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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 71 posts in Arbitration.
Chancery Addresses the Arbitration Versus “Expert” Determination Distinction in Acquisition Agreement
Purchase agreements in M&A transactions often include alternative dispute resolution mechanisms. It similarly is not uncommon for parties to debate whether their agreement contemplates arbitration or an “expert” determination. There is a distinction between the two under Delaware law, and it is important. In particular, it dictates what role a court can play, such as in determining the scope of the non-judicial adjudicator’s authority in the first instance. The Court of Chancery thoroughly addressed the issue last year in Penton Business Media Holdings, LLC v. Informa PLC, 2018 WL 3343495 (Del. Ch. July 9, 2018). This is another decision on that topic, one reading the parties’ contract as requiring arbitration, not an expert determination, citing the contract’s references to the process as “arbitration.”
This decision explains the difference between agreeing to have a dispute decided by an expert rather than an arbitrator. The distinction is important because it may determine what the third-party adjudicator can review before reaching a decision, what questions it may address, and what role a court might play. For example, an expert may be confined to reviewing only a selected set of documents without resort to extrinsic types of evidence. That might not be what one party expected or desires. But it is a possible result under Delaware law, where the distinction is recognized, unlike in some other jurisdictions. In short, it is best to be specific about the exact type of adjudicator you want in your contract’s alternative dispute resolution provisions if your contract is governed by Delaware law.
This decision illustrates the dangers of not following the limited contractual time to file a dispute and instead relying on an arbitration provision to resolve that dispute. Exactly what the arbitrator is going to resolve was not clear to the plaintiff who filed a complaint to cover any claims not subject to arbitration. However, that complaint was not filed within the time permitted by the parties’ agreement. Hence, the complaint was dismissed.
This decision resolves a unique dilemma: what to do when the contracting parties agree to an arbitration clause designating a specific arbitrator (the former mediator in the case) to resolve disputes, but, it turns out, he will not serve in that capacity and the parties cannot agree on a replacement. Under the facts of this case, which involve the JAMS rules, the Court enforces the arbitration clause so that the chosen but unavailable arbitrator can decide whether he should pick his successor as a matter of procedural (as opposed to substantive) arbitrability.
This is another decision explaining the narrow circumstances when the Court of Chancery will vacate an arbitration award. It is very hard to get that relief.
The Court of Chancery often addresses the question of who, as between the Court and an arbitrator, should decide whether certain disputes are arbitrable. The analysis of this substantive arbitrability question is complicated where, as in this case, the parties’ relationship is governed by multiple contracts containing different choice of law, choice of forum, and dispute resolution provisions. In short, under Willie Gary, where the relevant contract generally refers all disputes to arbitration, and incorporates a set of rules for the arbitrator to follow, the arbitrator, not the Court, will decide substantive arbitrability. However, under McLaughlin, the Court still will not send the question of substantive arbitrability to the arbitrator where it is clear that only frivolous arguments support arbitration of a particular dispute.
This is another instance of the Court of Chancery addressing the overlap of advancement and the question of substantive arbitrability under Willie Gary. Here, the Court explains that once Willie Gary’s two-part test is satisfied and non-frivilous arguments exist in favor of arbitrability, the Court must defer the question of substantive arbitrability to the arbitrator. That the case is one involving advancement does not change the analysis.
This case involves the overlap of an advancement dispute and the question of substantive arbitrability under Willie Gary. The two-part test of Willie Gary asks whether the parties (i) generally referred all disputes to arbitration, and (ii) referred to a set of arbitration rules that empower an arbitrator to decide arbitrability. This decision focuses on the less clear question of what it means to generally refer all disputes to arbitration, and the effect carve-outs for certain disputes might have on this analysis. Broadly speaking, carve-outs must be expansive in order to prevent the question of substantive arbitrability from being passed onto the arbitrator.
This decision addresses issues that may arise when there are successive arbitrations involving the same basic set of facts, if different parties. It concludes that when engaging in the limited judicial review which asks whether an arbitrator exceeded its authority, the issue of whether the first arbitration’s findings are preclusive in the second arbitration is for the second arbitrator to decide, not the Court.
Jiampietro v. The Goldman Sachs Group Inc., C.A. 12601-VCL (Transcript, August 11, 2016)
Many employment agreements require that any dispute be arbitrated. But when the dispute is over the employee’s right to indemnification under bylaws or statute, then the arbitration clause better expressly cover that claimed right or otherwise the non-contractual right remains for a court to decide.
This is a great decision on when the provisions of a contract bar tort claims of fraud and tortious interference. Briefly, when the contract speaks to an issue (e.g., expressly permitting certain acts, or imposing no duty to act), a party may not assert a tort claim that would deny the other party the benefit of its bargain. Further, when the contract between two parties selects a judicial forum for dispute resolution, arbitration is not part of the deal even if provided in a collateral contract involving one of those parties, at least not where there are no grounds for binding the non-signatory to the arbitration clause.
This is another in a line of decisions that explains when the issue of arbitrability should be sent to the arbitrator to decide. When the familiar tests are applied that favor letting the arbitrator decide that issue, only a strong argument for not sending the issue to arbitration will avoid doing so.
Court Of Chancery Decides If Arbitration Required When Arbitration Clause Not In One Of Two Contracts
When only one of two related contracts has an arbitration clause, the Court can still require arbitration of a dispute under the contract lacking that clause. The question is whether the two contracts deal with the same subject matter and that is not as easy to decide as it may appear. For example, if the two contracts need to be read together to accomplish the parties’ intent, such as where one contract defines certain necessary terms while the other does not, then an arbitration clause in one contract may require arbitration of disputes that nominally arise under the other contract as well. While employing Illinois law, this decision helps guide how to determine if the relationship between the contracts warrants compelling arbitration.
As this decision explains, you can be bound by an arbitration clause even if you do not sign a contract containing such a provision. The issue is did you agree to be bound by that contract’s terms and if you did, then you are in for all of its terms.
This decision explains the timelines for seeking to vacate an arbitration award. It illustrates that an arbitration proceeding has its own rules that the parties better understand or lose their rights.