• ATP Tour, Inc. v. Deutscher Tennis Bund: Delaware Supreme Court Rules that Fee-Shifting Provisions in Non-Stock Corporation Bylaws Are Facially Valid Under Delaware Law
  • May 30, 2014
  • Law Firm: Sullivan Cromwell LLP - New York Office
  • In a recent opinion, a unanimous Delaware Supreme Court sitting en banc upheld as a matter of law feeshifting provisions in a non-stock corporation’s bylaws requiring that plaintiffs bear the full costs of intracorporate litigation if they do not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought. In so finding, the Court ruled that nothing in the DGCL prohibits the adoption of fee-shifting bylaws and further indicated that by allocating intra-corporate litigation risk such provisions also satisfy Section 109(b) of the DGCL requiring that bylaws relate to the “business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers or employees”. In the Court’s view, fee-shifting bylaws also are not prohibited under Delaware common law since corporate bylaws are contracts among shareholders, and contracting parties can agree to modify Delaware’s general rule that litigants pay their own attorneys’ fees and costs by requiring that an unsuccessful litigant reimburse the other’s fees.