The “First State” No Longer First in Corporate Litigation

The “First State” No Longer First in Corporate Litigation

By Michael V. Gattoni

For the past 15 years, the U.S. Chamber Institute for Legal Reform has conducted a “Lawsuit Climate Survey,” polling in-house general counsel, senior litigators or attorneys, and other senior executives at U.S. companies with at least $100 million in annual revenues. Each person polled must be knowledgeable about corporate litigation matters at their companies, as well as have first-hand, recent litigation experience in each state they evaluate.

This year, for the first time since the commencement of the survey, Delaware has fallen in ranking from 1st to 11th as the state with the most fair and reasonable liability system in the US. The new state holding the acclaimed first spot? South Dakota.

South Dakota’s favorable tax rates may play some part in the states appeal for corporations. Business inventory tax, corporate tax, income tax, and franchise tax are non-existent in the state.

Corporate litigation is a significant source of income for Delaware. Businesses that choose to incorporate in Delaware pay taxes and fees to the state. That accounts for nearly one-third of the state’s budget.

Delaware’s past year’s legislative decisions, specifically a 2015 decision to bar companies from adopting bylaws requiring a plaintiff who unsuccessfully sues a company to pay the legal fees accrued, may be part of the reasoning behind the states decline. Another complaint mentioned in the survey was that Companies were unhappy with the aggressive way in which the state enforced its unclaimed property laws.

“Delaware Secretary of State Jeffrey Bullock said the state has worked hard to update its business statutes, including reforming its unclaimed property laws. Bullock noted that the number of Fortune 500 companies incorporated and Delaware and number of initial public offerings launched in the state are at record levels.”(Mordock,

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Click here for the 2017 Lawsuit Climate Survery