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“Delaware’s Fee-Shifting Debate Set to Reignite
Despite Ban,” Law360

May 16, 2016

In an article published on May 13, 2016, Jacksonville Managing Partner Daniel B. Nunn Jr. provides insight on Delaware’s recent ban of corporate bylaws that force a litigation loser to pay both sides’ costs. Since Delaware enacted the law in August 2015, experts say that the debate over fee-shifting is about to be rekindled, as companies that have pursued creative ways around the law are already facing shareholder lawsuits in the Chancery Court over the workarounds. Mr. Nunn explains that one tactic a corporation may use to get around the ban is removing fee-shifting bylaws for internal actions such as breach of fiduciary duty claims, but keep them for external matters such as securities fraud claims. Delaware’s law is narrowly constructed, which allows enough wiggle room to perhaps not bury the fee-shifting practice altogether. “What you may see as the dust settles from the law is more corporations adopting fee-shifting bylaw provisions that do not apply to internal corporate claims as the statute defines it, but could apply in another context,” says Mr. Nunn. He expects challenges to those bylaws and thinks that the SEC may even weigh in. For the full article, Law360 subscribers may click here.