June 09, 2015 Articles

"Loser Pays" and Federal Preemption

Why does Delaware's proposed legislation only partially overrule the ATP Tour decision?

By John C. Coffee, Jr.

Delaware and the federal courts have been on a collision course since 2014 when the Delaware Supreme Court upheld the facial validity of a corporate bylaw that shifted the corporation’s (and all defendants’) legal expenses to a losing plaintiff. That 2014 decision, ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A. 3d 554 (Del. 2014), quickly led a number of public corporations to adopt similar “loser pays” bylaws and charter provisions, all of which are one-sided provisions (that is, only the plaintiff may be held liable) and most shift the fees against the plaintiff even if it wins (unless it is “substantially successful,” which is defined to mean recovering significantly on all its claims and theories).

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