Court Rules Fee-Shifting Bylaws Are Legal in Delaware - For Now

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June 25, 2014
Chicago Daily Law Bulletin

The Delaware Supreme Court, in ATP Tour Inc. v. Deutscher Tennis Bund, held in May that bylaws of Delaware corporations requiring a shareholder who brings an unsuccessful lawsuit against the corporation or its directors to pay their legal fees are legally valid, although such bylaws would be unenforceable if adopted for an improper purpose or through an unfair process.

But Delaware lawmakers may enact legislation amending the Delaware General Corporation Law to limit ATP Tour’s applicability to non-stock corporations. Accordingly, boards of directors of Delaware stock corporations may want to wait and see whether the proposed legislation is enacted before adopting fee-shifting bylaws.

Eric Fogel and Vic Peterson discuss in their article for the Chicago Daily Law Bulletin.

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