Litigation

Do Arbitration Clauses Really Reduce Time and Expense?

By Francis G. X. Pileggi, Esq.

In McLaughlin v. McCann, 2008 WL 483457 (Del. Ch., Feb. 21, 2008), read opinion here, the Delaware Chancery Court addresses the perennial issue of whether the court or an arbitrator should decide the threshold matter of arbitrability, based on the arbitration clause in an agreement, and a dispute about whether the provision requiring arbitration of claims covers the particular claim involved. The court disects with surgical precision the different analytical approaches and policy considerations related to the matter. In particular, the court parsed and "put under a magnifying glass" the prior decisions of both the Chancery Court and the Delaware Supreme Court in the Willie Gary LLC v. James and Jackson LLC,  case that was summarized here  and here on this blog. The Supreme Court affirmed the Chancery Court opinion though with slightly different reasoning, and this decision highlights those differences in the context of the majority view around the country on the issue of who should decided substantive arbitrability.

Anyone interested in the latest Delaware law on the issue of  "arbitrability" needs to read this decision.

A "collateral" aspect of this opinion, in my view,  is that it provides another example of how much litigation can ensue, and how much time and expense can be spent fighting over whether an arbitration clause (which in part is designed to reduce the time and expense of litigation), requires arbitration of a particular claim or if the claim is not covered by the clause. In my view, this common imbroglio is one of several indications that arbitration may not always be a cheaper and faster alternative to regular litigation.

Full post as published by Delaware Corporate and Commercial Litigation Blog on February 27, 2008 (boomark / email).