Dole Foods Co. and E. I. du Pont de Nemours & Co. also lobbied privately against the bill, according to people familiar with the matter.
The legislature instead agreed to study the issue over the next few months and take it up again when they return in January.
Most lawyers say they don’t expect big public companies to adopt these bylaws in the meantime, but rather to wait and see what the state assembly does.
Echo Therapeutics, however, appears to be in an unusual situation. It recently faced a lawsuit and a proxy fight from hedge fund Platinum Partners, which owns nearly 20% of its shares and accused the company of reneging on an agreement to put a Platinum nominee on its board. The lawsuit was withdrawn in February and the director in question was elected at Echo’s annual meeting last month. A week later, the company adopted its new bylaw.
Added the Echo spokeswoman: “In recent months, Echo has . . . been forced to incur significant resources responding to litigation and threats from activist investors . . . . [T]he Echo Board determined that the adoption of a fee-shifting bylaw provision and its potential effect in deterring future frivolous litigation was in the best interests of all shareholders.”
Christopher Davis, a lawyer for Platinum, said the bylaw is of “questionable legality” and that the fund is considering its legal options.
“At a time where the trends in activism suggest boards are becoming more accountable to shareholder concerns, to see that kind of entrenchment is deeply troubling,” he said
Need a Real Sponsor here July 3, 2014, 4:02 PM ET.Two Companies Say Yes to New ‘Loser Pays’ Option.ByLiz Hoffman
Update: This post was updated Thursday afternoon to include comment from Echo Therapeutics.
Two companies have decided to seize a newly created opportunity to shift corporate legal fees to shareholders.
Such “loser pays” bylaws, which require any investors who sue a company and lose to pay their costs, have been much discussed in recent weeks, after a recent Delaware Supreme Court decision appeared to open the door to them.
Yet Echo Therapeutics Inc., a Philadelphia-based maker of medical devices, and LGL Group Inc., an electrical-components maker, appear to be the first companies to adopt them, doing so last month, regulatory filings show.
LGL did not respond to requests for comment. A spokeswoman for Echo said “Echo’s Board and management team believe that it is in our shareholders’ best interests to focus our limited resources on our ongoing product development efforts rather than responding to frivolous litigation.”
The new bylaws are the latest sign that some companies are eager to discourage shareholder litigation, which has become more common over the past few years. Lawsuits followed 94% of corporate merger announcements last year, for example, and rarely resulted in substantial gains for shareholders.
Some critics expressed hope in the wake of the Delaware Supreme Court’s decision that fee-shifting bylaws could deter these cases by essentially making it more expensive to sue and lose.
But the issue quickly got complicated, exposing rifts within the corporate community.
Within two weeks, a section of the Delaware state bar association drafted a bill to ban companies from adopting such bylaws, arguing it would unfairly hurt shareholders with good cases. The Delaware legislature was set to vote on the bill last month, but tabled it under criticism from business interests, including the U.S. Chamber of Commerce.
Dole Foods Co. and E. I.
This is effing repugnant. Lawsuits can only follow
SEC filing: Doman and Echo Board estimates they will spend ~$450,000 fighting us shareholders
Follow and Google DDbuyer twitter as this thing moves along
Vote the Gold and take these incumbent crooks out of office. We the shareholders are about to take the company back from it's thievous board who have destroyed 96% OF VALUE. They are toast so vote early and often. Get the vote out. Very important.. Platinum is aligned with us with $18.6 million invested at higher levels
Vote for the two Goldbergs. No to Doman
Doman et al have failed us... and the attempt at self perpetuation is repulsive to the shareholders
Vote no to Doman... He wants to be CEO... Where is the permanent CEO?
And they are fighting Platinum who has $18.6 million invested from shutting down their criminal enterprise?
Is this really happening in broad daylight?
Grieco is the laywer collecting fees for 34 board meetings in 2013 after burying us?
What is wrong with this picture?
Vote Doman out. Vote the gold proxy for Shepherd Goldberg
34 board meetings 2013 ? I kid you not. That is in the proxy. The just want fees.. Grieco and Doman are crooks... Exercise your democratic rights and finally put an end to this grand larceny... These guys are just running the meter like a taxi..
Grieco should be in jail.. 34 Board meetings in 2013. it's in the proxy.... yet the stock is still 31cents.. Down 91%.. And they want our votes for them to protect us?
Smith and Enright were Mooney's cronies from Aphton. Now Mooney is out and suing his buddies from Aphton which went bankrupt. Pass the popcorn. Is this really happening?
