She Took the Midnight Train Going Anywhere to the Delaware Chancery Court

Imagine you and your longtime business partner are entering a new phase of your partnership and create a new entity to manage it. Because you’re both equal shareholders in this entity, you must both agree on big decisions, from major expenses to hiring and firing staff. 

But you and your partner don’t agree. Actually, you seriously disagree on how to run this business, butting heads time and again and bringing the entire operation to a grinding halt over even the most routine business activities. Bills go unpaid, morale is in the tank and your reputation in the industry is starting to suffer.

Now imagine that partnership is 80’s rock band Journey, and you have the latest high-profile case out of the Delaware Chancery Court. And another example of the kinds of complex business disputes that Texas’ new specialized business court was created to handle.

In this case, the band’s keyboardist brought the action against its guitarist, asking the court to appoint a neutral third party as a tie-breaking director on the board of Freedom 2020, the entity Journey created to manage its latest world tour. According to the pleading, it seems the two couldn’t agree on anything from hotel stipends (a cool $1,500 per night) to managing recurring cashflow issues.

After initially even disagreeing on the need to bring in a neutral tie-breaker, both sides finally agreed and a third director—or custodian—was appointed by the Delaware Chancery Court to help break the organizational deadlock.

If Journey’s tour management company had been incorporated in the Lone Star State, the business court likely would have had jurisdiction over this case, as “an action regarding the governance, governing documents, or internal affairs of an organization,” with at least $5 million in controversy. Texas’ Business Organizations Code also allows for the appointment of a custodian in cases of deadlock, which would also fall under the jurisdiction of the business court if a company is at an impasse with no clear remedy in its governing documents.  

Journey isn’t the first or last musical act to find itself in litigation to resolve a business dispute (hello, Hall and Oates), and the touring company’s incorporation in Delaware is no coincidence. 

Delaware has long been a haven for business incorporation because of its internationally renowned Chancery Court, the expert judges who oversee the complex cases in that court from start to finish, and the decades of case law supporting Delaware’s corporate governance statutes.

While Texas’ corporate governance laws are strong, building them out would bolster the framework for companies doing business in the Lone Star State, setting clear guidelines for their actions and for the judges who will decide any disputes that inevitably arise. Those guidelines help give confidence to employers in every sector of our economy—including Texas’ growing entertainment, music, high tech, energy and medical industries—about how to conduct their business activities.

Now that the business court has officially launched, the Legislature has the opportunity in the 2025 session to expand the business court’s jurisdiction and strengthen our corporate governance laws to make Texas not only the nation’s job creation engine, but a premier location for business incorporations of all kinds. 

To put it in music industry terms, we have the arena, now we just need to build out the set list.