Andrew here. To kick off the week, I’ve been digging into a new study quietly making its rounds in corporate boardrooms. The analysis suggests Delaware’s judiciary has created a veritable fee machine for lawyers, raising pointed questions about the state’s long-held status as the preferred incorporation haven.
Meanwhile, investors are focused on new comments from the White House and China on the tariff battle. And my colleague Danielle Kaye has uncovered some truly counterintuitive implications within a provision in Republicans’ budget bill that limits states’ ability to regulate A.I. — with far-reaching consequences.
What are Delaware judges doing?
Delaware’s decades-long pitch to corporate America is simple: It offers predictable judges, light-touch politics and fast decisions.
But a new study making the rounds in boardrooms — and loudly promoted by the prominent venture capitalist Bill Gurley — finds reasons for Corporate America to reconsider its reliance on courts in the First State.
A fee factory? The study, by the well-known Stanford law professor Joseph Grundfest tallied every shareholder case since 2000 in which lawyers won fee “multipliers” of 7 times (“septuples”) or 10 times (“decuples”) their normal hourly rate from big corporations.
Here’s what it found:
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Delaware produced 21 septuples and 14 decuples, almost matching the entire federal system on septuples and nearly triple on decuples.
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This trend has increased over the past five years: Septuple fee awards have been 23 times more common in Delaware than in federal court. Decuples were 57 times more common.
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One payout for a lawyer practicing before Delaware’s Court of Chancery worked out to an astonishing $35,000 an hour. Some lawyers are walking away with multipliers of 66 times their standard rates.
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Just two chancery court judges handed out a majority of those supersize awards, so it matters which judge you get.
“Something is awry in Delaware and you should know the risks,” Gurley, the Benchmark Capital partner who invested in Uber, wrote on X. He has been critical of Delaware and supported what like-minded critics call DExit.
Why it matters: A Delaware judge’s decision to void Tesla’s $56 billion pay package for Elon Musk helped prompt the billionaire to persuade shareholders to redomicile the carmaker in Texas and urge other companies to follow suit. (He reposted commentary about Gurley’s post.)
Meta is now exploring a jump from Delaware to Texas or another state. Walmart has reportedly told Delaware lawmakers it, too, might exit. SpaceX already followed Tesla, and at least a dozen other companies are weighing moves to Nevada or Texas this year. (Delaware this spring enacted a new law meant to dissuade companies from leaving.)
The study’s author says he isn’t advocating a view.When I spoke to Grundfest on Sunday, he said, “I’m not drawing any inferences. I’m not telling anybody what it means. The data is the data.”
But if you know Grundfest — who has taught corporate directors how to be directors for 30 years and long weighed in on all sorts of governance issues — the study can be seen as a shot across the bow of Delaware’s activist approach.
The study has its critics, however. It’s a small sample size to begin with, said Joel Fleming, a partner at Equity Litigation Group who represents investors. Several of the cases the authors include are not actually Delaware fee awards, he said; moreover, the methodology for federal cases is different.
(Grundfest, in response to Fleming’s criticism, told me that “Even if we made all the adjustments that Fleming suggests — adjustments that are objectively unwarranted — Delaware would still remain an outlier on an empirical basis.”)
The authors undercounted the percentage of federal cases with big so-called lodestar attorneys’ fees, Brian Fitzpatrick, a law professor at Vanderbilt University who has studied class action settlements and fee awards, told DealBook.
The question for directors: Are the long-perceived governance protections of Delaware worth the latest verdicts — and the lawyer bills — when Texas or Nevada beckon?
The question for shareholders: Most companies require you to vote for them to leave Delaware. Will you?
Send us your thoughts — and let us know whether your board is discussing a DExit.
HERE’S WHAT’S HAPPENING
Senate budget discussions and jobs numbers are in focus this week. Republican senators are expected to begin closed-door talks on revisions to the House spending bill, as fiscal hawks continue to threaten the legislation. On Friday, investors will anxiously await the latest jobs report: It’s expected to show 130,000 nonfarm positions were added in May, with unemployment holding at 4.2 percent.
Questions linger over the withdrawal of President Trump’s nominee to lead NASA. Trump announced Saturday that he was pulling Jared Isaacman from consideration after reviewing the Elon Musk ally’s “prior associations” — including donations to Democrats. But The Times reports that Trump had been made aware of the giving late last year. Musk, who recently left government service, praised Isaacman as “competent and good-hearted.”
Elon Musk pushes back against a report about his drug use. Washington, Silicon Valley and beyond are continuing to talk about a Times investigation into whether the billionaire was consuming drugs more intensely than previously disclosed, including during the 2024 presidential campaign and during his time in government. Musk denied the report, writing on social media that he hadn’t taken it in years. The Times defended its report.
China hits back
Market futures are down again Monday morning as global investors keep guessing how President Trump’s trade fight will go.
Beijing and Washington continued to exchange blame over who was undermining their truce, while top Trump officials insist that his tariffs will remain in place despite uncertainty over their fate in the courts.
The latest: China’s Ministry of Commerce said it was the U.S. that had “severely undermined” the détente between the two, after Trump accused Beijing on Friday of doing so in a confrontational social media post. (Treasury Secretary Scott Bessent on Sunday cited Beijing’s ongoing curbs of critical mineral exports as a concern.)
“The U.S. side has unilaterally escalated new economic and trade frictions, exacerbating the uncertainty and instability of bilateral economic and trade relations,” the ministry said.
That raises questions about whether the two sides can reach a deal by a 90-day deadline set last month. While Kevin Hassett, the director of the National Economic Council, suggested that Trump and President Xi Jinping could hold talks as soon as this week, he acknowledged that such a discussion hadn’t been scheduled yet.
