By Paul A. Reynolds, Partner of Shustak Reynolds & Partners, P.C. posted on Tuesday, March 11, 2025.

Paul A. Reynolds

Partner

Location: San Diego, California
Phone: (619) 696-9500
Direct: (619) 225-7422
Email: [email protected]

In December of last year, I was fortunate to try a case in the Delaware Court of Chancery, generally regarded as the world’s foremost court for the resolution of intra-corporate disputes.

This article will provide some background about the Court and discuss its practices and procedures, a number of which make it a highly desirable forum for matters within its jurisdiction and expertise.

Choice of Law and Forum Issues

I have been litigating Delaware law my entire career given the prevalence of Delaware-incorporated (corporations) or formed (limited liability companies or limited partnerships) business entities. This is due to choice of law provisions or, even more so, application of the Internal Affairs Doctrine—a choice of law principle that selects the law of the state of incorporation/formation for internal disputes amongst the various constituencies of corporations, LLCs, and LPs.

Although I have litigated numerous cases before the Court, this was the first time I had a case before it that made it all the way to trial. Neither choice of law—as opposed to choice of forum— provisions nor the Internal Affairs Doctrine speak to forum; and only recently have some entities started putting choice of forum provisions selecting the state of incorporation/formation in their constitutive documents. Indeed, in my case, there was no such provision, but we (representing one of the plaintiffs in this particular case) brought it in the Court of Chancery, even though it could have been filed in San Diego Superior Court as the company at issue was based here, because we believed its expertise was desirable for the dispute. (Even if your client does not have affirmative monetary claims, you may still choose to file a declaratory judgement claim before the Court if your adversary has not already filed an action in another proper jurisdiction.) To have the option to file an action before the Court, of course, it must have subject matter and personal jurisdiction, which is discussed below.

You will also need to apply for pro hac vice and also retain Delaware counsel (NB: it is always “Delaware counsel,” and never “local counsel”).

The Court’s Jurisdiction

Delaware has maintained the system of bifurcated courts of law and equity that existed in Great Britain at the time of the United States’ founding and was common within the U.S. for a time thereafter—but which has since been merged into single unified court systems in 46 of the 50 states. As such, the subject matter jurisdiction of the Court of Chancery is limited to issues of equity. Under Delaware law, corporate directors and officers (and, depending on the relevant constitutive documents, managers of LLCs and general partners of LPs) are considered to manage the company’s assets as fiduciaries for the company’s shareholders or their alternative entity equivalents, just as the trustee of a trust does for its beneficiaries. As such, claims for breach of those duties are inherently equitable, just as they are in the trust context, and are thus within the subject matter jurisdiction of the Court. The Court of Chancery has also been legislatively granted subject matter jurisdiction over certain other disputes, for example as “to interpret, apply, enforce or determine the validity of" various corporate instruments, including certificates of incorporation, bylaws, stock purchase agreements, proxies, and merger agreements, among others, see 8 Del. Code § 111(a), as well as analogous documents relating to limited liability companies and limited partnerships, see 6 Del. Code §§ 17-111, 18-111. In addition, it has subject matter jurisdiction over actions for advancement of attorneys’ fees or indemnification brought against a Delaware entity or its fiduciaries. Finally, the Court can hear declaratory judgement actions, but only to the extent that the issue at hand is otherwise within the Court’s subject matter jurisdiction.

As for personal jurisdiction, it will exist over any Delaware-incorporated or formed entity and any of its fiduciaries. 

The Development and Appeal of the Court’s Special Expertise and Resources

In the early 1900s Delaware began competing against other states (most notably New Jersey) to charter corporations. One of the ways it did that was advantageous corporate taxation. Another was to create a statutory body of law relating to corporations that was considered clear, flexible, and fair. A third was to invest resources in the Court of Chancery to make it an expert in intra-corporate disputes. The state succeeded wildly in this regard, and Delaware is now by far the most common choice for U.S. incorporation or formation, both for publicly traded and privately held companies.

On the issue of the Court of Chancery’s special expertise, the Chancellor and Vice Chancellors in the Court of Chancery are now and historically have been chosen from practitioners who have specialized in these kinds of disputes for their entire careers at the at the highest level. Further, the Court of Chancery is very generously funded given its importance in generating tax revenue though encouraging Delaware incorporation or formation, and as such enormous resources in terms of support staff, law clerks, and the like. These things have both led to the Court’s opinions being extremely detailed and nuanced no matter their often mind-numbing complexity; it is common indeed for an opinion from the Court to exceed 100 pages and have hundreds of footnotes containing copious citations. And there has developed over the years a mind-bogglingly large volume of these opinions. This extremely extensive and nuanced body of case law, applied by world experts on the subject matter, is perceived by many to provide greater predictability of outcome than if the cases were filed elsewhere.

In short, if one has a complicated matter within the Court’s subject matter and personal jurisdiction, and one wants to ensure as best as possible that the correct outcome, based on the current law, is reached, one will generally choose to file the action before the Court, even if other courts are also available. (I am not referring to certain public company contingency fee litigation here; the Court of Chancery has stopped approving “notice only” settlements of shareholder derivative and class actions challenging M&A activity and, as such, the members of the bar in that line of work have started filing those sorts of cases in other jurisdictions.)

Pre-Trial Procedures

The Delaware Rules of Civil Procedure mirror the federal rules, making it easy to practice them if one is familiar with the federal counterparts.

