In a Bind: Mandatory Arbitration Clauses in the Corporate Derivative Context
Arbitration has permeated the corporate governance landscape. Parties to contracts frequently choose to adhere to contractual language obligating them to resolve their disputes in front of a neutral arbitrator and outside of the courtroom.1 An increasingly popular alternative dispute resolution mechanism, mandatory arbitration clauses are now springing up in more complex forms of contract: corporate bylaws and articles of incorporation. 2 These clauses bind a corporation's owners (its shareholders) to arbitration proceedings for resolution of their derivative claims against corporate management one of the principal methods of upholding the corporate governance structure. 3 Because shareholders are being barred from the secure confines of Delaware jurisprudence as a result, mandatory arbitration clauses are causing a revolution in shareholder derivative suits, along with the fundamentals of Delaware corporate law. The popularity of mandatory arbitration provisions is evidenced by the U.S. Supreme Court's endorsement of this alternative dispute mechanism within the corporate context. The recent 5 4 Supreme Court decision AT&T