The State of Delaware's Civil Justice System

Introduction

When you think of Ford, GM, or Chrysler, what state comes to mind? Michigan, of course. No other state is as synonymous with the auto industry as Michigan. You might be surprised to learn that despite their close ties to Michigan, none of the “Big Three” are actually Michigan corporations. Instead, Ford, GM, and Chrysler are incorporated in the state of Delaware.

Because Delaware was the first of the original Thirteen Colonies to ratify the Constitution, Delaware calls itself “The First State.” And Delaware is the first state corporations choose for incorporation. Over half of all U.S. publicly traded corporations, and over half of the companies in the Fortune 500 are incorporated in the state of Delaware.

Because so many corporations are incorporated there, Delaware is often referred to as a “corporate haven.” Delaware got its start as a corporate haven at the close of the nineteenth century when Delaware passed a general corporation act that greatly eased the process of incorporating. Prior to this act, obtaining a corporate charter required approval by the state legislature, and even if granted, the corporate charter would expire at the end of twenty years.

The general corporation law passed in Delaware in 1899 allowed corporations to exist perpetually, removed the requirement of legislative approval, and helped transform the corporation from a public improvement organization to a for-profit organization. For over one hundred years, Delaware has proven to be a safe, fair, and profitable home for some of America’s most important business enterprises. To do so, Delaware legislators have consistently worked to ensure that Delaware’s court system has been fair to – but not biased in favor of – Delaware corporations.

The Institute for Legal Reform

The U.S. Chamber Institute for Legal Reform (ILR) was founded in 1998 “to address the country’s litigation explosion” and works to “neutralize plaintiff trial lawyers’ excessive influence over the legal and political systems” as well as to “enact common sense reforms to ensure fairness in liability lawsuits.”

The ILR spends in excess of $20 million per year lobbying for various “reforms” to the civil justice system and was instrumental in passing the Class Action Fairness Act of 2005. It is disputed whether the ILR aims to make the civil justice system more fair, or to make it unfair to plaintiffs is hotly disputed. What cannot be disputed is that the ILR works to pass legislation that limits the liability of corporations and other businesses.

A key weapon the ILR uses in its efforts is a yearly study which ranks “how reasonable and balanced” each state’s liability system is. The ILR issued the first “U.S. Chamber of Commerce State Liability Systems Ranking Study” in 2001, and released the 2007 study in April of this year.

Delaware’s Justice System is Ranked Best in the Nation

Some may argue that Delaware’s legal system needs to be altered, but such an argument ignores the work of the ILR. From 2001 to 2007, the ILR has consistently ranked Delaware as having the best legal climate in the nation. The ILR ranks states broadly, as well as in individual categories. Since Delaware was ranked number one overall, it stands to reason it did well in individual categories as well. It did.

In both 2006 and 2007 Delaware ranked first in the nation for:

• Overall treatment of tort and contract litigation – According to the ILR, no state in the land has a fairer tort system. This is hardly evidence that Delaware needs legal “reform.” Those who suggest otherwise should recall the aphorism “If it ain’t broke, don’t fix it.”
• Treatment of class action suits and mass consolidation suits – While class action lawsuits may be a problem elsewhere in the nation, the ILR found that in Delaware they are not. Remember, the ILR led the successful charge for nationwide class action reform.
• Punitive damages – Corporations fear few legal remedies more than the award of punitive damages; according to the ILR they need not fear them in Delaware.
• Timeliness of Summary Judgment or Dismissal – Clearly, Delaware’s courts are the best in the nation in spotting and eliminating frivolous lawsuits. This is no doubt the result of fair and balanced rules of civil procedure.
• Discovery – Abusive discovery practices can cost a corporation dearly. Thankfully, Delaware’s courts ensure the discovery process is fair to all parties. Once again, Delaware’s rules of civil procedure are working to the benefit of all litigants.
• Scientific and Technical evidence –So-called “junk science” is purported to support bogus lawsuits across the country. Delaware’s judges understand how to properly apply the Daubert standard and ensure junk science doesn’t corrupt Delaware’s court system.
• Noneconomic damages – Delaware’s judges and juries understand better than those in any other state how to fairly award noneconomic damages. The temperance of Delaware citizens is to be commended.
• Judges’ Impartiality – Despite Delaware’s reputation as a “corporate haven,” its judges are not beholden to corporations, but to the fair administration of justice.
• Judges’ Competence – Every citizen in Delaware should take pride in the fact their state has the most competent judges in the nation.

