Delaware Coalition for Open Go v. Leo Strine, Jr., et al

Filing 32

ECF FILER: ELECTRONIC AMICUS/INTERVENOR BRIEF on behalf of Amicus Public Citizen, Inc. in support of Appellee/Respondent, filed. Certificate of Service dated 01/14/2013 by ECF. (SLN)

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
_______________
Case No. 12-3859
_______________
DELAWARE COALITION FOR OPEN GOVERNMENT, INC.,
Plaintiff - Appellee,
v.
THE HON. LEO E. STRINE, JR.; THE HON. JOHN W. NOBLE; THE
HON. DONALD F. PARSONS, JR.; THE HON. J. TRAVIS LASTER;
AND THE HON. SAM GLASSCOCK, III; IN THEIR OFFICIAL
CAPACITIES,
Defendants - Appellants.
_______________
On appeal from the United States District Court
for the District of Delaware
(Hon. Mary A. McLaughlin, United States District Judge)
_______________
BRIEF OF AMICUS CURIAE PUBLIC CITIZEN, INC. IN SUPPORT OF
PLAINTIFF-APPELLEE DELAWARE COALITION FOR OPEN
GOVERNMENT, INC. URGING AFFIRMANCE
Scott L. Nelson
Jehan A. Patterson
PUBLIC CITIZEN LITIGATION GROUP
1600 20th Street NW
Washington, DC 20009
[phone]
Attorneys for Amicus Curiae
Public Citizen, Inc.
January 14, 2013

CORPORATE DISCLOSURE STATEMENT
Pursuant to Federal Rule of Appellate Procedure 26.1 & 29(c)(1), amicus
curiae Public Citizen, Inc. states that it has no parent corporation and that there is
no publicly held corporation that owns 10% or more of Public Citizen, Inc.

i

TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT ..........................................................i
TABLE OF AUTHORITIES ................................................................................... iii
INTEREST OF AMICUS CURIAE .......................................................................... 1
SUMMARY OF ARGUMENT ................................................................................. 1
ARGUMENT ............................................................................................................. 4
I.

BY AUTHORIZING A COURT TO ISSUE ENFORCEABLE
JUDGMENTS, THE DELAWARE STATUTE AND ITS
IMPLEMENTING RULES CREATE A PARALLEL COURT
SYSTEM THAT IS MATERIALLY DISTINGUISHABLE
FROM CONVENTIONAL ARBITRATION. ........................................... 4

II.

THE CONFIDENTIALITY PROVISIONS OF SECTION 349
AND THE IMPLEMENTING CHANCERY COURT RULES
VIOLATE THE QUALIFIED FIRST AMENDMENT RIGHT OF
PUBLIC ACCESS. ................................................................................... 16

CONCLUSION ........................................................................................................ 23
CERTIFICATION OF BAR MEMBERSHIP ......................................................... 24
CERTIFICATION OF SERVICE............................................................................ 24
CERTIFICATION CONCERNING IDENTICAL
VERSIONS OF THE BRIEF…. .............................................................................. 25
CERTIFICATION OF COMPLIANCE WITH RULE 32(a).................................. 25
CERTIFICATION CONCERNING VIRUS CHECK ............................................ 26

ii

TABLE OF AUTHORITIES
CASES
AT&T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643 (1986)......................................................................................... 6
Allstate Settlement Corp. v. Rapid Settlements, Ltd.,
559 F.3d 164 (3d Cir. 2009) ............................................................................ 7
Ario v. Underwriting Members of Syndicate 53 at Lloyds for 1998 Year of
Account, 618 F.3d 277 (3d Cir. 2010) ............................................................. 8
Bowles Fin. Group, Inc. v. Stifel, Nicolaus, & Co.,
22 F.3d 1010 (10th Cir. 1994) ......................................................................... 6
Cardiac Pacemakers, Inc. v. Aspen II Holding Co., Inc.,
No. 04-cv-4048, 2006 WL 3043180 (D. Minn. Oct. 24, 2006) ...................... 1
Chi. Reg’l Council of Carpenters v. Onsite Woodwork Corp.,
No. 11-cv-8365, 2012 WL 6189635 (N.D. Ill. Dec. 12, 2012) ..................... 10
Cincinnati Gas & Elec. Co. v. Gen. Elec. Co.,
854 F.2d 900 (6th Cir. 1988) ......................................................................... 18
Colonial Penn Ins. Co. v. Omaha Indem. Co.,
943 F.2d 327 (3d Cir. 1991) .......................................................................... 20
Company Doe v. Public Citizen,
No. 12-2209 (4th Cir. filed Dec. 13, 2012) ..................................................... 1
D.H. Blair & Co., Inc. v. Gottdiener,
462 F.3d 95 (2d Cir. 2006) .............................................................................. 7
Derwin v. Gen. Dynamics Corp.,
719 F.2d 484 (1st Cir. 1983).......................................................................... 10
Gompers v. Bucks Stove & Range Co.,
221 U.S. 418 (1911)......................................................................................... 9
iii

