September 5, 2014-Delaware Supreme Court Approves Fee Shifting Bylaws
September 5, 2014
On May 8, 2014, in the case of ATP Tour, Inc., Charles Pasarell, Graham Pearce, Jacco Eltingh, Perry Rogers and Iggy Jovanic, v. Deutscher Tennis Bund (German Tennis Federation), Rothenbaum Sport GMBH, and Qatar Tennis Federation, No. 534, 2013, the Delaware Supreme Court addressed a federal court’s certified question about a bylaw adopted by a private company that shifts attorney fees and costs to unsuccessful plaintiffs in corporate litigation. In a landmark ruling, the Delaware Supreme Court held that a fee-shifting provision such as the one at issue could be valid and enforceable under Delaware Law. Other corporations may now adopt the bylaw provision making shareholder suits riskier. Commentators have said such bylaws could prevent frivolous shareholder disputes from being filed in the first place but critics point to scenarios that could ultimately disadvantage plaintiffs and steer them towards avoiding what could be a successful litigation.