WILMINGTON — Brooke Sedita walked to the podium on March 12 and looked at the eight senators on the Judiciary Committee and talked about her father’s auto-body shop in Elsmere.
She talked about how she answered phone calls on Saturday mornings for customers and that experience opened the door for a skill she needed in her legal career which now helps support her family who lives in Newark.
“I had to learn to listen and the fine art of helping others. Fast forward to working in the legal industry, I find that those are also the similar core ideas,” Sedita told the committee. “I am very grateful for my legal job and I want to keep it. Please support Senate Bill 21.”
Sedita was one of 300 employees who work at Richards, Layton & Finger, the largest law firm in Delaware, which has represented high-profile clients in the state and beyond. She’s also one of two employees — not attorneys — who testified before legislators on the controversial corporate law amendments.
Since SB 21 was first proposed back in February, two law firms have been the center of the controversy: Wilson Sonsini Goodrich & Rosati and Richards, Layton & Finger. Both have offices in Wilmington and represent companies in business disputes, and both had attorneys testify as expert witnesses on the need for revisions to the corporate law that the bill presents.
Both law firms have also represented two big names in the tech business in the recent past. In the past,Richards, Layton & Finger was one of the firms that represented Tesla in the appeal on the court decision that invalidated Elon Musk’s pay package.
But a key difference between the two is that Richards, Layton & Finger was invited to an emergency meeting with state and business officials to discuss the corporate franchise. CNBC has reported that after the Wall Street Journal broke the news that Meta was considering incorporating elsewhere, Gov. Matt Meyer had called the meeting to discuss revisions to Delaware’s corporate law that shaped SB 21.
Richards, Layton & Finger Chair Lisa Schmidt told the Delaware Business Times on Tuesday that the fact that legislators turned to the firm reflected how trusted its collective experience was in corporate law in handling a momentous issue. She also noted that in corporate law circles, the matter of a “course correction” had long been discussed for years.
“Other states want to compete,” Schmidt told DBT. “We have something incredibly valuable here that all of our citizens benefit from and so we’re proud to be a part of it. We think it’s critical for the state.”
A robust opposition campaign has focused on both these connections. Mailers and billboards feature Musk holding a chainsaw, implying that the provisions in the so-called “billionaire’s bill” would cut pension plans and retirement funds with little recourse for individual stockholders.
The campaign perpetuates a false narrative and distracts from the real conversation companies are having right now, she said.
“[Elon Musk] is gone from Delaware and [this bill] doesn’t apply to any cases that are pending. I get that it plays into an interesting political narrative, but I do find it ironic that the moniker they gave the bill is about a case that asked for $5 billion in attorney fees,” Schmidt said.
The word from ‘the market’
Many plaintiff attorneys and critics of the bill point to the involvement of high-profile attorneys in the process of crafting the bill as weighing the process too heavily in favor of corporations, including former Chancellors Leo Strine and William Chandler III, who now work at elite law firms that represent Big Tech companies.
Senate Majority Whip Bryan Townsend previously told DBT that he and other legislators drafted the bill with input from corporate attorneys and law professors. Richards, Layton & Finger Partner John Mark Zeberkiewicz drafted the language seen in the first draft of the bill. Zeberkiewicz is not part of the legal team representing Tesla in its appeal of the Court of Chancery’s decision on the Musk compensation plan.
The chair of Richards, Layton & Finger travels to several law conferences around the country and she said many attorneys in business transactions in her circles have been expressing concerns for the last months on Delaware’s corporate law. The largest mergers and acquisitions conference hosted by Tulane Corporate Law Institute last year focused on the Chancery Court’s decision on Elon Musk’s pay package.
Schmidt said this discussion has been percolating for years, pointing to an academic paper authored by Lawernce Hamermesh in 2021 that argued that there could be room for improvement, such as defining controlling stockholders, standards of record review that lead to excessive litigation and more.
Hammermesh testified on Wednesday that such litigation related to “books and record” requests has expanded from two months to two years. Delaware Supreme Court Chief Justice Charles Seitz Jr. offered rare comments last month about how the Chancery Court as well as the highest court in the state have never been busier and jurists have to expedite cases.
