Correcting Corporate Benefit: How to Fix Shareholder Litigation by Shifting the Doctrine on Fees

61 Pages Posted: 16 Sep 2014 Last revised: 28 Feb 2015

See all articles by Sean J. Griffith

Sean J. Griffith

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Date Written: September 15, 2014

Abstract

The current controversy in corporate law concerns whether firms can discourage litigation by shifting its cost to shareholders. But corporate law courts have long engaged in fee-shifting — from shareholder plaintiffs to the corporation — under the “corporate benefit” doctrine. This Article examines fee-shifting in shareholder litigation, arguing that current practices are unsound from the perspective of both doctrine and public policy. Unfortunately, the fee-shifting bylaws recently enacted in response to the problem of excessive shareholder litigation fare no better. The Article therefore offers a different approach to fee shifting, articulating three specific reforms of the corporate benefit doctrine to quell the current crisis in shareholder litigation.

Keywords: corporate law, shareholder litigation, Delaware, attorneys' fees, corporate benefit, fee shifting, derivative suit, class action, mergers, acquisitions, corporate governance

JEL Classification: K22, K41

Suggested Citation

Griffith, Sean J., Correcting Corporate Benefit: How to Fix Shareholder Litigation by Shifting the Doctrine on Fees (September 15, 2014). Boston College Law Review, Vol. 56, No. 1, 2015; Fordham Law Legal Studies Research Paper No. 2496395. Available at SSRN: https://ssrn.com/abstract=2496395

Sean J. Griffith (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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