Posts tagged Arbitration

Court of Chancery Interprets Limitations Law on Arbitration Demands

Personnel Decisions Inc. v. Business Planning Systems Inc., C.A. 3213-VCS (Del. Ch. May 5, 2008)

The Delaware Arbitration Act has a statute of limitations that is not found in some other arbitration acts. Here the court held that a demand for arbitration was barred by that limitation and as a result, arbitration would be enjoined. The decision is particularly important in setting out when the limitations period begins to expire.

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Court of Chancery Explains Scope of Arbitration Agreement

Brown v. T-Ink, LLC ,C.A. No. 3190-VCP (December 18, 2007) Delaware courts have recently issued several decisions dealing with the scope of an agreement to arbitrate. This is yet another. The opinion is interesting for its explanation of the Delaware approach to determining whether it is for the arbitrator or the court to decide if an issue is subject to arbitration. Generally, that issue will be decided by the court unless there is a clear indication in the agreement that the arbitrator is to decide such questions. As this decision points out, references to the AAA rules and language including "all controversies" arising out of the parties' relationship indicate that an arbitrator should decide such issues. Share

Court of Chancery Upholds Very Broad Arbitration Clause

Ornero v. Country Grove Investment Group LLC, C.A. No. 2245-VCS (October 12, 2007).

In this case the contract required arbitration of any dispute between the parties arising from "any other cause", not just from a cause related to their contract. The Court upheld the claim that even a suit on a dispute unrelated to the contract containing the arbitration clause was within this broad arbitration agreement.

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Court of Chancery Holds Arbitrator Decides If Claim Is Arbitrable

Baypo Limited Partnership v. Technology JV, C.A. No. 2693-VCL (October 10, 2007).

Many arbitration clauses contain provisions that permit a court to grant injunctive relief.  These are used because of a fear that the arbitration panel may not have that power and that sort of relief may be needed, such as to enforce a noncompetition clause. Notwithstanding the presence of such clause, this decision upholds the usual Delaware rule that it is up to the arbitrators to decide if an issue is subject to the arbitration provision. Of course, that does not mean they decide if a court may hear an application for an injunction.

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Court of Chancery Stays Suit In Favor of Arbitration

Friendly Ghost Enterprises LLC v. McWilliams, C.A. No. 2935-VCN (July 27, 2007). Sometimes fiduciary duty claims are mixed in with claims that are subject to an arbitration provision. The issue then is whether the nonarbitration claims for breach of fiduciary duty are to be stayed in favor of arbitrating the other claims first. Here, the Court granted a stay because the resolution of the fiduciary duty claims and the claims for dissolution and a receiver would be illuminated by the resolution of the claims to be arbitrated. Share

Court of Chancery Defers to Arbitration Panel

Wilmington Paper Corp. v. ANDA Management LLC, C.A. No. 2568-VCN (May 14, 2007).

When a dispute is subject to an arbitration agreement, it is often the case that immediate relief is needed to protect the parties in the period before the arbitration is decided. While sometimes an arbitration panel may have the power to issue orders that provide that relief, that is not always the case. Here, the Court of Chancery issued a status quo order that limited  management powers while an arbitration panel was being formed and was to review the disputes.

Status quo orders are thus a way to deal with problems that occur before the arbitrators can decide what to do. Note, however, that the Court limited the status quo order to the period before the arbitrators could act.

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Court of Chancery Explains Third Party Obligation To Arbitrate

NAMA Holdings, LLC v. Related World Market Center LLC, C.A. No. 2755 (Del. Ch. April 27, 2007).

The rights and obligations of a third party beneficiary to a contract are not clear. This decision illustrates that uncertainty and resolves the issues of when a third party beneficiary may be compelled to arbitrate a dispute.

The Court held that a third party beneficiary may be compelled to arbitrate a dispute when the agreement provides that the right the third party seeks to enforce is subject to the arbitration provisions of the agreement. In addition, the theory of equitable estoppel will compel a third party to arbitrate if it has received a direct benefit from the contracts' performance such that it would be inequitable to refuse to comply with the general intent of the agreement that disputes are to be arbitrated. More ›

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Superior Court Grants Motion to Dismiss Claims Raised in Arbitration, Denies Motion to Dismiss Separate Breach of Contract

Mehiel v. Solo Cup Company, No. 06C-01-169-JEB, 2007 WL 901637 (Del. Super. Ct. Mar. 26, 2007).

This case arose from defendant’s acquisition of SF Holdings and relates to disagreements over the amount of SF Holdings’ working capital adjustments and, by extension, its purchase price. The plaintiff, chairman and CEO of SF Holdings, brought this action in his capacity as the shareholders’ representative for fraud in the inducement, breach of contract, and unjust enrichment. 

Shortly after the parties entered into the merger agreement—and days before closing—they found themselves deadlocked and unable to reach an agreement on the working capital adjustments. To resolve their differences, the parties appointed a neutral auditor as provided in the merger agreement, which further stated that the auditor’s decision would be final, binding, and conclusive, making no mention of appeal or reconsideration. The auditor resolved several issues in favor of the purchasing company (defendant), and plaintiffs’ action followed. More ›

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Court of Chancery Gives Arbitration Award Finality

Country Life Homes Inc. v. Shaffer, C.A. No. 2288-S (Del. Ch. January 31, 2007).

