Delaware's corporate litigation elites squared off before the state's Supreme Court on Wednesday over arguments that state lawmakers either righted — or subverted — the Court of Chancery's equity powers in amending the state's General Corporation Law earlier this year.

The arguments placed before the state's five justices challenges by plaintiffs' counsel to Delaware Senate Bill 21 — backed by businesses and Del. Gov. Matt Meyer and approved in March — 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.

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.

Vice Chancellor Lori W. Will put the amendments before the justices in June by way of midcase questions on the constitutionality of S.B. 21 that arose in a case alleging breaches of fiduciary duty in a $117 million deal for Clearway Energy Inc.'s acquisition by its majority shareholder, Clearway Energy Group LLC, on May 6.

Gregory V. Varallo of Bernstein Litowitz Berger & Grossmann LLP told the justices Wednesday that "there has never been a case like this" because the General Assembly has never purported to take away from Chancery remedies that include "the power to do equity."

Chancery's ability "to act with respect to a series of transactions is being taken away," Varallo said, adding separately that a provision of S.B. 21 retroactively barring some litigation even if filed prior to passage of the law is unconstitutional.

In a brief, Varallo and other counsel for Clearway stockholder Thomas Drew Rutledge noted that the General Assembly approved of "safe harbor" provisions in the Delaware General Corporation Law to shield breaches otherwise subject to damages claims. The brief said those provisions "impermissibly reduce the Court of Chancery's equity jurisdiction" and are unconstitutional.

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.

Varallo argued that S.B. 21 is unconstitutional under the state's 1897 constitution, adding: "My cause is extremely unpopular, and I understand well the pressures on this court to do anything but follow the well-trodden gloss on this constitution. But it is at the center of what made us special."

William Savitt of Wachtell Lipton Rosen & Katz, counsel for Meyer, the Democratic governor, said those behind the appeal are asking the court to accept an "extra-constitutional rule that the General Assembly is powerless to make confining or refining revisions" to the law.

Alleged "exorbitant restrictions" on General Assembly discretion are based on a text "that provides no such thing," Savitt said.

The retroactive protections can be invoked as defenses for authorized board committees and individuals if those involved can show they acted without "gross negligence" in purportedly conflicted decisions, among other provisions.

Chief Justice Collins J. Seitz Jr. asked Varallo what the court should do with the "plain text" of the amended General Corporation Law.

"It says this court shall have all jurisdiction and vested power by the laws of this state. If you're going to read that plainly, laws of the state means laws of the General Assembly," Justice Seitz said.

Savitt later addressed the issue at length, arguing that "equity is not some free-floating, independent body of authority forever beyond the reach of the electoral branch."

"Equity follows the law," Savitt said, repeating the observation several times.

Jonathan C. Bond of Gibson Dunn & Crutcher LLP, counsel to Clearway, told the justices that the General Assembly "simply performed its independent function in deciding what rules should apply. The plaintiff asks you to upend that well-functioning order."

Bond added: "No Delaware case has held that a change in the rules is the same as wiping out jurisdiction merely because it makes some plaintiff's claims harder."

The Society for Corporate Governance filed a friend of the court brief, although it is not testifying, arguing that the positions taken by S.B. 21 opponents would upend Delaware's "orderly" evolution of corporation law and collaboration between the courts and the General Assembly.

In its place would be a "regime under which courts have unilateral control over the future of Delaware corporate law. That is not how things ever have worked in Delaware, and it would damage if not destroy" past stability and predictability, The Society for Corporate Governance said.

Eight corporate law professors separately submitted a brief arguing that the Delaware's courts have long protected the Chancery Court's equity jurisdiction, citing the benefits of equity court policing of fiduciary breaches.

"In sum, predictability in Delaware corporate law requires more than just that transactional planners can ensure that their deals will escape judicial scrutiny," the professors argued. "It requires that all parties to the corporate contract — including investors — can have reliable and consistent expectations of the standards to which every party will be held and how the courts will respond if another party violates those expectations."

Clearway Energy Inc. stockholder Thomas Drew Rutledge is represented by Gregory V. Varallo, Andrew E. Blumberg and Daniel E. Meyer 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 who submitted a brief in support of Thomas Drew Rutledge's appeal are 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 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.