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
Date Written: September 15, 2014
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: Suggested Citation