Professor Stephen Bainbridge recently took note of a draft essay by Yale Law School Professor Jonathan R. Macey, Delaware Law Mid-Century: Far From Perfect but Probably Not Leaving for Las Vegas. Professor Macey posits that while Delaware has a "state-of-the-art and up-to-date corporate law", "certain judges are making Delaware corporations feel unwelcome, and are raising concerns that the plaintiffs’ side of the bar is entitled to more deference than the defense bar".
I disagree. Like every other state, Delaware's corporate law is both statutory and judge made. Unfortunately, Delaware's judge made law has overwhelmed its statutory law. The body of Delaware corporate decisional law is immense and continually evolving. This fact alone makes Delaware's corporate law inaccessible to everyday users. It is also notable for its novelty and hence its unpredictability. Before In re Caremark Int'l Inc. Deriv. Litigation, 698 A.2d 959 (Del. Ch. 1996), how many would have predicted that directors owed a duty of oversight? Before In re Match Group, Inc. Derivative Litigation, 315 A.3d 446 (Del. 2024), how many would have predicted that transactions involving a controlling stockholder receiving a non-ratable benefit are presumptively subject to entire fairness review? Notably the General Corporation Law nowhere mentions a "duty of oversight" or the "entire fairness" standard of review. While the sophistication of the Delaware courts is admirable, corporations and advisors know that uncertainty is a cost and foments additional litigation costs.
In proposing to reincorporate from Delaware to Nevada, The Trade Desk cited the Match Group decision and included a memorandum from Professor Steven Davidoff Solomon observing:
However, Delaware law can also be indeterminate because of its use of broad, flexible standards that are applied to individual cases in a highly fact-specific way. In addition, it is not uncommon for the Delaware Supreme Court to reverse decisions of the Delaware Court of Chancery. This focus on precise facts and circumstances means Delaware decisions may be less predictable in some situations. For example, the rapidly evolving legal standards for controllers in Delaware and the application of MFW procedures as a cleansing mechanism for transactions involving a controller illustrate this unpredictability.
(footnote omitted). The Trade Desk's stockholders approved the proposal at a special meeting held last month.
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