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Court Of Chancery Holds That Contractually Agreed Issues Of Substantive Arbitrability Are For Judicial Resolution

Willie Gary LLC. v. James & Jackson LLC., C.A. No. 1781, 2006 WL 75309 (Del. Ch. Jan. 10, 2006), aff'd, (Del. Mar. 14, 2006)(Berger, J.) Plaintiff sought to enjoin defendant to remedy an alleged breach of the LLC Agreement and to specifically enforce the defendant's alleged promise to guarantee a debt of the LLC. Alternatively, plaintiff sought to dissolve the entity in which he owned 80% of stock because of an alleged decisional deadlock. In denying the defendant's motion to dismiss in favor of arbitration, the court held that unless the contract clearly and unmistakably provides otherwise, judicial resolution is mandated on the claims presented by the plaintiff. The court examined the LLC agreement and held that it clearly provided for judicial resolution for injunctions, specific performance and to prevent breaches and held that it trumped the arbitration provisions. The defendant unsuccessfully claimed that the issue of arbitrability itself was to be submitted to arbitration, including the request for injunction and specific performance. The court also declined to stay the judicial resolution of the arbitrability issue pending completion of arbitration, because the latter was an attempt to carry out resolution in a manner not intended by the plaintiff and the LLC agreement. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com Share

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