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States with the Best and Worst Legal Climates for Starting a Business

States with the Best and Worst Legal Climates for Starting a Business Credit: Feverpitched | Dreamstime.com

More than ever, businesses are looking at a state's legal environment when deciding where to locate or expand their operations, new research shows.

In a survey by a business advocacy campaign, the U.S. Chamber Institute for Legal Reform, 70 percent of  the participants said a state's lawsuit environment is likely to have an impact on important business decisions at their company, including where to locate or expand their business. That is up 13 percentage points since 2007.

The survey of general counsels and senior attorneys found Delaware to have the best legal climate for businesses, while California and Illinois was among the states with the worst. The state with the lowest ranking overall was West Virginia.

"As our economic recovery has stalled, a growing percentage of business leaders have identified a state’s lawsuit climate as a significant factor in determining their growth and expansion plans, and the jobs that come along with them," said Lisa A. Rickard, president of the Chamber of Commerce-founded institute. "That makes the consequences of this survey even more significant to the economic growth of individual states."

[Best States for Starting a Small Business]

The rankings were based on a series of factors, including a state's overall treatment of tort and contract litigation, having and enforcing meaningful venue requirements, treatment of class action and mass consolidation suits, and timeliness of summary judgments or dismissals, as well as judges' impartiality and competence and juries' fairness.

The top 5 states in the rankings were:

  • Delaware
  • Nebraska
  • Wyoming
  • Minnesota
  • Kansas

The states with the worst rankings were:

  • West Virginia
  • Louisiana
  • Mississippi
  • California
  • Illinois

When examined by city, the research found that Chicago, Los Angeles, San Francisco and Philadelphia had the least fair and reasonable litigation environments.

The ninth annual State Liability Systems Survey was based on interviews with 1,125 in-house general counselors, senior litigators or attorneys and other senior executives who are knowledgeable about litigation matters at public and private companies with annual revenues of at least $100 million.

Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.