Third Circuit Rejects Delaware Chancery Arbitration Scheme

The Third Circuit has affirmed the District Court decision striking down Delaware’s Chancery Arbitration scheme in Delaware Coalition for Open Government v. Strine. Like the District Court, the Third Circuit applied the “experience and logic test” to conclude that the First Amendment confers a right of public access to the Chancery arbitrations because there has been “a traditional of accessibility” to that type of proceeding and because “access plays a significant positive role in the functioning of the particular process in question.”

While I agree that the First Amendment should be understood to require openness for the proceedings contemplated by the Chancery arbitration scheme, I see the case raising even more fundamental questions about the rule of law and access to justice. The Chancery arbitration program effectively allowed well-heeled corporate litigants to buy an improved version of the normal state-run dispute resolution process. For the modest sum of $12,000 up front and $6,000 per day, a corporation with a million-dollar claim could procure a decision by a sitting judge, but with a streamlined process and complete secrecy. The scheme thus created a two-track system of justice with a privileged place for wealthy corporate claimants.

Wealthy corporate litigants are and should be free to settle their disputes privately, employing private arbitrators. They should not be able to cloak the judicial process with an arbitration veneer in order to buy premium treatment behind a wall of secrecy.

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