Opinion ID: 2332584
Heading Depth: 1
Heading Rank: 2

Heading: Delaware Uniform Arbitration Act

Text: In 1972, the Delaware General Assembly enacted the Delaware Uniform Arbitration Act (DUAA). [2] The Delaware statute provides that a written agreement to submit to arbitration any controversy existing at or arising after the effective date of the agreement is valid, enforceable and irrevocable. [3] Jurisdiction to enforce arbitration agreements and to enter judgments on arbitration awards is vested in the Court of Chancery. [4] This Court has recognized that the public of Delaware favors arbitration. [5] A party cannot be forced to arbitrate the merits of a dispute, however, in the absence of a clear expression of such intent in a valid agreement. [6] The threshold question regarding the validity of an arbitration agreement is known as substantive arbitrability. [7] A party who has not agreed to arbitrate has a right to have the merits of dispute adjudicated ab initio by a court of competent jurisdiction. [8] When an action is commenced under Section 5703 of the Delaware statute to either compel or enjoin arbitration, a question of substantive arbitrability is decided by the Court of Chancery as a mater of contract law and reviewed by this Court de novo. [9] This case presents questions of first impression for this Court because there was no Section 5703 request made by either party to have the Court of Chancery either compel or enjoin the arbitration, Consequently, in this case, the threshold question of arbitrability was initially presented to the arbitration panel. This Court must decide the proper standard of review when the issue of arbitrability is presented to the Court of Chancery for the first time under Section 5714, in an application to vacate an arbitration panel's dismissal on the ground of non-arbitrability. The facts and issues in this case are strikingly similar to the ones addressed by the United States Supreme Court in First Options of Chicago v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Kaplan involved the proper standard of appellate review under the Federal Arbitration act following an arbitrator's decision as to the question of arbitrability itself. The Supreme Court held that if the parties did not clearly agree to submit the question of arbitrability to arbitration, then a reviewing court must decide arbitrability independently and without deference, just as it would decide any other question of law by applying a de novo standard of review. [10] The question of whether the parties agreed to arbitrate is generally one for the courts to decide and not for the arbitrators. [11] Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question `who has the primary power to decide arbitrability' turns up what the parties agreed about that matter. [12] If the parties agreed to submit the question of arbitrability itself to arbitration, the standard of review is deferential. [13] Conversely, if the parties did not agree to submit the question of arbitrability itself to arbitration, the court must review the question of arbitrability independently or de novo. [14] The United States Supreme Court stated that these differing standards of review followed inexorably from the fact that arbitration is simply a matter of contract between the parties; it is a way to resolve those disputes  but only those disputes  that the parties had agreed to submit to arbitration. [15] The law presumes that parties who agreed to arbitrate the merits of some disputes also agreed to arbitrate the merits of issues on which their agreement is either silent or ambiguous. [16] Nevertheless, the United States Supreme Court held that courts should not presume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so. [17] Thus, the legal presumptions are reversed when there is silence or ambiguity about who should decide arbitrability vis-a-vis when there is silence or ambiguity about the question of whether a particular merits-related dispute is within the scope of a valid arbitration agreement. [18] In this case, the record reflects that neither Scott Associates nor DMS agreed to submit the issue of arbitrability to arbitration. The fact that Scott Associates did not seek to enjoin the arbitration and argued the arbitrability issue to the arbitrator[s] does not indicate a clear willingness to arbitrate that issue, i.e., a willingness to be affectively bound by the arbitrators' decision on that point. [19] To the contrary, as in Kaplan, to the extent that Scott Associates submitted written memoranda in support of its Motion to Dismiss on the basis that the arbitration panel was without jurisdiction, it demonstrates an unwillingness to consent to the arbitration panel's authority. [20] Similarly, DMS did not clearly agree to submit the question of arbitrability to the arbitrators. In fact, in opposing Scott Associates' Motion to Dismiss, DMS argued that the issue of arbitrability could not be decided by the arbitration panel because it was beyond the scope of authority found in 10 Del. C. § 5714(a)(3). Therefore, we hold that since the parties did not agree to submit the question of arbitrability to arbitration, that issue was subject to an independent or de novo determination by the Court of Chancery when it was raised for the first time under Section 5714. [21] Our conclusion that the Court of Chancery erred in applying a deferential standard of review finds support in decisions of other jurisdictions that have enacted a form of the Uniform Arbitration Act. [22] For example, in Stephen L. Messersmith, Inc. v. Barclay Townhouse Associates, [23] the Maryland Court of Appeals held that the proper procedure for reviewing a jurisdictional challenge to an arbitration award was to conduct de novo review. The Maryland court stated that the deferential standard of review was appropriate only where the parties indisputably agree to submit to arbitration. [24] In instances where the arbitrators' very authority to hear a dispute is challenged, deference to the arbitrators' assertion of jurisdiction is improper. [25] Because the existence of an agreement to arbitrate is a threshold issue, the courts must have authority to assess, independently of the arbitrators' point of view, whether or not the parties ever reached such an agreement. [26]