Posts in Arbitration

Court Of Chancery Bars Late Statutory Contribution Claim

Global Link Logistics Inc. v. Olympus Growth Fund III, L.P., C.A. 4444-VCP (January 29, 2010)

 If you are a co-defendant in an arbitration case with a claim for contribution, you had better assert it in the arbitration proceedings. Otherwise, you may lose the right under the Joint Tortfeasors Act to make your co-defendant pay more than his pro rata share. This result follows under this decision because the Act requires the cross claim be asserted before "judgment" is rendered and the arbitration award counts as a judgment for that purpose.

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Court of Chancery Imposes Severe Sanctions for Refusal to Arbitrate

Aveta Inc. v. Bengoa, C.A. 3598-VCL (December 24, 2009)

After the entry of an order compelling arbitration, the defendant delayed the arbitration and even sought to re-litigate the underlying suit compelling arbitration. The Court was not impressed and found the defendant in contempt, imposing severe sanctions.

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Court of Chancery Declines to Upset Unusual Arbitration Ruling

Zurich America Insurance Company v. St. Paul Surplus Lines Inc., C.A. 4095-VCP (December 10, 2009, revised April 14, 2010)

In this case, the Court of Chancery declined to upset an arbitrator's decision and explained the limits on the Court's review of arbitration awards. Here, that limit applied even when the arbitrator had declined to rule based on his decision that he lacked jurisdiction.

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Court of Chancery Holds Arbitrator Decides Limitations Defense

Lefkowitz v. HWF Holdings LLC, C.A. 4381-VCP (November 11, 2009)

The Delaware Arbitration Act has a unique provision that permits the Court of Chancery to enjoin an arbitration when the claim asserted is barred by a statute of limitations. However, to get into Court, the arbitration agreement must be governed by Delaware's Arbitration Act. If it is not, then this unique remedy is not available, and it is up to the arbitrator to decide if the claim is barred on limitations grounds.

This decision also contains an excellent discussion of when the Delaware Arbitration Act applies and, when it does, to what extent its provisions control.

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Court of Chancery Explains Limits of Review of Arbitration Award

World-Win Marketing Inc. v. Ganley Management Co., C.A. 3905-CC (August 18, 2009).

The extent to which a court will review an arbitration award is a tricky question. The court may do so when the arbitrator exceeds his authority. But, what does that really mean? This decision explains this vague standard of review.

In general, if the decision seems grounded in the facts presented to the arbitrator and is within the subjects that she may deal with under the parties agreement to arbitrate, the decision will be upheld even if the court would have decided the matter differently.

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Superior Court Holds Chancery Has Exclusive Jurisdiction To Appoint Arbitrator

Firemen's Insurance Co. v. Birch Pointe Condo. Assoc., Inc., C.A. No. 08C-04-081 JAP (Del. Super. Dec. 17, 2008).

In this decision, the Superior Court ruled sua sponte that it lacked subject matter jurisdiction over an action seeking declaratory relief and requesting the appointment of an arbitrator. The court held that under 10 Del. C. § 5704 the Court of Chancery has exclusive jurisdiction to appoint an arbitrator when the parties’ agreed upon method of appointment fails for any reason.   

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Court of Chancery Upholds Post Merger Arbitration

Aveta Inc. v. Bengoa, C.A. 3598-VCL (Del. Ch. Dec. 11, 2008)

 

It is now common to provide for post merger payouts and the arbitration of any disputes about those payouts. This case illustrates the problem of what happens when one party feels it does not have enough information to go into arbitration where discovery may be limited. The Court held that when the obligation to arbitrate is not conditioned on the receipt of information, arbitration will be ordered and the parties will be left to deal with the arbitrators over information exchange issues.

 

The answer is to provide clearly for adequate information exchange rights in the arbitration.

 

 

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Court of Chancery Set Rules to Uphold Arbitration Awards

TD Ameritrade, Inc. v. McLaughlin, C.A. 3603-CC (July 24, 2008)

This decision set out in detail when the Court of Chancery may set aside an arbirtation award. Not surprisingly, the answer is not very often. The only part of the award set aside was due to an obvious math error. The Court upheld the rest of the award even against an attack that the award was manifestly contrary to law.

