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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.). 1

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