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145th General Assembly
House Bill # 49

Primary Sponsor: George Additional Sponsor(s):    Rep. Oberle & Rep. Kovach & Sen. Adams & Sen. DeLuca
CoSponsors: Rep. Wilson
Introduced on : 01/22/2009
Long Title:AN ACT TO AMEND TITLE 10 OF THE DELAWARE CODE RELATING TO THE RESOLUTION OF DISPUTES IN THE COURT OF CHANCERY.
Synopsis:This bill is intended to preserve Delaware’s pre-eminence in offering cost-effective options for resolving disputes, particularly those involving commercial, corporate, and technology matters.

This bill advances that goal by several means.

First, the bill authorizes parties voluntarily to agree to have a member of the Court of Chancery arbitrate a dispute, if the parties do so by a contract that meets the pre-existing requirements for using the mediation-only provisions that the General Assembly recently enacted, which set forth definitions for the types of disputes eligible for resolution. In general, this class of cases involve business-to-business disputes about major contracts, joint ventures, or technology. Specifically excluded are cases involving consumers. Use of this new option, like the option for mediation, is entirely voluntary. By this means, the Court of Chancery can remain at the cutting-edge in dispute resolution. Many federal and international statutes specifically identify instances when tribunals will stay or defer to the parties’ decision to have their dispute resolved by way of arbitration. These statutes often deal with issues, such as intellectual property disputes, that are of importance to Delaware entities. Thus, this bill, if enacted, will permit Delaware entities to have disputes of this kind arbitrated by a member of the Court of Chancery by voluntary agreement. Because a member of the Court of Chancery would be handling the arbitration, the bill also vests the Supreme Court with authority to hear any action to enforce or vacate an order issued by a member of the Court of Chancery as an arbitrator.  And, because arbitration is traditionally private, the bill maintains proceedings in the Court of Chancery as confidential but makes clear that the record will be filed with the Supreme Court, in accordance with its Rules and the Rules of the Court of Chancery in the event of appeal.

Second, the bill authorizes parties voluntarily to agree to have a matter adjudicated before a Master of the Court of Chancery and to have the Master’s decision have the same force and effect as a decision of a member of the Court of Chancery. This will permit parties to make a voluntary election to have their matter adjudicated in a more streamlined fashion by agreeing in advance to avoiding the potential for a de novo trial before a member of the Court of Chancery.

Third, the bill would authorize parties to agree that any adjudication before a member of the Court of Chancery, or a Master of the Court, would be final and non-appealable. In many matters, parties desire an answer and their dispute is narrow enough that even if they cannot settle, they are willing to agree in advance to live with the outcome rendered by the trial court. This section would give parties that voluntary option.

Finally, the bill updates the Delaware Uniform Arbitration Act to conform to evolving standards and to address inconsistencies with prevailing best practices. The bill does so by eliminating the option to seek an injunction in the Court of Chancery on the grounds that the claim sought to be arbitrated would be time-barred. A party believing that the other side’s arbitrable claim was time-barred would be required to present that defense to the arbitrator, along with its other defenses. If the arbitrator rejects that defense and enters an adverse award, the party arguing that the claim was time-barred could seek to avoid enforcement of the order by arguing that defense to the Court of Chancery in a post-arbitration proceeding. By this means, the Delaware Uniform Arbitration Act would come into conformity with prevailing practice in the nation and eliminate an inefficient and cumbersome approach to addressing limitations defenses.

Relatedly, the bill clarifies that the Delaware Uniform Arbitration Act only applies to agreements when the parties specifically choose to have their agreement governed by its terms. In other situations, any consideration by the Court of Chancery of an application to enjoin or stay an arbitration, require arbitration, or enforce or vacate an arbitration order, shall be governed by the Federal Arbitration Act, and such principles of law, equity, and procedure as are consistent with the FAA. By doing so, the bill makes clearer the reality that arbitration contracts in interstate commerce are subject to the principles in the FAA and that the Delaware Uniform Arbitration Act is only applicable when parties make an express election to use it.  This will simplify procedure for practitioners and the Court of Chancery. The effectiveness of the amendments to the Delaware Uniform Arbitration Act is delayed for three months after enactment to give practitioners a period of prior notice.

Current Status: Signed   On   04/02/2009
Volume Chapter77:8
Date Governor acted:04/02/2009
Full text of Legislation:
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Fiscal Notes/Fee Impact:Not Required
Committee Reports:
House Committee Report 01/28/09 F=5 M=1 U=0---->Committee Report
Senate Committee report 03/25/09 F=4 M=0 U=0----->Committee Report
Voting Reports:
House vote: () Passed 1/29/2009 4:57:21 PM------->Voting Record
Senate vote: () Passed 3/31/2009 4:01:43 PM------->Voting Record
Actions History:
Apr 02, 2009 - Signed by Governor
Mar 31, 2009 - Passed by Senate. Votes: Passed 21 YES 0 NO 0 NOT VOTING 0 ABSENT 0 VACANT
Mar 25, 2009 - Reported Out of Committee (JUDICIARY) in Senate with 4 Favorable
Mar 19, 2009 - Assigned to Judiciary Committee in Senate
Jan 29, 2009 - Passed by House of Representatives. Votes: Passed 41 YES 0 NO 0 NOT VOTING 0 ABSENT 0 VACANT
Jan 28, 2009 - Reported Out of Committee (JUDICIARY) in House with 5 Favorable, 1 On Its Merits
Jan 22, 2009 - Introduced in House and assigned to Judiciary Committee
Jan 22, 2009 - Assigned to Judiciary Committee in House
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