Paradigm shift? Delaware Supreme Court allows bylaw that shifts Attorneys' fees to loser in fiduciary duty litigation

Under the prevailing "American rule," shareholders and their counsel face little financial risk when they assert claims against directors and officers for breaches of fiduciary duty, typically following the announcement of a significant corporate transaction or disappointing corporate news. Winning plaintiffs (or at least their counsel can get big paydays. Losers usually move on, having only lost some time and their own costs. That paradigm may begin to shift, however, after the Delaware Supreme Court's recent ruling in ATP Tour, Inc v. Deutscher Tennis Bund. In ATP, the court ruled that Delaware law does not prevent the board of a Delaware nonstock corporation from enacting a fee-shifting bylaw that would require the unsuccessful plaintiff in intra-corporate litigation (including purported class action fiduciary duty claims) to pay the corporate defendants' litigation costs, including attorneys' fees. The Delaware Supreme Court upheld ATP's fee-shifting bylaw provision after analyzing the Delaware statutes and common law governing contracts.