Delaware Courts: Bias and Business Risks

In this episode, we uncover alarming shifts in Delaware's courts that threaten business stability and investor interests.

Key Takeaways

• Delaware awards attorney fees at multipliers 100 times higher than federal cases, often exceeding 10x the standard loadstar.

• Judicial activism since 2009 has led to a surge in high-multiplier rulings, with recent years seeing four times more such cases.

• Companies face unprecedented bias, with courts favoring plaintiffs and granting excessive access to corporate records.

• States like Texas and Nevada offer prescriptive laws based on statutes, reducing uncertainty compared to Delaware's precedent-driven system.

• Reincorporation away from Delaware protects against escalating legal costs and unpredictable judgments.

Recent research highlights how Delaware's Chancery Court has deviated from norms, with multipliers reaching 25x in high-profile cases, far beyond the federal average of 1-2x. This trend, accelerating over the last two decades, stems from key judicial appointments that prioritize plaintiff awards, creating chaos in what was once a predictable business haven. Data shows federal cases rarely exceed 4x multipliers, occurring in just 0.023% of instances, while Delaware hits these levels in 2.36% of cases—indicating systemic favoritism. As a result, ventures are migrating to states with clearer, statute-based rules that limit broad discovery and ensure balanced rulings, fostering a more competitive environment for innovation.

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