Delaware's Supreme Court upheld Friday hotly contested legislation approved by state lawmakers in 2025 that expanded liability shields for some corporate acts involving controlling stockholders or potentially conflicted officers or directors, and narrowed public access to some corporate books and records.

The controversial legislation upheld by Delaware's high court had been approved by lawmakers amid concerns that state-domesticated corporations might recharter elsewhere. (iStock.com/Ray Tan) In a unanimous 37-page opinion, penned by Delaware Justice Gary F. Traynor, the high court upheld Delaware Senate Bill 21, debate on which in the Legislature hinged on what was the perceived exodus of businesses from the state.

"The question here, at bottom, is not whether the General Assembly may eliminate a segment of the Court of Chancery's equity jurisdiction — jurisdiction that is time-honored and firmly grounded in our state constitution — without simultaneously establishing an adequate legal remedy in another tribunal," the decision, which followed arguments on Nov. 5, said. "It may not. The question is whether" Section 1 of S.B. 21 "effects the result Rutledge claims that it does. We conclude that it does not."

The arguments placed before the state's five justices address challenges by plaintiffs' counsel to S.B. 21, which was backed by businesses and Gov. Matt Meyer and approved in March. The legislation expanded liability shields for some corporate acts involving controlling stockholders or potentially conflicted officers or directors, and narrowed public access to some corporate books and records.

Lawmakers approved the fast-tracked bill amid rumblings that state-domesticated corporations and the franchise fees they pay — more than 20% of the state's general fund — could be lost to the state as companies recharter elsewhere, straining other revenue sources.

The legislation was rushed through the General Assembly with brief but often pointed and sometimes angry arguments from both sides, with advocates warning that without the changes, Delaware's status as a corporate charter and litigation hub would suffer, along with state revenues.

Clearway Energy Inc. stockholder Thomas Drew Rutledge is represented by Gregory V. Varallo of Bernstein Litowitz Berger & Grossmann LLP.

Clearway Energy Group LLC and Christopher Sotos are represented by Srinivas M. Raju, Matthew D. Perri and Andrew L. Milam of Richards Layton & Finger PA.

The state of Delaware and its governor are represented by Peter J. Walsh, Michael A. Pittenger, T. Brad Davey, Callan R. Jackson and Joshua S. Almond of Potter Anderson & Corroon LLP and William Savitt, Ryan A. McLeod, Anitha Reddy and Alexander S. Mackler of Wachtell Lipton Rosen & Katz.

Clearway Energy Inc. is represented by Elena C. Norman, Skyler A.C. Speed and Alyssa T. Atkisson McKeever of Young Conaway Stargatt & Taylor LLP, Brian M. Lutz, Colin B. Davis, Jonathan C. Bond and Russell B. Balikian of Gibson Dunn & Crutcher LLP and Srinivas M. Raju, Matthew D. Perri and Andrew L. Milam of Richards Layton & Finger PA.

Corporate Law Academics, which submitted a brief in support of Thomas Drew Rutledge's appeal, is represented by Ned Weinberger and Mark D. Richardson of Labaton Keller Sucharow LLP.

The Society for Corporate Governance is represented by William M. Lafferty, Lauren K. Neal and Phillip Reytan of Morris Nichols Arsht & Tunnell LLP and Nicole A. Saharsky, Andrew J. Pincus and Minh Nguyen-Dang of Mayer Brown LLP.

The case is Thomas Drew Rutledge v. Clearway Energy Group LLC and Christopher Sotos and Clearway Energy Inc., case number 248,2025, in the Supreme Court of the State of Delaware.

The case under appeal Thomas Drew Rutledge v. Clearway Energy Group LLC and Christopher Sotos, case number 2025-0499, in the Court of Chancery of the State of Delaware.