Delaware returns to top of U.S. Chamber’s business legal climate list

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Delaware’s lawsuit climate returned to a top ranking in a new national survey released by the U.S. Chamber Institute for Legal Reform.

Delaware has been first in almost every survey since 2002, except for2017 when it fell to 11th place.

The 2019 Lawsuit Climate Survey: Ranking the States, conducted by The Harris Poll on behalf of the U.S. Chamber Institute for Legal Reform, questioned senior business executives about the fairness and reasonableness of state court systems.

Delaware’s legal climate fell to 11th place in 2017 after the legislature banned “loser pays” provisions in company bylaws that required shareholders who file and lose lawsuits to reimburse companies’ legal fees.

But Delaware’s Chancery Court has been very effective in reining in frivolous lawsuits in the state’s courts. A 2016 ruling by the Court prohibited so-called “disclosure-only” settlements in merger and acquisition lawsuits, in which all of the money went to lawyers and not plaintiffs.

As a result of the Chancery Court’s decision, these types of lawsuits have largely migrated out of Delaware to other jurisdictions such as the federal courts.

“Hands down, Delaware has some of the most competent and experienced judges and stable legal system in the country,” said Harold Kim, chief operating officer of the U.S. Chamber Institute for Legal Reform. “As long as the state legislature doesn’t try to interfere with that, Delaware will continue to be a great state in which to do business.”

The excellent perception of Delaware’s legal climate is helpful to its economy. According to the survey, 89 percent—an all-time high—said a state’s lawsuit environment is likely to impact their company’s decisions about where to locate or do business.

The 2019 Lawsuit Climate Survey: Ranking the States is the 12th time The Harris Poll has conducted the survey since 2002 for the U.S. Chamber Institute for Legal Reform.

The final results are based on interviews with a national sample of 1,307 in-house general counsel, senior litigators or attorneys, and other senior executives who are knowledgeable about litigation matters at public and private companies with annual revenue of at least $100 million, a release stated.

The No. 1 ranking comes as Chancery Court remains the target of criticism by a group known as Citizens for a Pro-Business Delaware.

The group was formed when Chancery Court was given the task of determining who should buy out a 50-50 partner in translation services company TransPerfect. The court was criticized for contributing to the estimated $250 million in legal costs arising from the case. ‘

Chris Coffey, campaign manager for Citizens for a Pro-Business Delaware, issued the following:

“In 2017 at the height of the TransPerfect case, when the Chancery Court was forcing an owner to sell their company that they had built for over two decades from scratch, Delaware was ranked number 11 in the U.S. Chamber’s Lawsuit Climate Survey. Although some general counsel from around the nation may have forgotten the unchecked power of the Chancery Court in 2019’s poll, Citizens for a Pro-Business Delaware is here to remind them. Our message is resonating with over 1,000 new Delaware residents signing our petition for transparency and accountability in the state’s court system in just a few short weeks. We will continue to call for change no matter the pushback we receive from those who benefit from the status quo.”

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