Delaware Business Litigation Report

Rule Changes For The Court of Chancery

Effective January 1, 2007, there will be some significant rule changes in the Delaware Court of Chancery. Some of these changes will affect pending actions and are required reading. The most extensive changes are directed at preventing the kick-back abuses that have occurred in other jurisdictions where lawyers have allegedly paid professional plaintiffs to bring class and derivative suits. These changes may be briefly summarized as follows.

First, all complaints must now be "verified". In other words, the plaintiff must swear or affirm that the facts alleged are true or at least that there is a basis to believe they are true.

Second, in class and derivative suits, the plaintiff must file an affidavit stating he will not receive any payment for acting as a representative party, except for damages or fees and costs awarded by the Court. In effect, this means that the plaintiff may not receive any compensation for acting as a plaintiff unless the Court approves that payment. A similar affidavit must be filed when any settlement is presented for approval by the Court.

Third, in pending actions, the "no-kick-back" affidavit must be filed when any person asks to intervene as a representative party or asks to be appointed as a representative party.

There are some other more minor changes to the rules as well.

 

 

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