Delaware Business Litigation Report

Chancery Enforces Arbitration Provisions for Former Employees’ Claims Against the Company’s Successor

Buzzfeed Media Enterprises, Inc. v. Anderson, C.A. 2023-0377-MTZ (Del. Ch. May 15, 2024).
The Court of Chancery held that arbitration provisions in employment contracts between a company and its former employees were enforceable against the company’s successor-in-interest via a merger. The successor asserted that the Court had jurisdiction over the employees’ claims because the arbitration provisions did not delegate to an arbitrator the duty to decide whether a dispute was covered by the arbitration provisions, i.e., substantive arbitrability, and the employees may not force the company to participate in a mass-claims arbitration. The Court found, however, that the language of the agreements indicated the parties’ intent to delegate the substantive arbitrability issue to an arbitrator. The Court explained that the parties had agreed to arbitrate generally all disputes, which reinforced the presumption that substantive arbitrability was for an arbitrator to decide. The Court noted that the carveouts for arbitration were not so broad or substantial to overcome the presumption arising from the delegation of generally all disputes to arbitration. Turning to the issue of mass arbitration, the Court found that the parties had consented to mass arbitration. The Court reasoned that the parties agreed to arbitrate under the rules that apply in form and effect at the time any arbitral demand was filed. The Court pointed out that when the parties agreed to the American Arbitration Association’s substantive rules, they also consented to the supplementary rules, such as the mass-claims arbitration rules. Thus, an agreement to delegate substantive arbitrability may include mass arbitrations. Accordingly, the Court enforced the arbitration provisions and dismissed the successor’s claims in favor of arbitration.

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