Delaware Opens Door For ‘Loser Pays’ Bylaws To Suppress Shareholder Suits

The Delaware Supreme Court in a recent ruling opened the door for Delaware-incorporated companies to more easily adopt “loser pays” bylaws, potentially putting a damper on shareholder lawsuits. If widely adopted, fee-shifting bylaws could lead shareholders to pause before filing the kind of class actions that have become increasingly common in recent years. Shareholders challenged 94 percent of corporate mergers in 2013, compared to 44 percent in 2007. But some argue that corporate misconduct may go unchallenged under that scenario, with investors holding small portions of companies facing outsized legal fees unless successful.