Survey Ranks Delaware Tops in Legal Climate

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By Michael Greene

Sept. 10 — Delaware is the best litigation environment in the U.S., according to a Sept. 10 survey released by the U.S. Chamber Institute for Legal Reform (ILR).

The 2015 lawsuit climate survey, conducted by Harris Interactive, polled 1,203 general counsel, senior attorneys and other senior executives at major companies.

Delaware has held on to the top spot since the survey was first conducted in 2002.

However, recent legal developments—including the state's adoption of legislation that prohibits “loser pays” bylaw and charter provisions in stock corporations—could put the state's top ranking at risk.

In Jeopardy?

Recent reports and commentators have suggested that Delaware's status as the preferred forum for corporate and commercial litigation could be in jeopardy. According to recent media reports, some Delaware corporations may consider leaving the state unless Delaware lawmakers find ways to limit abusive litigation, including lawsuits related to mergers and acquisitions.

ILR's 2015 survey was completed June 24, several weeks before Delaware law that restricts the ability of stock corporations to adopt fee-shifting provisions became effective.

The fee-shifting legislation was strongly opposed by critics, including the U.S. Chamber of Commerce, which argued that it eliminates an important mechanism that corporations can use to combat abusive lawsuits.

“The new fee-shifting law is not reflected in the rankings, and had it been, Delaware may have fallen in the rankings,” ILR President Lisa A. Rickard told Bloomberg BNA in an e-mail.

“State lawsuit perceptions don’t change overnight, and only time will tell if this law hurts Delaware’s long-term ranking,” she added.

Impacting Business Decisions

The survey also found that a state's legal environment is increasingly becoming important to general counsel and senior attorneys.

Three-quarters of the respondents said that “a state's litigation environment is likely to impact important business decisions” at their companies, which is up from previous surveys where 70 percent (2012) and 67 percent (2010) said so.

When asked to identify the most important issues for improving a litigation environment, the top answer was “eliminating unnecessary lawsuits” (32 percent), followed by “placing reasonable limits on discovery” (15 percent), “limiting punitive or other types of damages” (11 percent) and “increasing the effectiveness of judicial case management” (11 percent).

Low Ranked States

Meanwhile, the lowest ranked state in the survey was West Virginia.

The survey also found that several highly populated states continue to be perceived as unfavorable legal climates—California (47th), Illinois (48th) and Florida (44th).

In addition to the survey, the ILR released a guide that suggests legal reforms states can adopt to improve their lawsuit climate—“101 Ways to Improve State Legal Systems.”

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

The survey is available at http://www.instituteforlegalreform.com/uploads/sites/1/ILR15077-HarrisReport_BF2.pdf.

The guide is available at http://www.instituteforlegalreform.com/uploads/sites/1/101Ways_WebFile.pdf?utm_source=Institute_for_Legal_Reform&utm_medium=carousel_3&utm_campaign=R_101_Ways_to_Improve_State_Legal_Systems_909_KE.