When considering differences between jurisdictions, it can be hard to appreciate when these differences will matter.  To help showcase contrasts between jurisdictions, I’ve decided to launch a comparative series taking decisions from one jurisdiction and considering whether a court would come out differently when applying another state’s law. 

As Delaware has the most public companies and its courts issue the most widely discussed decisions, I’m launching this series with a recent Chancery decision, Fishel v. Liberty Media. 

Notably, this transaction occurred and the litigation was filed before Delaware passed SB21. If the same facts were to recur in Delaware today, the outcome might differ.

Structure – Review Panel

To make this interesting and provide independent views on how the case might come out under Nevada or Texas law, I’ve given the decision to different practicing lawyers and law professors.  I’ve asked them to independently review the decision and give a brief explanation for how they think the decision would come out under their state’s law. 

To make the lift easy, I also provided them with an early draft of this post and my quick factual summary of the decision.  This also saves time as they don’t need to introduce any facts I’ve already summarized in this post, and they can turn to whether it might come out differently elsewhere. 

Disclaimer

Sharing a quick view for post like this is easier with a plain disclaimer. A panelist’s views are not going to be the views of their firm or institution.  The views and opinions expressed are always going to be incomplete.  Although I’ll probably use what I learn from this process for a law review article later, the responses have been provided quickly.  No one has created a client matter number to do this or burned substantial time doing exhaustive research.  This is not legal advice.

Quick Factual Summary

Chancellor McCormick issued this decision on April 13, 2026.  The stockholder plaintiff challenged a 2024 spin-off of SiriusXM “by its controller Liberty Media Corporation (‘Liberty’).”  The transactions created “an independent company with no controlling stockholder” (the “Company”).

Before the spin off, Liberty had a “tracking stock tied to its Old Sirius holdings,” and that “tracking stock traded at a discount to the net asset value of those holdings (the ‘NAV Discount’).  The spin-off eliminated the tracking stock and the NAV Discount, ”a unique multi-billion dollar benefit that Liberty alone enjoyed.”

Because of the conflict, the Company’s board created “a two-person special committee to negotiate the transactions” (the “Special Committee”).

The Special Committee negotiated with Liberty over tax sharing agreements and other matters.  The Special Committee ultimately negotiated the transaction and recommended it to the full board.  The other board members voted in favor of the transaction based on that recommendation.

The plaintiffs challenged the transaction and alleged that “each of the director defendants lacked independence from Liberty or were interested in the transactions.”

Two different groups of director defendants moved to dismiss the complaint—the members of the special committee (“Committee Defendants”) and the directors that were not on the special committee (“Non-Committee Defendants”).  Liberty itself did not move to dismiss.

Delaware law provides that plaintiffs must plead non-exculpated claims against each director for a claim to survive under Cornerstone.

With respect to the Committee Defendants, the plaintiffs argued that they had a “controlled mindset” and that they deferred to the controller without any reason.  As the plaintiffs could not “plead the extreme set of process flaws” to support this theory, the Chancellor dismissed the claims against the Committee Defendants because pleadings were not enough to infer “that independent directors acted disloyally in connection with the [t]ransactions.”

When it came to the Non-Committee Defendants, the Chancellor took a different line, finding that for directors who are not independent, Cornerstone only requires “that a plaintiff also plead that the director ‘acted to advance the self-interest of an interested party.’”  The Chancellor found that simply “[v]oting in favor of a transaction unquestionably advances the transaction.”  As the Non-Committee Defendants voted in favor of a transaction that the Committee Defendants negotiated and recommended, the Chancellor denied the Non-Committee Defendants’ motion to dismiss.

Chancellor McCormick then denied a request for a subsequent interlocutory appeal from the Non-Committee Defendants on this issue despite acknowledging there was a split in Court of Chancery authority on whether a plaintiff needed to plead more. 

This sets up an interesting situation where the directors that actually negotiated the transaction have had the claims against them dismissed, but the directors that did not negotiate the transaction but simply voted in favor of a Special Committee’s recommendation must defend a transaction they did not negotiate.  The sole basis for allowing the clams against the Non-Committee Defendants was that they voted in favor of the transaction as recommended by the Special Committee.

