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Key takeaways Delaware faces corporate departures amid “Dexit” concerns.

Texas, Nevada, and Oklahoma expand business-friendly laws.

New courts aim to rival Delaware’s Court of Chancery.

States seek millions in franchise taxes and legal fees.

CLAYMONT, Del. — Lawmakers in Texas, Oklahoma and Nevada have recently approved changes aimed at helping their states dip into the lucrative side of corporate litigation that Delaware, with a specialized court and business-friendly laws, has dominated as the world’s incorporation capital.

Concerned that these changes may lure corporations away from Delaware, thereby causing the small state to lose millions in corporate franchise taxes, Delaware officials have responded with their own changes to solidify their status in the business world.

In Texas, which opened a business court last year, there was bipartisan support for legislation diminishing shareholder powers and giving businesses more legal protections against shareholder lawsuits. Nevada lawmakers approved a corporation-friendly update to its business laws, also with bipartisan support, and separately moved toward asking voters to consider changing the state constitution to create a dedicated business court with appointed judges.

Billionaire Elon Musk had advocated both states as better options for incorporation after a Delaware judge struck down his shareholder-approved $56 billion compensation package from Tesla. Musk’s businesses have also changed where they’re incorporated: Tesla and SpaceX relocated to Texas, while Neuralink moved to Nevada.

Oklahoma also took action to get in the mix, as the Republican-led Legislature sanctioned the creation of business courts in its two most populous counties, a move the governor said would help Oklahoma become the most business-friendly state.

“This is an area in which states, in many ways, are behaving like businesses,” said Robert Ahdieh, dean of the Texas A&M University School of Law. “Delaware is selling something. Texas is selling something that they hold out to be better. So it is very much a comparative exercise.”

Concerns about a ‘Dexit’

Since 2024, several billion-dollar companies including TripAdvisor and DropBox have relocated to Nevada. More than a dozen others, including the AMC theater chain and video game developer Roblox Corporation, have announced plans to incorporate there this year. Latin American e-commerce giant MercadoLibre filed a request for shareholders to approve a Texas relocation in April, citing Delaware’s “less predictable” decision-making process — a common thought among exiting companies.

Amid concerns about more companies reincorporating elsewhere in a so-called “Dexit,” Delaware passed its own legislation to help protect its status as the corporate capital, limiting shareholders’ access to records and increasing protections for leadership. Opposition dubbed it “the Billionaire’s Bill.”

“Ultimately, I think the damage is done because businesses successfully undermined shareholder rights in Delaware,” said Corey Frayer, director of investor protection at Consumer Federation of America, who argues that the Delaware bill was a rash acquiescence to “Dexit” concerns.

However, some business law experts, like Ahdieh, say the average shareholder is focused on increasing their returns and does not care about shareholder power or where the company is incorporated.

Delaware Gov. Matt Meyer has vowed to win back companies that leave, arguing his state’s experience “beats going to Vegas and rolling the dice.”

Less predictability

Companies flock to Delaware for its well-respected Court of Chancery, a sophisticated and separate forum focusing on equity, corporate and business law. This incorporation machine generates $2.2 billion annually, about one-third of the state’s operating budget.

There is comfort in working in the familiarity of Delaware law, said Ahdieh, but that predictability has come into question in the last decade as corporate leaders grew unhappy over losing precedent-setting court decisions governing corporate conflicts of interest.

Widener University Commonwealth law school professor Christian Johnson acknowledged a shift in Delaware but said reincorporating elsewhere might be “a bit of an overreaction.” Although a few big-name companies have moved, there are still more than 2 million legal entities incorporated in Delaware, including two-thirds of the Fortune 500.

Statutes in Texas and Nevada may appear more flexible, but they have not been extensively tested, and their courts are not as experienced working with the larger entities that favor Delaware, Johnson said.

Protections in Texas

In May, Texas Gov. Greg Abbott signed legislation providing greater securities for corporate officers and adding restrictions to shareholder records requests. The bill also allows corporations to require an ownership threshold, no more than 3% in outstanding shares, before a shareholder can initiate a derivative lawsuit, typically on behalf of the company and against its own board or directors.

Restrictions on who can initiate such lawsuits are not uncommon, but Texas’ implementation imposes a “far higher barrier than the norm,” Ahdieh said.

