Delaware Governor Defends Corporate Law Overhaul in Court (2)

Delaware Gov. Matt Meyer (D) moved Friday to enter a brewing court fight over the legal overhaul he spearheaded earlier this year shifting corporate power toward influential insiders like Elon Musk and Mark Zuckerberg.

Meyer sought permission to join litigation targeting Dropbox Inc.'s relocation to Nevada, one of several high-profile “DExits” that led him to introduce state Senate Bill 21 on an aggressive fast track. The changes lowering judge-made guardrails around self-dealing divided Delaware’s legal community during their six-week rollout but ultimately sailed through the legislature before taking effect March 26.

The state has a “strong and compelling interest in upholding, enforcing, and protecting its legislation and the Delaware franchise,” Friday’s filing said.

The move came as efforts to take the bill directly to the state supreme court—bypassing an initial trial-level ruling—gained momentum. The chief judge of Delaware’s elite business court, Chancellor Kathaleen St. J. McCormick, said May 22 that she favors letting the higher tribunal swiftly resolve uncertainty raised by the growing number of challenges confronting the law.

Shifting those questions to the state’s top court would pave the way for binding precedent in the near term. It would also ramp up the pressure on a five-member tribunal that’s currently weighing the closely watched appeal of McCormick’s landmark $56 billion ruling against Musk, who has spent the last 18 months publicly attacking her, including as recently as last week.

DExit Concerns

So far, three lawsuits have taken direct aim at a provision making much of SB21 retroactive and another section offering a safe harbor for dealmakers with conflicts of interest. Four other shareholders leading similar cases have submitted court filings asking Delaware’s justices to step in and determine the validity of a major overhaul that could affect dozens of pending cases.

The controversial legislation—introduced in mid-February—followed a panicked response to news that Dropbox, Bill Ackman’s Pershing Square Capital Management, and Meta Platforms Inc. were considering reincorporating away from Delaware. The state funds more than a quarter of its budget with billions in fees on more than 2 million business entities registered there.

Meyer, who took office Jan. 21, enlisted a panel of experts—including retired judges now practicing law at firms linked to Musk and Zuckerberg—to draft the bill. Besides introducing the safe harbor, the law reduced shareholder access to board member communications and strengthened a presumption that they’re capable of independent corporate oversight.

Backing the changes was a coalition of white-shoe corporate defense firms, private equity lobbyists, and the state’s political establishment, all sounding the alarm that unpredictable litigation outcomes were opening the DExit floodgates. The bill was aimed largely at reining in the know-it-when-I-see-it discretion of Delaware’s judiciary following a court crackdown on conflicts of interest.

‘Law of the Land’

Scholars, shareholder attorneys, and institutional investors mobilized unsuccessfully against the legislation. The investor lawsuits targeting SB21 say its retroactivity sections violate Delaware’s due process clause and its dealmaking safe harbor goes against a provision in the state constitution prescribing the jurisdiction of Delaware’s Chancery Court, the leading US forum for corporate disputes.

The governor’s motion to intervene in the dispute came about two weeks after the Meyer administration made a court appearance in its capacity as an “interested party” without formally seeking to join the legal fray.

Friday’s filing declined to take a position on which tribunal should weigh in first. But if McCormick does send the case to the state supreme court, she should let Meyer participate to vindicate the state’s “substantial interest in protecting the law of the land,” he said.

Meyer is represented by Potter Anderson & Corroon LLP. The pension fund leading the Dropbox case, the Plumbers & Fitters Local 295 Pension Fund, is represented by Prickett, Jones & Elliott PA and Kessler Topaz Meltzer & Check LLP. Dropbox is represented by Wilson Sonsini Goodrich & Rosati PC.

The case is Plumbers & Fitters Local 295 Pension Fund v. Dropbox Inc., Del. Ch., No. 2025-0354, 5/30/25.