The Business Judgment Rule in Nevada and Texas

Virtually all jurisdictions recognize some form of a business judgment rule.  This rule is a judicial presumption that, absent evidence of fraud, illegality, self-dealing, or (in some jurisdictions) gross negligence, courts will not second-guess business decisions made by a board of directors.  Typically, the directors must act on an informed basis, in good faith, and in the honest belief that the action taken was in the interests of the corporation.  This rule effectively places the burden on a plaintiff to rebut this presumption before any liability can attach to directors.

Delaware’s business judgment rule is found in Delaware case law.  Nevada and Texas have each instead codified their rule. 

Under the Nevada Revised Statutes (NRS) Sec. 78.138, directors and officers of a Nevada corporation must exercise their respective powers in good faith, on an informed basis and with a view to the interests of the corporation.  This statute creates a presumption that directors and officers do act in good faith, on an informed basis, and in the interests of the corporation.  Directors and officers are not individually liable to the corporation, its stockholders or its creditors unless this presumption is rebutted and it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties and such breach involved intentional misconduct, fraud, or a knowing violation of law.  Texas has also adopted a statute substantially similar in function to Nevada’s business judgment rule, although the Texas statute differs in structure and operates alongside Texas fiduciary-duty law.

Panel Views from Nevada & Texas

To see how others thought this situation might play out in Nevada or Texas, we have views from Gian Brown at Holland & Hart and Erika Pike Turner at Garman Turner Gordon, both in Las Vegas.  We also have Professor Carliss Chatman from Southern Methodist University, Dedman School of Law in Dallas.  I’ve set out their views below.

Gian Brown’s quick take:

If Fishel v. Liberty Media had been decided under Nevada law rather than Delaware’s Cornerstone framework, the Non-Committee Defendants’ motion to dismiss likely would have been granted, rather than denied as it was by Chancellor McCormick.  The Chancellor held that a vote advancing a conflicted transaction was sufficient to state a non-exculpated claim against non-independent directors (despite the Special Committee’s determination, following arm’s-length negotiation, that the transaction should be recommended to the full board).

Nevada’s statutory framework, by contrast, does not employ the Cornerstone doctrine.  NRS 78.140 provides that a contract between a corporation and an officer or director (or entity in which an officer or director has a financial interest) is not void or voidable solely for that reason if one of four safe harbors is satisfied:

(a)       the fact of the common directorship, office or financial interest is known to the board or a board committee, and the directors or committee members, other than any common or interested directors or members of the committee, approve or ratify the contract or transaction in good faith;

 (b)      these facts are known to the stockholders, and stockholders holding a majority of the voting power approve or ratify the contract or transaction in good faith;

(c)      these facts are not known to the director or officer at the time the transaction is brought before the board of directors of the corporation for action; or

(d)      the contract or transaction is fair to the corporation at the time it is authorized or approved.

Here, a Nevada court is likely to find that the Non-Committee Defendants would be presumed to act in good faith; NRS 78.140(4) expressly provides that interested directors may be counted toward the quorum and vote necessary to authorize, approve, or ratify the transaction, and their participation does not, standing alone, void the transaction. The plaintiff would need to plead facts that the directors engaged in intentional misconduct, fraud, or a knowing violation of law — a significantly higher threshold than the Delaware standard applied in Fishel.  In other words, a Nevada court draws a critical distinction: whereas Delaware’s framework focuses on whether a director acted to advance an interested party’s self-interest, Nevada’s statute focuses on whether the director’s own conduct was affirmatively wrongful.  Absent additional facts, reliance on the Special Committee’s recommendation, where that reliance satisfies one of NRS 78.140’s safe harbors, would not rise to that level.  The practical effect of applying Nevada law to the Fishel facts would be to eliminate the anomaly that Chancellor McCormick’s decision created—where the directors who actually negotiated the transaction (the Committee Defendants) had claims dismissed, while the directors who merely voted in reliance on the Special Committee’s recommendation (the Non-Committee Defendants) were required to defend those claims.

