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A Delaware judge, a Texas judge and a Nevada judge walk into a bar.
Actually, not a bar, but the Bar. Berkeley’sCenter for Law and Business confab this week in chilly San Francisco addressed the ongoing discussion about ‘Dexit’ and the continued trickle of companies re-incorporating from Delaware to Nevada and Texas. The topic prompted a fun, lively conversation moderated by Freshfields’ Ethan Klingsberg in what may be the first corporate law panel that brought all three state’s perspectives.
We had a proud Texan, Judge Sofia Adrogué, chosen to be on the first Texas Business Court, launched in September, who admitted “we are just starting.” We had Nevada Supreme Court Justice Lidia Stiglich, who noted there is no “Business Court” per se in Nevada, and Delaware attorney Catherine Dearlove from Richards, Layton & Finger, who represented the Delaware Judiciary and noted about the First State, “we are extraordinarily efficient.”
The judges from Nevada and Texas acknowledged a few things: There is basically no case law, plaintiffs have the opportunity for jury trials and they are following their own state law, not Delaware.
Justice Stiglich noted that the decisions are not publicly available, and they don’t get a lot of business cases. “Case law is pretty sparse,” she admitted. Cool!
Judge Adrogué acknowledged Texas is the most litigious state and has no court of equity. To which Dearlove responded with laughter, “One of these three is not like the other.”
Dearlove took the argument about Delaware’s predictability head on: Just because Texas and Nevada have statutes doesn’t mean those statutes won’t need to be interpreted in the same way Delaware case law has been built up since the Court’s founding in 1776. She summed it up by saying, “that will create less certainty for companies moving from Delaware to other states.”
At the end of the panel, Judge Adrogué marketed the Lonestar State: “There are options, there are choices. We welcome your business.” To which Justice Stiglich responded wryly, “Nevada has a different relationship with risk. We have a whole City,” which prompted laughter. “We encourage innovation and are open for business.”
The whole question of why we have corporate courts for business disputes and not for other aspects of the economy or society is the subject of a timely paper by Zohar Goshen, professor at Columbia Law School.
This topic came up at an Economic Club of New York luncheon this week with Dan Loeb of Third Point, who was interviewed by DealBook and CNBC’s Andrew Ross Sorkin. While many institutional investors opposed the legislative fixes, Loeb said the Delaware Chancery Court "over-reached" and should let shareholders decide on compensation. "It was out of bounds. Why should a court in Delaware determine comp. I can understand why companies would not want overreach."
Lastly, we congratulate Semafor for a phenomenal conference attended by CEOs and leading global policymakers. Citadel CEO and Founder Ken Griffin had the best line when he bemoaned the state of Brand America.
Have a great weekend,
GPP
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