Maffei v. Palkon and Its Potential Impact on Incorporation Trends in Nevada

The Delaware Supreme Court’s recent decision in Maffei v. Palkon, (C.A. No. 2023-0449-JTL), brings new attention to the legal complexities surrounding corporate redomestication, or the practice of changing a company’s state of incorporation. This 2025 case addressed a pivotal question in corporate governance—whether companies can relocate to states with more management-friendly regulations, like Nevada, without raising fairness concerns for minority stockholders. The Court’s ruling sets a significant precedent that could influence not only future corporate moves out of Delaware but also states that market themselves as business-friendly incorporation hubs. This article summarizes the case and examines how it may affect Nevada and its legal landscape, including the demand for local counsel.

The Case in Summary

The dispute in Maffei v. Palkon arose when minority shareholders in Tripadvisor, Inc. and Liberty TripAdvisor Holdings, Inc. challenged the decision by the companies’ boards to reincorporate from Delaware to Nevada. The plaintiffs alleged that the move offered “non-ratable benefits” (benefits not equally accessible to stockholders) to the directors, such as reduced liability exposure under Nevada’s more lenient corporate laws. They argued that this change harmed minority stockholders by diminishing their rights to sue for breaches of fiduciary duty in Nevada’s less rigorous legal environment.

The Delaware Court of Chancery first determined that the standard of review for the board’s actions was one of “entire fairness” given the potential for directors, shareholders, and controllers like Gregory Maffei to gain unique personal benefits from the transaction. The “entire fairness” standard is the most stringent review in Delaware corporate law, requiring directors to prove that the transaction was fair in both process and price.

But on appeal, the Supreme Court of Delaware rejected this view. The Court held that under Delaware law, such claims must show material, non-ratable benefits to directors or controllers. It also emphasized that hypothetical or speculative future benefits, like reduced litigation risks under Nevada law, are insufficient to satisfy this requirement absent any existing or pending claims against the directors. The Court ruled that the business judgment rule applied—a far less intrusive standard that assumes directors act in good faith for the benefit of the corporation.

This outcome underscores Delaware’s deference to corporate directors when their decisions reflect sound business judgment, and it highlights the difficulty of challenging such moves by alleging speculative harms.

Potential Impacts on Nevada’s Incorporation Appeal

Nevada’s appeal as an incorporation hub stems largely from its business-friendly corporate governance regime, which offers higher liability protections for directors and officers and eschews the more invasive judicial oversight often seen in Delaware. These selling points, exemplified by Nevada’s statutes and legal framework, have attracted companies seeking to escape Delaware’s strict fiduciary duty standards, especially those involving “entire fairness” reviews.

The Delaware Supreme Court’s explicit refusal to second-guess a board’s decision to reincorporate—provided such a decision does not extinguish existing liabilities or confer material benefits on directors—gives corporations a safer pathway for redomestication without fear of litigation under Delaware law. This ruling effectively eliminates the specter of entire fairness review tied solely to concerns about the looser legal protections offered by other states like Nevada.

For Nevada, the legal green light from Delaware’s judiciary could encourage more corporations to make the move to Nevada or other states with director-friendly statutes. It may also come with increased scrutiny of Nevada’s regulatory regime might arise if plaintiff stockholders begin mounting challenges in Nevada courts instead. Litigation in Nevada could intensify as parties test the limits of its more relaxed liability framework.

Economic Implications and Demand for Local Counsel in Nevada

One likely offshoot of more companies incorporating and litigating in Nevada is the heightened need for specialized local legal expertise. Nevada’s governance framework, though designed to favor directors, offers less predictable outcomes due to its relatively less-developed case law. By contrast, Delaware’s comprehensive body of precedent provides clear guidance to corporations and litigators, which has historically minimized legal ambiguity.

Demand for Local Counsel

Companies that opt for Nevada incorporation may find themselves more often in need of skilled local counsel to interpret and operate within the state’s unique legal ecosystem. Unlike Delaware, Nevada judges lack the extensive corporate law background of Delaware’s Court of Chancery, and businesses may face challenges regarding judicial consistency and predictability in corporate litigation. Local counsel well-versed in Nevada statutes, business court precedents, and procedural nuances can bridge this gap, offering companies both advisory and litigation services.

A Barrier, But an Opportunity

Additionally, Nevada’s comparatively opaque corporate governance regime may require corporations to do more to secure legal assurances about future liabilities. This, in turn, might amplify the role of local counsel in drafting governance documents, advising on fiduciary duties, and defending executives against the rare cases that do make their way to court. Consequently, the thriving business incorporation market in Nevada might see an ancillary boost in its legal services sector. Yet this complexity could also serve as a deterrent for firms accustomed to the legal predictability provided by Delaware.

Broader Considerations

The Maffei v. Palkon decision also opens up broader discussions about state-level competition to attract businesses. Delaware has long been the leader in corporate law sophistication because of a finely-tuned legal environment that balances flexibility for directors with robust protections for stockholders. But by allowing companies greater latitude to move elsewhere, Delaware courts may have unintentionally leveled the playing field, giving states like Nevada a stronger foothold in the corporate governance race.

This legal permissiveness may encourage other states to develop their own incorporation incentives, whether through legislative reform or adjustments in judicial interpretation. For instance, Nevada’s legislature, often seen as particularly friendly to directors and executives, might consider further strengthening its protections to distinguish itself from Delaware.

Strategic Decisions for Corporate Boards

Corporate boards considering redomestication must also weigh potential reputational and market risks. Investors are often wary of companies that abandon Delaware, typified by what plaintiffs in Maffei v. Palkon called the “market perception” of Nevada as a “less responsive” jurisdiction for stockholders. While speculative claims about liability risks may no longer suffice to block such moves, boards must still contend with investor skepticism and potential blowback when adopting corporate governance architectures perceived to prioritize directors over shareholders.

Boards must therefore tread carefully when framing their rationale for redomestication, ensuring that their decision aligns with the business’s strategic goals beyond mere liability minimization. This might include considering whether Nevada law offers tangible long-term benefits, such as attracting executive-level talent or deterring hostile takeovers, that offset the potential reputational costs.

Final Thoughts

Maffei v. Palkon represents a seismic shift in the ongoing evolution of corporate incorporation. While Delaware retains its primacy, the decision provides a clear pathway for entities considering relocation to states like Nevada. At the same time, this freedom comes with tradeoffs—corporations must brace for a potentially more litigious landscape while navigating the reputational challenges associated with leaving Delaware’s established framework.

For Nevada and other states vying for incorporation business, this case presents both opportunities and challenges. Local legal counsel will likely play a crucial role in shaping the incorporation experience for businesses, particularly as more complex disputes arise under Nevada’s regime. Ultimately, the decision reinforces the delicate balance between corporate flexibility and stockholder protection, a dynamic that will continue to shape the future of U.S. corporate law.

Micah Nash

Micah Nash is an experienced business litigator with over fifteen years of experience representing clients in a broad range of commercial disputes.  Micah understands that sound legal counsel extends beyond issue-spotting and pre-packaged litigation strategies.  He endeavors to identify his clients’ goals, anticipate possible adverse developments, and craft effective solutions as quickly and efficiently as possible.  He offers straightforward legal advice and works to ensure efficient results.  In all of his cases, he is committed to preventing litigation costs from spiraling out of control. Learn more here.