Consumer advocates worry the changes endanger shareholder and investor protections by giving owners and directors more protection against lawsuits that could hold them accountable if they violate their fiduciary duty.

For businesses, the changes mean potentially saving millions of dollars in shareholder lawsuit settlements and legal fees by mitigating the likelihood of those costly cases reaching court. For the states, attracting the companies means millions in business activity and revenue from regulatory filing and court case fees and taxes.

New courts

Eyeing a piece of that, Oklahoma is on pace to establish its recently approved business courts in 2026.

“I’m trying to take down Delaware,” said Oklahoma Gov. Kevin Stitt, a Republican. “We want to be the most business-friendly state.”

Nevada wants to compete, too. It has run business dockets in Washoe and Clark counties since 2001, and it’s in the state’s interest to expand operations considering its fast-growing economy and population, said Benjamin Edwards, a University of Nevada, Las Vegas law professor who studies business and securities law.

But he said it could take decades to build up a court comparable to Delaware, which has a valuable reputation for handling cases relatively quickly.

Nevada’s proposed business court wouldn’t take effect until 2028 at the earliest and would require amending the state constitution, which would need approval by the 2027 legislature and voter approval in 2028 to allow for the appointment of judges.

Mingson Lau reports for the Associated Press. Associated Press reporter Marc Levy in Harrisburg, Pennsylvania, contributed to this report.

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Key Summary: SB 453 caps non-economic damages and adopts Daubert standard

HB 2619 restricts foreign litigation funding in Oklahoma courts

Business groups support reforms to reduce legal unpredictability

Both laws take effect later this year, improving legal clarity

OKLAHOMA CITY – Business leaders say two pieces of legislation recently signed into law by Gov. Kevin Stitt will help them navigate Oklahoma’s commercial legal environment.

Senate Bill 453 puts a cap on non-economic damages to $500,000 for physical injuries and $1 million for permanent mental injuries and adopts the federal Daubert standard, a rule of evidence that determines the admissibility of expert witness testimony.

Stitt signed the measure championed by the State Chamber into law May 27. The legislative voice for Oklahoma’s business community supported the measure to prevent excessive litigation costs, protect healthcare providers and support a stable insurance market.

“Our courts aren’t casinos. It’s not a place where you go to make 40% on your investment. You go there as a plaintiff and your attorney,” Adam Maxey, vice president of government affairs for the Oklahoma State Chamber said in a statement. “Oklahomans should be fairly compensated when injured, and businesses should be held accountable, but eight- and nine-figure verdicts hurt our entire state.”

The Oklahoma Supreme Court in 2019 struck down a $350,000 cap on non-economic damages, finding that it treated survivors of injuries differently from those whose deaths resulted from the same incident.

State Sen. Brent Howard, R-Altus, the measure’s author, said it has different factors that at least three sitting justices said would make it constitutional, but state Sen. Michael Brooks-Jimenez, D-Oklahoma City, also a metro-based attorney, disagreed on the chamber’s floor last month. He asked how the reasoning would be different between someone who is killed on the spot of an accident and there’s no limit on non-economic damages, and another who may suffer serious physical, mental or emotional injuries, but are limited in their damages despite having to live with the injury for the rest of their life.

Howard said he thinks most Oklahomans would see it’s not a special law, because those are different classes of cases, as one survived and another is deceased.

According to the State Chamber, since the 2019 Oklahoma Supreme Court ruling, the absence of a cap on non-economic damages has led to more frequent ‘nuclear verdicts,’ higher litigation costs, uncertainty for healthcare providers, and growing unpredictability for businesses and insurers alike.

A study by The Perryman Group found that excessive tort costs in Oklahoma result in a loss of approximately $3.7 billion in gross product and almost 32,000 jobs annually. This translates to a total loss of $14.9 billion in gross product and 128,500 jobs from 2020 to 2023.

The chamber said the Daubert Standard, already in place in most states and federal courts, will prevent what they call “junk science” from swaying juries, instead promoting evidence-based outcomes.

SB 453 goes into effect Sept. 1.

Oklahoma bill prevents foreign litigation funding

Another legal reform bill signed into law this session, House Bill 2619, by state Rep. Erick Harris, R-Edmond, makes third party litigation funding agreements discoverable and outlaws lawsuit investments from foreign adversaries.

