Stockholder Wants $395K Award in Paylocity Fee-Shifting Case

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By Michael Greene

A Paylocity Holding Corp. stockholder who successfully challenged the company’s fee-shifting bylaw is requesting $395,000 in attorneys’ fees ( Solak v. Sarowitz , Del. Ch., No. 12299, fee petition 3/13/17 ).

John Solak, who is represented by Andrews & Springer LLC, made the request after the Delaware Chancery Court’s novel ruling in December finding the bylaw invalid.

The decision was the first to interpret a state statute that bars stock corporations from adopting provisions that make shareholders bear all the legal expenses when they sue a company over its internal affairs and lose.

Paylocity’s bylaw would have allowed the cloud-based payroll-services provider to recoup litigation expenses when a shareholder breached the company’s forum-selection clause by suing it or its officers outside Delaware over corporate matters.

Solak, in a March 13 petition, said his fee request was warranted because his case discouraged other corporations from adopting similar provisions. He also said his request was within the range of awards in similar cases where the court found a corporate bylaw invalid.

A ruling on Solak’s fee request could clear the way for Paylocity to appeal the case to the Delaware Supreme Court. The chancery court ruled in January that Solak’s fee application must be decided before Paylocity can file an appeal.

Paylocity’s counsel—John L. Reed, the partner in charge of DLA Piper LLP’s Delaware litigation practice—didn’t immediately respond to a request for comment.

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

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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