Delaware's Balancing Act

Delaware's Balancing Act

John Armour, Bernard Black, Brian Cheffins

Series number :

Serial Number: 
167/2010

Date posted :

November 01 2010

Last revised :

December 06 2018
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Keywords

  • Delaware • 
  • courts • 
  • corporate litigation • 
  • jurisdictional competition

Delaware’s courts and well-developed case law are widely seen as integral elements of Delaware’s success in attracting incorporations.

However, as we show using empirical evidence involving reported judicial decisions and filed cases concerning large mergers and acquisitions, leveraged buyouts, and options backdating, Delaware’s popularity as a venue for corporate litigation has dropped sharply. Today, a majority of shareholder suits involving Delaware companies are being brought and decided elsewhere. We examine in this Article the implications of this “out-of-Delaware” trend, emphasizing a difficult balancing act that Delaware faces. If Delaware accommodates litigation too readily, companies, fearful of lawsuits, may incorporate elsewhere. But if plaintiffs’ attorneys find the Delaware courts unwelcoming, they can often file cases in other courts. Delaware could risk losing its status as the de facto national corporate law court, as well as the case flow that lets it provide the rich body of precedent that is part of Delaware’s overall corporate law “brand.” We assess how the Delaware courts and legislature, and Delaware companies, might respond to this threat to Delaware’s pre-eminence as the leading forum for corporate cases, as well as incorporations.

Published in

Published in: 
Publication Title: 
Indiana Law Journal
Description: 
pages 1345-1405 (2012)

Authors

Real name: 
Fellow, Research Member
Northwestern University Law School and Kellogg School of Management Law School