Major Newspapers Say Judicial Arbitration by Delaware’s Court of Chancery is Unconstitutional

According to The Wall Street Journal, the major print media don’t believe that the country’s premier corporate litigation forum should be able to arbitrate business disputes. On Monday, News Corp, the news publication’s parent company, was joined by The New York Times Company, the Associated Press, the Washington Post, Atlantic Media, Inc., Bloomberg L.P., Reuters America LLC, and other media companies and groups in a friend-of-the-court brief to the U.S. Court of Appeals for the Third Circuit. They are pushing for a state law that gives the state’s Delaware Court of Chancery the power to arbitrate business disagreements in secret to be found unconstitutional. The outcome of this case could affect how business disputes in Corporate America are settled.

It was last year that U.S. District Judge Mary A. McLaughlin struck down a program by the Delaware Chancery Court that let its judges preside over arbitration disputes. Her decision was a victory to Delaware Coalition for Open Government, which is the civic group that filed a lawsuit against the court’s judges. The judges are the ones that filed the appeal.

The media’s brief wants the appeals court to affirm McLaughlin’s ruling and acknowledge the “strong presumption” that champions open access to judicial proceedings and the First Amendment rights of the media and the public to that access. Supposedly backing the concept of judicial arbitration is the idea that Delaware, which is dependent on corporate tax, wants to take advantage of having its chancery court be a go-to venue for corporate litigation, including class action lawsuits.

The coalition contends that the closed-door proceedings of the Chancery Court violate the First Amendment. Agreeing with the plaintiff, Judge McLaughlin had said that judicial arbitration should be, like civil trials, open to the public.

Last month, the US Chamber of Commerce filed its brief supporting the Chancery Court judges, who claim that they are merely providing an alternative for companies that would otherwise secretly settle their disputes via regular arbitration. Their side seems to be concerned that public proceedings would scare businesses off and that not only would such entities lose the chance to adjudicate disagreements in a forum that works but also this might cause injury to shareholders and the markets.

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‘Judicial Arbitration’ Is Unconstitutional, Say Newspapers, The Wall Street Journal, January 15, 2012

Federal Judge: Delaware’s Secret Court Arbitration Is Unconstitutional, Insurance Journal, September 5, 2012

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