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Savvy founders and entrepreneurs ask which states have fair legal systems and competent, impartial judges, because they know the state in which they incorporate matters.
For years, information about state legal systems was anecdotal. However, in 2002, a non-profit organization known as ILR or the Institute for Legal Reform, began asking corporate attorneys to assess the state systems in which they work, to publish a report known as The Lawsuit Climate Survey: Ranking the States. The results of thee 2019 Report are out. In this comprehensive survey, focusing on fairness and reasonableness of state legal systems, Delaware ranks #1.
In terms of overall state rankings, after Delaware at number one, Maine is in the number two spot; next is Connecticut, then Wyoming and Alaska round out the top 5.
And at the bottom of the list are some of the largest states in the nation—New York is ranked 36, Texas is ranked 38, Florida is ranked 46, and California comes in at 48, barely beating out Louisiana and Illinois who take the title of the worst ranking of all the states.
|Category||Best State||Worst State|
|Enforcing Meaningful Venue Requirements||Delaware||Illinois|
|Overall Treatment of Tort and Contract Litigation||Delaware||Illinois|
|Treatment of Class Action Suits and Mass Consolidation Suits||Delaware||California|
|Scientific and Technical Evidence||Delaware||Louisiana|
|Trial Judges’ Impartiality||Delaware||Louisiana|
|Trial Judges’ Competence||Delaware||Illinois|
|Quality of Appellate Review||Delaware||Illinois|
Delaware ranks first in eight of the 10 categories!
Here is how the survey is designed. Attorneys are asked to evaluate their opinions of each state’s liability procedure, using a numeric ranking of significant elements. Those surveyed were part of a “national sample of 1,307 in-house general counsel, senior litigators or attorneys, and other senior executives at companies with at least $100 million in annual revenues who indicated they: (1) are knowledgeable about litigation matters; and (2) have recent litigation experience in each state they evaluate,” (Executive Summary of Ranking the States, The Lawsuit Climate Survey, p.3).
Wondering where the supposedly-corporate-friendly Nevada ranks? Number 29. As well, it failed to crack the Top 15 in any category. Its highest category ranking was 17th (in Overall Treatment of Tort and Contract Litigation).
The poor performance of other states puts to rest the notion that they are comparable to the truly corporate-friendly Delaware.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.