Atp Tour, Inc. v. Deutscher Tennis Bund

Facts

ATP Tour, Inc. (D) is a Delaware membership corporation that operates a global professional men's tennis tour. Its members include professional men's tennis players and entities that own and operate professional men's tennis tournaments. ATP Tour, Inc. (D) is a Delaware membership corporation that operates a global professional men's tennis tour. Its members include professional men's tennis players and entities that own and operate professional men's tennis tournaments. Two of those entities are Deutscher Tennis Bund (P) and Qatar Tennis Federation (QTF). ATP is governed by a seven-member board of directors, of which three are elected by the tournament owners, three are elected by the player members, and the seventh directorship is held by D's chairman and president. Upon joining P 'agreed to be bound by D's Bylaws, as amended from time to time.' In 2006, the board amended D's bylaws to reimburse D for all fees, costs and expenses of every kind and description (including, but not limited to, all reasonable attorneys' fees and other litigation expenses) that the parties may incur in connection with any failed claim by any member. D's board voted to change the Tour schedule and format. Displeased by these changes, Ps sued D and six of its board members in the United States District Court for the District of Delaware, alleging both federal antitrust claims and Delaware fiduciary duty claims. The District Court granted Ds' motion for judgment as a matter of law on all of the fiduciary duty claims, and also on the antitrust claims. The jury then found in favor of D on the remaining antitrust claims. Ps did not prevail on any claim. D moved to recover its legal fees, costs, and expenses under Rule 54 of the Federal Rules of Civil Procedure. D grounded its motion on Article 23.3(a) of D's bylaws. The District Court denied the motion because it found Article 23.3(a) to be contrary to the policy underlying the federal antitrust laws. The District Court ruled that 'federal law preempts the enforcement of fee-shifting agreements when antitrust claims are involved.' D appealed, and the Third Circuit vacated the Court's order. On remand, the District Court reasoned that the question of Article 23.3(a)'s enforceability was a novel question of Delaware law and certified the following four questions of law:

1. May the Board of a Delaware non-stock corporation lawfully adopt a bylaw (i) that applies in the event that a member brings a claim against another member, a member sues the corporation, or the corporation sues a member (ii) pursuant to which the claimant is obligated to pay for 'all fees, costs, and expenses of every kind and description (including, but not limited to, all reasonable attorneys' fees and other litigation expenses)' of the party against which the claim is made in the event that the claimant 'does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought'?

2. May such a bylaw be lawfully enforced against a member that obtains no relief at all on its claims against the corporation, even if the bylaw might be unenforceable in a different situation where the member obtains some relief?

3. Is such a bylaw rendered unenforceable as a matter of law if one or more Board members subjectively intended the adoption of the bylaw to deter legal challenges by members to other potential corporate action then under consideration?

4. Is such a bylaw enforceable against a member if it was adopted after the member had joined the corporation, but where the member had agreed to be bound by the corporation's rules 'that may be adopted and/or amended from time to time' by the corporation's Board, and where the member was a member at the time that it commenced the lawsuit against the corporation?

Issues

Rule of Law

Holding and Decision

Legal Analysis

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