Hall St. Assocs., L.L.C. v. Mattel, Inc.,
552 U.S. 576 (2008)......................................................................................... 8
Hannibal Pictures v. Les Films de L’Elysee,
No. 12-cv-6434, 2012 WL 6608595 (C.D. Cal. Dec. 18, 2012) ..................... 7
Joint Stock Soc’y v. UDV N. Am., Inc.,
104 F. Supp. 2d 390 (D. Del. 2000) .............................................................. 17
Joy v. North,
692 F.2d 880 (2d Cir. 1982) .......................................................................... 18
Leucadia, Inc. v. Applied Extrusion Techs., Inc.,
998 F.2d 157 (3d Cir. 1993) .......................................................................... 17
Littlejohn v. BIC Corp.,
851 F.2d 673 (3d Cir. 1988) .......................................................................... 19
In re MAXXAM, Inc./Federated Dev. S’holders Litig.,
698 A.2d 949 (Del. Ch. 1996) ....................................................................... 21
Menke v. Monchecourt,
17 F.3d 1007 (7th Cir. 1994) ........................................................................... 7
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (1985)....................................................................................... 21
Mosaid Techs. Inc. v. LSI Corp.,
__ F. Supp. 2d __, 2012 WL 2951389 (D. Del. July 20, 2012) ...................... 6
Pansy v. Borough of Stroudsburg,
23 F.3d 772 (3d Cir. 1994) ............................................................................ 18
Publicker Indus., Inc. v. Cohen,
733 F.2d 1059 (3d Cir. 1984) ........................................................................ 17
Puleo v. Chase Bank USA, N.A.,
605 F.3d 172 (3d Cir. 2010) ............................................................................ 7
iv

Scherk v. Alberto-Culver Co.,
417 U.S. 506 (1974)....................................................................................... 17
Schlumberger Tech. Corp. v. United States,
195 F.3d 216 (5th Cir. 1999) ....................................................................... 7, 9
Steelworkers v. Warrior & Gulf Nav. Co.,
363 U.S. 574 (1960)....................................................................................... 21
Steris Corp. v. Int’l Union, United Auto., Aerospace & Agric. Implement
Workers of Am.,
489 F. Supp. 2d 501 (W.D. Pa. 2007) ........................................................... 10
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.,
130 S. Ct. 1758 (2010)...........................................................................6, 7, 21
Union Oil Co. of Cal. v. Leavell,
220 F.3d 562 (7th Cir. 2000) ......................................................................... 19
Verni v. Lanzaro,
960 A.2d 405 (N.J. Super. Ct. App. Div. 2008) .............................................. 1
Volt Information Sci., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ.,
489 U.S. 468 (1989)......................................................................................... 7
Young v. United States ex rel. Vuitton et Fils S.A.,
481 U.S. 787 (1987)......................................................................................... 9
STATUTES
9 U.S.C. § 9 ................................................................................................................ 8
9 U.S.C. § 10 ........................................................................................................ 8, 20
Cal. Civ. Proc. Code § 1141.20 ............................................................................... 14
Conn. Gen. Stat. § 51-193u ...................................................................................... 14
Del. Code Ann. tit. 10, § 347 ..................................................................................... 4
v

Del. Code Ann. tit. 10, § 349 ...........................................................................passim
Del. Code Ann. tit. 10, § 5703(a) ............................................................................ 15
Del. Code Ann. tit. 10, § 5704 ................................................................................ 15
Del. Code Ann. tit. 10, § 5713 ................................................................................ 15
Ga. Fulton Cty. R. 1004(12) .................................................................................... 14
N.C. Gen. Stat. § 7A-50 ........................................................................................... 14
N.C. Gen. Stat. § 90-21.62 ....................................................................................... 14
N.C. Gen. Stat. § 90-21.66 ....................................................................................... 14
N.C. Gen. Stat. § 90-21.68 ....................................................................................... 14
W. Va. Code R. § 158-13-4.5.f.1 ............................................................................. 15
RULES
Del. Ch. R. 23.1(c) ................................................................................................... 21
Del. Ch. R. 96............................................................................................................. 5
Del. Ch. R. 97...................................................................................................4, 5, 16
Del. Ch. R. 98.............................................................................................5, 9, 16, 21
Or. Uniform Trial Ct. R. 13.040(3).......................................................................... 14
Wyo. Code of Judicial Conduct R. 3.9 .................................................................... 15
MISCELLANEOUS
N.Y. Advisory Comm. J. Ethics, Op. No. 07-12 (Sept. 6, 2007) ............................ 14

vi

Clyde W. Summers, Mandatory Arbitration: Privatizing Public Rights,
Compelling the Unwilling to Arbitrate, 6 U. Pa. J. Lab. & Emp L. 685
(2004) ............................................................................................................. 20
Notice of Availability of a United States Magistrate Judge to Exercise
Jurisdiction,
http://www.innd.uscourts.gov/judges/nuechterlein/docs/
FastTrack.pdf ................................................................................................. 13
Optional Fast Track Procedure for Civil Cases Assigned to Judge DeGiusti,
http://www.okwd.uscourts.gov/files/fast_track_pro.pdf ............................... 13
Pilot Program for Expedited Civil Litigation,
http://www.pawd.uscourts.gov/Documents/Forms/EXPEDITED_DO
CKET.pdf....................................................................................................... 12
Richard McMillan, Jr. & David B. Siegel, Creating a Fast-Tract Alternative
Under the Federal Rules of Civil Procedure, 60 Notre Dame L. Rev.
431 (1985) ................................................................................................12, 13

