Delaware Law Weekly‘s first article, published Nov. 10, 1998, analyzed current Court of Chancery Chancellor Leo E. Strine Jr.’s qualifications as a potential vice chancellor on the court he now leads. Exactly 15 years later, DLW published an article analyzing Strine’s qualifications as a potential Delaware Supreme Court chief justice.
Those two articles are bookends to how little things have changed in the Delaware legal community over the past 15 years. The state’s reputation as the preeminent corporate law venue remains intact despite challenges from other jurisdictions, prison overcrowding and improved sentencing remain a key concern among the legislature despite renewed efforts to address the problem, and the influx of out-of-state firms seeking to set up offices in America’s corporate capital continues.
Even the names have changed little over the past 15 years. The seventh issue of DLW focused on up-and-coming attorneys who will soon become household names. Two Young Conaway Stargatt & Taylor partners, Matt Denn and Jan R. Jurden, and W.L. Gore & Associates Inc.’s in-house counsel, Christopher A. Coons, were among the highlighted attorneys. Today, Coons is a U.S. senator, Denn is Delaware’s lieutenant governor and Jurden is a Superior Court judge and a candidate to become Delaware’s next chief justice.
An issue that has generated much discussion both then and today is Delaware’s Limited Liability Company Act and the explosion of alternative business entities formed under state law. Although Delaware first adopted the LLC Act in 1991, it was heavily revised in 1995 and 1997. In the past decade alone, LLCs and limited partnerships, or LPs, have exploded.
“Alternative business entities have given a broader scope of Delaware law available to people who want to do business here,” said former state Supreme Court Justice Andrew G.T. Moore, now an attorney at Gibbons P.C. “It’s been an impressive boom and is quite popular.”
Lawrence A. Hamermesh, a corporate law professor at Widener University School of Law, agreed that alternative business entity formation is one of the most important Delaware law developments over the past 15 years.
In 2003, 61,310 new LLCs and LPs were formed in Delaware, according to the state’s Division of Corporations. Last year, 111,376 new LLCs and LPs were formed in Delaware, an 81 percent increase. In both years, the number of traditional corporations launched under state law was roughly 32,000.
“The sheer number of entities formed is significant,” he said. “It exceeds traditional corporations.”
One reason why alternative entity law has been so important is the Delaware General Assembly has constantly tinkered with the LLC Act. For example, in 2008, the act was revised to broaden the Chancery Court’s jurisdiction over alternative entities as well as to provide a stricter definition of an LLC manager.
The most important change, however, may have been adopted in April when the LLC Act was amended to confirm and clarify that default fiduciary duties apply in the absence of a provision in the LLC agreement eliminating such duties. Default fiduciary duties among alternative entities was an issue that had been hotly contested for years. In fact, in 2012, the Supreme Court and Court of Chancery sparred over the issue through their opinions in Gatz Properties v. Auriga Capital.
Another development on the corporate side that has been significant to Delaware is the issue of multijurisdictional litigation, also known as venue shopping. In a fairly recent trend, plaintiff shareholders file suits against a Delaware corporation in multiple jurisdictions, in the hopes of pressuring corporations to settle because the non-Delaware venues are perceived as friendlier to shareholders.
“The advent of multiforum shareholder litigation has been a remarkable and new substantial phenomenon,” Hamermesh said. “We are still evolving responses to it.”
One of the responses that was a watershed on the subject was the Chancery Court’s ruling earlier this year in Boilermakers Local 154 Retirement Fund v. Chevron. In the decision, the court upheld the right of Delaware corporations to adopt exclusive forum provisions requiring any shareholder lawsuit to be filed in the Chancery Court. Previously, Delaware courts would heavily scrutinize such suits by invoking Chancery Court Rule 23.1, requiring shareholders to make a demand on the board before initiating litigation.
On the criminal side, the issue of prison overcrowding still remains as hot an issue as it was 15 years ago. Delaware has begun to combat the burden placed on state correctional facilities by improving pretrial supervision through the Justice Reinvestment Task Force’s 2012 recommendations. The General Assembly passed a legislative package last year based on the JRI’s recommendations and has begun to measure the impact of its reforms.
“I think when there is less support for individualized punishment and the decision-making is placed up front, it really ties the hands of the judges at sentencing,” said Chrysanthi S. Leon, a professor of sociology and criminal justice at the University of Delaware. “The judges have felt compelled to give longer sentences and that means people are spending more time in prison.”
The JRI, a task force created by Gov. Jack Markell in 2011, has sought to address the problem of prison overcrowding by improving pretrial supervision of offenders. Perhaps the most sweeping measure implemented by the JRI is the adoption of pretrial risk assessments to gauge an offender’s risk of flight and arrest. It allows judges to craft sentences based on the offender’s risk of recidivism.
While Leon was complimentary of the JRI’s recommendations, she said more reforms are needed, such as giving judges more discretion with sentencing.
“We need broader changes to see a greater impact,” she said. “A number of little programs may add up to something else, but a larger policy shift is what we need.”
Improving the arrest and prosecution of sex offenders has been an important issue in Delaware over the past few years, especially in the wake of the Earl Bradley case. Bradley, a Lewes pediatrician, is said to be the nation’s worst pedophile, and was convicted of molesting hundreds of his patients.
“The Bradley case was a total anomaly,” Leon said. “The typical sex offender is nothing on that scale.”
One year after Bradley’s 2009 arrest, the General Assembly passed nine bills with the goal of improving how sex offenses are reported as well as requiring more stringent background checks for physicians. Under the legislation, children can only be examined by a doctor when a chaperone is present.
However, efforts to keep kids safe began two years before anyone was aware of Bradley. In 2007, Attorney General Beau Biden created the Child Predator Task Force Unit to investigate online child exploitation. Since the unit’s formation, it has grown to include 35 local police forces, 800 investigations, executed more than 300 search warrants and secured more than 150 convictions.
Biden followed up the Child Predator Task Force Unit earlier this year with the creation of the Child Victims Unit, a specialized division within the Department of Justice that will focus on violent crimes against children, including all child death cases and life-threatening crimes committed against a child. The new unit will serve as the Department of Justice’s first contact with the police and victim and will be involved in every stage of child protection from the initial criminal investigation and sentencing to reviewing current laws and recommending legislation.
It is interesting to note that both the earliest and most recent issues of DLW feature articles on these corporate and criminal issues, proving that as things change in Delaware, things also stay the same.