Tom Stipanowich called the Delaware Court of Chancery’s arbitration program “a veritable trifecta of procedural advantages for commercial parties, including expert adjudication, efficient case management and short cycle time and, above all, a proceeding cloaked in secrecy.”  But he warned that its constitutionality was in doubt.  Now the Third Circuit Court of Appeals has, indeed, ruled it unconstitutional.  The grounds for the ruling go to some of the most profound assumptions of access to justice, and the distinction between public dispute resolution that is costly, long and uncertain, and alternative processes that the disputants privately agree to in order to avoid those encumbrances.

The arbitration program was established in 2009 as a way of “preserv[ing] Delaware’s preeminence in offering cost-effective options for resolving [commercial] disputes.”  Qualified parties mat consent to avail themselves of arbitration before the same Chancery Court judges who would otherwise try the case.  The initial fee is $12,000 plus an additional $6,000 per day thereafter.  The proceeding is conducted in a Delaware courthouse during normal business hours.  The award is entered as an order of the Court of Chancery and is appealable to the Delaware Supreme Court, applying the deferential standards of the Federal Arbitration Act.  Pleadings are confidential and not publicly docketed, and public access to hearings and filings is denied.

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