Litigation

Chancery Declines to Alter Arbitral Decision

By Francis G. X. Pileggi, Esq.

Zurich American Insurance Company v. St. Paul Surplus Lines, Inc., No. 4095-VCP (Dec. 10, 2009, Del Ch.), read opinion here. This opinion addresses the limited scope of review that the Court of Chancery is restricted to when asked to alter a decision of an arbitrator made in a binding arbitration. The facts of this case are beyond the scope of this blog but the issue involved applies to corporate and commercial cases. The procedural posture of this case began with a binding arbitration in connection with a subrogation claim by one insurance company against another. The Superior Court dismissed the original complaint and told the parties to refile in the Court of Chancery.

Section 5715 of Title 10 of the Delaware Code describes the few instances when the Court is authorized to modify a binding arbitration award. Section 5714 circumscribes the limited circumstances when the Court may vacate an arbitration award.  See also Section 1514(a)(3). In sum, the Court reasoned that the arbitrator's decision that he did not have jurisdiction over the claim submitted to arbitration was still tantamount to a "decision" as defined in the statute, and even if the arbitrator's decision to decline jurisdiction was apparently contrary to the intent of the Delaware Legislature regarding mandatory arbitration between insurance companies, none of the statutory bases that would allow the Court to modify or vacate the award applied in this case.

Full post as published by Delaware Corporate and Commercial Litigation Blog on December 15, 2009 (boomark / email).