# Delaware Chancery Court Faces Scrutiny Over Hidden Litigation Funding Lack of transparency in litigation finance threatens corporate trust and national security interests. - **Source:** [Fortune](https://fortune.com) - **Published:** 2026-11-10 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/30220eb0-509b-4ba5-a25d-5cf8e293d97a ## Corporate Exodus from Delaware Delaware is witnessing a significant corporate flight, with at least 30 companies relocating over the last two years. Firms like Virtu Financial cite unpredictable judicial decisions in the Chancery Court as a primary driver. This trend challenges the state's long-standing reputation for providing a consistent and reliable legal environment for American businesses. ## The Litigation Finance Blind Spot While Delaware's federal court has implemented disclosure rules, the state's Court of Chancery remains largely opaque regarding litigation funding. Companies often face lawsuits without knowing who is financing the action or if an undisclosed backer controls settlement decisions. This lack of transparency undermines the fundamental principle that courts should operate openly. ## Explosive Market Growth The global litigation finance market reached an estimated $20.6 billion in 2025, with U.S. commercial funders managing $16 billion in assets by late 2024. Originally intended to improve access to justice for plaintiffs, the industry has evolved into a complex, often secretive sector that frequently obscures the true parties driving legal disputes. ## National Security Risks Undisclosed funding creates severe risks, particularly when capital originates from foreign states or hostile entities. A December 2024 GAO report identified stakeholders concerned about funders from China, Saudi Arabia, and France. These entities may use litigation to impose burdensome costs on American competitors or extract sensitive strategic information through broad civil discovery. ## Weaponizing Civil Discovery Discovery processes, which account for up to 90% of litigation costs, are being weaponized to hinder competitors. By requesting massive document dumps, funded plaintiffs can force defendants to incur heavy operational costs. This practice turns the judicial process into a mechanism for extracting sensitive industry data under the guise of legitimate legal action. ## Evidence from Federal Courts Chief Judge Colm Connolly’s 2022 order requiring disclosure in Delaware's federal district court yielded immediate results. Patent filings in his court dropped 41% over two years, while funded cases virtually disappeared. This transparency successfully discouraged litigation that relied on secrecy, proving that disclosure requirements effectively deter strategic, non-meritorious lawsuits from entering the system. ## Chancery Court Inconsistency Unlike the federal district court, the Delaware Court of Chancery lacks a universal disclosure rule. While Vice Chancellor Nathan Cook ordered full disclosure in a 2024 class action, this remains a case-by-case approach. This structural gap prevents the court from fully assessing conflicts of interest or policing improper control by third-party litigation funders. ## Legislative and Regulatory Momentum States and federal regulators are increasingly acting to mandate transparency. Ohio enacted laws requiring funder registration, while North Carolina prohibited third-party litigation investment entirely. Meanwhile, bipartisan efforts in Congress seek to bar sovereign wealth funds from financing U.S. litigation, reflecting a growing national consensus that the current lack of oversight is unsustainable. ## The Case for Transparency Capital markets and legal systems rely on disclosure to function effectively. Just as shareholders disclose ownership and political donors report contributions, litigation funders should be subject to similar standards. Requiring parties to reveal the existence and control rights of funders would restore the integrity of the judiciary and protect corporate interests. ## Restoring Judicial Trust Delaware must adopt a mandatory disclosure rule modeled on Chief Judge Connolly’s successful framework to remain the premier venue for corporate law. By bringing litigation funding into the light, the state can mitigate national security threats and restore the predictability that once defined its court system. Transparency remains the ultimate remedy for justice. ## Sources covering this story - https://fortune.com/2026/11/10/delaware-chancery-litigation-funding-rule-proposal/ — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._