Fee-shifting bylaw

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It is no secret that SEC Chair Paul Atkins has ideas about how U.S. securities laws could be reformed to “revitalize” America’s capital markets. Among other things, late last year Atkins proposed a number of revisions to the current U.S. public company disclosure regime. Now, in a speech earlier this week, Atkins floated several additional proposed reforms, among other things referring to the possibility of loser-pays bylaws for shareholder suits and of a “safe harbor” for public company disclosures concerning widely publicized events. As discussed below, Atkins’s recent ideas have a long and relevant history. The text of Atkins’s February 17, 2026, speech can be found here.Continue Reading SEC Chair Atkins Proposed Further Securities Litigation and Disclosure Reform

A short time ago, a storm of controversy briefly emerged after a Delaware court endorsed a firm’s adoption of a fee-shifting bylaw. The controversy quieted down after the Delaware legislature adopted a statutory provision prohibiting fee-shifting bylaws. The fee-shifting provision controversy could be back, albeit this time in a different state. A Nevada legislator has introduced a bill in the state senate that would explicitly allow Nevada corporations to adopt  provisions requiring fee-shifting in unsuccessful M&A litigation, as long as the deals were approved by a shareholder majority. University of Nevada Las Vegas Law School Professor Benjamin Edwards describes the legislation in a March 18, 2019 post on the Business Law Prof Blog (here).
Continue Reading Proposed Nevada Legislation Introduces Fee-Shifting in Shareholder Litigation

delawareMany readers will recall that just a short time ago companies were actively experimenting to try to incorporate litigation management measures into their corporate bylaws. These efforts led to decisions by Delaware courts upholding both forum selection bylaws (about which refer here) and fee-shifting bylaws (refer here). Delaware’s legislature ultimately addressed these bylaw experimentation efforts by adopting statutory provisions allowing forum selection bylaws but prohibiting fee-shifting bylaws.

Following the enactment of this legislation, the payroll software services firm Paylocity adopted a bylaw provision designating Delaware as the forum for any shareholder disputes and holding any shareholder who filed an action outside Delaware and who did not prevail on the merits liable for the company’s attorneys’ fees. A Paylocity shareholder filed an action in Delaware Chancery Court challenging the bylaw’s fee-shifting provision. In an interesting December 27, 2016 opinion (here), Chancellor Andre Bouchard held that the Paylocity bylaw’s penalty provisions violated the Delaware statutory fee-shifting bylaw prohibitions, but dismissed the claims that company’s board had violated its fiduciary duties in enacting the bylaw.
Continue Reading Del. Court Pans Fee-Shifting Portion of Forum Selection Bylaw

delsealIn a late night session on June 11, 2015, the Delaware House of Representatives overwhelmingly passed S.B. 75, which prohibits Delaware stock corporations from adopting “loser pays” fee-shifting bylaws and which confirms that Delaware corporations may adopt bylaws designating Delaware courts as the exclusive forum for shareholder litigation. The bill, which previously passed the state’s…

Lebovitch_Mark_300dpiOne of the more significant recent developments in the corporate and securities litigation arena has been the emergence of the debate over fee-shifting bylaws following the Delaware Supreme Court’s May 2014 decision in ATP Tour, Inc. v. Deutscher Tennis Bund. Draft proposed legislation is now being considered by the Delaware legislature that would address…

blumarbleAn ever-present anxiety for globally-active non-U.S. companies is the possibility that they might find themselves having to deal with litigation in U.S. courts. This concern is warranted because certain attributes of the U.S. legal system – including the absence of loser pays attorneys’ fee model and the availability of discovery and jury trials – provide …

stockmarketticker2One of the more interesting recent developments in the D&O liability arena has been the emergence of issues surrounding fee-shifting bylaws. As readers will recall, in May 2014, the Delaware Supreme Court in the ATP Tours case upheld the validity of a non-stock corporation’s bylaw imposing attorneys’ fees on an unsuccessful claimant in an intra-corporate …

oklachomaOne of the most interesting recent developments has been the onset of innovative litigation reform efforts in the form of bylaw revisions. Among the most intriguing of these efforts involves fee shifting bylaws, whereby an unsuccessful claimant in intracorporate litigation must pay the other party’s costs. As discussed here, earlier this year, the Delaware …