Is Delaware’s Hegemony Over Corporate Law About To End?

Ancient Greece was a coherent culture but not a coherent state.  It was comprised of a many city states that vied with each other for ??eµ???a (hegemony).  The Greek word refers to some one or thing that “leads the way”.  The most famous contest for hegemony was fought between democratic Athens and the diarchy of Sparta.  These two vastly different poleis battled for nearly three decades in the Peloponnesian war.  The war is well-known today because Thucydides, a general on the losing Athenian side, famously chronicled the conflict as an eyewitness.

Look on my works, ye mighty, and despair!”

In the realm of corporate law, Delaware has exercised hegemony for decades.  But can or will it continue to lead the way?  Professor Eric A. Chiappinelli issues a stark alarum in a soon to be published paper:

The judges of the Delaware Court of Chancery, the nation’s leading corporations law court, are worried and angry.  The lifeblood of that court, stockholder litigation, is migrating out of Delaware to other states.  If Delaware continues to lose case flow, it risks losing its dominance in corporate law and also risks the 20% of its revenues that Delaware enjoys from the out of state businesses incorporated there.

The Underappreciated Importance of Personal Jurisdiction in Delaware’s Success, 63 DEPAUL L. REV. (forthcoming 2014), available for download here.  Surprisingly, Professor Chiappinelli attributes Delaware’s leadership to its aggressive, but in his view unconstitutional, approach to personal jurisdiction over fiduciaries.

I would add that Delaware faces another existential threat – the trend towards federalization of corporate governance, a trend that accelerated with the enactment of the Sarbanes-Oxley Act in 2002.