Delaware Judge Rules Private Arbitration Unconstitutional

Delaware Judge Rules Private Arbitration Unconstitutional

U.S. District Court Judge Mary McLaughlin recently deemed a Delaware state rule unconstitutional, much to the chagrin of the Chancery Court and the slew of corporations that call Delaware home. Three years ago an arbitration program was instated in order to allow Chancery judges to privately mediate commercial litigation, therefore lessening the costs and time associated with these types of cases.

William Chandler, now partner at Wilson Sonsini, was head of the court when the program started in 2009 and stated that its benefits in comparison with the private arbitration system were:

  • Lower costs
  • The right to appeal
  • Speeding up the entire mediation process
  • Leveraging the expertise of jurists with experience in the corporate realm

Despite these benefits, Judge McLaughlin likened the arbitration program to a civil trial except that, “the judge [sitting as arbitrator] does not publish his rulings or reasoning. The public does not know the factual findings the judge has made or what legal rules the judge is, or should be, applying to these arbitrations.” Finally in Delaware Coalition for Open Government v. Hon. Leo E. Strine Jr. et al., she declared the rule unconstitutional.

Chandler argues that the program is in “stark contrast” to civil trials and would also lend a unique edge over other Alternative Dispute Resolution (ADR) forums because of its use of active judges. At the time the rule was invalidated, not enough arbitrations had been filed to declare it a success or failure. The chancellors are reaching out to the 3rd U.S. Circuit Court of Appeals to ask for the program’s reinstatement.

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