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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.

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Court Of Chancery Upholds Indemnification Rights Not Expressly Subject To Arbitration

Posted In Arbitration

Jiampietro v. The Goldman Sachs Group Inc., C.A. 12601-VCL (Transcript, August 11, 2016)

Many employment agreements require that any dispute be arbitrated. But when the dispute is over the employee’s right to indemnification under bylaws or statute, then the arbitration clause better expressly cover that claimed right or otherwise the non-contractual right remains for a court to decide.

Court of Chancery Explains When Contract Bars Tort Claims and Arbitration

Flores v. Strauss Water Ltd., C.A. 11141-VCS (September 22, 2016)

This is a great decision on when the provisions of a contract bar tort claims of fraud and tortious interference. Briefly, when the contract speaks to an issue (e.g., expressly permitting certain acts, or imposing no duty to act), a party may not assert a tort claim that would deny the other party the benefit of its bargain. Further, when the contract between two parties selects a judicial forum for dispute resolution, arbitration is not part of the deal even if provided in a collateral contract involving one of those parties, at least not where there are no grounds for binding the non-signatory to the arbitration clause.

Court Of Chancery Explains When To Not Enjoin Arbitration

Posted In Arbitration

Angus v. Ajio LLC, C.A. 11895-VCG (May 13, 2016)

This is another in a line of decisions that explains when the issue of arbitrability should be sent to the arbitrator to decide. When the familiar tests are applied that favor letting the arbitrator decide that issue, only a strong argument for not sending the issue to arbitration will avoid doing so.

Court Of Chancery Decides If Arbitration Required When Arbitration Clause Not In One Of Two Contracts

Posted In Arbitration

Align Strategic Partners LLC v. Moesser, C.A. No. 11240-VCN (February 26, 2016)

When only one of two related contracts has an arbitration clause, the Court can still require arbitration of a dispute under the contract lacking that clause. The question is whether the two contracts deal with the same subject matter and that is not as easy to decide as it may appear. For example, if the two contracts need to be read together to accomplish the parties’ intent, such as where one contract defines certain necessary terms while the other does not, then an arbitration clause in one contract may require arbitration of disputes that nominally arise under the other contract as well. While employing Illinois law, this decision helps guide how to determine if the relationship between the contracts warrants compelling arbitration.

Superior Court Explains When Arbitration Is Binding

Posted In Arbitration

Airbase Carpet Mart Inc. v. Aya Associates Inc., No.. 15C-03-104 VLM (December 15, 2015)

As this decision explains, you can be bound by an arbitration clause even if you do not sign a contract containing such a provision. The issue is did you agree to be bound by that contract’s terms and if you did, then you are in for all of its terms.

Court Of Chancery Explains Arbitration Timelines

Posted In Arbitration

SC&A Construction Inc. v. Potter, C.A. 10528-VCG (January 6, 2016)

This decision explains the timelines for seeking to vacate an arbitration award. It illustrates that an arbitration proceeding has its own rules that the parties better understand or lose their rights.

Court Of Chancery Defers To Arbitrator

In re Knowledge Crossing LLC, C.A.10383-VCG (May 29, 2015)

It is now established that a pending arbitration qualifies for purposes of applying Delaware’s law on when to stay a case in favor of a prior proceeding. This decision extends that law to enter a stay to let the arbitrator decide if he is going to deal with the issues in the later-filed Delaware case.

Court Of Chancery Explains Willie Gary

Posted In Arbitration

Riley v. Brocade Communications System Inc., C.A. 9486-VCN (May 6, 2014)

When a claim is subject to arbitration needs to be decided by either the court or the arbitrator, and the Willie Gary decision says who gets that honor. This decision explains how to apply Willie Gary.

Court Of Chancery Grants Discovery Of Arbitration Claim

Posted In Arbitration

New Continuum Holdings Corporation v. China/United Capital, LLC, C.A. 9589-VCN (May 6 2014)

This decision explains when a party may get discovery into the issue of whether a claim is subject to an arbitration clause.

Court Of Chancery Orders New Arbitrator

Posted In Arbitration

Lynn v. Ullrich, C.A. 7098-ML-VCN (September 12, 2013)

This decision ordered the parties to pick a new arbitrator when the prior arbitrator concluded he was biased.  Why anyone would argue this seems odd.

When A Request For An Injunction Does Not Preempt Arbitration

Posted In Arbitration

Shareholder Representative Services LLC v. ExlService Holdings Inc., C.A. 8367-VCG (August 27, 2013)

Arbitration clauses often have an exemption for suits for injunctive relief. Yet just asking for an injunction in the complaint may not avoid the need to arbitrate, as this decision holds. Apparently, when the injunction is just to enforce the terms of the contract and not to prevent irreparable harm, the claim must still go to arbitration.

Court Of Chancery Explains Injunction Out Clause In Arbitration Agreement

Posted In Arbitration

Medicis Pharmaceutical Corporation v. Anacor Pharmaceuticals Inc., C.A. 8095-VCP (August 12, 2013)

Agreements to arbitrate disputes often have an "out clause" that permits the parties to seek judicial relief by way of an injunction.  The scope of such a clause is the focus of this opinion that explains when a party may still file suit even after the other party has demanded arbitration.

Supreme Court Decides Who Decides

Posted In Arbitration

Viacom International Inc. v. Winshall, C.A. 513, 2012 (Del.  July 16, 2013)

When there is an argument over whether part of a dispute is subject to the Court or the arbitrator's judgment, there has been considerable confusion.  The classic formulation of the test is:

Issues of substantive arbitrability are gateway questions relating to the scope of an arbitration provision and its applicability to a given dispute, and are presumptively decided by the court. Procedural arbitrability issues concern whether the parties have complied with the terms of an arbitration provision, and are presumptively handled by arbitrators.  These issues include whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, as well as allegations of waiver, delay, or a like defense to arbitrability.

In this Supreme Court decision, the Court adopts this test at first and then seems to back away from it for a new test of its own.  The new test seems to be whether the dispute is simply part of the overall controversy.  If it is, then the arbitrator decides it.  Now that may be a misguided view of the holding, but it is the best that I can do.

Court Of Chancery Explains Limits Of Review Of Appraiser Decision

Posted In Arbitration

Senior Housing Capital LLC v. SHP Senior Housing Fund LLC, C.A. 4586-CS (May 13, 2013)

This decision explains the limits on any substantive review of an appraisal determination the Court will undertake when the parties' agreement limits that review.  it is an excellent overview of the way in which parties may decide how much judicial review they want in such cases.

Court of Chancery Explains Willie Gary

Posted In Arbitration

Li v. Standard Fiber LLC, C.A. 8191-VCN (March 28, 2013)

Who decides if a dispute is subject to arbitration? The Delaware Supreme Court decision in the Willie Gary case sets the way to resolve this question.  However, those rules are often hard to interpret. This decision explains Willie Gary in a useful way.