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Q&A: J. Travis Laster
Commercial Litigation Insider
On Wednesday, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery will appear in New York for the Commercial and Federal Litigation Section’s panel presentation during the New York State Bar Association annual meeting. He will participate in a panel discussion that will include New York and Delaware practitioners, as well as Associate Justice David Friedman of the Appellate Division, First Department, as they discuss the interplay of New York and Delaware law in resolving corporate and commercial disputes.
Q: How would you describe the relationship between the New York and Delaware business courts and how has it evolved?
A: I think the relationship is one of mutual respect. There have been a number of panels and conferences in recent years that have allowed Delaware and New York judges to interact, and organizations like the American Bar Association and the American College of Business Court Judges also provide opportunities.
I think there is a greater sensitivity, at least in the Delaware Court of Chancery, to the way decisions can be misperceived. The Court of Chancery has a long tradition of respecting the jurisdiction of other courts, largely for reasons Chancellor [William T.] Allen captured 20 years ago in Household v. Eljer. This is our approach not just for New York courts, but for all courts.
Q: We often hear the word “rivalry” come up in the context of the New York and Delaware business courts. As a jurist, what’s your take?
A: The judges do not see our courts as rivals at all. We in Chancery have plenty to do, perhaps too much to do. I suspect the New York court feels the same way. Judges simply don’t have any reason to see one another as rivals or to try to get more “business” than another court.
There are groups of people who do have an interest in claiming that one court might be better than another, and those are the lawyers who primarily practice in that court. Lawyers are wonderful people, and they have to make a living just like everyone else. If they can convince people that the court where they do most of their work is better, then they get more business. If there is any perception of the two courts as rivals, I suspect that is where it comes from.
Q: But there certainly seems to be a fair number of parallel actions in New York's Commercial Division and Delaware's Chancery Court.
A: Yes, but it is still only a fraction of cases. Commercial litigants are very sophisticated. They shop for the most favorable forum. If they feel they are not doing well in one court, they try to shift the litigation to a different court. Many businesses have ties to both New York and Delaware, so it’s natural that a litigant in Delaware would view New York as an alternative forum and vice versa.
But in recent years, there were one or two widely reported situations where cases involving the same subject matter went forward in both New York and Delaware, and unfortunately, the broader legal community saw those exceptions as the norm. We have tried to demonstrate to our fellow judges, and hopefully the broader legal community, that those situations were the exceptions.
Q: There is an established body of Delaware law the New York court often turns to. How influential has this jurisprudence been?
A: That’s a better question for a New York judge! New York has an extensive body of business law jurisprudence dating back to the 1800s. I would expect a New York court to start with New York law and only look elsewhere if the case presented a novel issue. If it did, then I would think a New York court might consider a Delaware decision as persuasive authority, but the Delaware case would have to be convincing in its analysis. I would not expect New York to simply adopt a Delaware rule—nor should they.
Q: How does the Chancery Court differ from New York’s Commercial Division?
A: One specific difference that springs to mind is the New York Commercial Division’s jurisdiction, which is broader than the jurisdiction of the Court of Chancery. The smart people who set up the Commercial Division clearly sat down and thought about what would make sense in terms of the types of cases that raise commercial issues. In Delaware, the Court of Chancery’s jurisdiction is primarily historical and largely determined by the jurisdiction of the English High Court of Chancery at the time of the separation of the colonies. If Chancery was a true “business court,” then there would be some commercial matters, like D&O insurance cases, that logically would go to the same court (us) that hears directors and officers’ liability cases.
Q: What can Delaware's court learn from its New York counterpart?
A: Delaware could learn from New York’s experience as a court with broader commercial jurisdiction and consider whether any tweaks in Chancery jurisdiction would make sense for us.
The Court of Chancery is always open to new ideas that might help us do our job better. One thing that the New York courts have done well is to actually study that question and try to answer it. Chief Judge [Jonathan Lippman]’s Task Force on Commercial Litigation in the 21st Century is an example of New York courts doing that [See report here]. Delaware can learn from that example.
New York is one of the world’s great commercial centers. Its courts should be an attractive forum for commercial litigators. There will never be a shortage of work for judges to do. Business people are not going to wake up tomorrow and start getting along without needing courts to decide their disputes. If New York develops practices that help resolve cases efficiently, Delaware and other jurisdictions can learn from that.
Q: What kinds of disputes typically come before the Chancery judges?
We mainly hear cases involving the internal affairs of business entities. A standard situation involves a conflict between investors on one side and management or other investors on the other. The one side believes the other has failed to live up to their agreement, either as set down in the documents that formed the entity, or as implied by law in the form of fiduciary duties.
Q: Does that mean there are specific areas of the law Delaware has really helped shape?
