April 2, 2010
Is Delaware Losing?
John Armour, Bernie Black, and Brian Cheffins have a new paper, Is Delaware Losing its Cases? that argues Delaware may well be losing its competitive edge with respect to corporate litigation. They focus their research on what Wachtell's Ted Mirvis has called the "Anywhere But Chancery" trend. They put together a dataset of 729 corporate law opinions over 15 years and conclude that Delaware is losing its market share with respect to the types of cases that have typically called Delaware home. Here's an interesting chart from their paper that makes this point:
The big move over the past decade appears to be to the Federal courts. That's consistent with other scholarship that suggests that states don't really compete for incorporations and that the only viable competition is with Federal regulators. However, it looks like since the 2002 states have also begun to hear and apply Delaware cases. If I were sitting in Wilmington, this graph would be disturbing.
Contrast the findings here with findings in Cain and Davidoff's paper, Delaware's Competitive Reach that looked at merger agreement and found that the overwhelming majority of agreements (60%) select Delaware as their choice of forum.
State competition for incorporations and governing law it seems is still a live issue.
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There is a lot of action in courts of other states against Delaware companies too. It doesn't show in the chart above, which is based on opinions captured by Westlaw or Lexis, because judges tend not to write opinions.
Whether we will also see important corporate decisions partly moving out of Delaware is a different question, but is certainly a possibility.
Posted by: Bernie Black | Apr 7, 2010 4:36:23 AM