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Delaware’s Balancing ActJohn ArmourUniversity of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI) Bernard S. BlackNorthwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI) Brian R. CheffinsUniversity of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI) July 1, 2012 as published in 87 Indiana Law Journal 1345-1405 (2012) University of Cambridge Faculty of Law Research Paper No. 37/2011 ECGI - Law Working Paper 167/2010 Northwestern Law & Econ Research Paper No. 10-04 Oxford Legal Studies Research Paper No. 64/2010 Abstract: 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.
Number of Pages in PDF File: 61 Keywords: Delaware courts, corporate litigation, forum shopping JEL Classification: K22, K41 Date posted: September 17, 2010 ; Last revised: July 12, 2012Suggested CitationContact Information
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