US Chamber Comments on Proposed Delaware Fee Shifting Legislation
Not surprisingly, the US Chamber of Commerce is not pleased with the introduction of legislation that would bar Delaware registered corporations from adopting fee-shifting provisions in their company bylaws. While the chamber argues such provisions are necessary to ward off abusive merger-and-acquisition lawsuits, the reality is the bylaws would have chilled shareholder suits as the potential downside of paying the defendant company’s legal fees would be to punitive to undertake.
The Chamber spokesperson said of the legislation, “helping trial lawyers instead of shareholders calls into question Delaware’s commitment to maintaining the balanced legal system that to this point has been a hallmark of its corporate franchise.” In reality, the legislation is necessary to allow individual and institutional shareholders to pursue valid claims against the corporations without fear of a massive legal fee bill at the end of the day if the don’t prevail one each and every one of the claims. Given the downside, shareholders would never again file suit to protect their interests and that is simply not right.
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