Lawyers in Delaware corporate cases are frequently earning up to 10 times their normal hourly rate from big corporations, according to a new study from a prominent Stanford law professor—and that’s fueling calls from the venture-capital community for startups and corporations to consider leaving the state.
One lawyer, as a result of these multipliers, saw their rate jump to a jaw dropping $35,000 per hour. Another received 66 times their normal rate.
The study is raising eyebrows in the venture-capital community, with Bill Gurley, former general partner at Benchmark, emerging as the loudest voice.
On Twitter/X, he added ” Something is awry in Delaware and you should know the risks.”
Gurley has been a leading advocate for “DExit,” a movement for companies to move out of Delaware. The study from Grundfest, a well-known professor, could nudge more companies to make the move, however.
Texas and Nevada have emerged as the beneficiary of these retreats.
The Grundfest study also found the majority of these oversized multipliers came from just two chancery court judges. (“We draw no inferences from these data. Readers can reach their own conclusions,” the study reads.)
In the five-year period the study examined, there were 21 septuples and 14 decuples in Delaware. That nearly matches the entire federal system on septuples and it’s nearly triple the number of federal decuples.
“To me this is more damning than just the one Tesla thing,” Gurley said. “Delaware was a place where there was supposed to be business calm, where you didn’t expect chaos. This shows that chaos is being built into the system and it’s a recent development.”
While there’s plenty of talk of a DExit, Delaware isn’t likely to cede its position as the go-to place for businesses to incorporate easily. It has decades of case law, which provides precedent on an extraordinarily wide ranges of business issues, as well as a specialized, efficient courts dedicated to business matters, which helps companies identify and manage risk.
Delaware’s governor Matt Meyer says he is talking with corporate leaders to gather feedback and told Fortune earlier this year that changes will be coming in the short term.
