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Joseph M. McLaughlin NYLJ/Rick Kopstein

Last month, the Delaware Supreme Court ruled that a board-approved provision in a non-stock corporation’s bylaws shifting legal expenses in intra-corporate litigation to unsuccessful claimants can be valid in Delaware. Although ATP Tour v. Deutscher Tennis Bund1 pertained to a non-stock corporation, the decision has provoked an outpouring of debate because its reasoning applies equally to stock corporations. Some have warned that widespread adoption by Delaware corporations of fee-shifting bylaws could upend intra-corporate litigation by deterring even meritorious stockholder claims. At the same time, advisers to Delaware stock and non-stock corporations have paused to analyze ATP Tour and evaluate whether it is in the best interest of corporations and their stockholders to adopt fee-shifting bylaws.

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