vii

INTEREST OF AMICUS CURIAE
Public Citizen, Inc., a non-profit advocacy organization with approximately
300,000 members and supporters nationwide, appears before Congress, federal
agencies, and the courts to advocate for openness in government, access to courts,
consumer protections, and health and safety regulations. Since its founding more
than forty years ago, Public Citizen has advocated for the public right of access to
court proceedings and court records in many cases, including Company Doe v.
Public Citizen, No. 12-2209 (4th Cir. filed Dec. 13, 2012), Verni v. Lanzaro, 960
A.2d 405 (N.J. Super. Ct. App. Div. 2008), and Cardiac Pacemakers, Inc. v. Aspen
II Holding Co., Inc., No. 04-cv-4048, 2006 WL 3043180 (D. Minn. Oct. 24, 2006).
The public interest in access to court proceedings and court records is strongly
implicated by this case.
All parties have consented to the filing of this brief. No counsel for any party
authored this brief in whole or part. Apart from Public Citizen, no person,
including parties or parties’ counsel, contributed money intended to fund the
preparation and submission of this brief.
SUMMARY OF ARGUMENT
At issue in this case is whether Delaware statutes and rules of court under
which the Delaware Court of Chancery, through its judges, adjudicates cases and
issues binding judgments in secret, violate the right of public access to civil
1

judicial proceedings. The district court correctly held that the system of secret
adjudication created by Del. Code Ann. tit. 10, § 349 and Delaware Court of
Chancery Rules 96 through 98 (a “§ 349 proceeding”), though denominated as
“arbitration,” functions “essentially as a non-jury trial before a Chancery Court
judge,” rather than as a conventional arbitration and that, therefore, the statute and
the Chancery Court Rules violate the qualified right of public access to civil
proceedings under the First Amendment. The court’s finding that a § 349
proceeding is, functionally, a civil judicial proceeding is based on the facts that
when parties elect to invoke that process, their dispute is heard by the Chancery
Court through its active judges, and public resources, including the courthouse,
court personnel, and judicial salaries, are employed to decide the dispute and issue
an executable judicial judgment.
On appeal, the Chancery judges administering § 349 proceedings, who were
the defendants in the district court, contend that the district court erred in holding
that the right of public access that attaches to conventional judicial proceedings is
equally applicable to the parallel system of secret court adjudication that Delaware
has created. They argue that § 349 proceedings must be compared to conventional
commercial arbitration, to which the public historically has been denied access.
The Chancery judges are wrong. The Chancery Court’s power to issue enforceable
judgments in § 349 proceedings, which derives from the state, stands in stark
2

contrast to the authority of conventional arbitrators, which is derived from the
parties’ agreement. Thus, whereas arbitrators’ awards must be confirmed by a
court before they can be enforced, executable judicial judgments under § 349 are
an exercise of governmental, rather than private, authority. This exercise of state
judicial power underlies First Amendment public access jurisprudence, which
promotes understanding of the judicial system and confidence in the results it
renders.
Accordingly, the district court was correct in holding that § 349 and the
implementing Chancery Court Rules establish, in essence, a private, parallel court
system in which the parties’ dispute and, perhaps most significantly, the judge’s
decision are shielded from public knowledge. Further, because the resulting
judgments may be executed upon without further judicial action, a § 349
proceeding eliminates public access even to those elements of conventional
arbitration that are subject to public access: judicial confirmation and enforcement
of arbitration awards. This Court should affirm the district court’s holding that
§ 349 and Court of Chancery Rules 96 through 98 violate the public’s First
Amendment right of access.

3

ARGUMENT
I.

BY AUTHORIZING A COURT TO ISSUE ENFORCEABLE
JUDGMENTS, THE DELAWARE STATUTE AND ITS
IMPLEMENTING RULES CREATE A PARALLEL COURT
SYSTEM THAT IS MATERIALLY DISTINGUISHABLE FROM
CONVENTIONAL ARBITRATION.
Section 349 and the implementing Chancery Court rules purport to allow

parties to business disputes the option of obtaining a judicial resolution of their
dispute incorporated in a judgment of the Chancery Court while bypassing the
right of public access that normally accompanies the judicial proceedings in a civil
case. Parties seeking to avail themselves of this option file a petition with the
Register in Chancery stating that the dispute meets eligibility criteria set forth in
Del. Code Ann. tit. 10, § 347, a statute that authorizes non-binding Chancery Court
mediations of certain business disputes, including cases involving claims solely for
monetary damages if the amount in controversy exceeds $1 million. See
§§ 347(a)(1)-(5) and 349(a); Del. Ch. R. 97(a)(1).1 Chancery Court Rule 97
mandates procedures for the appointment of a judge or master to act as
“arbitrator,” preliminary conference, preliminary hearing, pre-hearing exchange of
information (unless the parties agree, subject to the appointed judge’s approval, to
forgo exchanging information), and the proceeding itself, which occurs within 90
1

The arguments set forth in this brief do not challenge the constitutionality of the
non-binding Chancery Court mediation scheme set forth in § 347.
4

days of the filing of the petition. Del. Ch. R. 97(b)-(f). The Chancery Court rules
with respect to discovery govern proceedings, unless the parties and judge agree
otherwise. Id. 96(c).
The Chancellor selects the “arbitrator,” who “is a judge or master sitting
permanently in the Court.” Id. 96(d)(2).2 The selected judge is empowered to make
a final award of “any remedy or relief” that is just and equitable and within the
scope of the parties’ agreement. Id. 98(f)(1). “Upon the granting of a final award,”
the judge must enter judgment that “shall … be enforced as any other judgment or
decree.” Id. 98(f)(3).
As the district court correctly recognized, a § 349 proceeding is properly
considered a civil judicial proceeding. Parties enjoy the benefit of the same
discovery rules that would apply had the parties filed an ordinary civil action, as
well as the benefit of having their disputes heard by active judges who are wellversed with developments in the business litigation that comes before the Chancery
Court. In issuing executable judgments, the Chancery Court in the Delaware
proceeding exercises the same state-created authority as in other civil litigation. It

