May 13, 2015
Delaware Senate Passes Fee-Shifting Bill (Now on to the House)
Here’s news from this Delaware Online article:
Lawmakers in the Delaware Senate voted 16-5 on Tuesday to approve legislation that would ban corporations from adopting bylaws that impose corporate legal costs on shareholders who file unsuccessful lawsuits. The fee-shifting legislation has been controversial, attracting opposition from the U.S. Chamber of Commerce. The Chamber says the legislation protects frivolous shareholder litigation and threatens Delaware’s business-friendly image. “Companies that incorporate in Delaware have valued the state’s clear and fair corporate law principles,” said Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform. “But they are increasingly becoming victims of ‘extortion through litigation.'” More than nine of every 10 corporate mergers or acquisitions are challenged in court.
The Delaware State Chamber of Commerce remained neutral on the legislation, which is sponsored by Delaware Sen. Bryan Townsend, a Newark Democrat and a practicing corporate lawyer at Morris James in Wilmington. In May 2014, the Delaware Supreme Court upheld a bylaw adopted by a private non-stock corporation, ATP Tour Inc., that shifted legal costs onto the loser in shareholder litigation. Delaware lawyers, concerned that stock corporations could seek similar bylaws, recommended that the General Assembly change the law to ban such bylaws.
The legislation now heads to the Delaware House of Representatives.
Meanwhile, here’s two blogs by Allen Matkins’ Keith Bishop:
– It’s Time To Put A Stop To Fee-Shifting (But Not In the Way You Might Think)
– Here’s One Way To Recover Attorneys’ Fees Without Adopting A Fee Shifting Bylaw