Fee-Shifting Bylaws: The Debate Continues in Delaware

March 18, 2015

The “American Rule” provides that each side generally pays its own legal fees during litigation. However, a recent Delaware Supreme Court decision seemingly allows for the American Rule to be set aside when a “loser pays” provision is included in a Delaware corporation’s bylaws. In light of this decision, new legislation has been proposed in Delaware to limit the breadth of the Court’s ruling. Depending on the stance the Delaware legislature ultimately takes, the amount of certain corporate litigation – and who pays the fees when this litigation is over – may be significantly affected.

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