Rickard: Delaware Flirts With Encouraging Shareholder Lawsuits

ILR President Lisa A. Rickard penned an op-ed in this weekend’s Wall Street Journal about Delaware’s recent attempt to “prohibit corporations from protecting themselves against predatory lawsuits.”

“Specifically,” writes Rickard, “The controversy hinges on whether a company can adopt bylaws allowing it to claw back some of its legal costs if plaintiffs lawyers bring an abusive shareholder lawsuit and lose in court.”

Such “fee-shifting” provisions have long been allowed under Delaware law and are increasingly being used by companies to protect against “rapidly growing abusive litigation, particularly regarding lawsuits over mergers and acquisitions.”

The recent debate over fee shifting, Rickard explains, was ignited by the Delaware legislature’s attempt – “supported by the powerful state plaintiffs’ bar” – to outlaw such fee shifting provisions, in the wake of a state Supreme Court ruling allowing them under state law.

Read the full op-ed here.