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Court of Chancery Clarifies Scope of Arbitration Clause

By Francis G.X. Pileggi

In Aveta v. Bengoa, No. 3598-VCL (Del. Ch. March 1, 2010), read letter decision here, the Court of Chancery clarified its prior decision, summarized here, regarding the scope of an arbitration clause. This 3-page letter ruling supplements a prior 43-page opinion from the Court  linked above(which is pending appeal before the Delaware Supreme Court.)

The very limited thrust of this decision is to confirm that based on the arbitration clause at issue, the Court had the authority to determine the scope and validity of the arbitration provision because that power was not delegated in the agreement to the arbitrator. The Court cited for this position both the decision in James and Jackson, LLC v. Willie Gary LLC , 906 A.2d 76, 78-79 (Del. 2006),  and 10 Del. C. Section 5703.

The Court also determined that the agreement did not allow the parties to expand the issues to be litigated before the arbitrator beyond those initially presented by the deadline provided in the agreement, and as for the substantial delay caused by one party, the Court provided a remedy for that delay in its prior opinion.  In closing, the Court explained that the arbitrator can determine what information it will--or will not--consider in deciding the issues and the Court declined to "intrude on the arbitral process by ruling on this question."

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 03, 2010 (boomark / email).