Delaware Top Court Will Review Major Corporate Law Overhaul (1)

Delaware’s top court agreed Wednesday to swiftly review this year’s controversial overhaul of the state’s corporate laws, which set the nationwide tone on board battles, merger fights, executive liability, and shareholder rights.

Chief Justice Collins J. Seitz Jr. said the state supreme court will directly consider a dealmaking safe harbor created by state Senate Bill 21—along with another section of the statute making parts of it retroactive—instead of waiting for them to come up on appeal. After taking effect in late March, the provisions are already confronting a growing wave of legal challenges.

“There are important and urgent reasons for an immediate determination,” Seitz wrote in a brief order. Less than an hour later, Gov. Matt Meyer (D)—who spearheaded the legislative blitz in February—said in a filing that he’d gotten permission from a lower court judge Tuesday to formally defend the statutory changes, which divided Delaware’s usually tight-knit legal community.

Meyer signed the bill March 25 after an aggressive six-week rollout sparked by news that Dropbox Inc., Meta Platforms Inc., and several other high-profile businesses were weighing corporate departures, a phenomenon dubbed “DExit.” The governor also nodded to concerns raised by Elon Musk, who has spent 18 months attacking Delaware’s judges after losing a $56 billion court ruling that prompted Tesla Inc. to reincorporate in Texas.

SB21 lowered key judge-made guardrails around insider conflicts of interest, reining in the know-it-when-I-see-it discretion of judges on Delaware’s elite business court. It was backed by the corporate defense bar, private equity lobbyists, and the state’s political establishment, all sounding the alarm that a court crackdown on self-dealing was leading to unpredictable litigation outcomes and opening the DExit floodgates.

Shareholder attorneys, scholars, and institutional investors unsuccessfully opposed the legislation, which added not just the safe harbor but also provisions curtailing shareholder access to board communications, strengthening a presumption that directors are capable of independent oversight, limiting the remedies available to investors challenging corporate transactions, and adopting a rigid definition of controlling stockholders.

It sailed through the legislature after bypassing the ordinary process for amending Delaware corporate law, instead going through an expert drafting panel enlisted by the governor that included prominent former judges now practicing law at major firms linked to Musk and Mark Zuckerberg. One of the firms in the room—Wachtell, Lipton, Rosen, and Katz—is now leading Meyer’s defense of the overhaul.

About a week after Meyer signed the changes into law, a pension fund suing Dropbox over its corporate exodus lodged the first court challenge to SB21. The shareholder lawsuit—soon followed by several others—said the retroactivity section violates Delaware’s due process clause, while the safe harbor goes against a state constitutional provision prescribing the jurisdiction of Delaware’s Chancery Court, the leading US forum for corporate disputes.

The first of those cases to reach the Delaware Supreme Court concerns a wind farm acquisition by Clearway Energy Inc., controlled by a joint venture between BlackRock Inc. and TotalEnergies SE. The other parallel disputes are now being put on hold pending a decision from the justices.

The investor leading the Clearway case, Thomas Rutledge, is represented by Bernstein Litowitz Berger & Grossmann LLP, Equity Litigation Group LLP, and Morris Kandinov LLP. The joint venture, Clearway Energy Group LLC, is represented by Young Conaway Stargatt & Taylor LLP and Gibson, Dunn & Crutcher LLP. In addition to Wachtell, Meyer is represented by Potter Anderson & Corroon LLP.

The case is Rutledge v. Clearway Energy Grp. LLC, Del., No. 248, 2025, 6/11/25.