Delaware Law Overview
At last unofficial count, Delaware is home to more than 1.5 million business entities, and it is often said that more Fortune 500 companies are incorporated in Delaware than in any other state. Delaware has been the chosen domicile for the majority of U.S.-incorporated public companies for the last 30 years, and the vast majority of new public-company incorporations continue to be chartered in Delaware. This is a state that is "the recognized leader on all matters corporate." Allen, et al., 18 Delaware Practice Series, Corporate Forms & Practice Manual, § 2-1 (Robert L. Gorham, ed., 3d ed. 2008). In Delaware, the General Corporation Law ("DGCL") governs all corporations as a matter of statutory authority, and the decisions of the Delaware Supreme Court and the Delaware Court of Chancery control corporate law as a matter of common law authority. There are also separate statutes governing partnerships, limited partnerships, limited liability partnerships, limited liability companies, and trade names. 8 Del. C. § 9; 6 Del. C. §§ 17-101 et seq., 18-101 et seq.; 7 Del. C. §§ 15-801 et seq.; 8 Del. C. §§ 381, 382, 391, 392, 393; 7 Del. C. §§ 162, 181-816, 901-916. All of these entities are creatures of statute; corporations are governed by the DGCL, all forms of partnership and limited liability companies are governed by their respective statutory provisions, and trade names are regulated at the state level as well.
The historical reasons that Delaware has become the leading jurisdiction for corporate law and governance are several. Historically, businesses incorporated in the states in which they were incorporated. However, franchises and loose associations of businesses became more common, and the problems that arose with this can be illustrated as follows: If X Corp . , headquartered in New York, has a subsidiary Y LLC, chartered in another state, and Y LLC has an employee in Oregon, Oregon’s workers’ compensation law would apply to that institution of employment. If Y LLC is in California, and that employee is injured, California’s law would apply. As a result, X Corp. could be liable in both states and forced to pay workers’ compensation premiums in both states, which could result in double liability. If X Corp. is sued in New York on behalf of Y LLC related to N.Y.’s insurance laws, that would jeopardize the individual assets of Y LLC’s members and further complicate the situation. To lessen that potential exposure, parties began to choose one main state to serve as its law of choice.
Delaware was the first state to offer a free of charge, central processing place for the filing of corporate charters and the entire company registration process. No other state had such an advantage, so businesses began incorporating in Delaware. Another reason for the proliferation of Delaware corporate law was that the Delaware judiciary offered a stable environment. There is no other state that has a greater regularity of judges or greater number of qualified judges on the bench in its constitutional courts of general jurisdiction. The Delaware judiciary is highly trained, deserving of its reputation as a "Model Judiciary." Allen et al., supra, at 3-4. The fact that Delaware judges are well versed in business matters has attracted foreign companies which want to avoid having their disputes heard by a jury, but which want their disputes heard by someone with specialized expertise in corporations and business.
Starting Your First Delaware Litigation
First assignments for new associates and other attorneys involved in Delaware litigation will usually involve the initial review of correspondence or discovery served on the client. Or, the initial review of pleadings by the attorney who will participate in the case, or the review of initial pleadings that are filed in a case, depending on whether the lawyer is involved in a case that has already commenced or whether the lawyer is involved in a new case from the beginning. The document will often include a complaint, the answer or answers, and motions to dismiss or motions for summary judgment, or other pleadings and discovery.
If the correspondence or discovery includes interrogatories or requests for production of documents, the attorney may prepare an initial response to these requests, and then follow this up with a meeting to determine what documents exist that would be responsive to the requests. If the attorney enters a case in which a response to interrogatories or requests for production of documents has been prepared by the prior attorney, an initial task will be to become apprised of the case and the responses and then to prepare supplemental responses if further documents are located.
A typical second assignment that relates to pleadings will be the preparation of a motion for summary judgment, assuming that the lawyer has expertise in the matters related to the case. Such a motion, like all in Delaware courts, must conform to the Rules of Court. In preparing a motion for summary judgment, the lawyer must determine the nature and relevance of all documents that he or she intends to attach to explain its content. In its most basic formulation, the motion for summary judgment consists of a memorandum of law which explains how there is no issue of fact so that the court can grant the motion when it reads the defendant’s papers, and the affiant witness testimonial material such as testified to at the deposition, as well as the documents that are responsive to the motion.
In exceptional cases, a lawyer may also prepare an affidavit in the format prescribed by Rule 56(c) when summary judgment is sought. Such a case would exist if an attorney, in preparing for depositions, is going to be introducing testimony of a lay witness to provide facts that are required for the summary judgment motion. In such a case, the Rule 56(c) affidavit may be executed at the time because the witness is present. However, if the witness is not going to be asked directly for a Rule 56(c) affidavit at his or her deposition, the affiant will often prepare an affidavit under Federal Rule 56(c), rather than the Delaware Rule. At the end of the case, when the appeal is ordered, and arguments are made for the exceptional and limited circumstances when an affidavit can be submitted on appeal beyond the record, both the affidavit and the law of the particular court are examined.