Erika Pike Turner’s quick view on the situation reached a similar conclusion:

Summary:

The shareholder claims against the directors would not have survived application of Nevada’s business judgment rule, as a matter of law.  The Delaware courts determined that the claim for breach of fiduciary duty against a director could proceed upon the contention that the director “voted in favor of the interested party.” The allegation that a director acted to advance the self-interest of the interested party with his/her vote is not enough to survive a Rule 12 motion under Nevada law.  An action that may result in a breach of fiduciary duty is not enough to rebut Nevada’s business judgment rule’s presumption against director and officer liability.  NRS 78.138(7).

Analysis under Nevada law:

Under Nevada law, a corporation’s board of directors has “full control over the affairs of the corporation.” Shoen v. SAC Holding Corp., 122 Nev. 621, 632, 137 P.3d 1171, 1178 (Nev. 2006); see NRS 78.120(1) (“[T]he board of directors has full control over the affairs of the corporation”). Part of managing the corporation’s affairs includes “decid[ing] whether to take legal action on the corporation’s behalf.” Id.

As the Nevada Supreme Court explained in Chur v. Eighth Jud. Dist. Ct. in & for Cnty. of Clark, 136 Nev. 68, 71–72, 458 P.3d 336, 339–40 (2020), and as is clear from the plain language of NRS 78.138, NRS 78.138, i.e., the business judgment rule, provides for the sole circumstance under which a director or officer may be held individually liable for damages stemming from the director’s or officer’s conduct in an official capacity.  See NRS 78.138(3) (“[a] director or officer is not individually liable for damages as a result of an act or failure to act in his or her capacity as a director or officer except under circumstances described in subsection 7.” (emphasis added.)).

First, “directors and officers, in deciding upon matters of business, are presumed to act in good faith, on an informed basis and with a view to the interests of the corporation.” NRS 78.138(3). Second, the “director’s or officer’s act or failure to act” must not only constitute “a breach of his or her fiduciary duties,” but that breach must further involve “intentional misconduct, fraud or a knowing violation of law.” NRS 78.138(7)(b)(1)-(2). Further, to meet the “intentional” misconduct requirement, it is not enough to intentionally vote or take other action.  That is not enough.  The shareholder must establish that the director or officer “had knowledge that the alleged conduct was wrongful.”  See Chur, at 75, 458 P.3d at 342.

Here, the allegations against the director, if proven, may indeed meet the elements for a standard claim for breach of his/her fiduciary duties under Nevada law.  Still, as the complaint is against a defendant director entitled to business judgment rule protections, the complaint cannot move forward without more. See Guzman v. Johnson, 137 Nev. 126, 134, 483 P.3d 531, 538 (2021) (properly dismissing claims against directors who took action sufficient to affect the subject transaction harming minority shareholders for failure to satisfy NRS 78.138(7)).

 In the subject Liberty Media case, the director’s vote, even if harmful to the minority shareholder, cannot move forward without also demonstrating intentional misconduct, fraud or knowing violation of law.  The complaint is properly dismissed for the failure to state a claim rebutting Nevada’s business judgment rule.

Professor Chatman focused on Texas law:

Texas law would likely analyze the challenged transaction through a series of statutory safe harbors that are substantially more protective of directors than Delaware’s fiduciary-duty framework.

Under the Texas Business Organizations Code, there is a strong presumption that directors and officers act in good faith, on an informed basis, in the best interests of the corporation, and in compliance with law (Tex. Bus. Orgs. Code § 21.419). Although Texas fiduciary-duty claims remain available, a plaintiff seeking to overcome that presumption must plead particularized facts showing fraud, intentional misconduct, an ultra vires act, or a knowing violation of law (Tex. Bus. Orgs. Code § 21.419).

Texas also provides statutory protections for transactions involving controlling shareholders and other interested parties when they are reviewed and approved by an independent committee of disinterested directors, approved by disinterested shareholders, or otherwise satisfy statutory fairness requirements (Tex. Bus. Orgs. Code §§ 21.416, 21.4161, 21.418). The statute further authorizes corporations to establish independent special committees and permits corporations to petition for advance judicial determinations regarding committee independence through the Texas Business Court under special circumstances (Tex. Bus. Orgs. Code § 21.4161). Texas has implemented a procedural innovation that allows corporations to reduce uncertainty before a challenged transaction closes.

