Delaware's use of Generative AI in courts may redefine how contracts are interpreted, impacting startups and investors by reshaping ‘ordinary meaning’ in corporate governance and fiduciary duties.
CEO of Fortuna-Insights. J.D. Candidate at Harvard Law School. Professional Registered Parliamentarian.
CORPORATE GOVERNANCE ALERT: Delaware’s Court system just approved judges, clerks, and other officials to employ GAI in judicial work. You can find the policy here: https://lnkd.in/eKx7ccQz. Unlike the 5th Circuit, where GAI is likely to face heavy disclosure regulation, the Delaware State Courts (including the Chancery) have almost all-inclusive access to employ GAI tools. Why does that matter for Corporate Governance with startups?  Virtually every startup incorporates in Delaware for a single reason: investors. The investors might pay lip-service to the Chancellery’s ability to coherently resolve fudiciary disputes, but really, no startup cares about the empirical truth to this matter—they simply care that San Francisco cares.  Onto why this minor change might matter a lot. In Delaware, the ‘ordinary meaning’ rule is often applied when enforcing contracts. Normally, court’s apply a variety of traditional tools, like dictionaries and context, to discern this meaning. But LLM’s flip this on its head. Judge Newsom summarized it best in his Snell concurrence: “Those, like me, who believe that “ordinary meaning†is the foundational rule for the evaluation of legal texts should consider—consider—whether and how AI-powered large language models like OpenAI’s ChatGPT, Google’s Gemini, and Anthropic’s Claude might—might—inform the interpretive analysis.†LLMs do this, Newsom writes, because “ LLMs are quite literally ‘taught’ using data that aim to reflect and capture how individuals use language in their everyday lives.†If Judges accept this standard (which might be empirically questionable), one could see enormous litigation opportunities for reconstructing the meaning of contracts. There’s two obvious implications here. Practically, there is a question if LLM’s actually reflect the context that contracts are placed by simply aggregating the use of language. That seems “ordinary,†but I sense that the Delaware Chancery—known for its heavy emphasis on ‘equity’ — isn’t going to weigh in with as an open mind as Newsom. But more broadly, we have yet to see if this sort of textual interpretation falls into fudiciary duties, and how. Will GAI be used to make imprentrable notices? In a world covered with information noise, its also going to be interesting to see if GAI can impact the way sophiscated parties understand their duties. Will committees be required to consult chatgpt to discern if contractual language has an ‘ordinary meaning’ that furthers corporate interests? I suspect we will see a 200+ page Chancellor Laster opinion on this soon. https://lnkd.in/ev-syCpV