First Assignments for Delaware Corporate Litigation
An important first assignment for a lawyer charged with handling a Delaware corporate law component of a case is to obtain and read the opinions of the Delaware Supreme Court and the Delaware Chancery Court, especially a comprehensive and detailed treatise on Delaware corporate law. The anvil of Delaware law laid down by those two influential courts in some senses may be the most important and binding law that governs the case that has come before you because many corporate decisions made by a company, such as Delaware counterparts, have been subject to the scrutiny of one of those courts.
A critical but often neglected initial assignment is to become thoroughly familiar with the full text of the Delaware General Corporation Law at 8 Del. C. Sections 101-402. Only after the lawyer is intimately familiar with that statute can he or she competently and properly advise the client about issues that may arise in the future when they must be addressed or litigated.
The two most important courts in the U.S. that interpret and provide guidance on corporate issues are the two Delaware courts described above. Corporate counsel have the duty to become sufficiently familiar with the opinions of these two courts, as well as their applicable rules and procedures and their practices, to satisfy minimum professionalism requirements for representation of a corporation. This is especially true where the dispute will be first heard in the trial courts, then appealed to the Delaware Supreme Court.
Delaware Corporate Law: The Difficult Areas
Initial assignments are oftentimes the hardest assignments that a new attorney receives. Much of this is due to a lack of familiarity with basic Delaware concepts or the overall Delaware jurisprudence. New attorneys, for example, are oftentimes unfamiliar with unique Delaware concepts such as the Enhanced Scrutiny standard of review in corporation litigation, the business judgment rule, the quasi-enterprise doctrine , and the concept of good faith in the context of fiduciary obligations. New attorneys oftentimes struggle with the application of these basic concepts in assignments that require some application of the law to their fact-specific situations. This means that initial assignments oftentimes require a fair amount of mentorship or supervision to ensure that the new associate is not missing something obvious in their analysis. All of the foregoing need to be worked through by those at the firm who are working with the new associate on their initial assignment. Failing to walk the new associate through some of their work at an initial stage could result in the new associate getting bogged down in their issues and possibly delivering work that is inadequate under Delaware law. Another common problem that can arise from initial assignments is in regard to discovery compliance and the very rigid discovery practices and rules in Delaware. Most new attorneys will need firm training in some of the practicalities of Delaware discovery practices. There are numerous pitfalls for the inexperienced attorney in taking initial fact depositions in end of the case agreements on the eve of trial. Most good associates are very bright, but Delaware practice sometimes is counter-intuitive to what you would expect. That is why mentoring and ongoing feedback is perhaps most critical with new attorneys since any problems with their understanding of or compliance with key aspects of Delaware discovery practices could have serious ramifications for a client.
Useful Tools for Newbies
Those who are new to practicing Delaware law have a variety of resources available to them. First and foremost are the practice guides. The three most commonly used practice guides are: Course Pockets (Looney, Cohen & Iacono), is published by Delos Incorporated. The 2015-2016 edition is more than 3,000 pages spread over two volumes. The first volume contains Chancery Practice which includes topics such as governing documents, fiduciary duties, books and records actions and expedited matters. Volume Two contains Corporate Practice which covers, among many others, Delaware capital stock, mergers, appraisal and subdivisions of capital stock. This work is indispensable to litigators in Delaware. Volume Two of the 2015-2016 edition comes with a Cumulative Supplement covering all changes in the law from September 2014 to September 2015. The supplement also includes a compressor index which helps when trying to find general topics and a table of newly enacted statutes. Subscription information can be found on the website, www.delosincorporated.com. Two other excellent practice guides are noted below: Although these volumes do not replace the Course Pocket , these guides are helpful for litigators who have less experience with Delaware law. The first of these, The Delaware Law of Debtor/Creditor Relationships, is an excellent resource for attorneys new to an area of corporate law that involves Delaware trusts and corporations, including Delaware specialized entities such as limited liability companies. A second helpful publication for antitrust law practitioners is the Delaware Antitrust Law Handbook, which includes an overview of Delaware State and Federal antitrust law. Another great way to stay informed about Delaware law is to attend CLE courses. Many of the prominent Delaware attorneys such as Vice Chancellor Noble and other members of the Delaware judiciary are readily available to new attorneys through CLE courses. All of these courses are well worth the time and effort. Networking opportunities also abound in Delaware. There are virtually countless opportunities to meet Delaware practitioners and judges, both at formal programs and events and on a more informal basis. Unlike larger legal markets, in Delaware it is easy to meet judges and leading practitioners on a frequent basis.