The analysis of how to determine if the award is contrary to law is particularly instructive.

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Court of Chancery Interprets Limitations Law on Arbitration Demands

Personnel Decisions Inc. v. Business Planning Systems Inc., C.A. 3213-VCS (Del. Ch. May 5, 2008)

The Delaware Arbitration Act has a statute of limitations that is not found in some other arbitration acts. Here the court held that a demand for arbitration was barred by that limitation and as a result, arbitration would be enjoined. The decision is particularly important in setting out when the limitations period begins to expire.

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Court of Chancery Explains Scope of Arbitration Agreement

Brown v. T-Ink, LLC ,C.A. No. 3190-VCP (December 18, 2007) Delaware courts have recently issued several decisions dealing with the scope of an agreement to arbitrate. This is yet another. The opinion is interesting for its explanation of the Delaware approach to determining whether it is for the arbitrator or the court to decide if an issue is subject to arbitration. Generally, that issue will be decided by the court unless there is a clear indication in the agreement that the arbitrator is to decide such questions. As this decision points out, references to the AAA rules and language including "all controversies" arising out of the parties' relationship indicate that an arbitrator should decide such issues. Share

Court of Chancery Upholds Very Broad Arbitration Clause

Ornero v. Country Grove Investment Group LLC, C.A. No. 2245-VCS (October 12, 2007).

In this case the contract required arbitration of any dispute between the parties arising from "any other cause", not just from a cause related to their contract. The Court upheld the claim that even a suit on a dispute unrelated to the contract containing the arbitration clause was within this broad arbitration agreement.

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Court of Chancery Holds Arbitrator Decides If Claim Is Arbitrable

Baypo Limited Partnership v. Technology JV, C.A. No. 2693-VCL (October 10, 2007).

Many arbitration clauses contain provisions that permit a court to grant injunctive relief.  These are used because of a fear that the arbitration panel may not have that power and that sort of relief may be needed, such as to enforce a noncompetition clause. Notwithstanding the presence of such clause, this decision upholds the usual Delaware rule that it is up to the arbitrators to decide if an issue is subject to the arbitration provision. Of course, that does not mean they decide if a court may hear an application for an injunction.

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Court of Chancery Stays Suit In Favor of Arbitration

Friendly Ghost Enterprises LLC v. McWilliams, C.A. No. 2935-VCN (July 27, 2007). Sometimes fiduciary duty claims are mixed in with claims that are subject to an arbitration provision. The issue then is whether the nonarbitration claims for breach of fiduciary duty are to be stayed in favor of arbitrating the other claims first. Here, the Court granted a stay because the resolution of the fiduciary duty claims and the claims for dissolution and a receiver would be illuminated by the resolution of the claims to be arbitrated. Share

Court of Chancery Defers to Arbitration Panel

Wilmington Paper Corp. v. ANDA Management LLC, C.A. No. 2568-VCN (May 14, 2007).

When a dispute is subject to an arbitration agreement, it is often the case that immediate relief is needed to protect the parties in the period before the arbitration is decided. While sometimes an arbitration panel may have the power to issue orders that provide that relief, that is not always the case. Here, the Court of Chancery issued a status quo order that limited  management powers while an arbitration panel was being formed and was to review the disputes.

Status quo orders are thus a way to deal with problems that occur before the arbitrators can decide what to do. Note, however, that the Court limited the status quo order to the period before the arbitrators could act.

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Court of Chancery Explains Third Party Obligation To Arbitrate

NAMA Holdings, LLC v. Related World Market Center LLC, C.A. No. 2755 (Del. Ch. April 27, 2007).

The rights and obligations of a third party beneficiary to a contract are not clear. This decision illustrates that uncertainty and resolves the issues of when a third party beneficiary may be compelled to arbitrate a dispute.

The Court held that a third party beneficiary may be compelled to arbitrate a dispute when the agreement provides that the right the third party seeks to enforce is subject to the arbitration provisions of the agreement. In addition, the theory of equitable estoppel will compel a third party to arbitrate if it has received a direct benefit from the contracts' performance such that it would be inequitable to refuse to comply with the general intent of the agreement that disputes are to be arbitrated. More ›

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