Delaware Passes Arbitration Bill Aimed at Improving Dispute Resolution

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By Michael Greene

April 7 — The Delaware Senate has unanimously passed a bill aimed at providing Delaware business entities with an option for more-efficient dispute resolution.

The Delaware Rapid Arbitration Act (HB 49), introduced and passed last month, is designed to give business entities greater capacity to resolve disputes through voluntary arbitration conducted under strict timeliness.

The bill, which passed the state House of Representatives 36-1, still needs to be signed by Gov. Jack Markell (D) before it becomes effective.

Rapid Arbitration

According to its synopsis, “the Act requires resolution of arbitrated matters in no more than 120 days, subject to extension of up to no more than an additional 60 days, by unanimous consent of all parties to the arbitration.” The Act additionally provides significant flexibility to select an appropriate arbitrator (and provides for a Delaware Chancery Court-supervised appointment process if the parties don't select one or the chosen arbitrator refuses to serve).

Under the bill, the arbitrator has exclusive jurisdiction to determine the scope of the arbitration. The Act additionally provides for direct appeals to the Delaware Supreme Court in certain circumstances and pursuant to the Federal Arbitration Act's limited standards of review.

The Act also cannot be used in cases where there is a danger that vulnerable parties’ rights are at stake, such as in controversies between business entities and consumers of their goods and services, according to a synopsis of the bill.

Invalidated Plan

The U.S. Supreme Court in March 2014 declined to review a federal appeals court ruling that struck down a Delaware plan to have sitting chancery court judges oversee closed-door arbitration proceedings in business disputes. 

A divided U.S. Court of Appeals for the Third Circuit held in October 2013 that the statutory scheme creating the private arbitrations violated the public's First Amendment right of access to the proceedings. 

The text of HB 49 is available at http://tinyurl.com/pt3jrzl.