An investor or subsidiary that sues a corporation and loses may be required to fork over attorney fees under fee-shifting bylaws, the Delaware Supreme Court has ruled. The court upheld the validity of the provisions in a response to certified questions of law asked by the U.S. District Court for the District of Delaware.
The en banc court’s decision in ATP Tour v. Deutscher Tennis Bund carved out a corporate exception to the “American rule” requiring parties in litigation to generally pay their own attorney fees and costs. Delaware typically invokes the American rule in all forms of litigation, but ruled corporations could contractually opt out of the rule. However, the court made it clear that it would not permit fee-shifting in non-corporate litigation.
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