2

The district court considered the constitutionality of § 349 and Chancery Court
Rules 96 through 98 only with respect to the appointment of Chancery Court
judges as arbitrators, not with respect to the appointment of masters. Joint
Appendix (JA) 11 n.3.
5

is this state authority that sets a § 349 proceeding apart from conventional
arbitration and establishes that the proceeding is judicial in nature.
Arbitration is a “creature born of a contract between parties who are desirous
of avoiding litigation in a court of law … [that] provides neither the procedural
protections nor the assurance of the proper application of substantive law offered
by the judicial system.” Bowles Fin. Group, Inc. v. Stifel, Nicolaus, & Co., 22 F.3d
1010, 1011 (10th Cir. 1994). Parties electing to arbitrate a dispute enjoy wide
latitude to agree to “limit the issues they choose to arbitrate, … [select] rules under
which any arbitration will proceed, … [and] choose who will resolve specific
disputes.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1774
(2010) (citations omitted). Further, arbitrations often are confidential. Mosaid
Techs. Inc. v. LSI Corp., __ F. Supp. 2d __, 2012 WL 2951389, at *7 (D. Del. July
20, 2012). Because the process is contractual, the parties are free to “trade[] the
procedures and opportunity for review of the courtroom” to achieve the objectives
that led them to choose private adjudication. Bowles, 22 F.3d at 1011.
As with the arbitration process itself, the decisional authority of an arbitrator
is both defined by and confined to the contractual agreement of the parties to
resolve their disputes outside of litigation. See AT&T Techs., Inc. v. Commc’ns
Workers of Am., 475 U.S. 643, 648-49 (1986) (“[A]rbitrators derive their authority
to resolve disputes only because the parties have agreed in advance to submit their
6

disputes to arbitration.” (citation omitted)); Puleo v. Chase Bank USA, N.A., 605
F.3d 172, 182 (3d Cir. 2010) (en banc) (recognizing that arbitrator’s authority
arises from contract (citing Allstate Settlement Corp. v. Rapid Settlements, Ltd.,
559 F.3d 164, 169 (3d Cir. 2009))). “[B]ecause an arbitrator derives his or her
powers from the parties’ agreement to forgo the legal process … arbitrators must
‘give effect to the contractual rights and expectations of the parties.’” Stolt-Nielsen,
130 S. Ct. at 1773-74 (citing Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford
Jr. Univ., 489 U.S. 468, 479 (1989)).
Significantly, because an arbitrator’s authority is derived from a private
contract, she lacks “coercive power to enforce the award,” which has no “legal
effect without the stamp of judicial approval.” Schlumberger Tech. Corp. v. United
States, 195 F.3d 216, 220 (5th Cir. 1999) (citation and internal quotation marks
omitted). Arbitration awards are “not self-enforcing, they must be given force and
effect by being converted to judicial orders [to confirm or vacate] by courts.” D.H.
Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006) (citation and
internal quotation marks omitted); see also Hannibal Pictures v. Les Films de
L’Elysee, No. 12-cv-6434, 2012 WL 6608595, at * 2 (C.D. Cal. Dec. 18, 2012) (“A
motion to confirm an arbitration award … ‘merely makes the arbitrators’ award a
final, enforceable judgment of the court.’” (citing Menke v. Monchecourt, 17 F.3d
1007, 1009 (7th Cir. 1994))).
7

Absent confirmation, which results in a court judgment, an arbitration award
merely establishes a contractual right to whatever relief has been awarded by the
arbitrator. See Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008)
(pointing out that absent the statutory procedures for confirmation or vacatur of
awards, a “separate contract action … would usually be necessary to enforce or
tinker with an arbitral award in court”). Although the Federal Arbitration Act
(FAA), 9 U.S.C. § 9, and its state analogs provide a mechanism for conversion of
the award into a judgment without the necessity of a separate contract action, they
do not permit judgment to be entered on an arbitration award unless the court has
exercised its power to determine whether the arbitrator exceeded her authority
under the agreement or engaged in some other conduct that requires vacatur of the
award. See Hall St., 552 U.S. at 589 (holding that statutory grounds for vacatur are
exclusive when parties invoke the FAA’s procedures for vacatur or confirmation of
an award); Ario v. Underwriting Members of Syndicate 53 at Lloyds for 1998 Year
of Account, 618 F.3d 277, 295 (3d Cir. 2010) (citing 9 U.S.C. § 10(a)(1)-(4))
(setting forth statutory grounds for vacatur).
That arbitration awards must be confirmed by a court to be enforceable
stands in marked contrast to judicial orders issued in civil actions. Although
arbitration awards may “flow[] almost always into” enforceable court orders, “[t]he
existence of state enforcement mechanisms” is a hallmark of the latter that is a
8

“decisive distinction” from the former. Schlumberger, 195 F.3d at 221 (emphasis
added). Indeed, without the ability to issue enforceable orders, courts would lack
means to “‘vindicate [their] jurisdiction and authority’” without assistance of the
judiciary’s co-branches of government and would be reduced to “‘mere boards of
arbitration whose judgments and decrees would be only advisory.’” Young v.
United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 796 (1987) (citing Gompers
v. Bucks Stove & Range Co., 221 U.S. 418, 450 (1911)).
Unlike a conventional arbitration, the proceeding established by § 349
provides for entry of an enforceable final judgment of the Chancery Court “[u]pon
the granting of a final award.” Del. Ch. R. 98(f)(3). There is no need for a party to
a § 349 proceeding to convert the judge’s award into an enforceable judgment by
taking steps to confirm the award first. The judge’s ability to issue an executable
judgment at the conclusion of a § 349 proceeding derives from her state-conferred
power to “vindicate [the court’s] jurisdiction and authority,” Young, 481 U.S. at
796 (citation and internal quotation marks omitted), rather than from the parties’
contractual agreement to arbitrate. The district court recognized this critical
distinction in finding the § 349 proceeding to be “essentially a civil trial.” JA 29-30
(“In Delaware … the judge’s final award results in a judgment enforced by state
power.”).

