Private Ordering Post-Trulia: Why No Pay Provisions Can Fix the Deal Tax and Forum Selection Provisions Can't
The Corporate Contract in Changing Times, Steven Davidoff Solomon and Randall S. Thomas, eds., (2017 Forthcoming)
25 Pages Posted: 26 Oct 2016 Last revised: 6 Jan 2017
Date Written: January 5, 2016
I examine the flight of cases from Delaware in the wake of the Court of Chancery’s decision in Trulia and ask whether there is a private ordering solution to the problem. After demonstrating why forum selection bylaws and exclusive forum provisions fail to solve the problem, I suggest instead a charter or bylaw term barring corporations from reimbursing stockholders for attorneys’ fees and expenses incurred in merger litigation. A binding “No Pay” provision addresses the collective action problem created by corporate defendants’ inconsistent preferences over time and, by precluding nuisance settlements, incentivizes plaintiffs’ attorneys to press only those claims where substantial relief is a realistic possibility.
Keywords: merger litigation, deal tax, Trulia, forum selection, exclusive forum, no pay, fee shifting, multiforum, corporate law, Delaware, M&A
JEL Classification: K22, K41, G32
Suggested Citation: Suggested Citation