While Delaware’s rankings in individual categories have fluctuated from year to year, Delaware has always been ranked by the ILR as having the best justice system in the country.

For six years straight, Delaware has been ranked as having the best civil justice system in the country by the U.S. Chamber of Commerce. This is strong evidence that any “reforms” to Delaware’s civil justice system are unnecessary. Moreover, such “reforms” may have unintended consequences that compromise Delaware’s fair justice system.

First vs. Worst

As impressive as it is for Delaware to have consistently been ranked as having the best justice system in the nation, it’s even more impressive in light of the amount of tort “reform” enacted in Delaware. Delaware has passed only three “reforms” to the civil justice system, all dealing with medical malpractice.

Contrast Delaware’s three “reforms” with the 53 of Texas and the 19 of West Virginia. Each state consistently ranks in the bottom five of ILR’s study. The “reforms” passed by those two states are included in the appendix. They run the gamut from damage caps to contingency fee reforms to modifying rules of civil procedure. Year after year, these states pass laws advocated by the ILR, yet year after year these states are said to have the worst civil justice systems in the nation.

The Institute for Legal Reform isn’t the only group to rank Texas and West Virginia as having terrible civil justice systems. The American Association for Justice (AAJ) also ranks Texas and West Virginia as having the worst civil justice system in the country. However, the AAJ is comprised mainly of the plaintiff trial lawyers the ILR opposes. These groups have completely opposite ranking methodologies, yet both groups agree that Texas and West Virginia’s civil justice systems are horrible.

Texas and West Virginia’s experiences with tort “reform” unequivocally demonstrate that “reforming” a state’s liability system by restricting the rights of the injured is not an effective way to bring fairness to the courts. If it were, Delaware would be near the bottom the ILR’s rankings, and Texas would be near the top.

The Real Reason to “Reform” Delaware’s Court System

Since Delaware has such a fair justice system, what possible reason could there be to modify it? Precisely because Delaware’s justice system is so fair.

In March of this year, a New Castle County jury unanimously found in favor of a brake technician who sued General Motors and Ford after he developed asbestosis from years of exposure to brake and clutch components with asbestos. The jury fairly awarded $2 million dollars to Roland Grenier, who was so critically ill that he could not attend the trial. Unlike many juries in asbestos trials, the Delaware jury did not award punitive damages.

In and of itself, this relatively small jury award would not be cause for alarm. But the manufacturers who fund the ILR are worried that more asbestos cases will find their way to Delaware’s courts. Due in part to the volume of asbestos litigation, many plaintiffs are now limited in the venues in which they may bring mesothelioma and other asbestos-related lawsuits. Those plaintiffs who for whatever reason are unable or unwilling to bring their suits in their own state are beginning to use a centuries-old doctrine that allows corporations to be sued in their home state. And since “The Big Three” and countless other companies with asbestos liability are incorporated in Delaware, Delaware courts may be used more often in asbestos litigation.

There are of course thousands of pending and potential mesothelioma lawsuits across the country. Many of the lawsuits are against the same entities, entities which knowingly allowed their workers to be exposed to asbestos. And the last thing those entities want is to be brought before the fair judges and juries of Delaware. So rather than take the risk that Delaware juries will make more fair awards, some companies with asbestos liability are working to tie the hands of Delaware’s judges and juries under the name of “reform.”

Conclusion

The fact is that Delaware has and has always had a remarkably fair and balanced justice system – a fact proven by the ILR’s own studies for the past six years. Texas and West Virginia are two states which both the ILR and the AAJ condemn, and both states have enacted numerous “reforms.” Again, if “reforms” worked, Delaware would be consistently ranked as having one of the worst civil justice systems instead of the best.

Perhaps Delaware jurors may not be kind to future asbestos defendants. But it is simply unfair to tie the hands of Delaware judges and juries to prevent them from fairly treating future plaintiffs in future litigation.