Can corporate bylaws require shareholders to sue in federal court? Volonte v. Domo, Inc. Explained

In Volonte v. Domo, Inc., the Utah Court of Appeals addressed whether corporate federal forum provisions (FFPs) in bylaws are valid and enforceable against shareholders bringing Securities Act claims.

Background and Facts

After Domo, Inc. went public in 2018, Fernando Volonte purchased shares and later filed a class action lawsuit under the Securities Act in Utah state court. However, Domo’s bylaws contained an FFP stating that federal district courts “shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933.” When the Delaware Court of Chancery initially invalidated similar provisions in 2018, Domo filed a Form 8-K stating it would not enforce the provision unless the decision was appealed and reversed, which ultimately occurred.

Key Legal Issues

The court addressed six main challenges to the FFP: (1) lack of mutual assent and notice; (2) whether Domo’s Form 8-K created a binding agreement not to enforce the FFP; (3) promissory and equitable estoppel doctrines; (4) conflicts with Securities Act anti-removal and anti-waiver provisions; (5) forum non conveniens analysis; and (6) whether non-signatory underwriter defendants could enforce the FFP.

Court’s Analysis and Holding

The court rejected all challenges, holding that FFPs are facially valid under both Utah and Delaware law. Corporate bylaws constitute binding contracts between corporations and shareholders, and shareholders are presumed to have knowledge of bylaws when purchasing stock. The Form 8-K was conditional and did not create a separate agreement. The Securities Act’s anti-waiver provision applies only to substantive, not procedural, provisions. Regarding the underwriter defendants, the court applied Delaware law under choice-of-law principles and found they could enforce the FFP under the Ashall Homes test because their conduct was closely related to the contractual relationship.

Practice Implications

This decision reinforces the enforceability of federal forum provisions in corporate governance documents. Practitioners should carefully review corporate bylaws when advising clients on Securities Act litigation strategy. The ruling also demonstrates the importance of thorough briefing on procedural arguments—the court noted that Volonte’s forum non conveniens argument failed partly due to inadequate briefing. For corporate defendants, this case provides a roadmap for enforcing FFPs and may encourage more companies to adopt similar provisions.