The most distinguishing feature of Delaware law is that it is interpreted and applied by a court of equity. A recent post by Professor Stephen Bainbridge illustrates this point:
The Delaware Supreme Court held in Schnell v. Chris-Craft Industries, Inc., that “inequitable action does not become permissible simply because it is legally possible.” This means that even if a corporate action complies with the literal terms of a statute, Delaware courts can intervene if the action is deemed unfair or inequitable. Schnell thus demonstrates that Delaware courts will not allow statutory formalism to justify unfair corporate behavior. Equity acts as a safeguard against directors exploiting statutory provisions to the detriment of shareholders. The decision remains a cornerstone of Delaware’s approach to corporate governance, ensuring that statutory compliance is always subject to equitable scrutiny. It’s at least conceivable that an activist judge could invoke Schnell to impose liability in a particular case even though the technical requirements of SB 21 were satisfied. (See, e.g., the discussion above of Fliegler [v. Lawrence. 361 A.2d 218 (Del.1976)].)
This understanding of equity versus law goes all the way back to none other than Aristotle. See Nicomachean Ethics Book V, Section 10. Thus, the risk that the Court of Chancery would "correct" statutory law is more than conceivable. It is entirely plausible given the Court's role as a court of equity.
[View source.]