According to Westfleet Advisors, 39 capital sources were active in the U.S. market in 2023 and managed a combined $15.2 billion in assets allocated to U.S. commercial litigation investments.

The Wall Street Journal reports annual returns average about 25% in these cases, creating incentive for businesses to settle claims early to avoid lengthy litigation.

Harris said it’s crucial to ensure courts remain free from manipulation by foreign powers seeking to influence case outcomes for their benefit.

The bill requires a disclosure by the producing party as to whether a foreign state or instrumentality of a foreign state is, has been, or will be a source of funding for the case.

“This bill strengthens the integrity of Oklahoma’s legal system and prohibits foreign adversaries, like Russia and China, from attempting to fund litigation that could undermine the fairness of our courts,” Harris said in a statement. “This legislation will help preserve the sanctity of our judicial process and protect the rights of Oklahomans from external interference.”

HB 2619 goes into effect Nov. 1.

National and state business organizations see the reforms as important steps toward more legal clarity.

“They’re wins for small businesses, job creators, and rural hospitals who ultimately bear the cost of an unpredictable and hostile legal environment,” Stephen Waguespack, president of the U.S. Chamber of Commerce Institute for Legal Reform said in a statement.

National Federation of Independent Businesses Oklahoma Director Jerrod Shouse said SB 453 will help protect small businesses so they can “continue to grow and invest in our communities.”

Oklahoma City attorneys filed a lawsuit to block the implementation of a new business court system.

The lawsuit claims the new law is unconstitutional, citing concerns about the judge appointment process and high filing fees.

Plaintiffs argue the high filing fees and inclusion of insurance disputes restrict access to justice for average citizens.

Two Oklahoma City attorneys have filed a lawsuit asking the Oklahoma Supreme Court to block the implementation of a new law creating a system of business courts in the state.

Attorneys Joe E. White Jr. and Jason Waddell are the plaintiffs in the lawsuit filed Thursday, June 26, asking the Supreme Court to take original jurisdiction of the case, bypassing the state’s district court, citing what he believes is the urgency of the matter. Without court intervention, the law creating the courts will take effect Sept. 1.

White and Waddell are asking the Supreme Court to declare the law that created the courts as unconstitutional, grant a temporary injunction to prevent Gov. Kevin Stitt from appointing business court judges while the case is being decided, and for a permanent injunction after that. Stitt, House Speaker Kyle Hilbert and Senate President Pro Tempore Lonnie Paxton are named as defendants in the lawsuit.

“This legal challenge to business courts was anticipated by members of the Legislature during session,” Hilbert said. “Regardless of how the Supreme Court rules, the House is committed to ensuring an effective court system for all Oklahomans. As such, the House is setting up an application portal similar to what we have successfully used for the state Workers’ Compensation Commission for those interested in seeking a position on the business courts.”

A spokesman for Paxton declined to comment, but Stitt roundly criticized the lawsuit.

“This meritless lawsuit is a Hail Mary pass thrown by trial attorneys who profit from maintaining the status quo,” Stitt said. “Our business court law will make Oklahoma the most business-friendly state, in part by limiting lawsuit abuse by trial attorneys. We can’t let these trial attorneys weaponize the justice system to protect their interests. Business courts will streamline litigation and will send a powerful message nationwide that Oklahoma is open for business. If companies come here they will have certainty and fairness in our courts.”

How the business courts under Senate Bill 632 work

Senate Bill 632 was passed during the final week of the legislative session as part of the budget deal struck by legislative leaders with Stitt. The creation of courts designed to handle complex business litigation long has been a goal of Stitt, as he believes the existence of such courts will help make Oklahoma appear more friendly to potential businesses looking for a place to locate.

The legislation would create a business court in any judicial district in Oklahoma containing a county with a population of more than 500,000 — essentially, Oklahoma and Tulsa counties. According to an analysis by the Administrative Office of the Courts, the business court system will cost taxpayers about $2 million to establish.

The business courts would focus on disputes regarding Oklahoma’s complex business laws, including securities, trade secrets, professional malpractice, contracts, commercial property, intra-business disputes and e-commerce. Under the legislation, for an issue to be considered by the court, the amount in controversy must be $500,000 or more. The bill also would require any non-jury trial in a business court to be resolved within 12 months.

