Posts in Arbitration

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.

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Court Of Chancery Explains Impact Of Forum Selection Clause On McWane Motion

Utilipath LLC v. Hayes, C.A. 9922-VCP (April 15, 2015) A non-exclusive forum selection clause in the parties' agreement means that a McWane motion asserting an improper forum is doomed to fail.

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Supreme Court Applies McWane To Arbitration

LG Electronics Inc. v. Interdigital Communications Inc., No. 465, 2014 (April 14, 2015) For the first time, the Delaware Supreme Court held that an arbitration proceeding qualifies as a having been first filed, warranting dismissal of a later filed suit under the McWane doctrine on forum selection. The facts here are somewhat unusual, but the decision has broad implications, particularly when the actual dispute was over the interpretation of a contract that did not have an arbitration clause.

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Court Of Chancery Explains How Hard It Is To Appeal Arbitration Order

3850 & 3860 Colonial Blvd. LLC v. Griffin, C.A. 9575-VCN (March 30, 2015) This decision explains how hard it is to appeal an order staying litigation in favor of arbitration.  Even when there are some good arguments over whether the dispute is subject to arbitration, the Supreme Court precedent strongly disfavors an interlocutory appeal.

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New Arbitration Act Prepared

The Delaware State Bar Association has prepared a new "Delaware Rapid Arbitration Act."  A copy with commentary is available here. The DRAA is designed to address the current problems with costs and delays that infect many arbitrations. It sets strict  limits on how long the arbitration should take and penalizes arbitrators who fail to act within those limits. It is expected that the DRAA will also avoid the extensive e-discovery that has more recently been permitted in arbitrations that are now closer to full-scale litigation. Arbitrator selection will also be streamlined. The DRAA requires that only parties who have signed an agreement to use its terms are subject to the DRAA. Hence, these arbitrations will not be available to cover stockholder or other representative litigation.

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Court Of Chancery Upholds Arbitration Clause In LLC Agreement After Conversion

3850 & 3860 Colonial Blvd LLC v. Griffin, C.A. 9575-VCN (February 26, 2015) This is an interesting decision because it deals with whether an LLC agreement requiring arbitration may be enforced even after the LLC was converted into a corporation that lacks such an arbitration clause.  The Court upheld the agreement to arbitrate. Share

Court Of Chancery Upholds Arbitration Clause In Breach Of Fiduciary Duty Case

Lewis v. AimCo Properties L.P., C.A. 9934-VCP (February 10, 2015) This decision enforces an arbitration clause in an LLC agreement even when the claim asserted a breach of fiduciary duty. While not surprising in itself, the decision may also have broader implications about whether a bylaw with an arbitration provision may be enforced in a breach of fiduciary duty case. Share

Court Of Chancery Affirms Arbitration Award

Roncone v. Phoenix Payment Systems Inc., C.A. 8895-VCN (November 26, 2014) This decision illustrates how hard it is to have the Court set aside an arbitration award. The grounds to do so are very limited and the court is not inclined to extend them Share

Court Of Chancery Declines To Intervene In Arbitration

LG Electronics, Inc. v InterDigital Communications Inc., C.A. 9747-VCL (August 20, 2014) This is the first decision by the Court of Chancery that dismissed a case over which it has jurisdiction because an arbitration proceeding had been filed first.  As the court points out, this is unusual because the court usually dismisses cases in favor of arbitration when the court lacks jurisdiction to hear disputes subject to an arbitration provision.  Here, however, both the court and the arbitration panel had jurisdiction so that a dismissal on those grounds was not appropriate.  Instead, the Court applied the McWane doctrine whereby a case is dismissed when a first-filed proceeding elsewhere will do justice between the parties. The decision is interesting because it also holds that the court will not interfere in how another proceeding is being conducted.  While that may not always be true, it is a useful reminder of the limits of what the Court of Chancery will get involved in most of the time. Share

Court Of Chancery Explains Willie Gary

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.

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Court Of Chancery Grants Discovery Of Arbitration Claim

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.

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Court Of Chancery Orders New Arbitrator

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.

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When A Request For An Injunction Does Not Preempt 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.

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Court Of Chancery Explains Injunction Out Clause In Arbitration Agreement

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.

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Supreme Court Decides Who Decides

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.

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