Rebuttal to “Delaware Law Permits Companies to Adopt Mandatory Arbitration Clauses”

Key Takeaways

• Delaware §115(c) explicitly requires a Delaware court for securities claims
• Legislative synopses and Supreme Court precedent reject exclusive arbitration clauses
• FAA preemption argument is weak because charter consent is state‑controlled
• Since SEC clearance, no Delaware public firm adopted mandatory arbitration
• SpaceX’s Texas charter tests market acceptance, not Delaware law

Pulse Analysis

Delaware’s amendment to §115 in 2025 introduced a clear safeguard: any forum‑selection provision for non‑internal claims must still allow a stockholder to sue in a Delaware court. The legislative synopsis spells this out, and the parallel language in §115(a) reinforces the prohibition of exclusive arbitration for federal securities claims. This reading aligns with the Delaware Supreme Court’s Salzberg decision, which warned that mandatory arbitration of internal claims would violate the statute. By anchoring the analysis in the statute’s own explanatory notes, Manesh demonstrates that the bar is not a peripheral policy preference but a statutory mandate.

The Federal Arbitration Act’s preemption doctrine, often invoked to override state restrictions, hinges on the existence of a consensual arbitration agreement. A corporate charter, however, is a public contract between the state and the corporation, not a private commercial pact. When Delaware law expressly limits the charter’s arbitration provisions, the FAA cannot force consent that the state itself withholds. This distinction preserves the long‑standing principle that states govern the internal affairs of corporations they charter, and it curtails attempts to use federal preemption to rewrite Delaware’s corporate governance framework.

Practically, the market’s response underscores the legal reality. After the SEC cleared the path for mandatory arbitration in September 2025, no Delaware‑incorporated public company has adopted such a clause; only out‑of‑state entities like Zion Oil & Gas have experimented with it. SpaceX’s planned arbitration provision, drafted under Texas law, serves as a litmus test for investor willingness when a company’s scale outweighs governance concerns. Until a major Delaware‑incorporated issuer embraces mandatory arbitration, the prevailing corporate bar and investor opposition suggest that §115(c) will continue to shape the litigation landscape, limiting companies’ ability to sidestep Delaware courts.