M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Thursday, July 3, 2014

Fee shifting bylaws adopted

So, now that the Chamber of Commerce has put the kibbosh on the quick fix to prohibit fee shifting bylaws following ATP, no surprise...the first of what might well be many fee shifting bylaws adopted by public companies have already been adopted.  This one by Echo Therapeutics.  Here is their new "Litigation Costs" bylaw:

Litigation Costs.  To the fullest extent permitted by law, in the event that (i) any current or prior stockholder or anyone on their behalf (“Claiming Party”) initiates or asserts any claim or counterclaim (“Claim”) or joins, offers substantial assistance to, or has a direct financial interest in any Claim against the Corporation and/or any Director, Officer,  Employee or Affiliate, and (ii) the Claiming Party (or the third party that received substantial assistance from the Claiming Party or in whose Claim the Claiming Party had a direct financial interest) does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought, then each Claiming Party shall be obligated jointly and severally to reimburse the Corporation and any such Director, Officer, Employee or Affiliate, the greatest amount permitted by law of all fees, costs and expenses of every kind and description (including but not limited to, all reasonable attorney's fees and other litigation expenses) (collectively, “Litigation Costs”) that the parties may incur in connection with such Claim.

Given that the Delaware Supreme Court has already passed on the validity of these bylaws, unless the legislature decides to prohibit them, I suspect more and more of them will get rolled out this summer.

-bjmq

http://lawprofessors.typepad.com/mergers/2014/07/fee-shifting-bylaws-adopted.html

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