Unlike Delaware’s emphasis on post hoc judicial review under doctrines such as entire fairness and MFW, Texas relies more heavily on ex ante procedural protections and statutory presumptions (Tex. Bus. Orgs. Code §§ 21.416–21.419). As a result, once an independent special committee approves a controller transaction, directors who are not themselves interested in the transaction would generally face a significantly lower risk of liability absent particularized allegations of intentional wrongdoing or knowing legal violations (Tex. Bus. Orgs. Code §§ 21.418, 21.419).

The result in Fishel arguably creates a structural disincentive for directors to participate in the ultimate approval of transactions negotiated by independent committees. Texas appears to move in the opposite direction, encouraging reliance on properly constituted committees by providing statutory presumptions and procedural protections for directors who follow those processes.

Conclusion – What Happens in Delaware Stays in Delaware?

This comparative exercise helps to illustrate differences between the jurisdictions. Nevada and Texas both have statutory frameworks making it unlikely that a case like this would continue against directors here past a motion to dismiss. Delaware might also reach the same result for transactions occurring today after its legislative reforms last year.

This also provides an example of how Delaware’s Court of Chancery sometimes splits on these types of issues.  Chancellor McCormick’s order denying the Non-Committee Defendants’ motion for an interlocutory appeal recognized that “the Non-Committee Defendants are correct to say that there is divergence among trial court decisions on what a plaintiff must plead to satisfy the action element of Cornerstone.”

For now, form may have triumphed over substance with Delaware’s equitable discretion balancing in favor of possible liability for the Non-Committee Defendants.  Another view may be that the final approving vote was real substance, even though it simply approved the deal negotiated by the Committee Defendants. The denial order appears to acknowledge that if the process had been set up slightly differently, the Non-Committee Defendants might have escaped liability under Delaware law.  In essence, if the Non-Committee Defendants had simply voted to authorize the Special Committee to handle the entirety of the matter and never voted in favor of the transaction, a different result might have occurred before Chancellor McCormick.  Her order noted “Delaware law encourages conflicted directors to abstain from board processes—including the ultimate board vote—to avoid liability.”  Here, a board process and participating in the ultimate board vote appears to have created liability for the Non-Committee Defendants. 

Of course, there are costs to conflict-mitigation measures as well.  When directors isolate themselves from a process for fear of personal liability, a corporation loses whatever benefit their judgment and involvement might have generated.  Had the Non-Committee Defendants isolated themselves from the transaction entirely here and refrained from casting any votes to approve the Committee Defendants’ recommendation, it might have allowed them to avoid liability.

The Delaware Supreme Court also recently rejected the Non-Committee Defendants’ request for an interlocutory appeal. It also noted the underlying divergence within the Court of Chancery, but in an exercise of “discretion” and “giving great weight to the trial court’s view,” it concluded that “the interlocutory appeal should be refused.” Dismissing the Non-Committee Defendants would not have ended the case because Liberty itself did not move to dismiss and the case will continue. 

Still, keeping the Non-Committee Defendants in the action maintains their exposure to possible personal liability.  It may be a factor they consider when deciding whether or on what terms to settle this action.

For now, how fact patterns similar to this will go may depend on which jurist directors draw in Delaware and how they apply SB21.  In Nevada or Texas, statutory protections may lead to a different result.

The deadline has passed to comment on the SEC’s proposal to permit semi-annual reporting (though the website seems to be still slowly updating with additional letters).

Professor Tzachi Zach at Ohio State has set up a useful, searchable tracker, and as of this posting, he clocks a total of over 80,000 submissions (of which 66,000 were form letters, identified by the SEC as templates A through K).  All of the form letters oppose; of the non-form letters, 99% oppose.

Some brief takeaways and highlights (I didn’t use LLMs or machine-reading or anything; I just used my actual web browser to click on actual links I thought were interesting and read the results, so this is a very rough overview; Professor Zach’s searchable database is more granular. Also, I only looked at what was posted through Friday morning.)