9

The Chancery judge defendants gloss over this distinction by asserting that
“[e]liminating the ministerial step of confirming the arbitrator’s award does not
transform the arbitration proceeding into a judicial one.” Appellants’ Br. 42 n.21.
But courts do not confirm arbitration awards as a matter of course or as a
“ministerial” exercise; rather, they exercise their power to confirm or vacate
arbitration awards according to criteria provided by governing statutes when there
is an actual dispute among the parties over the award’s validity. See Derwin v.
Gen. Dynamics Corp., 719 F.2d 484, 492 (1st Cir. 1983) (holding that courts
should not “ministerial[ly] confirm[]” an arbitration award, but should only
exercise their power to confirm or vacate when there exists a “concrete dispute”
between the parties concerning the award’s effect); Steris Corp. v. Int’l Union,
United Auto., Aerospace & Agric. Implement Workers of Am., 489 F. Supp. 2d 501,
515 (W.D. Pa. 2007) (adopting Derwin’s logic and refusing to confirm award);
Chi. Reg’l Council of Carpenters v. Onsite Woodwork Corp., No. 11-cv-8365,
2012 WL 6189635, at *4-*5 (N.D. Ill. Dec. 12, 2012) (declining to confirm award
where there is no evidence of a party’s non-compliance).
The Chancery judges further assert that the confirmation of an award as a
judgment is essentially meaningless because “the overwhelming number of
arbitrator’s awards … are complied with voluntarily.” Appellants’ Br. 42 n.21
(citation and internal quotation marks omitted). Of course, the “overwhelming
10

number” of all contracts are voluntarily complied with, but that does not mean that
there is no difference between a contractual right and a judgment enforcing that
contractual right. Voluntary compliance with an arbitration award indicates only
acceptance of or unwillingness to challenge the process that led to the result,
regardless of the parties’ satisfaction with the award itself. The Chancery judges
are correct that an arbitration is not a judicial proceeding simply because parties
are likely to comply with an arbitral award without its being confirmed as a
judgment. But by the same token, a judicial proceeding that results in an
executable judgment that is neither resisted nor appealed, but satisfied without
further enforcement action, remains fundamentally different from an arbitration
proceeding that does not yield such a judgment.
Moreover, the Chancery judges’ contention that “a party to the arbitral
award … is automatically entitled to [judicial] review in the Delaware Supreme
Court,” id., does not alter the nature of the judgments issued in a § 349 proceeding,
which can be executed on like any other judgment in the absence of further
review—a fact that the Chancery judges do not dispute. Indeed, that “automatic”
entitlement to review in the Supreme Court fails to differentiate judgments issued
as a result of a § 349 proceeding from final judgments issued in other civil actions
by the Chancery Court (and the Superior Court), which are likewise
“automatically” subject to appellate review if a party chooses to seek it.
11

The Chancery judges rely heavily on the fact that both parties must
voluntarily elect to have their disputes heard in a § 349 proceeding, contending that
this consent to the process “is the reason why courts in a variety of contexts have
expressly distinguished arbitration from judicial proceedings.” Id. 36. But focusing
exclusively on the parties’ consent to a process as the hallmark distinguishing
arbitration from civil litigation ignores the fact that many courts around the country
offer parties the option of participating in expedited case management systems
designed to resolve cases more efficiently if both parties consent. Fast-track
litigation “merges the goals of [alternative dispute resolution] with necessary
changes in court rules to make those goals achievable within the context of … [the]
existing judicial system.” Richard McMillan, Jr. & David B. Siegel, Creating a
Fast-Tract Alternative Under the Federal Rules of Civil Procedure, 60 Notre
Dame L. Rev. 431, 438 (1985) (emphasis added). In 2012, for example, the
Western District of Pennsylvania introduced an expedited docket offering parties
an “alternative, abbreviated, efficient, and cost-effective litigation and trial” in
which participation is voluntary and consensual.3 Under this program, discovery is
curtailed and summary judgment motions are not allowed.4 Each party may present

3

See
Pilot
Program
for
Expedited
Civil
Litigation
1,
http://www.pawd.uscourts.gov/Documents/Forms/EXPEDITED_DOCKET.pdf.
4

Id. at 2-3.
12

no more than three hours of testimony at a trial, and the right of appeal is waived in
most cases.5 Other courts similarly provide a fast-track option for consenting
parties.6 Because a § 349 proceeding shares this essential attribute of optional
“rocket docket” judicial proceedings, the Chancery judges’ reliance on the parties’
consent as a characteristic that meaningfully distinguishes an arbitration from a
judicial proceeding is misplaced. A fast-track proceeding, even if voluntary,
remains essentially judicial in nature if it results in the issuance of an enforceable
judgment by a court. See McMillan, 60 Notre Dame L. Rev. at 433 (describing fast
track litigation as “efforts to reform the formal litigation process through improved
management and simplified court procedures, reform of the rules of civil
procedure, and use of innovative trial techniques in certain categories of civil
cases”).
By contrast, court-annexed arbitration systems in other states, which the
Chancery judges discuss in their brief, Appellants Br. 44-45, do not vest authority
to issue executable judgments in the arbitrator, even when judges are permitted to
step into that role. This distinction further underscores the significant difference
5

Id. at 1.

