Posts tagged Arbitration

Court Of Chancery Holds Post Merger Dispute Resolution Procedure Is An Arbirtation

SRG Global Inc. v. Robert Family Holdings Inc., C.A. 5314-VCP (November 30, 2010)

Merger agreements or asset purchase agreements frequently include provisions for resolving post merger disputes.  This is particularly true when there is an escrow to cover contingent claims. In this decision, the Court holds that an agreement to submit such a dispute to an "expert " to resolve is the same thing as agreeing to arbitrate the dispute.  As a result, all the law governing what the arbitrator is to decide applies, including what facts he may consider in rendering his decision.

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Court Of Chancery Explains When A Non Party May Be Made To Arbitrate

Kuroda v. SPJS Holdings, L.L.C. , C.A. 4030-CC (November 30, 2010)

Of course the parties to an agreement may be compelled to arbitrate any dispute if that is what their agreement provides.  But when may a non-party to an agreement with an arbitration clause also be made to arbitrate a dispute with one of the parties?   The short answer is not too often.

This decision carefully explains the exceptions to the rule that only the parties to the arbitration agreement may be made to go to arbitration. The exceptions are: (1) incorporation by reference, (2) assumption, (3) agency, (4) veil piercing/alter ego, (5) third-party beneficiary and (6) equitable estoppel.

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Court Of Chancery Explains Equitable Remedy Carve Out

GTSI Corp. v. Eyak Technology LLC, C.A. 5815-VCL (November 15, 2010)

There seems to be one constant issue in decisions dealing with motions to stay court proceedings in favor of arbitration -- who decides if the claims are subject to arbitration, the court or the arbitrators.  Under Delaware law, absent an express provision directly dealing with that question, a reference in the parties' agreement to arbitration rules that provided the arbitrator decides that issue will be upheld.

Sometime litigants try to get around that result by pointing to provisions in their agreement that leave certain disputes to the courts to decide and then argue the claims in dispute fall within that exception.  One such frequent carve out is the Equitable Remedy Provision.  That sort of provision permits a court to grant an injunction to avoid harm while the dispute is in arbitration.  This decision holds that carve out does not swallow the whole, at least in this case.  As a result, the court granted the stay.

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Court Of Chancery Denies Arbitration Of Post Merger Dispute

Avnet Inc. v H.I.G. Source, Inc., C.A. 5266-VCP (September 29, 2010)

In this definitive review of when post merger arbitration is required, the Court held that it would determine the issue of arbitrability, not the arbitrator. While affected by the gross delay in seeking arbitration, the decision is noteworthy more for its careful analysis of the case law dealing with such merger agreements and the types of disputes they submit to arbitration.

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Court Of Chancery Declines To Interfere In Arbitration

SOC-SMG, Inc. v. Day & Zimmermann, Inc. , C.A. 5375-VCS (September 15, 2010)

It should come as no surprise that the Court of Chancery will not interfere in an on-going arbitration proceeding by issuing discovery orders or disqualifying counsel.

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Court Of Chancery Upholds Arbitration Of Statutory Remedy

Aris Multi-Strategy Fund L.P v. Southridge Partners LP, C.A. 5422-CC (May 21, 2010)

It is sometimes believed that remedies such as the right to inspect a company's records are not subject to an arbitration clause.  Wrong.  This decisions upholds arbitration of such claims in a variety of contexts.

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Court Of Chancery Discusses Scope Of Arbitration

RBC Capital Markets Corp. v. Thomas Weisel Partners LLC, C.A. 4709-VCN (February 25, 2010)

Many decisions discuss when arbitration is required by an agreement.  This one deals with the rarer problem of what claims may be presented to arbitrators in a matter that the parties concede must be arbitrated.  The Court will usually leave that decision to the arbitrators in the first instance, but will at least consider if a claim is so far outside  the scope of the arbitration clause that its presentation should be barred.

