Attorneys representing the Delaware Court of Chancery have filed an opening brief in the U.S. Court of Appeals for the Third Circuit seeking to overturn a federal court decision that declared the Chancery Court’s arbitration program unconstitutional, killing the program.
The Chancery Court’s attorneys argued that the First Amendment qualified right of access to judicial proceedings does not apply to arbitrations and the federal court erred by concluding that the arbitration program is akin to a civil trial.
The papers were filed in Delaware Coalition for Open Government v. Strine.
In September, U.S. District Judge Mary A. McLaughlin of the Eastern District of Pennsylvania ruled the Chancery Court’s arbitration was “sufficiently like a civil trial” and, therefore, unconstitutional because it was closed to the public and press, a violation of the First Amendment’s qualified right of access.
“Under the Delaware law and Chancery Court rules, a sitting judge of the Chancery Court, acting pursuant to state authority hears evidence, finds facts, and issues an enforceable order dictating the obligations of the parties,” McLaughlin wrote in her opinion. “The court concludes that the Delaware proceeding functions essentially as a non-jury trial before a Chancery Court judge. Because it is a civil trial, there is a qualified right of access and this proceeding must be open to the public.”
McLaughlin’s decision was in response to a lawsuit filed by the Delaware Coalition for Open Government, a nonprofit organization advocating government transparency. The lawsuit named Chancery Court Chancellor Leo E. Strine Jr. and the court’s four vice chancellors as defendants.
On Tuesday, the Chancery Court’s attorneys responded with a 134-page opening brief alleging that McLaughlin erred by not applying the “experience and logic” doctrine established by the U.S. Supreme Court in Press-Enterprise v. Superior Court, a 1986 ruling. In Press-Enterprise, the high court held that a First Amendment right of public access may only be recognized if the right is supported by both “experience,” or a tradition of public access to that type of proceeding, and “logic,” because public access will help the proceeding properly function.
“The district court did not apply the experience and logic test, but instead concluded that Delaware’s commercial arbitration proceeding is ‘sufficiently like a civil trial,’” wrote Andrew J. Pincus, an attorney with Mayer Brown, a Washington, D.C., firm, on behalf of the Chancery Court. “But there is no precedent for the district court’s substitution of the ‘sufficiently like’ standard for the experience and logic test. And the single factor relied upon by the district court — that the parties submit their dispute to a sitting judge — does not transform an arbitration proceeding into a trial.”
Pincus argued that a public right to access cannot be justified under either prong of the experience and logic test. He said arbitrations have traditionally remained confidential, satisfying the experience prong, and any open arbitration would quickly fall into disuse, thus satisfying the logic prong.
“The district court’s contrary approach — looking instead to whether Delaware’s commercial arbitration procedure is ‘sufficiently like a trial’ — undermines the experience and logic test by substituting a vague and malleable ‘sufficiently like’ test, it introduces tremendous subjectivity and uncertainty into the First Amendment inquiry,” he wrote.
Pincus also claimed McLaughlin erred by ruling that the arbitration program was akin to a civil trial, noting several differences between the two.
“Arbitration differs significantly from a civil trial: the authority of an arbitration proceeding rests on the consent of the parties, while civil litigation is an extension of government power; the hallmark of arbitration is procedural flexibility and efficiency, while litigation is governed by procedures specified in laws and court rules; and arbitrators’ determinations are subject to much more limited judicial review than trial court judgments,” he said.
Although McLaughlin did acknowledge some distinctions between the arbitration program and a civil trial, she concluded that having a sitting Delaware judge acting under state authority and using state personnel and facilities to serve as an arbitrator blurred the line between the two.
The Chancery Court’s attorney responded by claiming that federal and state judges historically serve as arbitrators and McLaughlin’s ruling is inconsistent with the settled principle that states may endow judges with nonjudicial responsibilities. Pincus noted that Georgia, New York, California and Washington, D.C., all allow their judges to serve as arbitrators.
In addition, Pincus added that because Delaware may assign nonjudicial functions to its state judges, allowing the vice chancellors to oversee arbitrations would be no different than the state allowing other government employees to oversee the program.
“Delaware’s decision to authorize its judges to serve as arbitrators, rather than hiring a separate corps of state arbitrators, does not transform the commercial arbitration proceeding into a judicial trial,” Pincus said.
According to sources familiar with the appeal, the plaintiffs are expected to have four weeks to respond to the defendants’ arguments with a reply brief. Roughly two weeks after the reply brief is filed, the court will likely issue a trial schedule.
In addition to Pincus, the Chancery Court is also represented by Andre G. Bouchard and Joel Friedlander, attorneys with Bouchard, Margules & Friedlander, and Lawrence A. Hamermesh, the Ruby R. Vale Professor of Corporate and Business Law at Widener University School of Law.
Hamermesh declined to comment on the defense argument.
David L. Finger of Finger & Slanina, a Wilmington, Del., firm, is representing the plaintiffs.
This article first appeared in Delaware Business Court Insider, a Legal sibling publication.