On April 13, 2026, Vice Chancellor Bonnie David of the Delaware Court of Chancery dismissed three consolidated derivative actions against Tesla, Inc. and its directors, enforcing a Texas forum selection bylaw that was adopted after the lawsuits were filed. The decision in In re Tesla, Inc. Derivative Litigation provides important lessons for corporations navigating redomestication, forum selection bylaws, and derivative litigation strategy.
Background
In April 2024, Tesla announced plans to seek stockholder approval to redomesticate from Delaware to Texas. As part of that proposal, Tesla proposed new bylaws designating Texas as the exclusive forum for derivative actions (Texas Forum Bylaw), replacing its existing bylaw designating Delaware as the exclusive forum.
Between the announcement and the stockholder vote, three groups of Tesla stockholders filed derivative suits in the Court of Chancery alleging insider trading, usurpation of corporate opportunities related to xAI, misappropriation of assets, and oversight failures by the board. On June 13, 2024, the same day the last suit was filed, the redomestication and Texas Forum Bylaw were approved by Tesla stockholders. Defendants did not appear in the actions until after the new bylaw was already in effect.
What the Court Held
The court rejected plaintiffs’ argument that venue must be assessed solely at the time of filing, finding that the federal transfer statute (28 U.S.C. § 1404(a)) on which they relied was inapplicable in this context. Instead, the court noted that courts may look to later points in time, such as when the defendant appears, to determine venue.
Drawing on settled Delaware law that stockholders consent to be bound by future bylaw amendments and have no vested right to litigate in a particular forum, the court held that the Texas Forum Bylaw could be enforced against the pending suits, pointing to three prior decisions in other jurisdictions reaching the same result.
The court also held that § 266(e) of the Delaware General Corporation Law (DGCL) did not preserve an “obligation” to litigate in Delaware, because no such vested right existed, and that § 115 of the DGCL, which prohibits Delaware corporations from excluding Delaware as a forum for internal claims, was inapplicable because Tesla was no longer a Delaware corporation.
Finally, the court rejected plaintiffs’ argument that enforcement of the Texas Forum Bylaw would be unreasonable or unjust as applied because defendants’ misled stockholders into voting in favor of the redomestication, which was a condition precedent to Tesla’s adoption of the Texas Forum Bylaw. The court explained that a party “cannot escape a valid forum selection clause ... by arguing that the underlying contract was invalid for a reason unrelated to the forum selection ... clause itself.” The court declined to weigh the merits of Texas versus Delaware corporate law, deferring instead to the stockholder vote approving the bylaw.
Takeaways
Corporations are not locked into a prior forum selection bylaw simply because a lawsuit was filed first. The enforceability analysis is fact-specific, but the Court of Chancery made clear that there is no inflexible rule tying venue to the date of filing.
The court emphasized that the Texas Forum Bylaw was publicly announced before any of the lawsuits were filed and took effect before defendants appeared. Corporations considering forum selection changes should factor timing and transparency into their planning.
The fact that 63% of Tesla’s shares voted to approve the Texas Forum Bylaw (as part of the redomestication) was a factor in the court’s analysis, reinforcing the value of submitting forum selection changes to a stockholder vote.
Delaware law does not recognize a stockholder’s vested right to litigate in any particular forum, and filing a complaint does not “perfect” such a right.
Once a company redomesticates out of Delaware, DGCL § 115’s requirement that Delaware remain available as a forum for internal claims no longer applies.
- In a footnote to the opinion, the court noted that results might differ if significant time and resources had been invested litigating the action before the venue change argument was raised. Venue arguments must be raised in an answer or Rule 12 motion to dismiss, so corporations should assert new forum selection bylaws at the earliest opportunity.