Why are corporations incorporated under the laws of Delaware?

Two things to remember:  First, business entities are formed under state law in the US, not federal law.  So, when a company incorporates it must choose the law of one of the 50 states.  Second, not all businesses choose Delaware law, but yes, Delaware is very popular.  In fact, so many public companies are incorporated under Delaware law you might have gotten the impression that all business entities are formed under Delaware law.

Why do companies choose Delaware law?  Delaware has a reputation for making it easy to form a company and offering flexibility with respect to the rules of the company (e.g.,shareholders do not have to hold meetings).  

In addition, Delaware is well-known and generally respected for its business law.  Delaware has a special court called a Court of Chancery that deals with business litigation.  The Chancery  Court does not have juries.  Instead, judges issue written decisions.  Attorneys reading these decisions have greater confidence in their understanding of Delaware law and their ability to predict the outcome of a dispute.

But attorneys in the United States who specialize in forming companies will check applicable laws and will select the state of incorporation best-suited for their clients.  

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What is an intended third-party beneficiary?

To understand this question, imagine that Perry & Debby sign a contract.  Debby promises to paint Perry's fence. Debby breaches the contract by failing to paint the fence.  We know that Perry can sue Debby.  But what about Tina, Perry's neighbor, who was not a party to the contract?   Obviously the answer is probably "No."  We would call Tina a "third-party" because she was not one of the parties to the contract.  Generally speaking, third-parties, or non-parties to a contract, cannot sue.  That makes sense.   Perry was injured, not Tina, so why should Tina ever be allowed to sue Debby?

One circumstance where Tina could sue Debby is if she were an "intended third-party beneficiary"  of the contract.  For example, let's say Perry owes Tina money.  He's short on cash but is able to make a deal with Debby that Debby will paint Tina's fence. Tina likes this idea and will forgive the debt.  Here, Debby's performance is intended to benefit Tina -- she's painting Tina's fence.  If Debby doesn't paint Tina's fence, Tina will probably be allowed to sue Debby for breaching the contract, even though Tina was not a party to the contract.

You will want to look at the Restatement (Second) of Contracts and to read cases of course, but usually on a law school examination where there is an intended beneficiary one party owes money to the third-party or the party has a reason to want to donate the benefit of the performance to the third-party.  For example, when a husband names his wife as the beneficiary of a life insurance policy, the wife is the intended third-party beneficiary of the contract between the husband and the insurance company.

On a law school examination you should also be prepared to distinguish incidental beneficiaries of a contract from intended beneficiaries.  Sometimes a third-party will benefit from parties performing according to a contract but that benefit is merely incidental - - it is not the intention of the contracting parties.  For example, let's say Tina hires Perry to fix her car.  She needs a new brake.  Debby, an auto-parts supplier, is late delivering her weekly shipment of parts to Perry and this slows down the repair job.    Under these circumstances, sure, Tina would like Debby to deliver parts on time, but Tina is probably just an incidental beneficiary of the agreement between Perry and Debby.  

Below is a short video discussing intended third-party beneficiaries.

Riley v. California: Why the police need a warrant to search the cellular phone of a person under arrest

Last month, in Riley v. California, the Supreme Court decided that the police, absent exceptional circumstances, cannot constitutionally search an arrested person's cellular phone.  If you are studying US law this is a very useful decision to see how courts split on tricky issues.   The case is also helpful to understanding how courts apply precedent and create new precedent.  

The background to the case is that the police are generally allowed to conduct a warrantless search of a person who is arrested.  This is often called a "search incident to an arrest."  That is, the police can search the arrested person's pockets, things the arrested person is carrying, and immediate surroundings.  Courts agree that the police need to conduct these types of  searches to ensure their safety (an arrested person might have a concealed weapon) and to keep arrested persons from destroying evidence.  For example, in one important case, a police search of an arrested person's cigarette pack was held constitutional.

The Supreme Court explained that a warrantless search of a cellular phone is different.  First, cellular phones usually are not dangerous (unless perhaps the arrested person used the phone to contact accomplices who might want to attack the police). Second, although data on a cellular phone can be remotely destroyed, the Supreme Court believed that measures could be taken to secure the data without searching the phone.  Finally, the Supreme Court explained that cellular phones often contain large amounts of personal data, some of it dating years back.  Searching a cellular phones pictures, emails, etc. is too far reaching.  

 Below is a short video discussing the case:


What does it mean if a plaintiff has "standing" or "lacks standing" to challenge a law's Constitutionality?

Standing means that a person has a legal capacity to sue.  

