In my last article, we took a look at Delaware’s Court of Chancery and how its rich history is a part of the Delaware advantage.  From that post we learned that the Court of Chancery hears matters of equity where no legal precedent is established, but what happens to business litigation that is purely legal in nature?  Commercial cases at law are heard by the Delaware Superior Court, which recently created a new division to identify and streamline resolution for complex commercial matters. In the June 2010 edition of The Metropolitan Corporate Counsel, Thomas E. Hanson, Jr. introduces the new Complex Commercial Litigation Division (CCLD) of the Delaware Superior Court. Below is an excerpt of the article that explains with further detail:

Introduction

Due primarily to the high cost of electronic discovery, delay in reaching a final resolution and uncertainty as to the outcome, there is a consensus that civil litigation must be reformed. To address the concerns of business litigants, and to provide yet another option for the resolution of complex business disputes within Delaware’s highly regarded court system, the Delaware Superior Court has established a Complex Commercial Litigation Division (CCLD) effective May 1, 2010. To promote prompt and efficient disposition of complex matters, the CCLD will include a special assignment of experienced judges, tight case management orders to move cases to conclusion, special e-discovery orders to limit expense and avoid disputes and protocols to control expert witness and fact discovery.

Not every business dispute is eligible for the CCLD. To qualify, a case must: (1) include a claim with an amount in controversy of at least one million dollars, (2) involve an exclusive choice of court agreement or a judgment resulting from an exclusive choice of court agreement or (3) be so designated by the president judge. Cases that meet one of these criteria can be brought in the CCLD – a forum that is focused on addressing what matters to parties who file and litigate complex commercial disputes.

The CCLD was designed to address two principal concerns of business litigants: (1) the need for predictable procedures to control the course of the proceedings and to bring such proceedings to a prompt conclusion and (2) the need for reasonable control over the cost of discovery, including e-discovery. The CCLD addresses these concerns by following three primary case administration principles.

First, each CCLD case will remain with the same judge from start to finish. Second, each CCLD case will be administered pursuant to uniform procedures, including the requirement of an early Rule 16 scheduling conference for counsel to meet and confer with the judge. At the Rule 16 conference, a case management order will be entered that covers all phases of the case, including the handling of discovery disputes and dispositive motions, early mandatory disclosures and the exchange of electronic discovery. Third, each CCLD case will be assigned firm pretrial and prompt trial dates that will be given priority as among the panel judges’ other trial assignments.

To read the full article click HERE.

Delaware has a unique court, the Court of Chancery, which is world-renowned for its jurisdiction in corporate matters. This court is a main reason for Delaware’s preeminence in the field of corporate law. Because of the speed and predictability that comes from experience, as well as a wealth of published judicial decisions, Delaware has emerged as the nation’s “corporate capital.”

Competition from other states is rising, however, as they observe the revenue produced for the state from its status as a top legal venue for corporate law. Over the decades, Delaware has carefully cultivated corporate statutes to make them more attractive to corporations than those of other states. In an effort to continue this, Delaware’s Court of Chancery has developed a system that could allow for binding arbitration. This will allow companies to present arguments privately to a judge from the court and get a decision in a timely manner, instead of the lengthy process of going to trial. The arbitration process is confidential and not available for public record; this is especially important when dealing with proprietary information such as technology and patents.

Eric Ruth of The News Journal writes, “Under the new rules, the rivals can choose to sit down privately with a judge from the court — or, as they are called, a chancellor — present their arguments, and let the arbitrator decide the outcome. The goal is to resolve the matter in 90 days — Chancery Court cases have been known to last a year or two before even reaching trial.”

Delaware’s efforts to broaden the scope of Chancery Court and make the arbitration process confidential, timely, and affordable, will keep the state on the cutting edge as the nation’s “corporate capital.”

The Delaware General Corporation has been the strongest form of company organization in the United States since the late 18oo’s when major entities like the railroads, Standard Oil and DuPont needed to organize into organizational structures that would provide for the governance of the company, as they grew beyond the lives of their famous founders. The General Corporation is perfectly designed as a vehicle for engaging in business, and it also provides a way to raise capital as needed throughout the life of the company.

In its simplest form, the General Corporation has three tiers of power; The Shareholders, The Directors and The Officers. The Shareholders “OWN” the company. The Directors “MANAGE” the company and the Officers “RUN” the company on a day-to-day basis.  The Bylaws of the company set forth the powers and the limits of power in each of the tiers. Each group may have separate priorities and they may clash occasionally. When one tier rises up against the others, a takeover battle may ensue. Takeover battles are usually fought in the Delaware Court of Chancery. In this unique business court a single judge decides the case. No juries, no tribunals, no 12 angry men. One judge determines quickly which party shall prevail according to 200 years of laws and legal precedents. It is said that the Chancellors of the Court respect the good-faith decisions of Directors over the profit priorities of shareholders, but a majority of shareholders can generally elect a new board of directors if they don’t like the ones they’ve got.

The “Rules” about how these three categories interact with each other is contained in three general knowledge bases. The “code”, which is the written law passed by the State Legislature, in this case called the “Delaware General Corporation Law” (DGCL); the “case law” handed down by the Delaware Court of Chancery and the Delaware Supreme Court over the past 200 years and in the “Letter Rulings” which are individual judicial decisions on a myriad of minute details that come up in a court case.

Stockholders are granted two “rights” that directors and officers don’t get: The right to vote for the Board of Directors, and the right to share in the dividends of the company in their pro-rata share when the Directors declared dividends. The shareholders, however, cannot operate the company. They cannot walk in and start telling people what to do. They act in a meeting, not individually. (Unless one person owns more than 50% of the company. In that case she could control the entire company and all three tiers of power.)

The Board of Directors also acts in meetings. Directors don’t generally act individually. Meetings must be announced in advance to all Directors and must contain a majority of directors present to be a legal meeting.  The Board of Directors makes all the important decisions in the company. They are responsible for company policy and oversee the managers. The Directors determine what the company will do with its profits and they control the sale of stock in the company. They hire the Officers of the company to run the business on a day-to-day business.

The Officers work at the pleasure of the Board of Directors, or by contract with the Board. Officers are usually the President, Vice President, Secretary and Treasurer, but the company’s bylaws can prescribe any officers and their titles, responsibilities and duties.  Officers are responsible for the conduct of the company and the profitability. If they fail, they get booted out quickly. If they succeed, they become superstars.

This unique structure, with three mandatory tiers of power, deserves a great deal of credit for the success of the American industrial revolution, the American economy since 1900 and the whole business of Wall Street itself. This structure differs greatly from other forms of company organization such as the sole proprietorship or the partnership, which precede it; and the Limited Liability Company which followed it historically.

If your vision is to form a big company, like Apple or Google or Dell you couldn’t pick a better vehicle to take the ride with than a Delaware General Corporation.