Professor John C. Coffee Jr. Testifies on Fee-Shifting Before SEC Committee

New York, October 9, 2014Columbia Law School Professor John C. Coffee Jr. testified before the U.S. Securities and Exchange Commission’s Investor Advisory Committee today about board-adopted bylaws that require shareholder plaintiffs to pay a defendant company’s expenses if the plaintiffs unsuccessfully sue over securities laws violations (or even if they are successful, but do not achieve a complete victory.)

Coffee’s testimony on “fee-shifting” bylaws—which urged the SEC to act on the issue—came as the Delaware’s legislature considers possible curbs to the provisions. Even if Delaware takes action, he said, the problem will persist and requires federal action.

“Although the SEC need not oppose all fee-shifting provisions adopted through board or shareholder action, it must be prepared to take on open-ended and more sweeping bylaws—or concede the decline of private enforcement,” said Coffee, the Adolf A. Berle Professor of Law and director of the Center on Corporate Governance.

Read the testimony.