Del. Bar to Mull Exclusive Forum Clauses, Fee-Shifting

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By Michael Greene

April 6 — The Delaware State Bar's Corporation Law Section will meet April 9 to consider proposed amendments related to fee-shifting and exclusive forum selection and provisions, according to Norman Monhait, chairman of the section and shareholder with Rosenthal, Monhait & Goddess, P.A.

The Corporation Law Council, a committee of the bar section, March 6 proposed a modification to the Delaware General Corporation that would restrict the ability of corporations to adopt fee-shifting bylaws or charter provisions. 

In addition to the fee-shifting limitation, as part of the March 6 package, the council also proposed amendments aimed at providing relief to corporations that believe they have been victimized by abusive litigation, including one that endorses Delaware exclusive forum selection provisions.

Divisive Proposal

The council's proposal, which has drawn both strong praise and criticism, was provoked in large part by the Delaware Supreme Court's May 2014 decision in ATP Tour Inc. v. Deutscher Tennis Bund. Delaware Supreme Court Chief Justice Leo E. Strine Jr. said recently that he supports the proposal.

In ATP Tour, responding to a certified question, the state's high court found that a fee-shifting provision in the bylaws of a Delaware non-stock corporation could be enforceable.

Since that decision, no court has resolved a case testing the facial validity of a fee-shifting provision. In March, the chancery court sidestepped arguments about the general validity of a post-ATP Tour fee-shifting bylaw and found it unenforceable based on the timing of its enactment. 

Legislative Sponsor Needed

Last month the Executive Committee of the Bar and Corporation Law Section approved two proposed amendments to Delaware's appraisal statute that also were included in the March 6 package.

The proposed amendments—like the fee–shifting and forum selection proposal, if passed—still need a legislative sponsor before the Delaware General Assembly can vote on them.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The fee-shifting and forum selection proposal is available at http://op.bna.com/ccw.nsf/r?Open=sbon- 9v5qmg.