When do you have the option of litigating in Delaware and when is it the best choice? These were among the questions addressed at a recent New England Legal Foundation (NELF) event.
The moderated discussion, featuring comments by Vice Chancellor Stephen P. Lamb of the Delaware Chancery Court and Justice Ralph D. Gants of the Massachusetts Superior Court Business Litigation Session (BLS), focused on procedural and structural differences between the two courts.
These differences, just as much as differences in the substantive law of the respective jurisdiction, should be considered by practitioners when deciding where to litigate a complex business case within the jurisdictions of both the Delaware court and an analogous New England forum.
For New England corporations formed under Delaware law, Delaware is an obvious choice if the litigation involves internal corporate governance. Unlike the BLS, for example, which is simply a session of the Massachusetts Superior Court, the Delaware Chancery Court is the ultimate interpreter of applicable corporate law for the many businesses incorporated in Delaware, subject only to appeal to the Delaware Supreme Court.
However, the Delaware court is more limited than its New England relatives. Thus, while the Delaware Chancery Court is considered by many to be the inspiration for the business court movement nationwide, it is primarily a court of equity. It is also a court of limited jurisdiction concentrated largely on internal corporate affairs. Other business or complex litigation courts, such as the BLS, typically cover a much broader range of business disputes, including “business v. business” cases and claims for damages tried to juries.
While Delaware Chancery has jurisdiction to hear preliminary injunction applications in non-competition cases, it does not have as strong a lead over other state courts in that arena as in the realm of internal corporate disputes. The law to be applied in such cases is often specified in the non-competition agreement and typically will be that of the state where the employee is employed or the business has its headquarters (neither of which may be in Delaware).
All business and complex litigation courts are likely to have considerable experience with the interpretation of non-competition agreements governed by the law of their own state. And when speed is of the essence, the best jurisdiction for preliminary enforcement of a non-competition agreement may be the one where the employee is located.

Significant resources

Delaware Chancery does have significant resources. The court is well funded, with five full-time judges. Each judge has two law clerks and one secretary. Judges are assigned a case and typically follow it through to the end. Relatively quick trial dates can be obtained when necessary.
Analogous courts in New England may not have equivalent resources. The BLS, for instance, has only one full-time judge and two judges who alternate every three months in a second session.
The BLS judges share one law clerk and a half-time secretary. Cases assigned to the full-time judge stay with him and the part-time judges are often available to hear cases on which they have had substantial involvement, even when they are not sitting in the BLS. Nevertheless, there is a certain discontinuity with respect to cases assigned to the second session. While a trial date two months out can be obtained where necessary, decisions on dispositive motions may be delayed significantly in the BLS given resource constraints.

Important distinctions

Keeping distinctions like these in mind will help in evaluating alternative forums. For example, since in the Delaware Chancery the same judge who will serve as the fact-finder and ultimate decider of a case will also hear any summary judgment motions, there is less likelihood that such motions will be effective in narrowing disputes or disposing of cases.
A summary judgment motion in Delaware may be useful in educating the judge about the facts of and the law applicable to a case, but the judge may decide to go ahead and have a trial, rather than risk reversal of a summary judgment decisions. On the other hand, in a court like the BLS, with much more limited court resources and jury trials, there may be an institutional imperative to grant summary judgment where warranted.
Another stark difference between the Delaware court and New England business courts is that the Delaware legislature has recently enabled Chancery Court judges to act as confidential mediators in business disputes, at the parties’ expense, even in matters that are not in litigation.
Over the past few years 75 percent of the mediated cases have been resolved on the day of the mediation or very shortly thereafter. If the matter is not resolved, there is no public record that mediation was requested or occurred and the parties are free to litigate or engage in further alternative dispute resolution process in or outside of Delaware.
Other recently adopted legislation grants the Chancery Court jurisdiction over legal disputes involving high technology issues and many of the judges’ subsequent mediations have involved intellectual property and technology-related disputes. No technology cases have yet resulted in published decisions, so the Chancery Court’s impact in this area of the law has yet to be felt.
Forum selection, whether in a pre-dispute contract such as a non-competition agreement or at the time of litigation, is often a complex decision. As a rule of thumb, where jurisdiction exists in both Delaware and a New England forum, if the case involves internal governance of a Delaware corporation Delaware Chancery is a natural choice. But even then there may be cases where strong local ties and the convenience of the parties warrant trying a corporate governance case in the BLS or another New England business or complex litigation court, which will apply a thoughtful interpretation of Delaware law.
Perhaps all that can be said by way of general guidance is that the nation’s first business court, given its considerable resources and expertise in the area of corporate governance, is very often worthy of serious consideration by New England companies looking for the optimal forum for resolution of their disputes.
Michael E. Malamut is deputy general counsel of New England Legal Foundation. NELF is a 501(c)(3) not-for profit public interest foundation whose mission is promoting public discourse on the proper role of free enterprise in our society and advancing free market principles in the courtroom. A graduate of Princeton and Harvard Law School, Malamut focuses on appellate law, land use, employment law, administrative law, and nonprofit governance. He is an adjunct professor at Suffolk University Law School and a member of the Board of Editors of Massachusetts Lawyers Weekly.