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Court Of Chancery Bars Late Statutory Contribution Claim

Global Link Logistics Inc. v. Olympus Growth Fund III, L.P., C.A. 4444-VCP (January 29, 2010)

 If you are a co-defendant in an arbitration case with a claim for contribution, you had better assert it in the arbitration proceedings. Otherwise, you may lose the right under the Joint Tortfeasors Act to make your co-defendant pay more than his pro rata share. This result follows under this decision because the Act requires the cross claim be asserted before "judgment" is rendered and the arbitration award counts as a judgment for that purpose.

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Court of Chancery Imposes Severe Sanctions for Refusal to Arbitrate

Aveta Inc. v. Bengoa, C.A. 3598-VCL (December 24, 2009)

After the entry of an order compelling arbitration, the defendant delayed the arbitration and even sought to re-litigate the underlying suit compelling arbitration. The Court was not impressed and found the defendant in contempt, imposing severe sanctions.

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Court of Chancery Declines to Upset Unusual Arbitration Ruling

Zurich America Insurance Company v. St. Paul Surplus Lines Inc., C.A. 4095-VCP (December 10, 2009, revised April 14, 2010)

In this case, the Court of Chancery declined to upset an arbitrator's decision and explained the limits on the Court's review of arbitration awards. Here, that limit applied even when the arbitrator had declined to rule based on his decision that he lacked jurisdiction.

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Court of Chancery Holds Arbitrator Decides Limitations Defense

Lefkowitz v. HWF Holdings LLC, C.A. 4381-VCP (November 11, 2009)

The Delaware Arbitration Act has a unique provision that permits the Court of Chancery to enjoin an arbitration when the claim asserted is barred by a statute of limitations. However, to get into Court, the arbitration agreement must be governed by Delaware's Arbitration Act. If it is not, then this unique remedy is not available, and it is up to the arbitrator to decide if the claim is barred on limitations grounds.

This decision also contains an excellent discussion of when the Delaware Arbitration Act applies and, when it does, to what extent its provisions control.

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Court of Chancery Explains Limits of Review of Arbitration Award

World-Win Marketing Inc. v. Ganley Management Co., C.A. 3905-CC (August 18, 2009).

The extent to which a court will review an arbitration award is a tricky question. The court may do so when the arbitrator exceeds his authority. But, what does that really mean? This decision explains this vague standard of review.

In general, if the decision seems grounded in the facts presented to the arbitrator and is within the subjects that she may deal with under the parties agreement to arbitrate, the decision will be upheld even if the court would have decided the matter differently.

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Superior Court Holds Chancery Has Exclusive Jurisdiction To Appoint Arbitrator

Firemen's Insurance Co. v. Birch Pointe Condo. Assoc., Inc., C.A. No. 08C-04-081 JAP (Del. Super. Dec. 17, 2008).

In this decision, the Superior Court ruled sua sponte that it lacked subject matter jurisdiction over an action seeking declaratory relief and requesting the appointment of an arbitrator. The court held that under 10 Del. C. § 5704 the Court of Chancery has exclusive jurisdiction to appoint an arbitrator when the parties’ agreed upon method of appointment fails for any reason.   

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Court of Chancery Upholds Post Merger Arbitration

Aveta Inc. v. Bengoa, C.A. 3598-VCL (Del. Ch. Dec. 11, 2008)

 

It is now common to provide for post merger payouts and the arbitration of any disputes about those payouts. This case illustrates the problem of what happens when one party feels it does not have enough information to go into arbitration where discovery may be limited. The Court held that when the obligation to arbitrate is not conditioned on the receipt of information, arbitration will be ordered and the parties will be left to deal with the arbitrators over information exchange issues.

 

The answer is to provide clearly for adequate information exchange rights in the arbitration.

 

 

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Court of Chancery Set Rules to Uphold Arbitration Awards

TD Ameritrade, Inc. v. McLaughlin, C.A. 3603-CC (July 24, 2008)

This decision set out in detail when the Court of Chancery may set aside an arbirtation award. Not surprisingly, the answer is not very often. The only part of the award set aside was due to an obvious math error. The Court upheld the rest of the award even against an attack that the award was manifestly contrary to law.

The analysis of how to determine if the award is contrary to law is particularly instructive.

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