6

See, e.g., Optional Fast Track Procedure for Civil Cases Assigned to Judge
DeGiusti 1, http://www.okwd.uscourts.gov/files/fast_track_pro.pdf (last visited
Jan. 10, 2013); Notice of Availability of a United States Magistrate Judge to
Exercise Jurisdiction 2, http://www.innd.uscourts.gov/judges/nuechterlein/docs/
FastTrack.pdf (last visited Jan. 10, 2013).
13

between a § 349 proceeding and conventional arbitration. California, Connecticut,
and Oregon expressly provide parties to an arbitration the option of seeking a trial
de novo, thus making clear that decisions by an arbitrator in these fora not only are
not judgments, as in the § 349 proceeding, but are not binding in any sense. See
Cal. Civ. Proc. Code § 1141.20 (allowing parties to seek trial de novo); Conn. Gen.
Stat. § 51-193u (timely demand for trial de novo renders arbitrator’s decision “null
and void”); Or. Uniform Trial Ct. R. 13.040(3) (allowing parties to raise issues
previously decided by arbitrator in trial de novo). Similarly, the Business Division
of the Fulton County Court in Georgia allows judges of that court to conduct nonbinding arbitrations only. Ga. Fulton Cty. R. 1004(12). North Carolina permits
retired judges who are eligible to be recalled as part-time emergency judges to
serve as arbitrators in malpractice cases, but it does not permit them to enter
judgments; judgment can be entered on those awards only through the procedures
normally applicable to confirmation of arbitration awards. N.C. Gen. Stat. §§ 9021.62, 90-21.66, 90-21.68; see also id. § 7A-50 (defining “emergency judge”).
New York, Wyoming, and West Virginia permit judges to serve as arbitrators
provided that the judges do so outside of their official duties and where it does not
conflict with their judicial obligations. See N.Y. Advisory Comm. J. Ethics, Op.
No. 07-12 (Sept. 6, 2007) (providing that “[a] Supreme Court justice … may serve
as a volunteer arbitrator for the New York City Civil Court” so long as there is no
14

conflict with judicial duties); W. Va. Code R. § 158-13-4.5.f.1 (allowing an
administrative law judge to serve as an arbitrator “if such activity does not affect
… the conduct of his official duties.”); Wyo. Code of Judicial Conduct R. 3.9 (“A
judge shall not act as arbitrator … or perform other judicial functions apart from
the judge’s official duties unless expressly authorized by law.”). The Chancery
judges’ reliance on these statutes and court rules thus is misplaced.
Moreover, the Chancery judges’ contention that the Delaware proceeding is
akin to conventional commercial arbitration proceedings overlooks that Delaware’s
statutory procedures governing conventional arbitration differ in kind from those
established by § 349 and the implementing Chancery Court rules. Notably,
Delaware’s Uniform Arbitration Act, which provides Delaware courts, including
the Chancery Court, with jurisdiction to compel arbitration, Del. Code Ann. tit. 10,
§ 5703(a), and to appoint neutral arbitrators where parties are unable to make the
selections themselves, id. § 5704, requires judicial confirmation of an arbitration
award, id. § 5713. These provisions of the Uniform Arbitration Act underscore that
§ 349 and the implementing Chancery Court rules represent a fundamental
departure from conventional arbitration principles. The existence of conventional
arbitration with judicial confirmation of awards pursuant to the Uniform
Arbitration Act also undercuts the Chancery judges’ claim that “[o]ffering a
government-sponsored arbitration forum, with judges of the Court of Chancery
15

serving as arbitrators” is necessary “to provide [Delaware’s] corporate citizens
with an expert, efficient dispute resolution system competitive with those available
in other parts of the country and the world.” Appellants’ Br. 64-65.
For all these reasons, the district court properly concluded that,
notwithstanding the arbitration label applied to it, a § 349 proceeding is a civil
judicial proceeding.
II.

THE CONFIDENTIALITY PROVISIONS OF SECTION 349 AND
THE IMPLEMENTING CHANCERY COURT RULES VIOLATE
THE QUALIFIED FIRST AMENDMENT RIGHT OF PUBLIC
ACCESS.
Section 349 and Chancery Court Rules 96-98 broadly provide for

confidentiality of the proceeding: The proceeding “shall be considered confidential
and not of public record.” Del. Code Ann. tit. 10, § 349(b). The petition to
commence the proceeding is not listed on the Chancery Court’s public docket. Del.
Ch. R. 97(a)(4). The arbitration proceeding may be attended only by parties and
their representatives, and any communications “made in or in connection with the
arbitration” relating to the dispute are confidential. Id. 98(b). Further, the judge’s
case file, including any memoranda submitted by the parties, is confidential. Id.
Although Chancery Court Rule 98, which provides for entry of judgment upon
issuance of an award, see Del. Ch. R. 98(f)(3), is silent on whether a final award or
judgment is confidential,

