56 B.C. L. Rev. 1 (2015)

handle is hein.journals/bclr56 and id is 1 raw text is: 





     CORRECTING CORPORATE BENEFIT:

 HOW TO FIX SHAREHOLDER LITIGATION

    BY SHIFTING THE DOCTRINE ON FEES



                              SEAN   J. GRIFFITH *

   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 share-
   holder litigation, arguing that current practices are unsound from the perspective of
   both doctrine and public policy. Unfortunately, the fee-shifting bylaws recently en-
   acted 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.

                                INTRODUCTION

     Delaware   may   at last be on the verge  of fixing shareholder  litigation.
Spurred  by the surprise 2014 decision  of the Delaware  Supreme   Court in ATP
Tour  Inc. v. Deutscher Tennis Bund,' the defacto national corporate law-maker
has launched  a thorough  examination  into fee-shifting in intra-corporate litiga-
tion.2 The current controversy over  fee-shifting is an outgrowth of a larger cri-
sis in shareholder litigation. And, just as matters of substance and  procedure

    © 2015, Sean J. Griffith. All rights reserved.
    * T.J. Maloney Chair and Professor of Law, Fordham Law School. Thanks to Jack Coffee, How-
ard Erichson, Jessica Erickson, Jill Fisch, Brian Fitzpatrick, Martin Gelter, Larry Hamermesh, Kurt
Heyman, Claire Hill, Alexi Lahav, J. Travis Laster, Robert Reder, Steven Davidoff Solomon, Richard
Squire, Alan Stone, Leo Strine, Steve Thel, and Randall Thomas for helpful comments and sugges-
tions. Thanks to Serena Shi (FLS 2015) for superlative research assistance. The viewpoints and any
errors expressed herein are mine alone.
    1 See 91 A.3d 554, 560 (Del. 2014).
    2 Ronald J. Gilson, Globalizing Corporate Governance: Convergence ofForm or Function, 49 AM.
J. COMP. L. 329, 350 (2001) (The aggregated choices of a majority of publicly traded U.S. corporations
have resulted in a convergence on the Delaware General Corporation Law as a de facto national corpo-
rate law.) More than half of all public companies and over sixty percent of the Fortune 500 are incorpo-
rated in Delaware. See Why Businesses Choose Delaware, STATE OF DEL. DIV. OF CORP., http://
corplaw.delaware.gov/eng/whydelaware.shtml, archived at http://perma.cc/L59P-KRQS (last visited
Dec. 31, 2014). Delaware law is the basis of the corporate law curriculum in law schools across the U.S.
and is widely followed by the courts of other states. John Armour et al., Delaware's Balancing Act, 87
IND. L.J. 1345, 1398-99 (2012) (Delaware law is a central part of the business law curriculum in most
major U.S. law schools . . . . Courts in other states often cite and follow Delaware case law when their
own case law is sparse.).


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