Delaware's business courts: litigation leadership.

AuthorHolland, Randy J.
  1. INTRODUCTION II. INCORPORATION PREEMINENCE III. DELAWARE'S COURT STRUCTURE A. The Court of Chancery B. The Superior Court C. The Supreme Court IV. IMPARTIALITY AND EXPERTISE A. Delaware's Judicial Selection Process V. ECONOMIC EFFICIENCY: DELAWARE'S PROMPT DECISIONS VI. PRECEDENTS BENEFIT BUSINESS PLANNING: DELAWARE'S DEVELOPED JURISPRUDENCE A. The Business Judgment Rule VII. FINALITY FROM FEDERALISM: DELAWARE DECISIONS AUTHORITATIVE VIII. FEDERAL SECURITIES STATUTES: DELAWARE'S CONTINUING JURISDICTION IX. DELAWARE'S NATIONAL FORUM: CERTIFICATION PROCEDURE PROVIDES CERTAINTY X. GLOBALIZATION OF BUSINESS: DELAWARE'S PERSUASIVE AUTHORITY XI. CONCLUSION 1. INTRODUCTION

    Many corporations have come to view courts as unwieldy, unpredictable purveyors of justice in the field of business litigation. But a mass exodus from the courts is not the answer; it is counter-productive for long-term business interests. The courts are uniquely equipped to address corporate concerns, and Delaware's court system provides a model that largely addresses modern corporate worries about courtroom litigation. Delaware's courts offer litigants a forum with an extensive and well-developed jurisprudence that creates predictability and expediency in adjudication, allowing for efficient business planning. Delaware's independent judiciary is essential to securing these values, and its practice of appointing judges and maintaining a balance of power between political parties on its high court has yielded dividends in both the expertise and independence of its judiciary. Delaware's continued preeminence in corporate law is contingent on not only the perception but the reality that the Delaware judiciary is engaged in principled decisionmaking. Corporations should not turn away from courts as dispute-resolution mechanisms, and Delaware provides a blueprint for how to succeed in bringing corporations back to the courts.

    Within the corporate community, there has been an increased interest in arbitration and other forms of alternative dispute resolution due to ongoing concerns about negative experiences in the adjudication of business cases in some state courts. In seeking alternatives to litigation in state courts, corporations are looking for efficiency and economy from an impartial decisionmaker with expertise in business matters. Delaware's business courts not only provide all of those qualities, but their decisions are predictable and authoritative.

    In 2008, for the seventh consecutive year, Delaware's judicial system ranked first among state courts for creating a fair and reasonable litigation environment by the State Liability Systems Ranking Study of the United States Chamber of Commerce Institute for Legal Reform. (1) The results can be attributed to Delaware's three business courts: its Supreme Court and two major trial courts, the Superior Court and the Court of Chancery. The history of those trial courts was recently summarized in Business Law Today by two eminent Delaware jurists from each of those tribunals. (2) A history of the Supreme Court was published in 2001 to commemorate its Golden Anniversary. (3)

  2. INCORPORATION PREEMINENCE

    Delaware is known as the "Corporate Capital of the World." (4) It is the state of incorporation for more than 60% of the Fortune 500 companies and for more than half of all companies whose stock is traded on the New York Stock Exchange and NASDAQ. (5) Delaware's preeminence in the market for corporate charters has lasted for nearly 100 years and "Delaware shows no sign of relinquishing its dominance." (6) Jeffrey Golden, Chair of the American Bar Association Section of International Law, recently wrote that "[t]he success of the State of Delaware in becoming the 'go-to' choice for companies as a place to incorporate in the United States turns in no small measure on the fact that its laws are watched over by a sophisticated bench and, through judicial precedents, are particularly well understood." (7)

  3. DELAWARE'S COURT STRUCTURE

    The structure of Delaware's business courts provides for efficiency and expertise. At the trial level, the Delaware Constitution preserves the historic divide between law, in the Superior Court, and equity, in the Court of Chancery. Only two other states continue that distinct separation of jurisdiction. (8) Appeals from both the Superior Court and the Court of Chancery are heard directly by the Delaware Supreme Court.

