In a case that has attracted the attention of legal experts from across the country, the U.S. Court of Appeals for the Third Circuit affirmed the U.S. District Court of Delaware’s decision that found the confidentiality provisions of the Delaware Court of Chancery’s arbitration program unconstitutional. Applying the well-known experience and logic test, the 2–1 majority concluded that the tradition and importance of public access to proceedings like Delaware’s government-sponsored arbitration required that such proceedings be open to the public under the presumptive right of access afforded by the First Amendment.

Overview of the Court of Chancery’s Arbitration Program

In an effort to maintain its status as the preeminent state in which to resolve business disputes, the Delaware General Assembly enacted a statute in 2009 that granted the Court of Chancery “the power to arbitrate business disputes.” Del. Coal. for Open Gov’t, Inc. v. Strine, 733 F.3d 510, 512 (3d Cir. 2013), petition for cert. filed, 82 U.S.L.W. 3463 (U.S. Jan 21, 2014 (No. 13-869). Under this statute and the Court of Chancery’s corresponding arbitration rules, only certain disputes qualify for arbitration. See 10 Del. Code § 349 (2009); Del. Ct. Ch. R. 96–98. Specifically, at least one of the parties must be a “business entity formed or organized” under Delaware law, neither party can be a “consumer,” and the amount-in-controversy must be at least $1 million. 10 Del. Code §§ 347, 349. Qualified parties must consent to arbitration by agreement or by stipulation.  Id. § 347(a)(1); Del. Ct. Ch. R. 97(a).

Arbitration is commenced in the Delaware Court of Chancery by the filing of a petition. The filing fee is $12,000, and the parties must pay $6,000 per day after the first day of arbitration.  Del. Coal. for Open Gov’t, Inc., 733 F.3d at 512. Once the arbitration is filed, the chancellor selects a member of the Court of Chancery as the arbitrator. Id. In most cases, the arbitration will begin approximately 90 days after the arbitration petition is filed. The arbitration proceedings are held in a Delaware courthouse during normal business hours. Id. at 513. Unless the parties stipulate to different discovery rules, Court of Chancery Rules 26–37 govern depositions and discovery. Id. 

The Court of Chancery judge appointed as the arbitrator has the authority to grant “any remedy or relief that [s/he] deems just and equitable and within the scope of any applicable agreement of the parties.” Del. Ct. Ch. R. 98(f)(1). Any party has a right to appeal the arbitrator’s ruling to the Delaware Supreme Court, which will review the arbitration decision in conformity with the standards enunciated in the Federal Arbitration Act. 10 Del. Code § 349(c). Under these standards, arbitration awards can be vacated only in circumstances where a party can prove that the “award was procured by corruption, fraud, or undue means” or that the “arbitrator was guilty of misconduct.” Del. Coal. for Open Gov’t, Inc., 733 F.3d at 513 (internal citations omitted).

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