Attorney David Finger (center), John Flaherty, president of Delaware Coalition for Open Government and coalition member Bonnie Corwin consider Wednesday's ruling against Delaware's 'secret' arbitration process as a victory for the coalition, which first filed suit in 2011. / ROBERT CRAIG/THE NEWS JOURNAL
Update: (News Journal) Sean O'Sullivan and Maureen Milford report ~The state made no secret that the program was designed to help maintain Delaware’s lucrative place as the preferred legal home to big business. For decades, the franchise has generated as much as a third of the state’s annual revenues. The decision upholds a 2012 ruling by U.S. District Judge Mary A. McLaughlin who found the program, which created a special forum that would allow sitting judges to confidentially arbitrate businesses-to-business disputes, violates the First Amendment.
The Chancery Court program is fundamentally different from other arbitration programs “because they are conducted before active judges in a courthouse, because they result in a binding order of the Chancery Court and because they allow only limited right of appeal,” wrote Circuit Judge Dolores Sloviter for the 2-1 majority. “The First Amendment ... protection of speech includes a right of public access to trials,” said Sloviter, finding that Chancery arbitration process amounts to a civil trial and must be open. “[T]he interests of the state and the public in openness must be given weight, not just the interests of rich businesspersons in confidentiality.” wrote Sloviter.
........John Flaherty, president of the coalition, said the ruling is a win for the rule of law and openness and transparency in government.“We have a right, when public officials are conducting business, that it be done in public,” he said.........While Flaherty described Wednesday’s ruling as a clear win for the coalition, the decision was factious with all three circuit court judges writing their own opinions. Sloviter, in writing the lead opinion, ruled McLaughlin’s logic in her lower court opinion was flawed and instead detailed her own reasons – based on the “experience and logic test” – for finding the arbitration process unconstitutional.Circuit Judge Julio Fuentes offered a more narrow opinion finding that with the exception of the secrecy, the arbitration process was constitutional........[Circuit Judge Jane Roth said] “Delaware did not intend the arbitration system to supplant civil trials” Roth wrote. “Delaware did not intend to preclude the public from attending proceedings that historically have been open to the public. The new system was created to provide arbitration in Delaware to businesses that consented to arbitration – and that would go elsewhere if Delaware did not offer arbitration before experienced arbitrators in a confidential setting.”There is also an Op-Ed ~ Delaware Chancery Court process should be open to public
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This big win for David Finger is great news for Delaware Coalition of Open Government and for defenders of the First Amendment.
(ABC News) AP reports ~ Appeals court rejects secret Delaware arbitration
"The benefits of openness weigh strongly in favor of granting access to Delaware's arbitration proceedings," Judge Doris Sloviter wrote for the panel majority. Judge Jane Roth, widow of the Delaware's late Republican U.S. Sen. Bill Roth, disagreed with Sloviter and Judge Julio Fuentes, who issued a separate concurring opinion. Roth noted Delaware's effort to remain the pre-eminent home to U.S. corporations and business law and said the court's secret arbitration "creates a perfect model for commercial arbitration.........Confidentiality is one of the primary reasons why litigants choose arbitration to resolve disputes — particularly commercial disputes, involving corporate earnings and business secrets," Roth wrote.The decision came in a lawsuit filed by an open-government group that challenged a law allowing secret arbitration in business disputes involving claims for monetary damages exceeding $1 million. Under the [2009 state] law and court rules, the court charged a fee of $12,000 for the filing an arbitration petition, and a daily fee of $6,000 every day after the first day a judge is engaged in arbitration.........[in] Delaware, which is the legal home for more than 1 million business entities, including more than half of all U.S. publicly traded companies and roughly two-thirds of the Fortune 500.But the Delaware Coalition for Open Government, backed by The Associated Press, The New York Times, The Washington Post, and several other major news organizations, filed a lawsuit in 2011, arguing that the secret arbitrations violated the constitutional and civil rights of citizens to attend judicial proceedings and access court records. In response to the lawsuit, Chancellor Leo Strine Jr., head of the Court of Chancery, issued a statement saying the law establishing the secret proceedings was designed to ensure that Delaware remains "the most attractive domicile in the world for the formation of business entities."........Because the arbitration petitions are not included on the court's public docketing system and all related documents are considered confidential unless an appeal is filed with the Delaware Supreme Court, the public has little way of knowing how often judges are involved in such proceedings. But in response to a query from The Associated Press, court officials disclosed that six arbitration cases had been filed as of April 2012.Following Wednesday's ruling, Democratic Gov. Jack Markell's office issued a statement by Andrew Pincus, one of several attorneys hired by Delaware to defend the law. The state was supported in its efforts by the U.S. Chamber of Commerce and the Business Roundtable, an association of chief executives from the top U.S. companies. "We feel strongly that it is important to our nation and our state to provide cost-effective options to resolve business-to-business disputes to remain competitive with other countries around the world," Pincus said. "Given the importance of this issue, we will be evaluating the appellate options after we have an opportunity to further study the three opinions."
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