“[Other firms] are hearing from their clients, so this bill was not a knee jerk [reaction]. The authors of that article had identified the problem and the conversation after that article only intensified,” Schmidt said.
She added that she has seen a trend over the last few years where the Delaware court system has requested funding to address the large caseload to address “books and records” requests.
Since SB 21 was filed, Richards, Layton & Finger partners have been asked questions by staff about the bill due to the marketing campaign. While the firm has always held regular town halls with sections of its team members, Schmidt said the last couple have been focused on the legislation.
“What I found most troubling was the social media [posts] from opponents of the bill that appeared to be targeting our employees and trying to speak to them directly,” she said, referencing LinkedIn posts that read that partners do not have the best interest of heart as well as negative Glassdoor reviews. “[The posts] say that we’ll lay off one-third of our associates, which is funny because we have active searches in the market right now.”
She also said that Richards, Layton & Finger had not asked employees to testify in favor or rally behind SB 21. She was in the gallery for the House Judiacry Committee to hear the three hours of debate and testimony.
“The folks who spoke crafted their own testimony, and we did not urge them to do this. I was really impressed,” she said. “When we’ve had questions from employees, it’s about what they can do and how they can help.”
More business support for the bill
Days before the Senate voted on SB 21, Richards, Layton & Finger Director Doneene Damon gave a presentation on the bill before the Delaware Business Roundtable. She was asked by Delaware Business Roundtable Executive Director Bob Perkins to do so at the quarterly meeting of the state’s most influential CEOs and business leaders.
Richards, Layton & Finger representatives and Perkins both told DBT that Damon had spoken before the organization as a member of its executive committee, not as a director at Richards, Layton & Finger. Damon is the immediate past president of the firm and she has been a member of the Delaware Business Roundtable in the past six years.
Schmidt said that she had no knowledge of Damon’s presentation before the Delaware Business Roundtable before it occurred, and she had not seen the presentation itself.
“Doneene keeps herself very up to date on what’s happening in Delaware, and it doesn’t
surprise me that she has a view,” the chair said. “I do think there’s value in [the roundtable], because you bring people together with varying perspectives on issues on the state, and they contribute where they have knowledge on a specific issue.”
Perkins told DBT in a separate interview that the roundtable had asked Damon to speak on the bill as it had been in the news for a while. It is also not uncommon for the Delaware Business Roundtable to ask experts to give presentations on policy or business matters during their quarterly meetings.
“There were some head-nodding, and some questions asked, and it seemed to come to an agreement that this was a good measure and we should take it up, as the action of doing nothing is a serious risk,” Perkins told DBT.
The Delaware Business Roundtable has historically endorsed legislation in the past, and relies on its executive committee for guidance before seeking a general consensus from the membership as a whole. Perkins did note that other law firms are members of the roundtable as well.
Richards, Layton & Finger— or Wilson Sonsini—are not the only two prominent firms who support SB 21. In addition to a coalition of Delaware Businesses, Potter Anderson Corroon and Young Conaway Stargatt & Taylor, LLP have issued statements of support earlier this month, and were included in another letter of support of the bill sent that represents 1,000 employees. Twenty-one other law firms have sent Meyer a letter of support of the bill as well. But several plaintiff attorneys have told DBT and testified this week that the bill would severely impact shareholder rights and their business.
Perkins added that there was a lot to lose if companies ceased incorporating in Delaware, as the corporate franchise tax incorporates millions to the budget and had long protected the state from implementing a sales tax. The week before the Delaware Business Roundtable met, Texas Gov. Greg Abbott wrote an opinion piece for the Wall Street Journal, urging companies to incorporate there.
“All [at the roundtable] are concerned because there’s a great deal to lose, and [that piece in the WSJ] didn’t help,” Perkins said “There’s already significant needs we have in our state, and we’re already facing property reassessment, cuts in federal funding. These are challenging economic times, and the risk is too great to simply do nothing.”
