June 13, 2013

Stipanowich on Delaware Chancery Arbitration

By Paul Kirgis

In May, the Third Circuit heard oral arguments in Delaware Coalition for Open Government v. Stine, the case challenging the constitutionality of Delaware’s chancery arbitration scheme (see my previous commentary on the program here, here, and here.) A federal court had found the scheme unconstitutional on grounds that it violated the public’s First Amendment right of access to court proceedings. Tom Stipanowich (Pepperdine) has now posted In Quest of the Arbitration Trifecta, or Closed Door Litigation?: The Delaware Arbitration Program on SSRN. He concludes that the scheme is unprecedented in its blending of the public judicial function and private process, and that striking down the program poses fewer risks than upholding it. Here’s the abstract:

The Delaware Arbitration Program established a procedure by which businesses can agree to have their disputes heard in an arbitration proceeding before a sitting judge of the state’s highly regarded Chancery Court. The Program arguably offers a veritable trifecta of procedural advantages for commercial parties, including expert adjudication, efficient case management and short cycle time and, above all, a proceeding cloaked in secrecy. It also may enhance the reputation of Delaware as the forum of choice for businesses. But the Program’s ambitious intermingling of public and private forums brings into play the longstanding tug-of-war between the traditional view of court litigation as a public venue for private dispute resolution and the and perception of courts as institutions that represent and are accountable to the public. A constitutional challenge based on third parties’ right of access to court proceedings resulted in a district court ruling that arbitration proceedings heard before sitting judges of the Delaware Chancery Court were “essentially” non-jury civil trials and thus were subject to public access. The case raises legitimate questions about the appropriateness of structuring a program in which sitting judges serve as arbitrators and preside over a procedure that is effectively shielded from public view. It also implicates issues regarding the use of public resources in ostensibly private disputes, and even the way our justice system is funded. This article explores the factors that provided the impetus for the Delaware Arbitration Program and analyzes the arguments and policy considerations for and against the district court’s decision.

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