Forget the First State — call it the Worst State.
One CEO launched a $2 million bid Monday to dirty up Delaware’s boring reputation and encourage America’s corporations to stop registering there despite its business-friendly taxes and court system.
Philip Shawe is spending big on a national attack ad after a bruising court battle which made him a sworn enemy of the state best known as the home of Joe Biden.
He is not its only enemy. Elon Musk has also lashed out at Delaware, specifically its courts, claiming they’re bad for the businesses which register there after he lost his own court battle over his planned $56 billion compensation package from Tesla.
“As Tesla’s CEO, Elon has created an unprecedented amount of value for his shareholders, and per the contract he signed with his board years he earned that compensation,” Shawe told The Post. “This is a terrible precedent for CEOs and companies across the country.”
Shawe, CEO of translation giant TransPerfect, is slamming what he calls Delaware’s “greedy” lawyers and singling out one of its most senior judges in ads aired nationally on CNBC and Bloomberg. The ads are running on local television stations and on Hulu accounts in Delaware.
Shawe’s campaign comes after his business was seized and then auctioned off by a Delaware court after his co-founder and now ex-wife filed a suit in the state, where they had incorporated it.
He was able to buy back the company as its sole owner for $385 million, at the cost of four years further legal battling and an estimated $260 million in legal fees. He is still tussling with the state over attorneys’ fees.
Shawe’s ad highlights Musk’s case, in which Delaware’s courts sided with a Tesla shareholder’s lawsuit which claimed the CEO’s cash-and-stock compensation package was not in the interest of all the company’s stockholders.
In Delaware, attorneys typically get 10% to 20% of a portion of what they “recovered” for shareholders, giving the lawyers who brought the Tesla suit an up to $6 billion payday — which Shawe said worked out to $300,000 per hour for each of them.
“The only thing I can think of that is more irrational and unpredictable for business law, than a court voiding an otherwise binding contract for executive compensation, that was ratified by both the board and shareholders—would be for that same court to turn around and reward the attorneys with a fee based on a percentage of value of the voided contract,” Shawe told The Post.
His ad attacks the judge who handled both Musk’s case and parts of his, Kathaleen McCormick, claiming she is allowing “fat cat” lawyers to run rampant. McCormick is Chancellor of the Delaware Court of Chancery, making her the most senior judge in its commercial courts.
Delaware has historically been a state where businesses incorporate — or legally register — in part because of having a chancery court system dedicated solely to adjudicating corporate disputes. Companies registered there but not doing business in the state pay no corporate income tax, and officers and directors affiliated with a company are not required to disclose their names.
More than 1.4 million companies are registered in Delaware, including a majority of the Fortune 500. But the ruling against Musk led to calls for “Dexit” and claims the state is anti-business.
Earlier this year Musk posted to X, “Never incorporate your company in the state of Delaware.” He has said he plans to move X, Neuralink and SpaceX out of the state.
Shawe is helping organize the campaign via the Citizens for Judicial Fairness, a nonprofit previously known as Citizens for a Pro-Business Delaware, that he founded in 2016 during his legal battle with Delaware.
The group says it is focused on transparency, equity, and accountability — and has even brought in the Rev. Al Sharpton to slam the lack of diversity on the court.
The Post has reached out to McCormick for comment.