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Gap Wins Dismissal of Diversity Lawsuit for Wrong Forum

April 28, 2021, 3:18 PM

Gap Inc. has fended off an investor lawsuit alleging the retailer breached its fiduciary duty by failing to have meaningful diversity on its board.

Magistrate Judge Sallie Kim of the U.S. District of Northern District Court of California on Tuesday granted the San Francisco-based company’s bid to dismiss the shareholder derivative suit on the grounds that it should have been brought in Delaware Chancery Court.

Plaintiff Noelle Lee alleged Gap failed to create the diversity it claimed among its board and senior executives, and made false statements about its diversity efforts.

Gap said its bylaws designate the Delaware court as the only forum for shareholder complaints. Judge Kim said Lee failed to identify a statute or judicial decision that would override the forum selection clause in the company’s bylaws, the judge ruled.

“When ‘the parties’ contract contains a valid forum-selection clause,’ the plaintiff has the burden, as the party defying the forum-selection clause, to establish that transfer is unwarranted,” Kim said.

Lee still can file her claims in the Delaware court, Kim said.

The case is Lee v. Fisher, N.D. Cal., No. 3:20-cv-06163, order 4/27/21.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Laura D. Francis at lfrancis@bloomberglaw.com