Corporate Communicator - Summer 2015
In this edition of the Corporate Communicator, we provide a Legal Alert about recently enacted legislation in Delaware that prohibits fee-shifting provisions in a Delaware stock corporation’s certificate of incorporation or bylaws and explicitly authorizes Delaware exclusive forum-selection provisions in a Delaware corporation’s certificate of incorporation or bylaws for internal corporate claims.
Delaware Legislature Rejects Fee-Shifting Bylaws for Stock Corporations
by John S. Delikanakis
On June 24, Delaware’s Governor signed Senate Bill No. 75 into law and closed the door on the tantalizing prospect of fee-shifting (“loser pays”) bylaws for Delaware stock corporations. The full text of the bill can be read here. The heavily negotiated bill is a blunt, legislative reaction to the Delaware Supreme Court’s May 8, 2014 decision in ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554 (Del 2014) permitting fee-shifting bylaws for non-stock corporations and discussed in an earlier Legal Alert. See Fee-Shifting Bylaw Facially Valid Under Delaware Law here. Many practioners believed that ATP Tour’s analysis supported the enforceability of fee-shifting bylaws for stock corporations too, and looked forward to seeing that belief become a reality. Others were alarmed that such bylaws would, as a practical matter, halt meritorious shareholder lawsuits from ever being filed. The Delaware Bar’s Corporation Law Council expressed its concerns shortly after the ATP Tour decision was issued: