Corporations are reconsidering whether Delaware remains the best place to incorporate due to a surge in shareholder litigation and increasing unpredictability in the state’s courts, according to a March 24 statement from the American Tort Reform Association (ATRA).
The new report, titled “Corporate Flight from Delaware: The Impact of Escalating Shareholder Litigation and Legal Uncertainty,” states that costly, lawyer-driven shareholder lawsuits are undermining Delaware’s historic position as the preferred state for corporate domiciling. Nearly 70% of Fortune 500 companies are incorporated in Delaware, but more corporations are now considering relocating to other states with what they view as more favorable legal environments—a trend referred to as “Dexit.”
“Delaware built its brand on stability and predictability, but that reputation is facing pressure from a litigation environment that is increasingly expensive, uncertain and attractive to plaintiffs’ firms. The result could be one of the largest corporate exoduses we’ve seen in recent years, with Delaware’s deteriorating civil justice system specifically cited as a reason for their departures,” according to Lauren Sheets Jarrell, vice president and counsel for civil justice policy at ATRA.
The report notes that Delaware residents have experienced a 45% increase in their individual tort tax since 2022. This places them eighth nationally at over $2,064 per person while nearly 18,000 jobs are lost each year due to lawsuit abuse. Sheets Jarrell said, “Delaware can respond by restoring predictability and reducing the incentives for abusive litigation, or it can keep watching companies choose other states while hardworking families pay the price of inaction.”
According to ATRA’s findings, major corporations such as Tesla, Dropbox, TripAdvisor—and recently Exxon—have left or announced plans to leave states like New Jersey or Delaware for Texas or Nevada. Companies cite aligning assets with legal domicile, reducing litigation risk and uncertainty, and lowering incorporation costs as primary reasons for redomiciling. The report also highlights how third-party litigation financing has contributed to increased filings; over 100 shareholder cases were filed in the Delaware Court of Chancery in 2024 alone.
“Plaintiffs’ lawyers are the ones truly benefiting and driving the surge in litigation,” Sheets Jarrell said. She added that competition among states benefits shareholders: “When states can improve their civil justice environments by raising the bar with balanced laws and fair courts, they’ll attract companies that drive economic growth and ultimately create more value across the board for all residents — not just opportunistic lawyers.” The full report is available at ATRA.org according to the official roster page.
