Delaware Business Litigation Report

Court of Chancery Addresses Effect Of Carve-Outs On The Question Of Substantive Arbitrability

Redeemer Committee of the Highland Crusader Fund v. Highland Capital Management L.P., 12533-VCG (February 23, 2017)

This case involves the overlap of an advancement dispute and the question of substantive arbitrability under Willie Gary.  The two-part test of Willie Gary asks whether the parties (i) generally referred all disputes to arbitration, and (ii) referred to a set of arbitration rules that empower an arbitrator to decide arbitrability.  This decision focuses on the less clear question of what it means to generally refer all disputes to arbitration, and the effect carve-outs for certain disputes might have on this analysis.  Broadly speaking, carve-outs must be expansive in order to prevent the question of substantive arbitrability from being passed onto the arbitrator.

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