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)

Fordham Law Legal Studies Research Paper No. 2855950

25 Pages Posted: 26 Oct 2016 Last revised: 6 Jan 2017

See all articles by Sean J. Griffith

Sean J. Griffith

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

Date Written: January 5, 2016

Abstract

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

Griffith, Sean J., Private Ordering Post-Trulia: Why No Pay Provisions Can Fix the Deal Tax and Forum Selection Provisions Can't (January 5, 2016). The Corporate Contract in Changing Times, Steven Davidoff Solomon and Randall S. Thomas, eds., (2017 Forthcoming); Fordham Law Legal Studies Research Paper No. 2855950. Available at SSRN: https://ssrn.com/abstract=2855950

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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