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Courting Business

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It’s hard to find someone in the business world who is interested in slowing things down. Technology has made the globe smaller. Decisions and transactions move faster. Something that closed last week is ancient history.

The courts haven’t always held such an outlook on their business. Expeditious outcomes are not the norm. Motions are filed. Continuances are granted. Sometimes, one side simply stalls to prevent the inevitable or to induce a settlement. Weeks turn to months. Months to years. Years to more years.

Some time ago, Jan Jurden, president judge of Superior Court, presided over a case in which both sides were eager for swift adjudication.

“The attorneys wanted a rocket docket,” she says. “They wanted a trial in eight months’ time. The two sides were really holding up transactions for the case.”

Jurden understood that a long trial could stagnate each party’s business interests, so she consented to an expedited schedule and rendered a decision quickly without sacrificing carefully considered justice. It was a perfect example of how Delaware’s 5-year old Complex Commercial Litigation Division is able to pivot rapidly and provide litigants with verdicts that allow business to keep moving.

“In that particular case, I was trying to be responsive to sides that wanted a resolution,” Jurden says. “An ancillary benefit [of the CCLD] is the ability to move quickly, even if a case is complex.”

The CCLD is the newest argument in Delaware’s case for being the nation’s most business-friendly court system. Litigants seeking legal relief in instances where more than $1 million is at stake can have their cases heard in the CCLD— by judges with considerable expertise in business matters—instead of bogging down crowded civil court schedules. The CCLD provides clarity quickly and in a cost-efficient manner. It joins Delaware’s renowned Court of Chancery as an outlet where corporate clients can get the rulings they need while continuing to do business.

“What we have done is make Delaware the most business-friendly state in the United States,” says Superior Court Judge Mary Johnston, one of the four judges on the CCLD panel. “Companies can feel comfortable incorporating in Delaware because they know they can get fair adjudication of matters.”

Since 1792, when the Court of Chancery began settling business cases here, Delaware has been a leader in the corporate legal world. Thanks to its experience and ability to handle complex matters brought by companies incorporated in the state, Chancery has led other states to create business-specific dockets of their own. Though those courts have their strong points—despite being criticized by some as blatant attempts to boost revenues by being friendly toward business—they do not have the body of work Chancery does. With the CCLD, companies looking for verdicts in monetary disputes can depend on the same high level of judicial performance.

“Our judges get a judge’s version of an MBA,” says Jim Patton, a bankruptcy law specialist and chairman of Young Conaway Stargatt & Taylor. “Their perception and understanding of the business environment allows them to make decisions that are not just legally sound, but are also grounded in how businesses operate.”

There is something of a misconception about that. Some believe that, because businesses incorporate so frequently in Delaware (about 60 percent of the Fortune 500 has done so), rulings favor the corporations, the better to keep them happy and keep them in the state.

That’s not the case. Though the taxes paid by businesses are vital to the state budget, the strength of the courts is their understanding of complicated statutes and their willingness to work quickly so that transactions are not delayed.

“It’s a culture,” says Larry Hamermesh, a professor of corporate and business law at Delaware Law School for 21 years who spent 18 years practicing at Wilmington’s Morris, Nichols, Arsht & Tunnell. “When someone is being considered for an appointment to the Court of Chancery or [CCLD], there is an expectation that the court will be getting a judge who is committed to devoting time and effort to being extremely well prepared, to writing strong opinions, to bringing credibility and to becoming a specialist.”

The credibility Hamermesh speaks of defines Delaware’s business courts. There are winners and losers in all cases, and though few businesses enjoy being on the wrong side of a verdict, they feel confident that the state’s courts are reasonable and accurate. “There needs to be some predictability,” Johnston says. “Attorneys must be able to advise their corporate clients on how to set up contracts, based on courts’ previous verdicts.”

Predictability is key to the CCLD’s value in the Delaware court system. Though it isn’t unique, due to similar vehicles in other states, it is another reason for businesses to remain incorporated in Delaware, and that’s important. Corporate taxes are an important revenue stream, but there is also an ancillary economy that depends on the corporate presence, in the way firms in Michigan support the auto industry. “It’s a big part of the economy,” says Fred Cottrell, a partner at Richards, Layton & Finger, a specialist in intellectual property law who also appears on behalf of clients in the CCLD.

Despite the advantages for corporations in the Delaware courts, there are moments when people fear a ruling or legislative action could cool the climate and lead businesses to look elsewhere for homes. Rulings with the potential to do that are usually balanced by legislative action, and vice versa. Bill Johnston, an attorney with Young Conaway Stargatt & Taylor, points to Delaware’s careful consideration in the 1980s of anti-takeover statutes adopted by other states. “We wanted to be looked at as being balanced,” he says. A more recent example is the Delaware Supreme Court ruling in May 2014 that the loser in a corporate litigation case would have to pay “all fees, costs and expenses of every kind.” It was not a popular ruling. A year later, the General Assembly voted to prohibit that ruling from taking hold in Delaware.

“Everybody is always afraid that something will happen that forces corporations out of Delaware,” says Connor Bifferato, a litigation attorney whose father (Vincent A. Bifferato) was a Superior Court judge for 34 years. “As long as the courts continue to be as learned and fair as they are, everything will be fine.

“Corporations have to deal with legal situations in one place or another. Why not do it where they have been treated fairly over the years?” 

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