Legal Alert - Fee Shifting Bylaw Facially Valid Under Delaware Law
By John S. Delikanakis and Jennifer Luiña
On May 8, 2014, Delaware Supreme Court, en banc, answered four questions of law certified to it by the U.S. District Court for the District of Delaware and upheld the facial validity of a fee shifting provision in a Delaware corporation’s bylaws adopted for the purposes of deterring litigation. The decision was issued with respect to a non-stock corporation; however, the Court’s analysis is applicable to stock corporations as well. The decision should prompt boards of directors of Delaware public and private corporations to consider adopting fee shifting bylaws. To the extent that the decision does not conflict with the corporation laws of other states, boards of directors in other jurisdictions will likely do the same. The case, ATP Tour, Inc. v. Deutscher Tennis Bund, et al., can be read here.