Most people know that courts use previous case law from the same jurisdiction as precedent to determine the outcome of a case in a given scenario. But what happens when there is no applicable case law in that jurisdiction for that scenario? Among other things, courts look to case law from other jurisdictions as persuasive authority to determine the outcome. But most courts do not find case law from each jurisdiction equally persuasive.
Over the years, certain jurisdictions develop law in particular subject areas more than others. Often, this means that courts ascribe more value to the persuasive authority from such jurisdictions in that subject area. For various reasons (which this post does not delve into), Delaware is widely considered the leader in business and corporate matters. That said, other jurisdictions like Texas, Nevada, Wyoming, and South Dakota are vying for that spot.
Washington Courts Rely on Delaware’s Influential Jurisprudence in Business/Corporate Matters When Washington Law is Silent or Scant
While Washington State maintains its own body of case law, its business/corporate case law is generally not as developed as Delaware’s. Thus, Washington courts frequently find Delaware case law persuasive on business matters, including those arising under the entity statutes. See, e.g., Goldberg Family Inv. Corp. v. Quigg, No. 44915-3-II, 2014 Wash. App. LEXIS 2598, at *24 (Oct. 28, 2014) (unpublished) (“Because the Delaware courts have significant experience with the law of business entities, the courts of this state often look to Delaware decisions as persuasive authority.”) (citing In re F5 Networks, Inc. Derivative Litig., 166 Wn.2d 229, 239–40, 207 P.3d 433 (2009)); see also Sound Infiniti, Inc. v. Snyder, 169 Wn.2d 199, 209, 237 P.3d 241 (2010) (relying on “Delaware’s influential jurisprudence”).
For example, Washington’s judicial dissolution statute for LLCs, RCW 25.15.274, provides that:
“On application by a member or manager the superior courts may order dissolution of a limited liability company whenever… It is not reasonably practicable to carry on the limited liability company’s activities in conformity with the certificate of formation and the limited liability company agreement.”
But Washington case law is silent as to the interpretation of the “not reasonably practicable” standard provided in the statute. Thus, Washington courts can look to Delaware’s interpretation of its nearly identical “not reasonably practicable” standard in 6 Del. C. § 18-802 as persuasive authority for its interpretation of the “not reasonably practicable” standard in RCW 25.15.274. The substance of this interpretation and application will be discussed in a subsequent post.
In short, Delaware’s greatly developed business and corporate law can be relied upon by Washington courts as influential jurisprudence.
Considerations
In business matters, Washington courts often look to Delaware when Washington precedent is scant. Therefore, it is critical for clients and practitioners to understand the intricacies of Delaware law in these areas – it may just determine the outcome of a given case.
The Business Lawyers at Beresford Booth have extensive experience and are well versed in these business/corporate matters Please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100 to see how we can assist you.