Delaware Supreme Court Endorses “Fee-Shifting” Bylaw in Certified Question of Law

On May 8, 2014, the Delaware Supreme Court provided an en banc answer to a certified question of law from the U.S. District Court for the District of Delaware captioned ATP Tour, Inc. v. Deutscher Tennis Bund, concluding that fee-shifting provisions in the bylaws of a Delaware corporation are facially valid under Delaware law and enforceable even against parties who joined the corporation before the bylaw was adopted. Although this opinion arose in the context of a non-stock corporation, as discussed below, the opinion is relevant to traditional stock corporations as well. Further, the court acknowledged that the bylaw would not necessarily be rendered unenforceable as an equitable matter if adopted with the “intent to deter litigation.”

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