Could Court Infighting Harm Delaware as Go-to Jurisdiction?
Legal analysts who spoke with Delaware Business Court Insider have said perceived infighting between Delaware's Supreme and Chancery courts hurts the state's reputation as the pre-eminent jurisdiction to resolve complicated corporate litigation, but differ on the impact of the damage.
Some view a "war of words" between the two courts as nothing more than fodder for gossip, but a former state Supreme Court justice cautions that corporations could turn to the federal court system to have their cases heard among less drama.
Lawrence A. Hamermesh, the Ruby R. Vale Professor of Corporate and Business Law at Widener University School of Law, conceded that clashes between the Supreme and Chancery courts are not in Delaware's best interest, but said that the recent battles were not enough to harm the state's reputation.
"I can't affirmatively say it is good," Hamermesh said. "But, I think, in terms of the big picture, it is just so small that it is not what people think about when they decide to incorporate in Delaware. There is so much positive about our court system when compared to the rest of the world. For major businesses, I don't think this is going to move the needle."
Former Delaware Supreme Court Justice Joseph T. Walsh agreed with Hamermesh. He said that it is healthy for the two courts to debate complicated legal issues through their decisions.
"To me, looking at these opinions, it says the courts are engaged in a dialogue about important legal matters and giving their views," Walsh said. "If you had a law journal article which voiced the same views as Chancellor [Leo E.] Strine Jr., I don't think anyone would say the author was off base. It's helpful to discuss these topics. When they are discussed in this manner, it is viewed as the Supreme Court cracking someone's knuckles, but I just don't see it that way."
However, another former Delaware Supreme Court justice, Andrew G.T. Moore II, disagreed. He said it was "embarrassing" that the Court of Chancery is using public legal opinions to propose modifications to established Delaware law. Moore added that when a judge addresses an issue not directly before the court or criticizes existing laws, they are telegraphing future decisions to attorneys.
"It's not the Supreme Court that is causing this embarrassing situation," Moore said. "It's the Court of Chancery's refusal to acknowledge the basic principle of law that their jurisdiction only goes so far and once the Supreme Court speaks, that is the end of it. Continued sniping is not appropriate. I don't care who the judge is."
Moore said that, ultimately, the courts' feud could result in lawsuits moving into the District of Delaware.
"We might find more filings in the federal court to the extent that they can be filed there," he continued. "I think, eventually, people can say, 'Why do I want to go to Delaware when the judges are telling me they are going to decide a case before they've heard the evidence.' That is what we have to worry about, but we are not there yet."