Delaware Legislature Delays Anti-Fee-Shifting Legislation

June 20, 2014

In the wake of staunch opposition from the U.S. Chamber Institute for Legal Reform and other business groups, the Delaware legislature is putting the brakes on legislation that would prevent corporate “fee-shifting” bylaws in the wake of a recent Delaware court decision allowing such bylaws.

The bill reportedly is being delayed for consideration until January 2015.

The Pipeline reports that ILR and other business groups argued the legislation "would ensure a steady stream of lawsuits in Delaware courts to the benefit of the state's lawyers and the detriment of its companies and their stockholders."

"This was a rush to judgment. That's atypical for Delaware," said ILR’s Matt Webb, who was quoted in that same Pipeline story. "The plaintiffs bar viewed this as a threat and acted accordingly. The business community views securities and M&A litigation just as strongly on the other side."

ILR had weighed in strongly when the bill was first introduced. In a letter to legislators, ILR President Lisa A. Rickard wrote that the court’s decision "gives corporations a way to protect their shareholders against these costs of abusive litigation.”

"Why would the Legislature so quickly deprive shareholders of the opportunity to obtain that protection?” she added.

ILR will continue to staunchly oppose this legislation, as well as to educate lawmakers on the negative impact this bill would have on Delaware’s business climate.

Related Resources

'Battle Lines' Drawn Over Delaware Fee-Shifting Fight

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Pensions & Investments' Hazel Bradford writes that "battle lines" have been drawn over a 2014 Delaware court ruling "that lets companies shift legal fees to investors bringing lawsuits." Read More »

Delaware Law Weekly Highlights ILR Opposition to Legislation Prohibiting Fee-Shifting By-Laws

December 17, 2014 | Insights

In a review of the Delaware Supreme Court rulings of the past year, Delaware Law Weekly highlights the court's decision in ATP Tour v. Deutscher Tennis Bund, which "upheld corporations' right to adopt fee-shifting bylaws requiring stockholders to pay all legal costs for unsuccessful lawsuits against the company." Read More »