State's Confirdential Arbitration Program Violates First Amendment

The United States Court of Appeals for the Third Circuit ended Delaware’s confidential arbitration arbitration program, upholding a trial court decision that it violated the First Amendment. The program, established in 2009, was limited to business disputes of $1 million or more involving Delaware companies. Delaware is well known as a friendly state of incorporation for public companies and its Chancery Court specializes in business disputes. The state Legislature wanted cost effective means of resolving these disputes in light of growing private confidential arbitration with streamlined proceedings, like AAA and JAMS. Interestingly, the disputes were arbitrated by Delaware’s own judges, knowledgeable in adjudicating corporate law matters. Deliberations and resolution were confidential. Delaware charged $6,000 a day with a $12,000 filing fee, generating revenue for the state. Those outside of Delaware contended the rules moved important business disputes into private, perhaps to the detriment of shareholders and other stakeholders in the corporation. However, reportedly, this experiment also had strong proponents. They argued that judges regularly participate in mediation. Moreover, parties could agree to arbitrate their disputes without these judges. Delaware's need to compete, they argued, made arbitration a natural extension of its corporate law expertise. The Delaware Coalition for Open Government sued in federal court, claiming that the arbitration statute was unconstitutional. A lower court struck down the statute in 2012 holding that these arbitration cases were essentially confidential civil trials since the judges, place and proceedings were the same. The appellate court applied an experience and logic test, finding that these proceedings had traditionally been open to the public, and should remain open, even if called arbitration. The lone dissenter in a 2-1 decision stated that the Court of Chancery "may not be able to compete with the new arbitration systems being set up in other states and countries.” Apparently, less than a dozen cases were actually decided under the program. See stories here-- http://nyti.ms/I8sfs9 and http://on.wsj.com/163Rl3r

DOJ Settles Airline Antitrust

The U.S. Justice Department agreed to settle with American Airlines and US Airways, ending the government’s antitrust lawsuit trying to block a merger creating the world's largest airline. The case was headed to trial this month in federal court and the parties previously agreed to a mediator suggested by the court. The Justice Department maintained the planned merger would create a monopoly, thereby reducing competition and leading to higher fares. The settlement calls for certain slots to be divested in major cities, including Boston, New York, Chicago, Dallas, Miami and Los Angeles. U.S. District Judge Kollar-Kotelly, who presided over the Microsoft antitrust case, is overseeing the litigation and must still approve the settlement. American, which has been in bankruptcy, will now exit court protection by merging with US Airways. The companies reportedly expect the merger to generate more than $1 billion in annual net synergies beginning in 2015. The merger will likely close in December, subject to the approval of the settlement by the U.S. Bankruptcy Court. See story here-- http://fxn.ws/1gGczKR

AAA Appellate Arbitration Rules

The American Arbitration Association (AAA) has introduced a new set of Optional Appellate Arbitration Rules effective this month. These new rules provide parties with a streamlined, standardized, appellate arbitration procedure, allowing for review of arbitral awards. AAA maintains this appellate rubric remains consistent with the objective of an expedited, cost effective and just arbitration process. Courts have previously used only narrowly defined statutory grounds to set aside arbitration awards. This process now provides for an appeal within the arbitration. An appellate arbitral panel applies a standard of review more expansive than that allowed by existing federal and state law in vacating awards. Though optional, these rules were developed for large, complex cases where parties value the ability to appeal. Parties may use these rules with agreement by contract or stipulation. Appeals are only permitted on the grounds that the underlying award is based on errors of law that are material, prejudicial or is made on clearly erroneous determinations of fact. Generally, AAA appeals will be determined upon the written documents submitted by the parties, with no oral argument. As efficiency is desired, the Optional Appellate Arbitration Rules anticipate a three month process to complete resolution. At present, the panels consist of former federal and state judges and neutrals with strong appellate backgrounds. Interestingly, the parties may apply the rules whether or not the underlying award was conducted pursuant to AAA or International Centre for Dispute Resolution (ICDR) rules. See rules here-- http://bit.ly/1cDPGXy

Airline Antitrust Mediation

The U.S. Justice Department agreed to go to mediation along with American Airlines and US Airways to try and resolve the government’s lawsuit seeking to block the proposed merger of the two airlines. The case is headed to trial this month in federal court. The parties agreed to a mediator “suggested by the court,” which is a bit unusual. The Justice Department contends the planned merger would create the world’s largest airline, thereby reducing competition and leading to higher fares. U.S. District Judge Colleen Kollar-Kotelly, who presided over the Microsoft antitrust case, is overseeing the litigation and has said in prior orders that she encourages the use of alternative dispute resolution. Though American has been in bankruptcy for two years, the parent company AMR was set to exit court protection by merging with US Airways when the federal government and a group of states sued to block the deal. If the U.S. prevails in stopping the merger, it has been reported that re-organization will have to start anew, causing disruption among creditors. See more at http://bit.ly/1axsR2f and in case 13-cv-01236 U.S. v. US Airways Group, Inc., U.S. District Court for the District of Columbia.