The comments overwhelmingly come from retail investors – not just the form letters, but even the individualized ones.  Which isn’t to say there isn’t industry interest; just that retail interest is big.  I’m sure we all saw the letter from r/wallstreetbets (still trying to figure out the governance structure that allows one person or persons to speak for WSB) but have you seen the one from Dave, the truck driver? Or Gilbert Rodriguez, the grocery store worker?

Also catching my attention: Many commenters highlighted that the proposal for semi-annual reporting is only one massive change on the SEC’s docket.  The SEC is also proposing to dramatically limit the number of companies subject to the full set of reporting requirements (which means, fewer companies that make compensation disclosures and risk disclosures, fewer with auditor attestation, say on pay, etc), and to make S-3 registration available to more issuers.  Also, Chair Atkins has made clear he plans to reduce the number of disclosure items, not to mention opening private markets up to more retail investors (including through 401(k)s).  Point being, this is a huge number of changes that will dramatically reshape (read: reduce) reporting obligations, and several commenters are concerned that the SEC has not adequately considered the effects individually, let alone collectively.  Here’s MFA, ICI, Ernst & Young, and also the “Shadow SEC,” John Coates, John C. Coffee, Jr., James D. Cox, Merritt B. Fox and Joel Seligman.

Apart from that, several commenters have noted this is an awful lot for them to weigh in on in a very short time, and could the SEC please extend the comment period? (SIFMA AMG, MFA, AIMA and SIFMA, SIFMA AMG and Better Markets and Wharton professors).

Beyond that, broadly speaking, commenters that come from the corporate side – corporations, corporate counsel, inhouse accountants, etc – favor the proposal, although Eli Lilly is the only corporation that I have seen explicitly announce they plan to go semi-annual. (In another letter, a group of pharma companies, including Lilly, supported the proposal and said some of their number would switch).  I point this out because these are blue chip names and I seem to recall some skepticism that anyone but the smallest issuers would opt-in to semi-annual.  It seems pretty clear that if the choice is given, it will be a popular one.

Meanwhile, broadly speaking, investors are opposed: here’s Vanguard, ICI, and SIFMA AMG, though there are outliers.

ICI’s letter in particular is interesting; its opinion was formed via discussions with members, including an anonymous survey.  Fourteen members responded to the survey (which isn’t, um, a lot), but the results are still worth looking at.  In particular, when it comes to 10-Qs, most respondents considered the earnings results and the MD&A to be most important, which matters because the SEC’s expectation – semi-annual reporters would still release earnings voluntarily on a quarterly basis – wouldn’t cover the loss of MD&A.

Sigma Two is especially angry at the proposal, pointing out, “Throughout the Proposal, the Commission refers to companies selecting the reporting cadence most appropriate for their investors, but leaves all the decision making with the management of publicly listed companies with no need to justify their decision.”

Compare Sullivan & Cromwell, which says “We agree with the Commission’s view that boards of directors and management are better positioned than a uniform federal rule to determine whether quarterly or annual reporting best serves a particular company and its investors.” (though to be fair, a few sentences later, S&C makes reference to a “company and its investors” determining that there is little incremental value to quarterly reporting).

Some letters – SIFMA is a good example – have warnings about how deeply embedded quarterly reporting is throughout the securities disclosure system, so at minimum, any changes must also account for ripple effects.

E&Y also had warnings on this and was – I believe – the only major accounting firm to squarely oppose the proposal, rather than say something wishy-washy like “whatever you do investors need assurances of reliable information.”

So, do with this what you will, but I will say one really important aspect to this is how much you think each company stands alone, versus the spillover effects – positive externalities – of having a uniform disclosure system with a rich pool of information available to everyone.  If you think of the benefits of that collective system of disclosure, which allows investors (and others) to monitor trends overall, that’s a very different calculus than if you think it’s every company (and its investors) for itself.

Edit: As I said, this post is based on letters publicly posted to the website through Friday morning, but the site is still being updated and, in what I think is a recent addition, Citadel is about as angry as Sigma Two. Like many other commenters on the investment side, Citadel highlights the need for comparability. It’s also scathing on the subject of the SEC’s (lack of) economic analysis.

Another update: This was a nice simple letter from the investing side about overlooked costs to retail investors of a switch to semi-annual.