“Rest assured, tariffs are not going away,” Commerce Secretary Howard Lutnick said on Sunday on “Fox News Sunday,” even as courts were weighing whether many of the levies were constitutional.
The big question: How will the Supreme Court, which recently looked askance at presidents taking sweeping economic actions without congressional approval, rule?
What happens if states can’t regulate A.I.?
Buried in the House budget bill is a provision about artificial intelligence that, at first, seems to mostly affect big tech companies. It bans state and local governments from regulating any algorithmic system for an entire decade.
That could remove some state-by-state confusion for companies like Microsoft, Google and OpenAI, which has urged lawmakers to oppose any laws that, as Sam Altman put it last month, would “slow down” the U.S. in its battle with China to dominate A.I. But the provision, perhaps counterintuitively, would also have a far-reaching impact on industries outside of the technology sector, Danielle Kaye reports.
Here are three big areas that could be immediately affected:
Automated decision-making in health care: Big hospital systems use algorithms to decide, for example, who gets a kidney. Cigna has faced legal action over claims that it has used an algorithm to automatically deny claims in bulk.
Colorado last year passed a bill that is, so far, the “farthest reaching” in promoting strong governance of A.I. in health care, said Michelle Mello, a professor of law and health policy at Stanford University. Mello acknowledged that the existing patchwork of health care A.I. regulation “is not standardized and it’s not awesome.” But if the tax bill provision halts all efforts completely, “that’s not great, either,” she said.
Surveillance pricing: The practice of using vast amounts of customer data to set prices, sometimes altering them for specific customers — think airlines, hotels and grocery stores — faces mounting scrutiny.
In California, State Assemblyman Chris Ward introduced a bill this year that would prevent businesses from using customer data to make algorithmic decisions that would change prices. Ward told DealBook that he is worried the federal bill might affect his legislation: “I can’t hit the pause button, waiting to see, for a whole other year, if something does or does not apply.”
Kids’ safety on social media: Gov. Kathy Hochul of New York signed a bill last year that aims to limit children’s access to algorithmic feeds on apps like TikTok and Instagram. And a new Florida law that broadly restricts teenagers’ access to social media (and has faced criticism and court challenges) indirectly regulates A.I., too, said Gaia Bernstein, a professor at Seton Hall University School of Law who studies addictive tech and social media.
She is concerned that emerging threats to children — such as A.I. bots that are “friending” kids online — would be nearly impossible to rein in if the ban becomes law.
“It’s killing that innovation of legislation and regulation,” Ben Winters, director of A.I. and privacy at the Consumer Federation of America said of the potential ban on state and local A.I. laws. He added, “It takes away the states’ ability to respond to new problems as we’re seeing them come to fruition.”
“This is America’s, and the world’s, Achilles’ heel, which China continuously exploits.”
— Nazak Nikakhtar, a former Commerce Department official during the first Trump administration. China’s dominance of rare earth magnets is a big point of contention in the U.S.-China trade fight, and puts automakers and other American industries at risk.
Remembering Stanley Fischer, economy rescuer
To economists and political leaders, Stanley Fischer, who died Saturday at age 81, was more than an esteemed academic and civil servant.
He mentored a score of economic leaders, from Ben Bernanke to Larry Summers to Mario Draghi. And he helped advise a half-dozen countries through economic crises and their aftermaths.
“He had a role in shaping a whole generation of economists and policymakers,” Bernanke, the Fed chair during the 2008 financial crisis, told The Times about Fischer, who was his thesis adviser at M.I.T.
Others he mentored at M.I.T.: Kazuo Ueda, the current governor of the Bank of Japan; Christina Romer, who chaired the Council of Economic Advisers under Barack Obama; and Greg Mankiw, who held that post under George W. Bush.
But Fischer also became a top E.M.T. to troubled economies. As the No. 2 executive at the International Monetary Fund from 1994 to 2001, he helped lead efforts to head off financial panics in Brazil, Indonesia, Mexico, Russia, South Korea and Thailand. In 1998, The Times called him “the closest thing the world economy has to a battlefield medic.”
As head of Israel’s central bank from 2005 to 2013, he steered the country through the 2008 financial crisis, moving quickly to slash interest rates and then raise them again as its economy began to recover.
“Stan, through his teaching, writing, advising and leading, has had as much influence on global money as anyone in the last generation,” Summers wrote in 2017. “Hundreds of millions of people have lived better because of his efforts.”
THE SPEED READ
Deals
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In health care deals: Bristol-Myers Squibb agreed to pay BioNTech up to $11.1 billion to license a new cancer treatment, and Sanofi said it would buy Blueprint Medicines, a maker of drugs for immunological diseases, for $9.5 billion. (Bloomberg, FT)
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How Tony Xu, the C.E.O. of DoorDash, turned to billion-dollar deals to consolidate the food delivery industry. (CNBC)
Tech and artificial intelligence
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“Meta Aims to Fully Automate Ad Creation Using AI” (WSJ)
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Can Saudi Arabia and the United Arab Emirates make good on their billion-dollar plans to turn the Middle East into an A.I. superpower? (FT)
Best of the rest
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Trump officials are indicating the price of ending their war against Harvard is the resignation of the school’s president, Alan Garber. (Boston Globe)
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The C.E.O. of the parent company of Taser stun guns was the highest-paid corporate leader last year, with a $165 million payday. (WSJ)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Sarah Kessler is the weekend edition editor of the DealBook newsletter and writes features on business.
Michael J. de la Merced has covered global business and finance news for The Times since 2006.
Danielle Kaye is a Times business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers.
The post Companies Rely on Delaware Courts. Lawyers Reap Huge Fees There. appeared first on New York Times.
