Thursday, September 6, 2012

Federal Court Strikes Down Secrecy of Delaware Chancery Court Arbitrations

            A federal district court in Delaware has held that because the First Amendment provides a qualified right of access to arbitration proceedings established by Delaware law and implemented by the Delaware Court of Chancery, such proceedings must be open to the public.  Delaware Coalition for Open Government v. Strine, No. 1:11-1015, 2012 WL 3744718 (D. Del. Aug. 30, 2012).

            Delaware law gives the Court of Chancery “the power to arbitrate business disputes when the parties request a member of the Court of Chancery, or such other person as may be authorized under rules of the Court, to arbitrate a dispute.” 10 Del. C. § 349(a).  Once the parties file an appropriate  petition, "the Chancellor appoints a Chancery Court judge to preside over the case as the arbitrator." 

The Chancery Court Rules require that all parts of the proceeding, including all filings and all contacts between the arbitrator and any party are 'confidential and not of public record.' Del. Ch. Ct. R. 97 a)(4), 98(b). The Register in Chancery does not file the parties' petition on the court's public  docketing system. Id. 97(a)(4). None of the hearings is open to the public.

            Plaintiff challenged the confidentiality provisions of the law, arguing that the First Amendment prevents the defendants from closing the proceeding to the public and press.  Judge McLaughlin granted plaintiff's motion for judgment on the pleadings. 

Although the Supreme Court has never addressed access to civil judicial proceedings, every Court of Appeals to consider the issue, including the Court of Appeals for the Third Circuit, has held that there is a right of access to civil trials. See Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1061 (3d Cir.1984); . . . .

The Delaware proceeding, although bearing the label arbitration, is essentially a civil trial. . . . In the Delaware proceeding, the parties submit their dispute to a sitting judge acting pursuant to state authority, paid by the state, and using state personnel and facilities; the judge finds facts, applies the relevant law, determines the obligations of the parties; and the judge then issues an enforceable order. This procedure is sufficiently like a civil trial that Publicker Industries governs. . . .

The public benefits of openness are not outweighed by the defendants' speculation that such openness will drive parties to use alternative non-public fora to resolve their disputes. Even if the procedure fell into disuse, the judiciary as a whole is strengthened by the public knowledge that its courthouses are open and judicial officers are not adjudicating in secret.

PM

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