And another thing.  New Shareholder Primacy podcast!  Me and Mike Levin join our sister pod, Proxy Countdown, for a discussion of 2026 so far and what to look forward to.  Here at Apple; here at Spotify; and here at YouTube.

We now have another five since the last update. One smaller company came to Nevada from Australia–Nova Minerals. Then four different Texas firms coordinated their defections from Delaware. All announced at the same time: Energy Transfer LP, Sunoco LP, SunocoCorp LLC, and USA Compression Partners. Collectively, these firms moved $89 billion in equity from Delaware to Texas. Notably, none of these four firms are organized as corporations.

Company Name	Principal Executive Office	Origination State	Destination State
1. TruGolf	Utah	Delaware	Nevada
2. Forian, Inc.	Pennsylvania	Delaware	Maryland
3. LQR House	Florida	Nevada	Delaware
4. CBAK Energy	China	Nevada	Cayman Islands
5. Cheetah Net	China	North Carolina	Delaware
6. Galecto	Massachusetts	Delaware	Cayman Islands
7. Resolute Holdings Management, Inc.	New York	Delaware	Nevada
8. Forward Industries, INC	Texas	New York	Texas
9. EQV Ventures Acquisition	Utah	Cayman Islands	Delaware
10. Datadog, Inc.	New York	Delaware	Nevada
11. Haymaker Acquisition Corp 4	Oklahoma	Cayman Islands	Delaware
12. CDT Equity	Florida	Delaware	Cayman Islands
13. eXp World Holdings	Texas	Delaware	Texas
14. ArcBest Corp	Arkansas	Delaware	Texas
15. Texas Capital Bancshares	Texas	Delaware	Texas
16. ExxonMobil Corp.	Texas	New Jersey	Texas
17. NL Industries	Texas	New Jersey	Delaware
18. ClearOne Inc	Utah	Delaware	Nevada
19. Liberty Media Corporation	Colorado	Delaware	Nevada
20. The LGL Group, Inc.	Florida	Delaware	Nevada
21. TTEC Holdings, Inc.	Texas	Delaware	Texas
22. Weatherford International plc	Texas	Ireland	Texas
23. Dream Finder Homes	Florida	Delaware	Texas
24. Voyager Technologies	Colorado	Delaware	Texas
25. GPGI, Inc.	New Jersey	Delaware	Nevada
26. FirstCash Holdings, Inc.	Texas	Delaware	Texas
27. AerSale Corp	Florida	Delaware	Texas
28. Natural Gas Services Group, INC	Texas	Colorado	Texas
29. Archer Aviation Inc.	California	Delaware	Texas
30. Sonoma Pharmaceuticals, inc	Colorado	Delaware	Nevada
31. Samsara Inc	California	Delaware	Nevada
32. Dell Technologies	Texas	Delaware	Texas
33. Spruce Power Holding Corp	Texas	Delaware	Texas
34. King Resources	China	Delaware	Nevada
35. Thunder Power Holdings	Delaware/China	Delaware	Nevada
36. NexGel, Inc.	Pennsylvania	Delaware	Nevada
37. DeFi Development Corp.	Florida	Delaware	Nevada
38. Granite Ridge Resources	Texas	Delaware	Texas
39. Nova Minerals	Colorado	Australia	Nevada
40. Energy Transfer LP	Texas	Delaware	Texas
41. Sunoco LP	Texas	Delaware	Texas
42. SunocoCorp LLC	Texas	Delaware	Texas
43. USA Compression Partners	Texas	Delaware	Texas

As usual, here is a link to my underlying data for anyone that wants it. I’ve updated this chart as well. The stock tickers are in the data and I’m showing declared principal executive offices instead. As usual now, I’ve had Claude generate some infographics to help make this easier to digest.

Principal Executive Offices

Destination States

DExits vs. DEntries

Texas Ties

With the principal executive office field added, it’s easy to see a very strong relationship between a Texas principal executive office and a decision to shift to Texas. In contrast, Nevada seems to draw from a wider array of principal executive offices.

