Delaware Corporate Law Changes Endanger Investors, Scholars Say

Delaware’s landmark corporate law overhaul earlier this year will undermine stability by handcuffing judges with rigid rules while inviting creative end runs by dealmakers, a group of scholars told the state’s top court Wednesday.

The eight professors behind the filing are weighing in on a shareholder case against a BlackRock Inc. affiliate that targets sections of the new law carving out a safe harbor for certain types of self-dealing and making portions of the bill retroactive. Their friend-of-the-court brief offered an ode to the arcane legal concept that defines Delaware’s elite business court: its status as an “equitable” tribunal designed for disputes that defy simple categories.

The coalition backing the legislation—corporate defense attorneys, private equity lobbyists, and the state’s political establishment—argued it would restore predictability to litigation outcomes, undoing the damage of a crackdown on conflicts of interest that’s driving corporate “DExits” to other states.

But while turning corporate planning into a check-the-box enterprise might make court fights easier to handicap, it would also transform the larger ecosystem into a Wild West for investors who will no longer be able to rely on judges to stop insiders from looting, the scholars said, throwing their support behind the legal challenge.

“Investors in Delaware corporations will find themselves subject to the whims of controlling stockholders and managers,” the professors said. “The outcome of a stockholder’s investment will turn not on longstanding principles of fairness, but whether a stockholder was lucky enough to have invested in a firm with beneficent managers.”

Corporate Culture War

The dispute—involving a wind farm acquisition by Clearway Energy Inc., which is controlled by a joint venture between Blackrock and TotalEnergies SE—reflects the latest flashpoint in a cultural cold war among competing corporate constituencies that periodically escalates into open conflict.

Gov. Matt Meyer (D) pushed the statutory changes at the heart of the case after news in February that high-profile firms including Meta Platforms Inc. were considering leaving the state, which funds a quarter of its budget with billions in fees on business entities. Delaware is home to two-thirds of Fortune 500 companies.

It’s still unclear if the trickle of departures will widen into a flood, despite 18 months of attacks on Delaware’s judiciary from Elon Musk and his allies following his a $56 billion court loss.

The new law, State Senate Bill 21—which Meyer signed in March after a fierce legislative battle—imposed a narrow definition of controlling stockholders, bolstered the presumption that board members are capable of independent oversight, and cut back investor access to corporate records.

Arguments against the legislation have surfaced in several shareholder suits, including the Clearway case. The retroactivity sections violate Delaware’s due process clause, while the dealmaking safe harbor is incompatible with a state constitutional provision prescribing the equitable jurisdiction of Delaware’s Chancery Court, they say.

Fast Track

Delaware Chief Justice Collins J. Seitz Jr. agreed to fast-track the Clearway matter in June, saying it would be more efficient for the high court to deliver a legally binding interpretation in the near term instead of waiting for the growing wave of challenges to reach the appeal stage. The move amped up the pressure on a five-member tribunal currently reviewing the ruling against Musk.

The Clearway case kicked off Aug. 1. Answering briefs are due Sept. 5 from the joint venture and Meyer, who intervened in the case to defend the law. Oral argument is set for Oct. 8.

The scholars are represented by Labaton Keller Sucharow LLP. The investor leading the lawsuit, Thomas Rutledge, is represented by Bernstein Litowitz Berger & Grossmann LLP, Equity Litigation Group LLP, and Morris Kandinov LLP.

The joint venture is represented by Richards, Layton & Finger PA. Meyer is represented by Potter Anderson & Corroon LLP and Wachtell, Lipton, Rosen & Katz. Clearway is represented by Young Conaway Stargatt & Taylor LLP and Gibson, Dunn & Crutcher LLP.

The case is Rutledge v. Clearway Energy Grp. LLC, Del., No. 248, 2025, amici brief filed 8/13/25.

A version of an AI summary at the top of this story was removed.