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

No Waiver of Judicial Review of Fee Arbitration

In a recent decision out of the US Court of Appeals for the Ninth Circuit, a panel ruled that parties cannot contractually eliminate judicial review of arbitral awards under the Federal Arbitration Act (FAA). The underlying dispute concerned attorneys' fees in connection with the settlement of a class action lawsuit. Counsel could not agree on how to divide the legal fees and submitted the dispute to arbitration. Following the issuance of an award that allocated the fees among them, the lawyer that received the most money petitioned a federal district court to confirm the award under the FAA. An attorney who received the second highest amount moved to vacate the award. After the district court granted the petition to confirm and denied the motion to vacate, the decision was appealed. The appellee argued that the appellate court lacked jurisdiction due to an arbitration clause that provided made it both binding and non-appealable. The Ninth Circuit rejected that argument and held that federal court review of arbitration cannot be waived or eliminated by contract. The court found the arbitration language was ambiguous, as it could be understood to preclude review of the merits or interpreted to divest courts of any right to review awards. The court noted that permitting parties to opt out of judicial review of arbitral awards under the FAA would frustrate a minimum level of due process for parties ensured by Congress. See article here- http://bit.ly/Mrw3pv and decision here-- http://cdn.ca9.uscourts.gov/datastore/opinions/2013/12/17/11-17718.pdf

Iranian Settlement Negotiations

Talks began today in Vienna regarding final settlement on Tehran's disputed nuclear program. Though the parties have indicated a deal may prove difficult, the Iranian negotiators were reported to have stated that if all sides enter the talks with the political will, positive results may be reached in time. Iran's Supreme Leader Ayatollah Ali Khamenei, however, who has final say in nuclear matters, was pessimistic about the prospects of a long-term deal. U.S. government officials similarly downplayed expectations in what was described as a complicated, difficult and lengthy process. This meeting is the first since the United States, Russia, China, France, Britain and Germany struck an interim accord with Iran last fall to scale back nuclear work in return for some sanctions relief. The issues for the permanent agreement include the level of Iran's ongoing enrichment of uranium, underground enrichment facilities and reactors, and inspection of military complexes where the IAEA suspects activities related to weapons development occurred. A final deal would define the permissible scope of an Iranian nuclear program and resolve concerns that Tehran is seeking the capability to build an atomic bomb. Iran, of course, denies having any such goal and wants the complete removal economic sanctions. See stories here-- http://reut.rs/1mr7muc and http://bbc.in/1gQ2vgj

Syrian Mediation

This week, a second round in the fragile peace talks resumed in Geneva between Syria’s government and opposition representatives. United Nations mediator, Lakhdar Brahimi, has reportedly maintained a cautious style, structuring meetings with opposition delegates of armed groups fighting in Syria, and later with the Assad government. Interestingly, the UN mediator presented both sides with a memorandum ahead of the mediation, proposing four main principles for dialogue: ending the violence and fighting terrorism; forming a transitional governing body; defining the relationship between the government and security services; and starting some form of national reconciliation. This time, Mr. Brahimi has apparently avoided bringing the warring parties together face to face, to avoid some rancorous exchanges that occurred during prior direct meetings. Rather, it is said he desires to keep the best chance of progress on confidence-building measures previously proposed, including cease-fires and prisoner exchanges. Meanwhile, humanitarian agencies have been evacuating civilians trapped for two years in the Old City of Homs and delivering food and medicines to those remaining during an extended cease-fire there. Additionally, the international effort to destroy Syrian chemical weapons has stalled with recent deadlines missed. Later this week, Mr. Brahimi meets Russia's Deputy Minister of Foreign Affairs and US Under Secretary of State for Political Affairs, hopefully having made more progress. See story here-- http://nyti.ms/1fe1xaa