We protected Delaware's future: Debunking the false 'controversy' around SB 21
In response to legitimate concerns from the national business and legal community, leaders of the Delaware General Assembly introduced bipartisan legislation that restores the balance between fairness and efficiency that has enabled Delaware to claim its role as the preeminent jurisdiction for incorporation. The Senate voted 20 to 0 in favor of the legislation, which was then sent to the House Judiciary Committee, from which it emerged with a vote of 9 to 2 in favor. Gov. Matt Meyer has signed the legislation.
The state's legal and business community has rallied around the legislation, which reflects the input from Delaware's Corporation Law Council, a body composed of prominent Delaware corporate attorneys with a wide range of experience that is advocating for its passage. The Corporation Law Section of the Delaware bar endorsed the legislation by a 74% margin. Several former Delaware judges have publicly spoken in favor of the legislation, citing the need for clarity and predictability in the core areas of Delaware corporate law over which they have collectively spent decades presiding. Delaware-based law firms that have practiced in the state for decades (and in some cases more than a century) and that collectively employ more than 1350 employees in Delaware have been unwavering in their support of the legislation. These firms, whose interests are uniquely aligned with the state, are actively promoting its passage as a means of burnishing Delaware's global reputation in the broader corporate system.
Delaware's trade groups also recognize how critical the legislation is to maintaining Delaware's corporate franchise. Non-profit organizations, including the Delaware Volunteer Firefighters' Association, Christiana Care, the Delaware Healthcare Association and the Delaware Alliance for Nonprofit Advancement, stand alongside thousands of Delaware businesses and trade groups. These include the Delaware State Chamber of Commerce, the Delaware Business Roundtable, the New Castle County Chamber of Commerce, the Rehoboth-Dewey Chamber of Commerce, the Central Delaware Chamber of Commerce, the Kent Sussex Leadership Alliance, the Homebuilders Association of Delaware, the Delaware Hotel & Lodging Association, and the Delaware Restaurant Association. All have voiced their support.
Opinion: Delaware is in a fight for our role as America's incorporation king. We must win
Why, then, is the legislation being characterized, in paid-for advertisements, in op-ed pieces and in some media coverage, as 'controversial'? The answer is simple: a small but well-funded alliance of stockholder plaintiffs' lawyers in the corporate bar view the legislation as a threat to the massive contingency fees they seek to collect, whether in the form of judgments or settlement payments, whenever they sue Delaware corporations or their directors and officers. The yard signs and mass mailings decrying 'SB 21' are not evidence of widespread opposition to the legislation. Rather, they reflect the profligate spending of well-healed stockholder plaintiffs' lawyers on an astroturf political campaign.
The corporate plaintiffs' firms that have voiced opposition to the legislation do not have Delaware's best interest at heart. Indeed, most of the lawyers who work at these firms reside out of state. Collectively, they employ fewer than 70 lawyers in Delaware. To the extent they have offices in Delaware (many do not), they were in most cases opened only very recently — within the last five to 10 years — and are merely outposts of much larger offices in New York and other cities, where the real decisions are made and where the lucrative settlement payments and fee awards are principally funneled. That these firms, in coordinating their opposition to the legislation, are using an expensive lobbyist from Washington, D.C. demonstrates their lack of ties to Delaware.
Nevertheless, by wielding a massive (and massively expensive) campaign to mischaracterize the legislation and the intent of the drafters, these firms have tried to spin the legislation as 'controversial,' creating the false impression that the legislation faces widespread opposition. Why? Because they believe the legislation threatens the massive fees they've been able to extract at the expense of the stockholders they purport to represent. In the past five years alone, 'stockholder' plaintiffs' firms have received fee awards exceeding $1 billion. Most of the firms that have received these fees have less than ten lawyers in Delaware. These are the primary opponents to SB 21. Why are these firms misbranding the common-sense corporate legislation widely supported by Delaware law firms and businesses as a 'billionaire's bill'? To protect their own fees. As the expression goes, that's quite rich indeed.
These plaintiffs' firms will feverishly resist any reforms to Delaware law that jeopardize their eye-popping fees, even if doing so risks a mass exodus of corporations from Delaware. Why? Because they don't need to be in Delaware. If corporations reincorporated, en masse, to other jurisdictions, the plaintiffs' firms would follow them. Again, most of the attorneys at these firms aren't currently in Delaware to begin with.
In short, lawyers and businesses who actually live and operate in Delaware have an interest in ensuring that the state remains strong and prosperous. And these Delaware firms and businesses overwhelmingly support the legislation, precisely because it is balanced and essential for a strong and prosperous state.
Andrew M. Lubin, president of Delaware Financial Group and 25-year member of the Delaware Economic and Financial Advisory Counci, or DEFAC.
This article originally appeared on NorthJersey.com: Delaware SB 21 protects First State's future | Opinion
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