As the Court is very familiar dealing with large, complex matters, it tends to be very pragmatic in terms of making pretrial procedure flexible to suit the particular case before it (much like the complex divisions within some California Superior Courts). Much of the procedure specific to the case is handled by lengthy stipulations and orders, negotiated between the parties and covering many topics in detail. These include stipulations and orders governing (a) pretrial and trial dates and cutoffs, (b) expert discovery, (c) the production and exchange of confidential information, and (d), ultimately, trial preparation and trial itself. These documents tend to cover the relevant topics in great detail, often far more granular than required by the relevant rules of procedure themselves.

Likewise, because the Court has substantial resources, it is ready and willing to resolve disputes the parties are unable to themselves—including through promptly resolving discovery disputes through minimum briefing and brief telephonic hearings. (Fortunately, we only had one of these in the three years of our litigation.)

In that regard, the ethos of the Court, and the Delaware bar, is collaborative, collegial, and extremely respectful; there is little tolerance for lawyers who do not consistently adopt and comply with this aspect of practice.

Delaware has enacted the Uniform Interstate Depositions and Discovery Act (as all but four states currently have), which generally makes document and deposition subpoenas of out-of-state witnesses easy to obtain. We ended up taking nearly 20 depositions of witnesses throughout the country and the world, most of which were accomplished remotely using video and exhibit sharing software. This was important, as only a handful of the witnesses could ultimately be compelled to testify at trial.

Trial

As a court of equity, there are no jury trials before the Court of Chancery. But that said, they function quite differently in some respects than bench trials in California state or federal courts. For one, there are no opening statements; rather, there are pre-trial briefs. These briefs are lengthy—ours clocked in at nearly 90 pages—and go into great detail on the facts, and the specific documentary and deposition evidence supporting them, as well as law.

The Delaware Rules of Evidence are essentially identical to the federal rules. But given that trials before the Court are bench trials, objections are, in practice, rarely interposed. This is in part because the pre-trial orders usually provide, as did ours, that all objections, for testimony or documents, are preserved until the post-trial brief. Although the Court is fairly formal in some respects—one must stand and remain standing while the Chancellor takes and leaves the bench, for example—it is relatively laissez-faire with respect to rules regarding witness examination. For example, the traditional impeachment with prior testimony process need not be followed; it is enough to simply read the impeaching prior testimony.

As noted, the legislature provides the Court of Chancery with enormous resources. At trial, these include large, state-of-the-art court rooms, multiple law clerks, and stenographers; the resources are comparable to, or even exceed, those in federal courts. We took advantage of the AV capabilities by having our AV technician run the many edited videotaped depositions we presented while bringing up concurrently the relevant pages and highlighting text on the exhibits the deponent was discussing. This was played on a large screen in the court room, as well as individual video monitors for counsel, the Vice Chancellor, and her two law clerks. All three of them paid extremely close attention throughout the trial, continuously taking copious notes on their laptops.

The Court’s rules also required a joint exhibit list, which could be supplemented during trial, as well as hard-copy binders of all exhibits. Although not required, we also prepared individual witness binders for both live and video witnesses that contained the exhibits they had been (videotaped) or were going to be (live) questioned about; for the taped witnesses, we included a conversion table that correlated the deposition exhibit number with its Joint Exhibit number.

Our case was limited to 15 hours of evidence presented per side—which covered five court days. The large number of witnesses we presented made it difficult to stay within our limit, but with a significant amount of time spent editing and re-editing the testimony of the witnesses presented via video deposition to what was truly important, and editing out long pauses and the like, we were able to just squeeze under the wire. Further, having these excerpts tightly edited helped, I am sure, keep the Vice Chancellor and her law clerks engaged.

The primary defendant is currently not allowed to enter the U.S. and also is not fluent in English, so we stipulated he could testify by video remotely from his house in Monaco, with functionality to be shown exhibits (we had a few key documents translated into Ukrainian). A translator was retained and was present in the court room to translate questions and answers as well as relevant parts of exhibits we had not had translated. This process worked as well as one could have hoped under the circumstances.

There are no closing arguments in the Court; instead, there is post-trial briefing. So, after our opponent finished presenting evidence just before lunch on Friday, we were done with trial.

Post-Trial

About a week after trial, the Vice Chancellor sent us a lengthy letter, as she said at the end of trial she would, that: (a) asked a series of very specific legal and factual questions to be addressed in post-trial briefing; (b) requested a series of timelines and charts be prepared and submitted addressing board composition and stock ownership; (c) asked whether certain specific documents or types of documents were in evidence and, if so, for us to identify them by Joint Exhibit number and, if not, to submit them (evidence was held open for this purpose, subject to objection in the post-trial brief); and (d) asked for certain key emails and other documents to be submitted in native format, including the native Excel files of our damages expert’s models.

We then stipulated to a post-trial briefing schedule, consisting of three rounds. We filed our opening brief in late February of this year; the Court will hear argument following the full round of briefing in mid-May. About 90 days after that, we can expect a very lengthy and detailed written ruling (likely over 100 pages).

The ability to make very detailed and precise written arguments, with citations to evidence and law, is, in my view, far superior in a complex case as compared to having to get up and deliver a closing argument orally following the examination of the last witness. This procedure is one of the best aspects of practice in the Court as it is far more likely to lead to the various arguments being made as well as they can be, and more likely to lead to the correct outcome, win or lose. (In fact, I would strongly consider using this process in arbitrations in the future.)

Conclusion

All-in-all, it was a wonderful experience to try a case in the Court, and I look forward to doing so again. If you have a matter within the Court’s jurisdiction that you think would benefit from the Court’s resources and expertise, you should absolutely strongly consider filing your action in the Court of Chancery.

 *Originally published in the Association of Business Trial Lawyers' 2025 Q1 Report. Republished with permission.

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