It is sometimes asked if an arbitration award really has the finality of res judicata. This decision holds that the first arbitration award in a dispute is a final award that bars any later arbitration award by another tribunal.  The Court did permit the party opposing the first award to contest the jurisdiction of that arbitrator. When that challenge failed, so did that party's case. More ›

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Federal Court Grants Renewal of Motion To Demonstrate Jurisdiction

Remote Solutions Co., Ltd. v. FGH Liquidating Corp., Civil Action No. 06-004-KAJ, 2006 WL 3498657 (D. Del. Dec. 5, 2006).

Plaintiff filed a Motion for Reconsideration and to Amend the Court’s earlier Memorandum Order in which it denied the plaintiff’s motion to vacate or modify an arbitration award for failing to demonstrate a proper basis for subject matter jurisdiction. The plaintiff now sought to have the Court amend its order so it could cure the jurisdictional defect. The Court granted the motion to the extent that the plaintiff could renew its prior motion to vacate or modify the arbitration award by demonstrating proper subject matter jurisdiction.

The Court also permitted the motion to relate back to the date of the original filing. It further permitted the defendant to move independently for confirmation of the arbitration award regardless of the course of action chosen by plaintiff.

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Court of Chancery Upholds Arbitration For Tobacco Case

State of Delaware v. Philip Morris USA, Inc. C.A. No. 2088-N (December 12, 2006).

By this decision Delaware joins the vast majority of other states in ordering arbitration over the disputes arising out of the State's agreement with tobacco companies.

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Court of Chancery Finds Limit On Advancement Rights

Majkowski v. American Imaging Management Services LLC, C.A. No. 1797-N (Del. Ch. December 6, 2006).

The right to have attorneys fees paid in advance of the final result in litigation is illustrated by this recent decision. The Court held that an agreement to "hold harmless" does not give the right to advancement of legal fees. Instead, "hold harmless" language only confers the right to be indemnified at the end of the litigation. More ›

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Federal Court Affirms Arbitration Award That Included Share Valuation By Agreement

Millennium Validation Services, Inc. v. Thompson, C.A. No. 02-1430 (GMS), 2006 WL 3159821 (D. Del. Nov. 3, 2006).

Plaintiff, a Delaware corporation, and defendant filed motions to vacate/modify and confirm the arbitration award respectively. The Court granted the defendant’s motion to confirm the award. Defendant Thompson and two others founded Millennium Validation Services, Inc. (“Millennium”) with equal shareholding. Due to some differences, the two other members sought to compel defendant Thompson to withdraw from Millennium, by triggering some clauses under their Shareholder Agreement (“Agreement”). Subsequently, plaintiff sought to buy-out the defendant’s shareholding, with its valuation computed under the Agreement. In the interim, the plaintiff discovered through its agents that defendant was allegedly violating the terms of his non compete provisions of the Agreement because he was employed by a competitor. Plaintiff therefore suspended its buy-out of his shares.

Plaintiff then filed suit for breach of contract and interference with prospective contractual relations and the defendant cross-claimed for breach of fiduciary duty. Thereafter, the parties stipulated to binding arbitration. The independent arbitrator denied the plaintiff’s claims for lost profits, breach of contract and tortious interference and ordered it to pay defendant a far greater amount representing the buy-out value of his shares and accumulated interest, in addition to a loan that the defendant had advanced the plaintiff company. The arbitrator declined to amend or modify the award and the above cross-motions ensued.

The Court held that the limited grounds on which the arbitration award could have been vacated were absent in the present matter. Here, the plaintiff alleged that the arbitrator had exceeded his powers by revaluing the shares of the defendant, a matter solely governed by the Agreement. This argument was dismissed because the parties had agreed to arbitration of the entire dispute – a term that included the valuation of the shares too. Similarly, the Court found that plaintiff’s non-compete violation and other claims failed to assert any grounds for vacating the arbitration award. Finally, the Court dismissed plaintiff’s argument that it was impermissible for the arbitrator to order a subsequent hearing to determine attorney fees and costs because there was no authoritative support for that contention.

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Homebuyers' Claims Against Builder Dismissed Based on Arbitration Clause

Zeleny v. Thompson Homes At Centreville, Inc. C.A. No. 05-12-224 SCD (Del. Super. Ct. July 10, 2006). Buyers of a newly constructed home sued the builder for breach of contract, breach of warranty, and negligence arising out of water leaks and other defects in their home. The court granted defendant's motion to dismiss on the ground that the parties' contract required the dispute to be submitted to binding arbitration. More › Share

Court of Chancery Grants Motion for Summary Judgment in Favor of Arbitration of Dispute

Delta & Pine Land Co. v. Monsanto Co., C.A. No. 1970-N, 2006 WL 1510417 (Del. Ch. May 24, 2006). Plaintiff moved for summary judgment on its claim for arbitration of a dispute with Defendant. More › Share