When the Government Is the Controlling Shareholder: Implications for Delaware

Marcel Kahan and Edward Rock

When the federal government is the controlling shareholder, the doctrine of sovereign immunity transforms the legal structures of accountability. Procedurally, the government and its agents can only be sued in federal court. Substantively, claims must be brought within one of the statutory waivers of sovereign immunity (the Federal Tort Claims Act, the Tucker Act, or the Administrative Procedure Act). Although in the right circumstances plausible claims could be brought in Delaware against the directors of a government-controlled Delaware corporation, we argue that Delaware should avoid a confrontation with Washington, and that the best way to do so is to take advantage of the flexibility provided by Delaware Court of Chancery Rule 19.