UCLA Law Professor Stephen Bainbridge recently posted an article calling Delaware’s recently enacted S.B. 75 a “self-inflicted wound”. SB 75, which was signed into law late last month, limits the ability of Delaware stock corporations to adopt so-called “fee shifting” bylaw provisions. What I find particularly interesting is Professor Bainbridge’s thesis that the Delaware legislature
In this post published yesterday on The Harvard Law School Forum on Corporate Governance and Financial Regulation, Delaware lawyer A. Thompson Bayliss and Mark Mixon write that no pay provisions “could transform stockholder litigation without the effects that make ‘loser pays’ provisions unpalatable to many”. According to the authors, a no pay provision requires that each side pay
Last Friday, Delaware lawyer Francis G.X. Pileggi wrote about Vice Chancellor J. Travis Laster’s recent decision to award more than $72 million in attorneys fees in costs in connection with the settlement of a derivative action challenging the divestiture Vivendi S.A.’s controlling equity position in Activision Blizzard, Inc. In Re Activision Blizzard, Inc. Stockholder Litigation, Cons. C.A. No.
With the ongoing hullabaloo concerning the legislative demise of fee shifting bylaw provisions under Delaware law, little attention has been paid to California law. More importantly, no one seems to have noticed that California law already provides a mechanism for the collection of attorneys’ fees and other costs by the prevailing corporation or defendant in a derivative suit
The problem with “fee-shifting bylaws” starts with the name. A better name might be “anti fee-shifting bylaws” because they end the fee shifting that otherwise applies. Without fee-shifting bylaws, plaintiffs’ attorneys are encouraged to bet with the stockholders’ money. This is, of course, unfair to the stockholders. Society also suffers because the current fee-shifting regime
Derivative suits rarely arrive alone. When something goes awry, directors and officers can be expected to see multiple suits based on demand futility as well as wrongful demand refusal. Often, suits will be filed at different times and in different fora. It is important to remember, however, that the “real” plaintiff in these suits is
A lot of folks these days are arguing and writing about fee-shifting bylaws as if they were some kind of novel and sudden irruption, like Athena bursting from Zeus’ skull. This overlooks the existence of fee-shifting provisions in a myriad of existing contracts. Arguably, some of these provisions may already applicable to derivative plaintiffs. When it comes to attorney’s
A plaintiff holding less than 2000 shares files a derivative suit against a corporation’s current or former directors and officers. The trial court finds the complaint to be internally inconsistent and that regulatory filings disproved allegations of false or misleading statements. More importantly, the trial court finds that the complaint fails to allege particularized facts
In 1970, Richard Nixon was president, the 26th Amendment was still not part of the Constitution, and the Fifth Circuit Court of Appeals issued its opinion in Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970). In that case, Judge Godbold wrote: The attorney-client privilege still has viability for the corporate client. The corporation is
Since 1969, there has no question that directors of a Delaware corporation have the authority to set their own compensation. 8 DGCL § 141(h). Having authority to do something, however, doesn’t mean that the use of that authority won’t be challenged, as was illustrated by newly appointed Chancellor Andre G. Bouchard’s ruling last month in Cambridge Ret. Sys.