GSK HQ is a 10X10 Foot Office in…..Delaware

GSK HQ is a 10X10 Foot Office in…..Delaware

June 11th, 2013 // 1:35 pm @

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Most of GlaxoSmithKline’s US operations are based in Philadelphia, where about 2000 people work and there is 700,000 square feet of office space. GSK also has a 10 by 10 foot tiny office in Wilmington, DE that mainly has books and records and is rarely used. Only one employee shows up there for about 20 hours per year. So where do you think that Glaxo’s corporation resides?

That’s right – GSK’s corporate headquarters are technically in Delaware. This was upheld after a decision last week by an appeals court. The reason is that the holding company for the firm is based in Delaware. This is an important ruling, as GSK can now go forward with plans to have a product liability suit heard in federal court and not in a PA court.

Many of you may know that a drugmaker that is facing a product liability suit is going to usually prefer it happen in a federal court. The idea is that the drug firm will get a friendlier audience with the judge. This is why Glaxo wanted to have a lawsuit on Thalidomide, which caused thousands of birth defects in the 1960s, and which the former SmithKline Beecham had a part in testing, out of a PA courtroom.

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The plaintiffs argue that they were damaged in the womb, and that GSK is really a corporation in PA. But the federal court found that GSK did pass the nerve center test. The US Supreme Court held in 2010 that the ‘nerve center’ is the main place of business where the HQ is located.

Even though very little corporate activity takes place in Delaware, the court found that the main place of business is not in Philadelphia. The meetings are actually coordinated from Wilmington and the holding company in Delaware oversees GSK’s operating structure. The decision is here.

What do you think about this decision? Should GSK’s corporate home be considered in Delaware or not?

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