16

§ 349 provides that nothing about the proceeding will become public record unless
and until a party appeals the decision to the Delaware Supreme Court, at which
time the “record shall be filed by the parties with the [Delaware] Supreme Court.”
§ 349(b).7 Indeed, the district court found only one arbitration judgment entered on
the Chancery Court’s public docket. JA14 at n.4.
Appellants do not dispute that, under this Court’s decision in Publicker
Industries, Inc. v. Cohen, 733 F.2d 1059, 1070 (3d Cir. 1984), the public has a
right of access to civil trials. Appellants’ Br. 16. Although this right is not absolute,
cases falling within a § 349 proceeding, including business disputes with at least
$1 million at stake, are the kinds of matters to which the access right applies.8 Yet
the confidentiality provisions ensure that the state-sponsored adjudication that
occurs in a § 349 proceeding, distinguished from conventional arbitration by the
judge’s power to issue judgments, is conducted entirely out of public view. In light

7

Even the notion of a “record” to be filed on appeal runs contrary to conventional
arbitration principles. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 532 (1974)
(Douglas, J., dissenting) (“An arbitral award can be made without explication of
reasons and without development of a record. …”).
8

The right of access is not absolute and may be restricted by sealing parts of a
court record to protect, for example, trade secrets or confidential commercial
information. See Leucadia, Inc. v. Applied Extrusion Techs., Inc., 998 F.2d 157,
166 (3d Cir. 1993) (explaining that court records may be sealed to prevent
competitive harm); Joint Stock Soc’y v. UDV N. Am., Inc., 104 F. Supp. 2d 390,
396 (D. Del. 2000) (holding that “legitimate trade secrets” were “entitled to
confidential protection.” (citations and internal quotation marks omitted)).
17

of the many judicial characteristics of the proceeding, see Part I, its secrecy
violates the public’s right of access, as “it is the presence of the exercise of a
court’s coercive powers that is the touchstone of the recognized right to access.”
Cincinnati Gas & Elec. Co. v. Gen. Elec. Co., 854 F.2d 900, 905 (6th Cir. 1988)
(finding no right of access to non-binding summary jury trials held for settlement
purposes because the trials “do not present any matters for adjudication by the
court.”); see also Joy v. North, 692 F.2d 880, 893 (2d Cir. 1982) (describing
adjudication as “a formal act of government, the basis of which should, absent
exceptional circumstances, be subject to public scrutiny”).
Under the scheme contemplated by § 349 and Chancery Court Rules 96
through 98, a sitting Chancery Court judge may hear and decide disputes with the
imprimatur of the court pursuant to his state-conferred authority, in which the
facts, arguments, rationales for judgment, and even the identity of the parties and
the nature of their dispute, are secret. The statute and rules provide for secrecy
without any demonstration of “good cause” that would justify closing the process
or result to the public. See Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d
Cir. 1994) (permitting restriction of access to judicial proceeding only upon a
“showing that disclosure will work a clearly defined and serious injury to the party
seeking closure”).

18

Moreover, the public has a strong interest in the oversight of a proceeding
conducted by a court through a judge acting in her official government role (or in a
capacity that cannot be meaningfully distinguished from her official role). “When
[parties] call on the courts, they must accept the openness that goes with subsidized
dispute resolution by public (and publicly accountable) officials. Judicial
proceedings are public rather than private property.” Union Oil Co. of Cal. v.
Leavell, 220 F.3d 562, 568 (7th Cir. 2000) (citations omitted). Access, which
includes “the right of the public to inspect and to copy judicial records[,] …
promotes public confidence in the judicial system.” Littlejohn v. BIC Corp., 851
F.2d 673, 678 (3d Cir. 1988) (citations omitted). Public oversight “diminishes
possibilities for injustice, incompetence, perjury, and fraud … [and] provide[s] the
public with a more complete understanding of the judicial system and a better
perception of its fairness.” Id. (citations omitted).
Delaware’s § 349 proceeding offers businesses all of the benefits of
Chancery Court litigation, including an adjudicator experienced in conducting such
litigation who has the power to issue enforceable judgments. But unlike Chancery
Court litigation, a § 349 proceeding is shrouded in secrecy that prevents the public
from understanding how Delaware’s sizable corporate jurisprudence will be
applied and further developed. A primary criticism of conventional arbitration is
that its informal and confidential nature stunts development of the law. Clyde W.
19

Summers, Mandatory Arbitration: Privatizing Public Rights, Compelling the
Unwilling to Arbitrate, 6 U. Pa. J. Lab. & Emp. L. 685, 704 (2004). Further, when
the public does not have access to proceedings in which statutory rights are
adjudicated, that lack of understanding of how statutes are interpreted and applied
stifles discourse on the utility of those statutes. Id. This problem is compounded
when, as here, interpretations of the law by judges that result in binding judicial
decrees are concealed from the public. Further, the body of secret law that the
Chancery Court will develop in proceedings under the statute is unlikely to be
available to the public because appeals to the Delaware Supreme Court, which are
the only avenue to making the court’s decisions in § 349 proceedings public, will
be stifled by the very narrow standard of appellate review, which does not allow
reversal even where significant factual or legal error has occurred. Under the
Federal Arbitration Act, 9 U.S.C. § 10, which governs appellate review of
decisions issued in a § 349 proceeding, see Del. Code Ann. tit. 10, § 349(c), a court
may not reverse on the basis that the arbitrator made an error of law or fact. See
Colonial Penn Ins. Co. v. Omaha Indem. Co., 943 F.2d 327, 334 (3d Cir. 1991)
(stating that arbitration award cannot be set aside even where arbitrator has made
error in determining factual issues).
In addition, the secrecy of a § 349 proceeding prevents interested non-parties
from learning about a dispute in which they otherwise might intervene. For
20

