Delaware Business Litigation Report

Chancery Dismisses Claims in Favor of Arbitration in Dispute over Sale of Pittsburgh Penguins

Wildfire Productions, L.P. v. Team Lemieux LLC, C.A. No. 2021-1072-PAF (Del. Ch. June 29, 2022)
The Federal Arbitration Act and the public policy of Delaware favor the resolution of disputes through arbitration. When parties contractually agree to arbitrate their disputes, Delaware courts will enforce the terms of arbitration provisions.

The owners of the Pittsburgh Penguins, a National Hockey League team, agreed to transfer a controlling ownership interest to another investor group. A minority owner challenged the transaction as violating the partnership agreement and filed claims against the controlling owners in the Court of Chancery. The NHL intervened. Both the NHL and the defendants argued that the dispute was required to be arbitrated before the NHL Commissioner under the terms of the NHL Constitution as well as a consent agreement and limited partnership agreement that the minority owner had signed at the time of its investment. These agreements cross-referenced and bound the minority owner to the terms of the NHL Constitution, to which the NHL was a party.

The Court held that the language of the NHL Constitution and the consent agreement required arbitration of the parties' dispute. The NHL Constitution itself contained a broad arbitration provision, and the consent agreement both bound the minority owner to the NHL Constitution and itself contained an explicit arbitration provision. The Court was not persuaded that a subsequent partnership agreement should supersede the arbitration requirement. The NHL had been a party to the prior agreements containing arbitration provisions, but not to the subsequent partnership agreement omitting arbitration, and thus, was not bound by the latter partnership agreement’s terms. The Court also declined to apply equitable estoppel to bind the NHL to terms of a later agreement, to which it was not a party, and that would vitiate its explicit rights under prior agreements to which it was a party.

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