Choosing Law, Forums, and Delaware Paper

My Cornell colleague (Ted Eisenberg) and former Civil Procedure teacher (Geoffrey Miller) recently circulated an interesting paper (Ex Ante Choices of Law and Forum: An Empirical Analysis of Corporate Merger Agreements ) arguing, in part, that "Choosing Delaware as the incorporation situs is, effectively, a choice-of-law decision."  Excerpts from the abstract follow:

Legal scholars devote much attention to the incorporation puzzle - why corporations so frequently incorporate in Delaware. This paper suggests that focusing on the incorporation decision overlooks a broader but intimately related set of questions. Choosing Delaware as the incorporation situs is, effectively, a choice-of-law decision.

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We study a data set of 412 merger and acquisition contracts contained as exhibits in SEC Form 8-K filings over a seven month period in 2002 to assess the decisions the parties have made regarding choice-of-law and choice-of-forum. Although these contracts frequently select Delaware law and Delaware as a forum, there is a relative "flight" from Delaware in this contractual setting. Delaware corporations choose Delaware law less than other corporations choose the law of their state of incorporation. Furthermore, many contracts specifying Delaware law did not specify Delaware as the litigation forum.

Comments

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Over time, the Constitution has been amended, and the interpretation and application of its provisions have changed. The general tendency has been toward centralization and incorporation, with the federal government playing a much larger role than it once did.

[Marvin]

The Litigation section of the Delaware Bar Association has just released a new booklet, Delaware Uniform Citation.The opinion has been keenly anticipated because of the issues it raises about the management of companies and the role of the directors and shareholders.
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Marvin

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[samsmith]

Empirical studies give all the para related to law.

sasmsmith
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[jecika gonzalvis]

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[Valerie Hans]

Delaware's Superior Court is actually very highly regarded by business and corporate folks, judging by the results of a Chamber of Commerce study.

From the Delaware Superior Court's website:

"March 17, 2006—The nation's top corporate counsel and senior litigators have recognized the Superior Court of Delaware as the premier court of general jurisdiction in the country for the fifth year in a row."
If you are interested in all the details, the Chamber of Commerce report is at www.instituteforlegalreform.org/harris/pdf/
2006_FULL_Report_FINAL.pdf.
[link should be all on one line, no spaces]

[frankcross]

You have to distinguish between Delaware courts. The Chancery Court of equity which handles most traditional corporate cases is regarded extremely highly. The Superior Court, which handles legal remedies is not considered bad but I doubt regarded as better than most other states.

These contracts would often yield merely legal remedies, as mergers are hard to unwind. In that context, I'm surprised there is so much choice of Delaware law and forum.