Judges in the two business courts would be appointed directly by the governor from a list of three candidates submitted by the House speaker — thus bypassing the Judicial Nominating Commission process in place for other state-court judges — and would serve six-year terms.

The 15-member Judicial Nominating Commission, created in 1967, was designed to take politics out of Oklahoma’s judicial appointment process. State lawmakers moved to the commission system after a scandal rocked the Oklahoma Supreme Court in 1965. After the scandal, voters narrowly created the commission, which supporters say has worked well for decades.

Lawsuit claims multiple reasons why Oklahoma’s business-courts law should be ruled unconstitutional

In their lawsuit, White and Waddell offered multiple reasons why they think the business-courts law should be declared unconstitutional, One, they said, is that the Legislature bypassed the Judicial Nominating Commission for the selection and appointment of judges for the business court. They also believe the Legislature “has created an unconstitutional barrier to access to the courts with a $1,565 filing fee” for a case to be heard by the courts.

“The clear language … of the Constitution requires that the courts must be open to all on the same terms without prejudice,” their attorney, Bob Burke, wrote in a court filing.

“What if the owner of a local machine shop in Oklahoma City has a dispute over ownership of the business that operates from a $550,000 building? The machine shop owner’s right to seek justice is impeded by a $1,565.00 filing fee.”

Citing U.S. Census figures, Burke noted the median household income in Oklahoma County was $65,400 and $67,317 in Tulsa County between 2019 and 2023. “Considering the average income and the cost of living, a potential plaintiff facing the payment of $1,565.00 to file a Business Court lawsuit to enforce his legal rights shuts the courthouse doors,” he wrote.

Burke said the normal fee for filing a lawsuit in a district court in Oklahoma’s 77 counties is about $200.

In a statement, Burke said Delaware and Texas have successful business courts, “but their legislatures limited jurisdiction to larger cases that are truly disputes between businesses. In Oklahoma, the Legislature was heavily influenced by the insurance lobby and added insurance coverage disputes and products liability cases to the Business Courts jurisdiction. In Texas, for example, citizens are still free to sue their insurance companies in regular district court.

“Oklahoma’s Legislature wants to try to cut off access to the local district court for common people who have a dispute with their insurance company over a tornado or fire claim.”

WASHINGTON — Conservative members of the Supreme Court on Wednesday leaned toward allowing Oklahoma to approve the first-ever religious public charter school in a case that could weaken the separation of church and state.

While several conservative justices expressed support for the school’s arguments, Chief Justice John Roberts emerged during the more than two-hour argument as a potentially decisive vote.

There is the possibility of a 4-4 split, as one justice, conservative Amy Coney Barrett, is not participating. That outcome would preserve an Oklahoma Supreme Court ruling that blocked the proposed school.

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Although the oral argument concerned only St. Isidore of Seville Catholic Virtual School, which would operate online throughout the state with a remit to promote the Catholic faith, the case could have broad ramifications.

The dispute, which pits Republicans in Oklahoma against each other, highlights tensions within the Constitution’s First Amendment. While the Establishment Clause prohibits state endorsement of religion or preference for one religion over another, the Free Exercise Clause outlaws religious discrimination.

Lawyers for St. Isidore, who are defending the proposal along with the Oklahoma Statewide Charter School Board, have a narrow interpretation of the Establishment Clause and say barring religious entities from applying to run charter schools would run afoul of the Free Exercise Clause.

The Archdiocese of Oklahoma City and the Diocese of Tulsa jointly proposed the school.

In recent years, the Supreme Court has repeatedly strengthened the Free Exercise Clause in cases brought by conservative religious liberty activists, sometimes at the expense of the Establishment Clause. Some conservatives have long complained that the common understanding that the Establishment Clause requires strict separation of church and state is flawed.

Conservative justices expressed doubt that charter schools are public schools that are effectively instruments of the state and favored the school’s argument that they are entirely private bodies that just happen to receive state funding.

They also expressed concern that it would be a form of religious discrimination under the Free Exercise Clause to bar religious schools from a state charter school program that other entities can participate in.

“Our cases have made very clear, those are some of the most important cases we’ve had, saying you can’t treat religious people, religious institutions and religious speech as second class in the United States,” conservative Justice Brett Kavanaugh said.

To prohibit religious entities from participating in a program open to everyone else would be “rank discrimination,” he added.

