Delaware Chancery Rejects “Race to the Courthouse” in Enforcing Texas Exclusive Forum Bylaw, Dismissing Three Derivative Lawsuits filed before Tesla’s Redomestication

On April 13, 2026, the Delaware Court of Chancery dismissed three derivative suits in In re Tesla, Inc. Derivative Litigation based on Tesla’s forum selection bylaw requiring that those lawsuits be brought in Texas. All three derivative lawsuits were filed after Tesla announced its proposal to redomesticate and adopt a Texas exclusive forum bylaw but before the redomestication and amended bylaw became effective after shareholder approval. The decision carries important implications for corporations considering redomestication and the enforceability of forum selection provisions adopted after litigation has commenced.

Background

On April 17, 2024, Tesla publicly announced its intent to seek shareholder approval to convert from a Delaware corporation to a Texas corporation. The redomestication included the adoption of a certificate of formation and bylaws for the Texas corporation, with the proposed Texas bylaws replacing the company’s then current exclusive forum provision selecting Delaware Chancery with one designating certain Texas courts as the exclusive forum for derivative actions. After the redomestication was announced, but before it was approved by shareholder vote, shareholders filed three derivative lawsuits in the Delaware Court of Chancery on May 24, June 10, and June 13, 2024. On June 13, 2024—just a few hours after the last lawsuit was filed and before Tesla was served—Tesla’s shareholders approved the redomestication and therefore caused the company to adopt the Texas forum selection bylaw.

The consolidated and coordinated actions were reassigned to Vice Chancellor Bonnie W. David on April 2, 2026, following Chancellor Kathaleen McCormick’s reassignment. After reviewing the parties’ written submissions and the October 22, 2025 oral argument transcript, Vice Chancellor David determined that additional submissions and argument were unnecessary and issued the opinion eleven days later on April 13, 2026.

Analysis

Vice Chancellor David addressed three arguments raised by plaintiffs seeking to avoid enforcement of the Texas forum selection bylaw.

1. Later-Adopted Forum Bylaws May Be Enforceable

Plaintiffs argued that the Court should not enforce the Texas forum selection bylaw because venue must be determined based on the facts at the time of filing.  Plaintiffs had, in fact, complied with the bylaws at the time they filed their cases by filing in the Delaware Court of Chancery. The Court rejected the notion that venue must be fixed as of the date suit is filed, declining to adopt a per se rule against enforcement of later-adopted forum selection bylaws. The Court recognized that courts may determine venue based on events after the filing of a complaint.

To that end, the Court noted that other jurisdictions applying Delaware law have enforced forum selection bylaws adopted after derivative litigation was filed. Under Delaware law, shareholders do not have a “vested right” to litigate in a particular forum because the corporate relationship is “by design, flexible and subject to change.” The Court found the case for enforcement particularly strong here because the Texas forum selection bylaw was publicly announced before the lawsuits were filed and became effective before the cases advanced beyond the initial pleading stage. The Court observed that “[i]f any circumstance supports allowing a later bylaw to apply to preexisting litigation, these facts do.”

2. The Texas Forum Selection Bylaw Does Not Violate Delaware Law

The Court also rejected plaintiffs’ argument that enforcement would violate Section 266(e) of the Delaware General Corporation Law, which provides that redomestication shall not “affect any obligations or liabilities” incurred prior to conversion.  The Court first noted that Delaware has long rejected the so-called “vested rights” doctrine, which is the idea that a “corporation’s governing documents cannot be amended in a manner that diminishes or divests pre-existing [share]holder rights.” Rather, the shareholders were on notice that the company’s bylaws remain subject to amendment.  Moreover, the Court noted that Section 266(e) governs the law that applies to pre-redomestication events but does not govern the forum in which those events must be litigated.

Plaintiffs also argued that enforcing the Texas forum selection bylaw violated Section 115, which prohibits Delaware corporations from adopting bylaws that bar litigation in Delaware courts. But this argument failed as well because Tesla was no longer incorporated in Delaware when it adopted the Texas forum selection bylaw.

3. Enforcement Is Not Unreasonable or Unjust

Finally, plaintiffs argued that the Texas forum selection bylaw should not be enforced because the company and the individual defendants made misleading statements to secure shareholder approval of the redomestication. The Court, however, held that challenges to the underlying redomestication transaction cannot be used to escape a valid forum selection clause. The plaintiffs failed to argue that the shareholders were misled about the effects of the Texas forum selection bylaw itself.

Plaintiffs also contended that Texas law offers less favorable rules for stockholders. The Court rejected this argument: “I am loath to second-guess Tesla stockholders’ chosen forum by purporting to weigh the advantages and disadvantages of Texas law and procedure relative to [Delaware’s] own.”  

Key Takeaways

This ruling offers several important lessons:

A race to the courthouse does not necessarily defeat a later-adopted forum selection bylaw. While courts retain discretion to deny enforcement where it would be unfair or unreasonable, the timing of a bylaw’s approval and adoption alone is not determinative. Corporations considering redomestication should be aware that newly adopted forum provisions may apply to derivative actions filed after public announcement of a redomestication vote.

Shareholder approval strengthens enforceability. A redomestication is typically effected through either a conversion or a merger, both of which require shareholder approval in Delaware. The Court emphasized that shareholder approval of the redomestication included an approval of the Texas forum selection bylaw and noted that she was “loath” to second-guess the shareholders’ decision.

Delaware courts will respect alternative forums. This decision reflects Delaware’s commitment to “flexibility and private ordering,” declining to impose its own judgment on where corporations and their stockholders choose to resolve disputes.