Noelle Lee v. Robert Fisher ( 2022 )


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  •                  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.