March 01, 2015

Litigating Corporate and Commercial Cases in Delaware

A huge number of companies are incorporated in Delaware, making it important to get a handle on the unique ways litigation is conducted there.

David L. Finger

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According to reports from the Delaware Division of Corporations, over half of all U.S. publicly traded companies and 63 percent of corporations in the Fortune 500 are incorporated in Delaware. Ninety percent of all new initial public offerings in 2102 and 83 percent of all new initial public offerings in 2013 were from companies incorporated in Delaware (including Twitter, Yelp, and Facebook). These same reports inform us that there are more legal entities in Delaware (980,000) than residents (905,000).

It is no surprise, then, that Delaware is home to a great deal of business litigation. In addition to internal governance and deal-related litigation in the state courts, Delaware’s federal district court has one of the busiest patent infringement dockets in the nation, and its federal bankruptcy court is one of the leading venues for corporate reorganizations.

Each year, 4,000 to 6,000 out-of-state lawyers are admitted pro hac vice in Delaware state courts alone. In fact, more lawyers are admitted pro hac vice than practice there full-time. If you represent an entity formed in Delaware, or someone doing business with one, there is a reasonable chance your client may end up litigating in Delaware. Consequently, you might want to understand how litigation is conducted in the First State.

Litigation of state law claims involving Delaware entities will likely take place in one of Delaware’s two principal trial courts: the Court of Chancery and the Superior Court. Delaware is one of the few remaining states with separate courts of law and equity. Thus, it is important to understand the scope of subject matter jurisdiction of each court to avoid unnecessary litigation over jurisdiction and the potential embarrassment of dismissal of your case on jurisdictional grounds. It is also important for a potential plaintiff to consider the choice of forum because the Court of Chancery does not conduct jury trials or award punitive damages (absent express statutory authority).

 

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