In this post published yesterday on The Harvard Law School Forum on Corporate Governance and Financial Regulation, Delaware lawyer A. Thompson Bayliss and Mark Mixon write that no pay provisions “could transform stockholder litigation without the effects that make ‘loser pays’ provisions unpalatable to many”.  According to the authors, a no pay provision requires that each side pay its own attorneys’ fees and costs unless the court decides that a party litigated in bad faith.  While I agree that “no pay” provisions impose a modicum of rationality, I disagree with the authors’ assertion that “‘Loser pays’ provisions threaten to impose significant costs on stockholder plaintiffs who are unsuccessful.”  No one places a gun to the head of stockholders and compels them to file suit.  They choose to file suit because the current rules encourage them to do so by compelling the non-suing stockholders to subsidize the plaintiffs’ bar.  See It’s Time To Put A Stop To Fee-Shifting (But Not In the Way You Might Think).  The legal system should encourage a rational weighing of risks rather than enforce a subsidy system for the plaintiffs’ bar.