Failed Vote

We also have another failed vote. Archer Aviation was looking to shift from Delaware to Texas and “did not receive the requisite stockholder approval.” The company may have a very high retail base. It collected 234,119,344 votes in favor while only 44,503,590 votes were cast against, giving it about 81% of the votes cast. But there were also 201,849,581 broker-non-votes. This left it unable to secure a majority of the outstanding shares.

The company also filed additional proxy soliciting materials before the final vote. It included this:

Archer is also interesting because it lists a California principal executive office, but its proxy touted a strong tie to Texas, noting a “plan to have significant operations over the long-term.” The company does seem to have been heavily involved in Texas. Its proxy discloses that “the Company’s Chief Strategy & Legal Officer, Eric Lentell, testified before both the Texas Senate and House Judiciary & Civil Jurisprudence Committees at hearings to discuss certain proposed amendments to Texas law and discussed with Texas senators and representatives the state’s efforts to establish itself as a leading state for legal domestication and corporate decision making.”

I looked through Archer’s past filings and saw that it had another failed vote in the past when it attempted to add officer exculpation provisions. Under Texas or Nevada law, they would have this as a default. Archer isn’t the only company that has failed to secure this.

A Random Note

Thunder Power presents oddly as a double DExit. It has been given Delaware/China as its principal executive office because around the time it announced a reincorporation to Nevada, it listed what appears to be an apartment in Wilmington as its principal executive office. It more recently identified a place in Hong Kong. I have no idea whether Thunder Power got its security deposit back when it left Delaware.

Javier Milei recently wrote in the Financial Times that Argentina will soon create a new type of legal entity: the “nonhuman corporation,” operated entirely by AI entities.  These entities will have the limited liability protections of an ordinary corporation; “human shareholders may participate, but are not required.”

Delaware, it seems, is developing something similar:

The proposed legislation would create a testing ground for companies to use what are called AI agents to autonomously complete business tasks typically done by humans. The AI agents would oversee whole business operations under the umbrella of a new kind of entity, called an Artificial Intelligence Company, or AIC.

It’s not exactly clear why a new entity is required for this; perhaps to allow for nonhuman corporate directors?  AI members or managers?  Nonetheless, there’s this:

The principal drafter of the proposed legislation, John Mark Zeberkiewicz, said the measure could allow AI agents to engage in just about any business activity — from providing coding services to signing contracts, or even filing and defending lawsuits.

He also noted that it seeks to protect owners of new Artificial Intelligence Companies from facing legal liability from actions the AI might take….

The incentive for a company to enter into the Delaware’s proposed regulatory sandbox would be to test an autonomous entity with a liability shield, Zeberkiewicz said.

“It’s like any limited liability company – you form it for the purpose of making sure that the owners of the business are not automatically liable for the debts and obligations of the entity,” he said.   

Okay, here’s the thing.  Choice of law for veil-piercing is generally governed by the internal affairs doctrine, but there are a minority of jurisdictions who use ordinary choice-of-law principles, and certainly, that’s the position that’s advocated by some scholars.

So my question is, if Delaware gets a bit over its skis in terms of authorizing nonhuman entities and then purports to provide their human investors with a liability shield, how likely is it that other states will respect that shield when faced with tort claims by their own residents?

I mean, I’m sure artificial intelligence can and will accomplish amazing things, but right now, it’s making a lot of headlines as cheating assistant, plagiarism machine, fabulist, and suicide coach, so I’m not bullish on the idea of other states’ courts willy-nilly respecting Delaware’s right to set the liability rules for the entire country.

Lagniappe.  I’ve previously posted about the case of Cannon v. Romeo Systems, which is something of a tragicomedy of startup drafting errors.  Where we last left things, the CEO had paid a consultant using a warrant for company stock, and the consultant later got a personal loan from the CEO using the warrant as collateral.  When she defaulted on the loan, the CEO claimed the warrant, but – as the Court of Chancery subsequently concluded – the security pledge agreement did not sufficiently describe the warrant and therefore the CEO had improperly converted her property, resulting in a multi-million judgment. 

Well, the Delaware Supreme Court recently reversed, holding that, though the pledge agreement was not perfect, it did sufficiently describe the warrant such that a security interest attached and there was no conversion.  Remanded for consideration of any further implications.