Bank Asks Delaware Legislature to Outlaw Fee Shifting Provisions in Company By-laws
Last Friday, Amalgamated Bank asked Delaware lawmakers to enact a prohibition against public companies enforcing provisions in their by-laws that would require losing plaintiffs to pay the defendant’s attorneys’ fees in shareholder litigation. Obviously such provisions would have a chilling effect on shareholder suits. The amendment was proposed last year when the Delaware Corporation Law Council soon after the Delaware Supreme court ruled that tennis nonprofit ATP Tour Inc. could impose fee shifting by-laws.
Although on their plate since last summer, the Delaware legislature has yet to take a stance on the fee-shifting issue, delaying a vote from last June until after the first of this year. While the legislatures ponder, the issue has harshly divided the state’s corporate bar. Both public companies and investors are anxious for guidance on how the litigation landscape may change in Delaware which is corporate registry for over half the U.S.. publicly traded companies.
Attorneys who support the proposal say such fee-shifting provisions could dissuade the filing of even the most meritorious investor claims. Several major pension funds publicly shown their support of the amendment as well. Opponents argue the provision will cut back on frivolous litigation.
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