d at 1090.
CONCLUSION
Lee has not met her heavy burden to show that enforcing
Gap’s forum-selection clause contravenes strong federal
LEE V. FISHER 11
public policy. We therefore conclude that the district court
did not abuse its discretion in dismissing the complaint.
AFFIRMED.