On April 3, 2014, PPVA delivered a letter to the Corporate Secretary of the Issuer nominating Shepard M. Goldberg for election to the Board of Directors of the Issuer (the “Board”) at the 2014 annual meeting of stockholders of the Issuer, or any other meeting of stockholders held in lieu thereof, and any adjournments, postponements, reschedulings or continuations thereof (the “Annual Meeting”). Mr. Goldberg has been nominated for the seat on the Board currently occupied by Robert F. Doman.
On the SEC site- Platinum nominates a new director. Opposes Doman's nomination to the BOD
Platinum nominates Shepherd Goldberg... will oppose Doman. The start of a corporate governance cleanup
The incestuous non-performing Board that has entrenched themselves at our expense has alienated the largest shareholder who is trying to save us from their grand larceny and personal greed
Vote no to Doman... Yes to Shepherd
This will be a no contest vote.. The shareholders want change and we all have the votes
Do you want your company back? Vote no to Doman
This smells. It reeks of enterprise corruption at our expense. They seem intent on gaming us into a phantom search for a CEO but the reality is that Bob Doman who was a director under the Mooney regime that led to our near demise wants the job...3 lawsuits? Well this is so glaring... The largest shareholder who has kept the lights on is now suing after just writing another check? This is infuriating and we need a special shareholders meeting to throw these thugs out. They all have to go. They refuse to unlock the value... they refuse to go.. The board is so weak... ranked amateurs. Their actions: "to hell with us all"-- Why?
Doman has no equity. I believe he is plotting with his cronies to become permanent CEO... the problem is 50% plus of the shareholder base(without a lobby) want new blood.. but he and Grieco are digging in their spurs. They don't care.. they want our $ ,the fees, the salary .They are all crooks. totally inept. What's the stock price? Ask the Board of Directors where is the search for the permanent CEO? They don't answer e-mails and phone calls. IR doesn't return phone calls. There appears to be a gag order. What is the stock price everyone? I don't believe they intend on conducting a real permanent search to replace Mooney. Doman is their guy. Has been all along
Excellent post Lee. I can't speak for Doman at Dusa because I didn't know him and initially on first CC I thought he sounded ok and a welcome departure from Mooney. But after I have observed his additional folly of the data first, then coming back hat in hand to Montaur... I have now concluded that this guy just wants to come off the beach for a paycheck . It appears that he is in a cat and mouse game to blow off Montaur who wants to hold him accountable and like Mooney he is holding us all hostage under the guise that he is out to protect the shareholders.. But wait.. he authorized the 4 down rounds, he let Mooney run uncontested and also allowed the reverse split. He has no equity. I believe he is plotting with his cronies to become permanent CEO... the problem is 50% plus of the shareholder base(without a lobby) want new blood.. but he and Grieco are digging in their spurs. They don't care.. they want our $ ,the fees, the salary
The guy has assisted in literally shipwrecking this company. Now he and his cronies want to save us? Bob appears to want the fat salary and wants to come off the beach. We have heard nada, zilch about an executive CEO search. No information is flowing. Nobody is returning phone calls. My bet is that this non performing interim CEO who owns 3200 shares of stock just wants to milk the carcass. He and his cesspool cronies don't care about you and I because they have no equity. Grieco should be sued as the lead director. He is allowing his crony to milk us for $400,000 per year. I bet the next announcement is that the interim CEO will be the permanent CEO.. But this is the same guy who allowed the reverse split and the 3 down rounds... Why? He owns no stock.. Just wants a salary. He's not a qualified Medical Device guy. He has failed us now wants to enrich himself under the premise of saving us?
google ECTE Revivalists... see ddbuyer post # 40
Emails of all the Directors who are entrenching Doman who just wants a salary and is recapitalizing the company to deny Platinum Montaur a board seat. This is actionable and all the directors are breaching their fiduciary responsibilities to the rightful owners. The S-1 indicates that Doman owns a whopping 3200 shares and is willing to essentially wipe out the shareholders by cramming them down to avoid financial supervision by the investor trying to save the company. This is broad daylight shareholder abuse. Doman wants the CEO job after a 95% erosion of value under his stewardship as a director. The directors essentially own zero stock. This is a walking lawsuit now. Is Doman conducting a CEO search? Well he states he is just the interim CEO... well it sounds like he is interested in the job and is duping us all.. He wants to wipe us out with this S-1 after the 3 down rounds. He and his cronies just don't care.They are hiding behind Delaware law yet making the company uninvestable. Doman needs to hire a new CEO and just resign.. all of them ...Are their any SEC lawyers on this board?