example, Chancery Court Rule 23.1, which governs derivative actions brought by
shareholders asserting claims on behalf of a corporation against the corporation or
its directors, requires notice to other shareholders in the event the parties settle the
case or voluntarily discontinue the action with prejudice so that other shareholders
may choose to prosecute the claims on the corporation’s behalf. Del. Ch. R.
23.1(c); see also In re MAXXAM, Inc./Federated Dev. S’holders Litig., 698 A.2d
949, 956 (Del. Ch. 1996). Assuming such a dispute were to be heard in a § 349
proceeding, there is no provision in either § 349 or Chancery Court Rules 96
through 98 that would allow for this mandatory notice. Instead, the proceeding is
restricted to the parties and their counsel unless the parties agree otherwise. See
Del. Ch. R. 98(b).
These concerns are partially obviated in conventional arbitration, where the
arbitrator is “‘part of a system of self-government created by and confined to the
parties.’” Stolt-Nielsen, 130 S. Ct. at 1774 (citing Steelworkers v. Warrior & Gulf
Nav. Co., 363 U.S. 574, 581 (1960)) (emphasis added). The state’s enforcement
authority is absent and the arbitrator “‘has no general charter to administer justice
for a community that transcends the parties.’” Id. (citing Steelworkers, 363 U.S. at
581). Notwithstanding its private nature and confidentiality, the confirmation and
enforcement aspects of arbitration provide a role for the public in the proceeding
before a court engages in any exercise of government authority. See Mitsubishi
21

Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 638 (1985)
(explaining that courts have “the opportunity at the award-enforcement stage to
ensure that the legitimate interest in the enforcement” of laws is satisfied). A § 349
proceeding blocks even this basic accommodation by providing for binding
judicial decrees without any public judicial proceedings.
Because a § 349 proceeding, unlike a conventional arbitration, involves the
exercise of state enforcement power, its confidentiality violates the public’s
qualified right of access under the First Amendment. This Court should affirm the
district court’s holding that § 349 and Chancery Court Rules 96 through 98 are
unconstitutional.

22

CONCLUSION
For the foregoing reasons, the Court should affirm the decision of the district
court.
January 14, 2013

Respectfully submitted,
/s/ Scott L. Nelson
Scott L. Nelson
Jehan A. Patterson
PUBLIC CITIZEN LITIGATION GROUP
1600 20th Street NW
Washington, DC 20009
[phone]
Attorneys for Amicus Curiae
Public Citizen, Inc.

23

CERTIFICATION OF BAR MEMBERSHIP
I certify that I am a member of the Bar of this Court.
/s/ Scott L. Nelson
CERTIFICATION OF SERVICE
I certify that on January 14, 2013, a true and correct copy of the foregoing
Brief of Amicus Curiae Public Citizen, Inc. was served on all parties to this appeal,
via CM/ECF, pursuant to Third Circuit Rule 25.1(b) and L.A.R. Misc. 113.4,
because counsel for all parties are Filings Users who will be served electronically
by the Notice of Docket Activity.
David L. Finger
FINGER & SLANINA, LLC
1201 N. Orange Street, 7th Floor
Wilmington, DE 19801
Counsel for Appellee
S. Mark Hurd
MORRIS, NICHOLS, ARSHT & TUNNELL
LLP
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 1989
Counsel for Proposed Amicus Curiae
Delaware State Bar Association

Andrew J. Pincus
E. Brantley Webb
MAYER BROWN LLP
1999 K Street, NW
Washington, DC 20006
Counsel for Appellants
Lawrence A. Hamermesh
WIDENER UNIVERSITY SCHOOL OF LAW
4601 Concord Pike
P.O. Box 7474
Wilmington, DE 19803
Counsel for Appellants

24

Roy T. Englert, Jr.
ROBBINS, RUSSELL, ENGLERT, ORSECK,
UNTEREINER & SAUBER LLP
1801 K Street, NW Suite 411L
Washington, DC 20006
Counsel for Proposed Amici Curiae
Chamber of Commerce of the USA and
Business Roundtable

Andre G. Bouchard
Joel Friedlander
BOUCHARD, MARGULES &
FRIEDLANDER, P.A.
222 Delaware Avenue
Wilmington, DE 19801
Counsel for Appellants

I certify that on January 14, 2013, I caused to be delivered by first-class mail
ten copies of this brief to the Clerk of the Court, as follows:
Marcia M. Waldron, Clerk
U.S. Court of Appeals for the Third Circuit
Room 21400, U.S. Courthouse
601 Market Street
Philadelphia, PA 19106
/s/ Scott L. Nelson
CERTIFICATION CONCERNING IDENTICAL VERSIONS OF BRIEF
I certify that the electronic and hard copies of this brief are identical.
/s/ Scott L. Nelson
CERTIFICATION OF COMPLIANCE WITH RULE 32(a)
I certify that this brief complies with Federal Rule of Appellate Procedure
32(a)(7)(B) because this brief contains 5,139 words, excluding those parts of the
brief excluded by Fed. R. App. Pro. 32(a)(7)(B)(iii).
/s/ Scott L. Nelson

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CERTIFICATION CONCERNING VIRUS CHECK
I certify that the electronic file of this brief was scanned with VIPRE antivirus software.
/s/ Scott L. Nelson

26