Fellow conservative Justice Samuel Alito took issue with some of the statements made by Oklahoma Attorney General Gentner Drummond, who challenged the decision to approve the school and was sitting in the courtroom.

Alito mentioned that Drummond has said that a ruling for St. Isidore would pave the way for Islamic schools, which he characterized as evidence of “hostility toward particular religions.”

Oklahoma Attorney General Gentner Drummond in his office in Oklahoma City on March 13. Nick Oxford for NBC News

Roberts was more measured than some of his conservative colleagues, asking skeptical questions of both sides. But in one exchange, he seemed to think the case echoed a 2021 ruling in which the Supreme Court ruled in favor of a Catholic group that was barred from participating in Philadelphia’s foster care program because of its religious views opposing same-sex relationships.

“How is that different from what we have here?” he asked. “You have an education program and you want to not allow them to participate with a religious entity.”

But in an earlier exchange, he also pushed back against some of the arguments made by the school and its supporters that charter schools are completely independent of the state, suggesting he thought the case is different from a line of recent Supreme Court decisions that allowed state taxpayer money to flow to religious entities.

Those cases, Roberts said, “involved fairly discrete state involvement” compared with Oklahoma’s charter school program.

“This does strike me as a much more comprehensive involvement,” he added.

The three liberal justices were much more skeptical about the school’s arguments, with Justice Sonia Sotomayor expressing concern about the future of the Establishment Clause.

“There is no Establishment Clause. What you are saying is the Free Exercise Clause trumps the essence of the Establishment Clause,” she said,

She wondered whether, if charter schools are not public schools, they would be free to teach creationism instead of evolution.

Likewise, Justice Elena Kagan raised the possibility of an Orthodox Jewish school’s being able to participate in a charter school program even if most of its teaching would be overwhelmingly religious in nature and mostly not in English.

“I don’t have to imagine very hard to come up with 100 hypotheticals like this, because religious communities are really different in this country and are often extremely different from secular communities,” she said.

There was also a risk of allowing only “accepted establishment religions” to run charter schools, while “more fundamentalist” groups could not, Kagan said.

Although the court has a 6-3 conservative majority that often backs religious rights, the case is complicated somewhat by conservative Barrett’s decision to recuse herself.

Barrett did not explain why she stepped aside. Before she became a judge, she was a professor at Notre Dame Law School and has close ties there. The law school’s Religious Liberty Clinic represents St. Isidore.

The campaign to authorize religious public charter schools dovetails with the school choice movement, which supports parents’ being able to use taxpayer funds to send their children to private school. Public school advocates see both as broad assaults on traditional public schools.

The school’s lawyers, who have the backing of the Trump administration, present the case as strictly a Free Exercise Clause issue and cite to a trio of recent rulings in which the Supreme Court said states cannot bar religious entities from programs that nonreligious private groups can apply for.

Drummond has argued that charter schools in Oklahoma are like all other public schools, meaning the state can require them not to be sectarian.

How the court ultimately rules will have nationwide implications. All of the 47 states that allow public charter schools do not allow religious entities to participate, so a ruling in favor of St. Isidore would open the doors to other states’ either changing their laws to allow religious schools or facing lawsuits that would require them.

During the argument, conservative Justice Neil Gorsuch sought to downplay that concern, noting that states could amend their laws so the government would more closely control charter schools. That would allow them to require a secular education without raising religious rights issues.

As a result, a ruling for St. Isidore “may apply in some states and may not apply in others,” he said.

Drummond said in court papers that such a ruling would bring charter school laws nationwide into question and give “special status” to religious charter schools, because, unlike secular schools, they may not have to comply with certain laws that apply to charter schools if they conflict with religious beliefs.

A win for St. Isidore could also have unintended consequences, lawyers for the National Alliance for Public Charter Schools warned in a friend-of-the-court brief. They noted, for example, that many charter schools would risk losing vital state funding if the court concluded they are not public schools given that the state bans public money going to any private schools, whether they are religious or not.

The case could also have repercussions at the federal level, where a program that provides funds to charter schools prohibits money from going to sectarian schools.

A state board approved the proposal for St. Isidore in June 2023 despite concerns about its religious nature, prompting Drummond to take immediate legal action.

The state court ruled last year that the school would violate both state law and the First Amendment.