Over the past couple of years, The D&O Diary has followed the growing “DExit” movement, including the increasing number of public companies that have either reincorporated outside Delaware or publicly explored doing so, and the resulting implications for corporate governance, shareholder litigation, and D&O risk.
To date, a key unanswered question has been whether changing a company’s state of incorporation would meaningfully alter litigation exposure in practice. An October 2, 2026, decision by the Texas Business Court involving Coinbase may be the first significant indication that it can. A copy of the Coinbase decision can be found here.
At the same time, an October 23, 2026, Delaware Chancery Court opinion approving the $250 million settlement of the long-running Activision Blizzard merger litigation underscores a parallel development: even as some companies depart Delaware, Delaware courts continue to preside over some of the largest and most consequential shareholder cases in the country. Indeed, Chancellor Kathaleen McCormick described the Activision settlement as the largest cash recovery ever obtained in Delaware Court of Chancery litigation challenging a third-party merger. A copy of the Chancery Court’s approval of settlement and attorneys’ fees can be found here.
Together, the Coinbase decision and Activision Blizzard settlement provide an illuminating snapshot of where the DExit debate currently stands and the potential implications for D&O insurers and underwriters. As more companies consider reincorporation, the issues presented by both cases could take on increasing importance for D&O insurers and underwriters, as differing corporate law regimes and judicial forums may influence litigation exposure.
The Coinbase Decision
In its October 2, 2026, decision in Guillaume v. Armstrong, 2026 Tex. Bus. 70, the Business Court of Texas, First Division (Texas Business Court), addressed whether a shareholder derivative action alleging misconduct that occurred while Coinbase was incorporated in Delaware was governed by Delaware or Texas law after the company redomesticated to Texas.
By way of background, Coinbase completed its reincorporation from Delaware to Texas in December 2025. On April 16, 2026, shareholder Gary Guillaume filed a derivative action against Coinbase directors and officers, including CEO Brian Armstrong, alleging wrongdoing occurring between 2021 and 2023, prior to the company’s move to Texas. Rather than making a pre-suit demand on Coinbase’s board, the plaintiff sought to proceed under Delaware’s demand-futility doctrine. The defendants argued that because Coinbase was a Texas corporation when the lawsuit was filed, Texas law governed the shareholder’s standing and authority to pursue the derivative action.
In the Coinbase decision, the Texas Business Court held that Texas law controlled the determination of the shareholder’s authority to pursue the derivative claims. In reaching that conclusion, the court distinguished between the law governing the substantive fiduciary-duty allegations and the procedural requirements governing a shareholder’s ability to prosecute claims on the corporation’s behalf. The court assumed, without deciding, that Delaware law might ultimately govern the substantive claims because the alleged misconduct occurred while Coinbase was incorporated in Delaware. However, the court held that a shareholder’s standing and authority to bring a derivative action are determined by the corporation’s state of incorporation at the time the lawsuit is filed. Because Coinbase was a Texas corporation when the action commenced, Texas law governed the plaintiff’s ability to proceed.
The court ultimately adopted a bright-line rule that a shareholder’s standing and ability to bring a derivative action on behalf of a Texas corporation is governed by Texas law, even where the underlying claims arose under and may ultimately be governed by another state’s law. The court reasoned that derivative claims belong to the corporation, not to individual shareholders, and that shareholders acquire no vested right to pursue future derivative litigation based on the state of incorporation existing when the alleged misconduct occurred. Because the plaintiff had not made the required pre-suit demand, the court dismissed the action without prejudice.
The Activision Blizzard Merger Litigation Settlement
The Activision Blizzard litigation originated in November 2022, when shareholder plaintiffs alleged that former Activision Blizzard CEO Robert Kotick and other directors failed to obtain the best available price for shareholders and rushed the company into a sale process allegedly influenced by Kotick’s desire to preserve his position and secure transaction-related compensation while the company faced ongoing workplace misconduct controversies.
The litigation continued after the transaction closed in October 2023. In October 2025, Chancellor Kathaleen McCormick allowed core fiduciary duty claims against Kotick and other Activision directors to proceed, concluding that plaintiffs had adequately alleged that the board may not have maximized shareholder value in the sale process. At the same time, the court dismissed claims alleging that Microsoft aided and abetted the alleged breaches of fiduciary duty.
Following further litigation, the parties reached the proposed $250 million settlement, which was submitted to the court for approval in May 2026. The settlement subsequently generated a separate dispute when certain investors sought to preserve federal securities claims they had asserted in a parallel federal action. In approving the settlement on October 23, 2026, Chancellor McCormick rejected those objections and approved a global resolution, concluding that the federal claims faced substantial legal hurdles and had little independent value. The court also concluded that the settlement represented a reasonable compromise considering the risks and uncertainties of continued litigation. In addition, the court awarded plaintiffs’ counsel approximately $60 million in attorneys’ fees and expenses, reflecting both the scope of the litigation effort and the significance of the recovery obtained for shareholders.
Discussion
For several years, proponents of DExit have argued that reincorporation can meaningfully alter litigation risk, while critics have contended that such claims are overstated because directors and officers remain subject to fiduciary obligations regardless of the jurisdiction of incorporation. Taken together, the recent Coinbase decision and the Activision Blizzard settlement suggest a more nuanced reality: corporate domicile may not eliminate fiduciary-duty exposure, but it can materially affect how shareholder claims are litigated.
The Texas Business Court’s decision in Coinbase provides one of the clearest examples to date of how a change in domicile can influence shareholder litigation. The court did not eliminate potential claims arising from conduct that occurred while the company was incorporated in Delaware, nor did it determine which state’s substantive law ultimately would govern those claims. Instead, the decision turned on who may pursue the claims and under what circumstances. By applying Texas’s mandatory demand requirement rather than Delaware’s demand-futility framework, the court illustrated how reincorporation can reshape procedural hurdles that may affect litigation strategy, defense costs, timing, and potentially claim outcomes.
At the same time, the Delaware Chancery Court’s approval of the $250 million Activision Blizzard settlement underscores Delaware’s continuing importance as the preeminent forum for significant corporate litigation. The settlement demonstrates that Delaware cases continue to generate substantial shareholder recoveries, defense costs, and fee awards. As Delaware attorney Anthony Rickey of Margrave Law LLC observed, the Activision Blizzard settlement may reinforce the view that some of the high-profile cases that helped fuel the debate over Delaware’s corporate law reforms ultimately generated substantial economic recoveries for plaintiffs.
From a D&O liability and underwriting perspective, the two decisions underscore the increasing importance of corporate domicile as a factor that may influence shareholder litigation exposure. The Coinbase ruling may be viewed as support for the argument that corporate domicile can influence claim exposure by altering procedural rules governing derivative litigation. If similar decisions follow, D&O insurers may increasingly evaluate whether Delaware-to-Texas conversions result in measurable changes in derivative claim frequency, defense costs, dismissal rates, and settlement values.
At the same time, the Activision Blizzard settlement serves as a powerful reminder that Delaware litigation can produce some of the largest corporate liability exposures in the country. As companies continue to evaluate potential reincorporation, D&O insurers and underwriters may find it increasingly important to assess not only a company’s governance profile and industry exposure, but also the claims implications associated with differing corporate law regimes and judicial forums.