A LONG, STRANGE "TRIP": PROTECTING STANDING AFTER REINCORPORATION

<p><i>On April 28, 2025, a Southwest Airlines stockholder served a demand alleging that the board had destroyed $300 million in annual value to preserve their own seats. Eighteen days later, the board adopted a bylaw requiring derivative plaintiffs to own three percent of the company’s outstanding shares—approximately $572 million worth of stock. Six weeks later, it told the stockholder to cease and desist his lawsuit. On March 17, 2026, the Northern District of Texas validated the strategy, dismissing the stockholder’s claims with prejudice and holding that S.B. 29 barred the derivative action as a matter of law.</i></p> <p><i>Southwest is not alone. Tesla, eXp World Holdings, and a growing list of corporations are reincorporating to Texas to purposely or with the opportunity to access standing thresholds that eliminate derivative enforcement as a near mathematical certainty. This Essay argues that the Delaware Supreme Court’s framework for evaluating these reincorporations—developed in the TripAdvisor case to assess marginal differences in liability standards between functioning enforcement systems—is a category error when applied to the elimination of enforcement itself. <br> It then identifies doctrinal tools available under existing Delaware equity and argues they should be deployed using a purpose inquiry rather than TripAdvisor’s materiality inquiry to distinguish legitimate reincorporations from immunization strategies.</i></p> <p><i>The remedial window is closing, for once a corporation reincorporates to a standing-eliminating jurisdiction, no minority stockholder can challenge the threshold under the destination state’s law, and the enabling reincorporation has already placed the corporation beyond the originating state’s reach—even for utterly egregious conduct and self-dealing.</i></p>