M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Wednesday, October 23, 2013

Delaware Arbitration Procedure Unconstitutional

So there you have it.  Just hit PACER today (h/t  KWC).  Here's  the opinion (DCOGvStrine).  Lengthy exploration of civil trials and arbitrations in the opinion.  I'm reading now...

-bjmq

 

From the opinion:

Finally, Appellants argue that opening the proceeding would effectively end Delaware’s arbitration program. This argument assumes that confidentiality is the sole advantage of Delaware’s proceeding over regular Chancery Court proceedings. But if that were true—if Delaware’s arbitration were just a secret civil trial—it would clearly contravene the First Amendment right of access. On the contrary: as the Appellants point out in the rest of their brief, there are other differences between Delaware’s government-sponsored arbitration and regular Chancery Court proceedings. Arbitrations are entered into with the parties’ consent, the parties have procedural flexibility, and the arbitrator’s award is subject to more limited review. Thus, disputants might still opt for arbitration if they would like access to Chancery Court judges in a proceeding that can be faster and more flexible than regular Chancery Court trials.

Funny, I think someone I know argued just that same argument not long ago.... More from the opinion:

Delaware’s proceedings are conducted by Chancery Court judges, in Chancery Court during ordinary court hours, and yield judgments that are enforceable in the same way as judgments resulting from ordinary Chancery Court proceedings. Delaware’s proceedings derive a great deal of legitimacy and authority from the state. They would be far less attractive without their association with the state. Therefore, the interests of the state and the public in openness must be given weight, not just the interests of rich businesspersons in confidentiality.

Like history, logic weighs in favor of granting access to Delaware’s government-sponsored arbitration proceedings. The benefits of access are significant. It would ensure accountability and allow the public to maintain faith in the Delaware judicial system. A possible decrease in the appeal of the proceeding and a reduction in its conciliatory potential are comparatively less weighty, and they fall far short of the “profound” security concerns we found compelling in North Jersey Media Group. See 308 F.3d at 220.

Because there has been a tradition of accessibility to proceedings like Delaware’s government-sponsored arbitration, and because access plays an important role in such proceedings, we find that there is a First Amendment right of access to Delaware’s government-sponsored arbitrations. We will therefore affirm the order of the District Court.

Boom.  There you have it.  A resounding victory for my profession...in that there will continue to be a corporate law for me to teach going forward... 

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