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Comparison of LLC Statutes

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Court System: Who Will Hear My Case?

At times, even with careful planning and drafting, business relationships may turn sour and amicable resolution impossible.  This is where being a Delaware entity might prove to be decisively advantageous.  Delaware houses the nation’s oldest business court, the Delaware Court of Chancery established in 1792.[1]  As a court of equity, it has broad jurisdiction over disputes involving the internal affairs of Delaware business entities and has developed a respected body of case law interpreting Delaware business law.[2]  Moreover, cases are heard by judges, as opposed to jurors, who are well versed in business law, making it more likely than not that the outcomes are consistent, well-reasoned, and predictable.  Indeed, members of the Delaware Court of Chancery are often hand-selected for their deep knowledge of business law.

With the preeminence of the Delaware Chancery Court, other jurisdictions began to follow suit.  In 1993, New York City began a pilot program assigning business and commercial disputes to an individual judge for a case’s duration, as opposed to the master calendar system with the possibility of multiple judges handling different aspects of the same case.[3]  This became what is now known as the Commercial Division of the New York Supreme Court (which is the state’s trial court and not the highest court in the state).  Unlike the Delaware Chancery Court, however, the Commercial Division hears both law and equity cases, as long as the case meets the minimum jurisdictional amount (generally ranging from $50,000 to $500,000, depending on the county, exclusive of punitive damages, interests, costs, disbursements, and counsel fees claimed).

Texas, on the other hand, does not have a specialized business court.  At least not yet.  Only days before this writing, a house bill was introduced calling for the creation of specialized business courts,[4] so it might just be a matter of time before we see a Delaware-type court of chancery in Texas, though we have doubts on whether it will be as deep and specialized as the Delaware court.  While we have seen other states have business-type courts, we have not seen any state put the attention and focus into this court system that Delaware does.

This post was a part of a multi-post blog series on comparison of LLC statutes.  You can find the other posts by searching our blogs.  In our next post, we will discuss other things you may want to consider in these states.

 

This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

About the Author

Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: (214) 418-0258; shawn.mcbride@rsmlawpllc.com, or www.mcbrideattorneys.com.

[1] Donald F. Parsons and Joseph R. Slights III, The History of Delaware’s Business Courts: Their Rise to Preeminence (ABA Business Law Section, Vol. 17, No. 4, Mar./Apr. 2008), http://apps.americanbar.org/buslaw/blt/2008-03-04/slights.shtml (last visited Feb. 27, 2015).

[2] Id.

[3] L. Applebaum, The “New” Business Courts: Responding to Modern Business and Commercial Disputes (ABA Business Law Section, Vol. 17, No. 4, Mar./Apr. 2008), http://apps.americanbar.org/buslaw/blt/2008-03-04/applebaum.shtml (last visited Feb. 27, 2015).

[4] See generally Tex. H.B. 1603, 84th Legis.

Posted In: Choice of Entity, LLC, Uncategorized

Facebooktwittergoogle_pluslinkedinmailAbout the Author Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can email or call (214) 418-0258.

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