U.S. Supreme Court Ends Delaware Chancery Arbitration Program

This week, the U.S. Supreme Court denied cert in a case regarding a Delaware arbitration program where sitting judges heard corporate disputes in secret. The Court declined to review lower court decisions holding the program unconstitutional on First Amendment grounds because proceedings weren't open to the public. The confidential arbitration program was adopted in 2009 to further the state's business-friendly reputation. Companies often choose to incorporate in Delaware because of its favorable corporate legal climate. Businesses like arbitration because it can be faster and less expensive than court and takes place behind closed doors. The Delaware program was run through the state's Court of Chancery, where judges are known for their expertise in corporate disputes. Judges presided over the proceedings instead of private arbitrators, so long as a corporate litigants were willing to pay a $12,000 filing fee and $6,000 a day in arbitration costs. Business groups supporting the program reportedly said confidentiality was a time-honored and common sense aspect of arbitration that allowed companies to protect trade secrets and sensitive financial information. Critics said corporations shouldn't be able to pay for the services of a judge in secret. The Delaware Coalition for Open Government, a public-interest group, sued to challenge the program, saying that the public should have access to the arbitrations because they essentially were civil-court proceedings, conducted in a state courthouse with state resources. Last year, the U.S. Court of Appeals for the Third Circuit held allowing access to the proceedings would give stockholders and the public a better understanding of how the state resolves business disputes. Although the lower court rulings didn’t preclude Delaware judges from conducting public arbitrations, the decisions effectively put a halt to the program. See full reports here-- http://on.wsj.com/Qc5OpT and http://buswk.co/NPeNv6

Arbitration Award for Queen of Versailles

Jacqueline Siegel, Orlando's Queen of Versailles, is free to pursue dreams of reality television after an arbitrator recently ruled against a filmmaker who claimed the Siegels signed away rights to their life story. The independent documentary film entitled "The Queen of Versailles" was a hit of the film festival circuit, including a Directing Award at the 2012 Sundance Film Festival. However, Siegel's victory comes with a bill for $750,000 in legal fees incurred by the filmmaker and her husband, in connection with a separate lawsuit. David Siegel's time-share company, Westgate Resorts, sued the couple for defamation and lost. An arbitrator in that case said he did not find any of the content in the movie to be false. The film was hailed as one of the best documentaries of the Great Recession and detailed the Siegels' quest to build the biggest home in America. Court documents claimed the couples' life-story rights were valued at $50 million. Reportedly, the victory might lead to a reality television show. David Siegel claims the couple is in negotiations with several networks. The filmmaker had argued the couple signed away rights to their life story as part of the filming release. The arbitrator apparently ruled differently, saying the life story releases were invalid and unenforceable. Attorneys for the filmmakers maintain their victory in the defamation suit was a triumph for First Amendment rights. See full story here-- http://bit.ly/PMdcbc

Supreme Court Defers to Arbitrators in International Arbitration

Last week, in a 7-2 decision, the U.S. Supreme Court held that arbitrators should decide whether a precondition to arbitration has been satisfied, and courts should only review their interpretation with considerable deference. In reaching this conclusion, the majority interpreted a bilateral investment treaty as if it were an ordinary contract, where the language of the contract is silent and courts must decide the parties’ intentions. A provision requiring disputes to be submitted to local courts for an eighteen month period before initiating arbitration was not satisfied as a precondition; but arbitrators decided such failure did not impact their arbitral jurisdiction. In affirming a $185 million arbitration award against the Republic of Argentina, the Court reversed the finding of the Court of Appeals for the District Court of Columbia that the arbitration panel lacked jurisdiction over the dispute, finding that the arbitrators, and not a court, properly determined whether the treaty's conditions to arbitration had been satisfied. The Court held that the arbitrators had not “exceeded their powers” in deciding that they had jurisdiction. Courts are to presume that parties intend for procedural issues regarding arbitration to be decided by the arbitrator and for substantive issues to be decided by the courts. Thus, an arbitration panel's determination that it had jurisdiction over the the dispute cannot be disturbed. Justices Roberts and Kennedy dissented, reasoning that there is no express agreement to arbitrate between a host country and an investor. Justice Roberts stated. "It is no trifling matter for a sovereign nation to subject itself to suit by private parties; we do not presume that any country – including our own – takes that step lightly." See decision here-- BG Group PLC v. Republic of Argentina, 572 U.S. __ (2014) http://www.supremecourt.gov/opinions/13pdf/12-138_97be.pdf

Breach of Confidentiality on Facebook Voids Deal

News of Facebook and the court system has been limited to juror misconduct and claimants deleting profiles. However, Florida's Third District Court of Appeal recently threw out an $80,000 age discrimination settlement between a Dade prep school and its former headmaster due to a social media status post. Apparently, the ex-employee through his daughter breached the terms of a confidential settlement agreement when she bragged about the money paying for her summer vacation on Facebook to her 1,200 "friends." The post, seen by current and former students, made its way back to the school’s attorneys, who claimed Plaintiff violated the clear and unambiguous language of the parties’ mediation deal. Plaintiff initially won a Circuit Court ruling to enforce the deal, but an appellate panel overturned that decision last week. Central to the settlement agreement was a detailed confidentiality provision, which provided that the existence and terms were to be kept strictly confidential and that should Plaintiff breach the confidentiality provision, a portion of the settlement proceeds would be disgorged. Plaintiff told his daughter that he was happy with the results, claiming he had to say something because she had suffered during her enrollment at the school and was aware of the mediation. The reviewing court said the Plaintiff's daughter did precisely what the confidentiality agreement was designed to prevent. See article here-- http://hrld.us/1pWtbB9 and court decision here-- http://www.3dca.flcourts.org/Opinions/3D13-1952.rh.pdf