The Future Direction of Delaware Law (Including a Brief Exegesis on Fee Shifting Bylaws)

Delaware sets the governance standards for most public companies. The ability to attract corporations could not be explained solely by the existence of a favorable statutory regime. Delaware was not invariably the first or the only state to implement management friendly provisions. Given the interpretive gaps in the statute and the critical importance of the common law in the governance process, courts played an outsized role in setting legal standards. The management friendly nature of the Delaware courts contributed significantly to the state’s attraction to public corporations. A current example of a management friendly trend in the case law had seen the recent decisions setting out the board’s authority to adopt bylaws under Section 109 of the Delaware General Corporation Law (DGCL), particularly those involving the shifting of fees in litigation against the corporation or its directors. The DGCL allows bylaws that address “the business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers or employees.” The broad parameters are, however, subject to limits. Bylaws cannot be inconsistent with the certificate of incorporation or “the law.” Law includes the common law. The Delaware courts have used the limitations imposed by “the law” to severely restrict the reach of shareholder inspired bylaws. The courts have not used the same principles to impose similar restraints on bylaws adopted by the board of directors. This can be seen with respect to bylaws that restrict or even eliminate the right of shareholders to bring actions against management and the corporation. In ATP Tour, Inc. v. Deutscher Tennis Bund the court approved a fee shifting bylaw that had littl relationship to the internal affairs of the corporation. The decision upheld the bylaw as facially valid.The decision ignored a number of obvious legal infirmities. Among other things, the decision did not adequately address the requirement in Section 109(b) that bylaws be consistent with “the law.” The decision obliquely acknowledged that the provisions would “by their nature, deter litigation” but otherwise made no effort to assess the impact of this deterrence on shareholders causes of action. The provision in fact had the practical effect of restricting, if not eliminating, litigation rights granted by the DGCL and the common law. Perhaps most significantly, however, the bylaws significantly limited common law rights of shareholders to bring actions against the corporation and the board. Given the high dismissal rates for these actions, fee shifting bylaws imposed a meaningful risk of liability on plaintiffs. Moreover, because judgments in derivative suits were paid to the corporation, shareholders serving as plaintiffs confronted the risk of liability without any offsetting direct benefit. By preventing suits in this area, the bylaw effectively insulated the behavior of boards from legal challenge. The ATP decision was poorly reasoned and overstepped acceptable boundaries. The management friendly decision threatened the preeminent role of Delaware in the development of corporate law. The decision raised the specter of federal intervention and the potential for meaningful competition from the states. Because the opinion examined the bylaw in the context of non-stock companies, the reasoning may remain applicable only to those entities and never make the leap to for-profit stock corporations. Nonetheless, the analysis reflects a management friendly approach that does not adequately take into account the impact of the provision on the rights of shareholders.

DUI program as OEF/OIF Veterans Outreach: Descriptive Data from Two Community-Based Outpatient Clinics

Although initially conceived as providing simply the preventive portion of an extended continuum of care for veterans, the Driving Under the Influence (DUI) program has turned out to be an important outreach service for active duty or recently discharged OEF/OIF (Operation Enduring Freedom/Operation Iraqi Freedom) veterans. Veterans receive empirically-based, state-mandated education and therapy under the only Department of Veterans Affairs (VA) - sponsored DUI program in the State of Colorado, with the advantage of having providers who are sensitive to symptoms of Post-Traumatic Stress Disorder (PTSD) and other relevant diagnoses specific to this population, including Traumatic Brain Injury (TBI). In this paper, the rapid growth of this program is described, as well as summary data regarding the completion, discontinuation, and augmentation of services from the original referral concern. Key results indicated that for nearly one third (31.9%) of the OEF/OIF veterans who were enrolled in the DUI program, this was their initial contact with the VA health care system. Furthermore, following their enrollment in the DUI program, more than one fourth (27.6%) were later referred to and attended other VA programs including PTSD rehabilitation and group therapy, anger management, and intensive inpatient or outpatient dual diagnosis programs. These and other findings from this study suggest that the DUI program may be an effective additional pathway for providing treatment that is particularly salient to the distinctive OEF/OIF population; one that may also result in earlier intervention for problem drinking and other problems related to combat. Relevant conclusions discussed herein primarily aim to improve providers' understanding of effective outreach, and to enhance the appropriate linkages between OEF/OIF veterans and existing VA services.