Before a person can sue to challenge a law as unconstitutional that person must meet certain requirements.  He must have suffered an injury, or be in danger of suffering an injury as a result of the law.  Also, the Court must be able to provide some sort of remedy or help for the plaintiff if the Court finds in favor of the plaintiff.

As a practical matter this generally means that a person cannot claim that a law is unconstitutional on behalf of another person.  Only a person who has actually been injured as a result of the allegedly unconstitutional law or government action has the right to sue.  There are some exceptions to this rule which I'll discuss in a future post.  If you take a US bar examination you might find that at least one of the questions on Constitutional law will focus on standing.  

For now, here is a short video:  





I heard cases in the US are public. What if there is confidential information?

This is a good point and a good question.  Yes, as a general rule, both civil and criminal cases in the United States are public.  Now that most court documents are filed electronically you can access these documents online.  Federal court documents are available through PACER (pacer.gov) and many state courts make documents available online, too.

But obviously some documents shouldn't be shared.  For example, parties in a business dispute might not want to disclose trade secrets.  Perhaps in a criminal case there is information that if shared publicly could put someone in danger.  If a judge agrees, certain information will be redacted and not shared with the public.

When a litigation involves confidential information one or both parties will ask the Court for a "protective order."  In a motion for a protective order a party asks the judge to issue an order that will shield confidential information from being shared with other parties and/or the public.  

For example, let's say a document contains a business secret.  The company could ask the judge for a protective order so the document does not have to be disclosed.  Alternatively, the company could ask for a protective order so that the document will be "lawyer's eyes only" - - meaning lawyers may review the documents but it cannot be disclosed to other parties and the public.  Judges will not automatically grant a motion for a protective order.  The party must provide sufficient grounds to show why it needs the protective order.



What is a motion to compel?

A motion to compel is when a party asks the Court to force another party (or sometimes a third party) to do something.  

You will often see a motion to compel during discovery.  Let's say a lawyer asks a witness to answer a question during a deposition but the witness refuses to answer that question.  Or let's say a party requests a category of documents from its adversary but the adversary declines to provide some documents.  At that point the party seeking to force the witness to answer the question or demanding the documents will file a motion to compel.  If the judge grants the motion to compel the witness will have to answer the question and the documents will need to be produced.

The federal rules of civil procedure and the individual rules of many judges in the United States encourage parties to resolve discovery disputes without resorting to motion practice.  These rules generally require the parties to have a conference, with or without the judge, to resolve the dispute before filing a motion.  


What is double jeopardy?

Double jeopardy is the principle that a defendant should not be tried twice for the same crime once he is either acquitted or convicted (or pleads guilty).  

The principle applies slightly differently in the United States because of the principle of dual sovereignty.  Each state and the federal  government is a separate sovereign, therefore, it does not violate double jeopardy for different states  to try someone twice for the same underlying crime.   Similarly, a state and the federal government may put someone on trial for the same crime.  But the same state cannot try a person twice for the same crime and the federal government cannot try someone twice for the same crime after a conviction or acquittal.  

Below is a short video on how double jeopardy applies in the United States.




What is spoliation?

Spoliation is when a party destroys or alters evidence that he was obligated to preserve.  In the United States, a party is usually obligated to preserve evidence if he can reasonably anticipate that there will be a civil litigation.  If a party spoliates evidence, even accidentally, a judge might impose sanctions  - - and the sanctions can be serious.

 It is especially important for companies to have an appropriate policy regarding the preservation and destruction of documents to avoid getting into trouble.  In some instances there might be a relevant statute regarding the preservation of documents.  Lawyers in the US will work with corporate clients to prevent spoliation both before and after a litigation arises.  

For example, companies usually keep their emails on their computer servers for a certain period of time.  But for how long?  The company should consult with its attorney regarding how long emails will be preserved and whether certain emails should be retained for a longer period of time.  If there is a civil litigation and the company destroyed emails it should have preserved, a judge could impose penalties.

Below is a short video on spoliation.


What does it mean to be indicted for a crime? Is the defendant guilty?

An indictment just means that a person was charged with a crime.  The defendant is not guilty, but he was accused of committing the crime.

One special characteristic of the United States is that in federal courts and often in state courts a "grand jury" indicts the defendant.  A grand jury is a large jury, 16-23 persons, which reviews the evidence presented by the prosecutor and determines whether there is at least enough evidence to accuse the defendant of committing the crime.  Grand juries are intended to, among other things, act as a shield against meritless prosecutions.  Not all states use the grand jury system and some states only use grand juries for certain crimes.  

If the grand jury agrees that there is enough evidence the foreperson of the grand jury will sign the document with the accusations against the defendant.  We would say that the grand jury has indicted the defendant. 

Below is a short video on grand juries.