Posts in Arbitration

Court Of Chancery Explains Limits Of Review Of Appraiser Decision

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.

Share

Court of Chancery Explains Willie Gary

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.

Share

Master In Chancery Upholds Arbitration Award

Garda USA Inc. v. SPX Corporation, C.A. 7115-ML (February 7, 2013) When may an arbitrator's award be vacated?  Of course, that is determined by the applicable  arbitration statute.  However, that begs the question as the statutes are not easy to apply in this area. This decision explains when the arbitrator award may be vacated for a manifest violation of the law. This decision was reversed by the Delaware Supreme Court in C.A. 332, 2013 (June 16, 2014) The test of "manifest disregard" of the law means that the arbitrator must be clearly ignoring clear law and when there is some logical explanation for the arbitrator's decision, that test is not meet. Share

Court Of Chancery Upholds Duty To Arbitrate Of Alter Ego

Legend National Gas II Holdings LP v. Hargis, C.A. 7213-VCP (September 28, 2012)

When a non-party to a contract is still bound by its arbitration provision is surprisingly often litigated. This decision reviews the past law and reiterates that a non-party may need to arbitrate when it is the alter ego of the a party that agreed to the arbitration clause, such as a successor partnership.

Share

Court of Chancery Discusses The Role of a Stockholder Representative In Arbitration Proceedings

Pryor v. IAC/Interactivecorp, C.A. 6884-CS (June 7, 2012)

What is the role of a "stockholder representative" in an arbitration proceeding?  When there are many parties to an agreement, it is common for the parties on one side (such as the selling stockholders entitled to an earn out payment) to chose one of their bretheren to act for them all.  While most assume that the representative chosen has the right to call the shots in the arbitration, her role may be much more.  This decision explains why that may be important.  It holds that notice to the representative that begins the period in which an appeal may be filed also counts as notice to all the parties the chosen one represented.  Hence, if she does not file a timely appeal,  the others may not do so later.  Moreover, the decision suggests that only the representative may argue the merits of an appeal.

Share

Court of Chancery Arbitration Likely to Become More Prevalent

 Authored by Lewis H. Lazarus
This article was originally published in the Delaware Business Court Insider | September 28, 2011

In 2009, Delaware's General Assembly passed and Gov. Jack Markell signed legislation enabling arbitration in the Court of Chancery.  In 2010, the Court of Chancery adopted rules governing arbitration. As the statutes — 10 Del. C. §§ 349 and 351 — and rules — Court of Chancery Rules 96-98 (Arbitration Rules) — are new and arbitration requires mutual agreement, arbitration may become a more prevalent means of resolving disputes as deal lawyers increasingly require Court of Chancery arbitration for disputes arising out of merger and other agreements.

Reportedly, the current dispute between Skyworks Solutions and Advanced Analogic Technologies contains a dispute resolution clause mandating arbitration in the Court of Chancery. It is thus appropriate to review why Chancery Court arbitration is likely to become an increasingly preferred method of dispute resolution.

First, the arbitration rules permit resolution of disputes by decision-makers with the knowledge and experience of the chancellor and vice-chancellors. To be eligible for Court of Chancery arbitration, the dispute must involve at least one party that is a Delaware entity; both parties must agree to arbitration; and if the dispute is solely about monetary damages, the amount in controversy must exceed $1 million. The procedure is not available for consumer disputes. Previously, disputes solely for monetary damages were not amenable to subject matter jurisdiction in the Court of Chancery.

Second, the members of the Court of Chancery are used to resolving matters on an expedited basis. The arbitration rules contemplate that generally an arbitration hearing will be scheduled within 90 days of the filing of the petition. However, they also allow for modification of the schedule with the consent of the parties and approval of the arbitrator. The arbitration rules thus permit flexibility for the parties and arbitrator to structure the dispute resolution on a schedule that makes sense.

Third, Chancery Court arbitration proceedings are confidential. The filing of a petition for arbitration is not included on the court's docket system. The petition and all supporting documents are by rule considered confidential and not of the public record, unless there is an appeal.

Fourth, Section 351 of Title 10 expressly authorizes parties to stipulate that an arbitration award shall be final, binding and non-appealable. As the synopsis to the legislation explains, "In many matters parties desire an answer and their dispute is narrow enough that even if they cannot settle, they are willing to agree in advance to live with the outcome rendered ... ." The new statutes permit that voluntary option.

Fifth, any appeals go to the Delaware Supreme Court, a decision-making body equally acclaimed for its knowledge and experience in the prompt resolution of significant business disputes.

Sixth, for parties in disputes with foreign entities, the new statutes and arbitration rules may provide greater comfort that the arbitration award will be enforceable against a foreign entity on its home turf under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Finally, the price is right compared to private arbitration. The filing fee is $12,000, to be equally divided by the parties. For each day or partial day that the vice chancellor or master engages in arbitration after the first day of arbitration, there is a $6,000 fee, also to be equally divided by the parties.

Efficiency, confidentiality, first-rate decision-makers experienced in resolving complex business disputes — for these reasons deal lawyers should consider the benefits of Chancery Court arbitration. And as they counsel their clients to specify Chancery Court arbitration in their agreements, we can expect that it will be an increasingly utilized tool for dispute resolution.

Share

Court Of Chancery Determines When Discovery Permitted To Vacate Award

Chartis Specialty Insurance Company v. LaSalle Bank,  C.A. 6103-VCN (July 29, 2011)

This decision discusses when a party may obtain discovery in an action seeking to vacate an arbitration award.  The short answer is "not very often."  However, discovery was granted in this case alleging arbitrator bias.

Share

Court Of Chancery Vacated Arbitration Award That Violates Law

Donegal Mutual Ins. Co. v. Progressive Northern Ins. Co., C.A. 5049-CC (January 11, 2011)

Arbitration between insurance companies is different.  To begin with, the arbitrators are expected more than most to follow the statutory scheme they are supposed to enforce.  Here, when the arbitrator made a clear mistake of law, the Court vacated the award.  Whether it would do so in a less clear cut case involving other sorts of arbitration claims remains to be seen.

Share

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.

Share

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.

Share

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.

Share

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.

Share

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.

Share

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.

Share

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.

Share