Delaware’s unique effort to offer private arbitration presided over by sitting judges to those who could afford it officially ended last month when the United States Supreme Court declined to hear arguments as to whether lower court rulings barring the program should be reversed.
Delaware, which has long enjoyed a business-friendly reputation and whose Court of Chancery is well respected for its business expertise, established its controversial arbitration program in 2009. The program was limited to business disputes of at least one million dollars involving Delaware entities. Sitting judges on the Court of Chancery would preside over the disputes in exchange for a $12,000 state filing fee and $6,000 per day in arbitration fees. Documents would not be filed or made available to the public. As with conventional arbitration, the hearings would remain private and the results confidential, with the added bonus of having some of the country’s most respected judges handling the disputes.
But in 2011, the Delaware Coalition for Open Government commenced an action to challenge the confidential arbitration program, arguing that the cases in the program were truly civil court proceedings—heard in a Delaware courthouse by Delaware judges—and thus should be open to the public. Another concern prompting the challenge to the program was that business law would be made behind closed doors without anyone knowing about it.
The lower court found that the arbitration program violated the First Amendment. The Third Circuit upheld that ruling last fall, finding that the concept of “private arbitration” using state resources violated the public’s right to access court proceedings. The Court of Chancery then asked the Supreme Court to take the case, but on March 24, the Court declined. The Supreme Court’s decision not to hear the case leaves the Third Circuit’s determination in effect, officially ending Delaware’s effort to generate revenue and bolster its reputation for business expertise at the expense of public access to the judicial system.
Davidoff, Steven M., “Appeals Court Throws Out Confidential Arbitration in Delaware.” New York Times, October 23, 2013.
Hals, Tom, “Delaware Loses Final Bid to Revive ‘Secret Courts.’” Reuters, March 24, 2014.
Kendall, Brent and Peg Brickley, “Supreme Court Declines to Revive Delaware Arbitration Program.” Wall Street Journal, March 24, 2014.
Resnick, Judith, “Renting Judges for Secret Rulings.” New York Times, February 28, 2014.