    1. The Court of Chancery

      Established in the 1792 Delaware Constitution, the Court of Chancery is the oldest business court in the United States. (9) The Delaware Supreme Court has held that the equity jurisdiction of the Court of Chancery "was founded upon, coextensive with, and in most respects, conformable to that of England." (10) Thus the Delaware Court of Chancery has the same equitable jurisdiction that was extant in England's Court of Chancery prior to the American Revolution. For more than 200 years, the Delaware Court of Chancery has demonstrated its "ability to adapt principles of equity developed centuries ago to ever-changing economic circumstances and legal relationships." (11)

      The five members of the Court of Chancery sit without a jury and issue well-reasoned decisions at the conclusion of each judicial proceeding. The Court of Chancery initially interprets Delaware's general corporation law statute and develops the common law on corporate matters. Its opinions are "so well respected that a majority of its judgments are never challenged by an appeal." (12)

      In 2003, the jurisdiction of the Court of Chancery was expanded by statute "to include adjudication of technology disputes that arise out of agreements involving at least one Delaware business entity, even if they concern solely claims for [money] damages." (13) That same year, the Court of Chancery was also authorized to establish a special docket that permits parties to mediate business disputes before a judicial officer of that court. (14) The synopsis to the 2003 legislative enactments explains that the General Assembly wanted to provide "additional benefits for businesses choosing to domicile in Delaware" in an effort to "keep Delaware ahead of the curve in meeting the evolving needs of businesses, thus strengthening the ability of the state to convince such businesses to incorporate and locate operations" in Delaware. (15)

      In 1992, then United States Supreme Court Chief Justice William H. Rehnquist gave the keynote address to commemorate the Bicentennial Anniversary of the Delaware Court of Chancery. (16) He praised the Court of Chancery as "an excellent example of how state courts are equal partners in the state-federal joint venture of providing justice." (17) Chief Justice Rehnquist also remarked that, "[i]n light of its 200 year history, the Delaware Court of Chancery deserves our celebration, not only as a unique and vibrant Delaware institution, but as an important contributor to our national system of justice." (18)

    2. The Superior Court

      The Superior Court is Delaware's major court of law. It has general jurisdiction and handles all complex tort and commercial litigation actions. The 19 judges of the Superior Court preside over jury trials in those matters. Delaware's first place ranking for seven consecutive years as a state court system that creates a fair and reasonable litigation environment (19) reflects the business community's confidence in how the Superior Court handles complex commercial matters including tort and contract claims, class action suits, and mass consolidated litigation. (20)

      On November 1, 2007, James A. Wolfe, President of the Delaware State Chamber of Commerce, sent a letter to the Honorable James T. Vaughn, Jr., President Judge of the Delaware Superior Court, expressing the Chamber's "concern regarding the increasingly large number of toxic-tort personal injury cases now being filed in Delaware Superior Court by out-of-state law firms on behalf of out-of-state plaintiffs whose claims have no meaningful connection to Delaware." (21) Later that month, President Judge Vaughn appointed a committee of five lawyers (the Special Committee) with no special background in asbestos litigation to consider the issues raised in the Chamber's letter. (22) The members examined the procedures used by the Superior Court to manage toxic tort litigation, gave the bar a chance to comment on those procedures and issues, and reported back to the President Judge. (23)

      The Special Committee issued its report on May 9, 2008. The report noted that two of Delaware's most distinguished corporate citizens, E.I. DuPont de Nemours and Company and AstraZeneca, "weighed in" on how Superior Court Judge Joseph R. Slights had handled the cases at issue. (24) Counsel for DuPont stated that the procedures for asbestos cases had "substantially improved" under Judge Slights' direction. (25) "But for [the Superior] Court's capable management of this influx of cases, the Delaware Court system might have lost its number one ranking for 'Fairness in Litigation Climate for Business in the United States.'" (26) AstraZeneca's Vice President and General Counsel stated that the Superior Court has "effectively managed the Delaware cases using existing local Court rules and practices and state statutes." (27) He said, "The Delaware judiciary continues to deserve the national acclaim it routinely receives." (28) The Special Committee noted:

      These two companies have had extensive experience with our Superior Court, and, along with the vast majority of the other defendants in the case have voiced the opinion that they are not only satisfied with how the [Superior] Court has been handling these cases but have spoken of a system that worked well when there were two thousand asbestos cases several years ago and is working efficiently now to handle the much fewer cases that it currently has on its docket. (29) The Superior Court has also been a national leader in litigation innovation. In 1991, the...

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