Fee Shifting Amendment by Oklahoma Legislature

Earlier this year, the Delaware Supreme Court made headlines upholding the validity of a fee-shifting bylaw in ATP Tour, Inc. v. Deutscher Tennis Bund (91 A.3d 554).  We reported on the decision, a likely related application of California law, and the Delaware legislatures' response thereafter.  The article can be found here. Also shortly after the decision, the Oklahoma State Legislature decided to amend their corporations code regarding shareholder’s derivative actions.  In addition to gender-neutralizing the language for shareholder standing, the legislature added two subparts to §1126, giving the court discretion to award plaintiffs attorney fees in certain successful derivative actions and requiring non-prevailing parties to pay the prevailing party’s reasonable costs.

Subpart (b) of the section states that the court may award the plaintiff reasonable costs, including reasonable attorney fees, if a substantial benefit is conferred on the corporation, by reason of settlement or compromise.  Subpart (c) goes further, requiring the non-prevailing party, in a derivative suit against a foreign or domestic corporation, to pay the prevailing party’s reasonable costs.

Similar to the bylaw in ATP Tour, this amendment is likely to deter derivative actions.  Even though attorney fees can be awarded to a shareholder whose action is determined through settlement or compromise, the award is not guaranteed unless the derivative actions is determined in their favor by final judgment.

Oklahoma must have predicted an effect from ATP Tour prior to the decision.  The legislation was introduced in February, four months before the ATP decision, and signed into law 15 days after the decision.  The amended section goes into effect on November 1, 2014 and can be found here.