Delaware courts seek a large volume of business cases, particularly those involving mergers and acquisitions. Simply due to volume, we will always have influence in shaping that law. The Delaware Supreme Court also has issued important decisions on the implied covenant of good faith and fair dealing, including the duty to negotiate in good faith.
Q: Are there certain areas of law being challenged more often in the Chancery Court?
A: The number of cases involving LLCs and limited partnerships continues to grow. These entities started becoming common in the mid 1990s, and their popularity has only increased. There is a lag as business honeymoons decay into business divorces, and we are now seeing many LLC and limited partnership disputes. They are often tougher than corporate cases because parties have tried to tailor their relationship by contract, so each case presents a unique governing agreement.
Q: Delaware's Chancery Court is often noted for its swiftness in adjudicating disputes. Would you agree?
A: Our principal strength is our ability to move quickly when speed is needed. We have five judges who are committed to making expedited decisions when necessary, and we have the support of a deep and experienced bar that regularly handles expedited cases.
Q: Does that translate into a fair amount of attention on the court’s decisions?
A: The most challenging aspect (of this role) is the level of scrutiny that our decisions receive. Our work, including our transcript rulings, are read almost immediately by reporters, by bloggers, by Delaware lawyers who want to provide a service to other lawyers around the country, by other lawyers around the country who want to provide a service to their clients, and by the academic community. Inevitably people disagree with results that we reach. Issues that our court in years past might have dealt with quietly now get close attention. It’s a level of criticism that takes some getting used to.
Q: Delaware Chancery Court is also unique in that it hosts many New York practitioners whose cases are handled up there. What have you noticed are some of the key differences between New York and Delaware litigators?
A: The New York and Delaware litigators that we see are smart, well-prepared, highly motivated people. The main difference is that the Court of Chancery litigators are repeat players who have to stand up in front of the same five judges in case after case. As in any small community, reputational capital becomes very important. It has to be built up over multiple cases, but it can be lost in just one. Because of that, Delaware litigators, on the whole, are always concerned about their credibility with the court and with other Delaware litigators. They are very careful about what they say, they resist taking aggressive factual or legal positions, and they are less likely to act out during discovery.
The New York legal market is orders of magnitude larger, and there are many more judges. A New York lawyer may only appear before a particular judge in one case, and they may never litigate against opposing counsel again. When people don’t have repeat interactions, they don’t have the same checks on their behavior.
Q: What about the Chancery Court’s role in the country do you think is most important to preserve?
A: I believe that it’s essential for Delaware to maintain its credibility as a jurisdiction that is not tilted either in favor of management or the stockholders, but that calls issues down the middle based on the entity-specific agreements that the parties have reached. I have tried to do that. Another important role for the court that I take seriously is supporting the efforts of our bar to maintain its tradition of civility.
Q: You were only 39 when appointed to the bench in 2009. Were you daunted at all by the years and level of experience on the court?
I saw the job as a big responsibility, but not as something daunting. Because I had practiced for 14 years in the Court of Chancery, I felt like I knew what I was getting into. It was and remains a position that is challenging, exciting and rewarding.
Q: How would you describe the interactions among the jurists on the Chancery Court?
A: There is a high degree of collegiality among the judges on Chancery. The three of us who sit in New Castle County see each other every workday, and we see our colleagues from Kent and Sussex regularly. We will share thoughts on tough legal issues and pitch in to help each other with cases when necessary. I have covered the occasional hearing for my colleagues, and they have done the same for me.
Q: What’s been the most rewarding aspect of serving on the bench?
A: The most rewarding aspect of any job is the feeling that you are doing something important and contributing to something bigger than yourself. Being a judge is no different. I feel best when I have delved into a difficult situation, thought about it carefully, and given the parties the best decision I could. It may not be what one side wanted, or even what they both wanted, and I may turn out to be wrong on appeal, but I can sleep well as long as it was my best effort.
Q: Five years later, what have you learned the most as a judge? What do you wish you had known then that you know today?
A: Five years later, I am more sympathetic to small firm attorneys and solo practitioners than I was when I arrived on the court. I had the good fortune to learn the practice of law at Richards, Layton & Finger, one of Delaware’s largest and best-known firms. We litigated primarily against other large firms who had the resources to do things well. Even when I started my own small firm, we worked on cases with and against big firm lawyers, and we maintained high standards. Having been on the bench, I have now seen the wide range of resources that parties can bring to cases. It is not always possible for a small firm lawyer or solo practitioner to devote the resources to a case that a large firm could with a well-heeled client. I would like to be able to send myself an inter-temporal memo with that information. I would also give myself a heads up about the decisions where I’ve been reversed so I could try to get them right.
Suevon Lee can be reached at email@example.com and on Twitter @suevlee.