Delaware Arbitration: Custom Justice for the Big Boys

Digby points to an interesting case that I had not heard about up until now.  The case, decided in October by the Third Circuit Court of Appeals, deals with an "innovative" procedure set up in Delaware to resolve disputes involving Delaware business entities (Delaware is the premier state when it comes to corporate law in the U.S.):

The Delaware Court of Chancery has taken its fight to have a secret business arbitration court to Washington.

Attorneys for the court late Tuesday filed a 116-page “petition for a writ of certiorari” with the U.S. Supreme Court asking the court to review and overturn the decisions of two lower courts that found the secret court violated the U.S. Constitution and the history of openness in the court system.

In their petition to the U.S. Supreme Court, attorneys for the Chancery Court argue that the secret arbitration process does not violate the First Amendment right of access to the courts because it is not a trial, that there is a growing demand for such arbitration and the process is necessary to keep lucrative corporate litigation from being taken overseas.

Here is a description of Delaware arbitration program from the Third Circuit's opinion (footnotes and citations omitted):

Delaware’s government-sponsored arbitrations are not open to all Delaware citizens. To qualify for arbitration, at least one party must be a “business entity formed or organized” under Delaware law...and neither party can be a “consumer.”....The statute is limited to monetary disputes that involve an amount-in-controversy of at least one million dollars....

Once qualified parties have consented “by agreement or by stipulation” to avail themselves of the proceeding, they can petition the Register in Chancery to start arbitration....The fee for filing is $12,000, and the arbitration costs $6,000 per day after the first day....After receiving a petition the Chancellor selects a Chancery Court judge to hear the arbitration....The arbitration begins approximately ninety days after the petition is filed, and, as the parties agreed in oral argument, is conducted in a Delaware courthouse during normal business hours....Regular Court of Chancery Rules 26-37, governing depositions and discovery, apply to the proceeding, but the rules can be modified by consensual agreement of the parties....

The Chancery Court judge presiding over the proceeding “[m]ay grant any remedy or relief that [s/he] deems just and equitable and within the scope of any applicable agreement of the parties.”....Once a decision is reached, a final judgment or decree is automatically entered....Both parties have a right to appeal the resulting “order of the Court of Chancery” to the Delaware Supreme Court, but that court reviews the arbitration using the deferential standard outlined in the Federal Arbitration Act....Arbitrations can therefore only be vacated in relatively rare circumstances, such as when a party can prove that the “award was procured by corruption, fraud, or undue means” or that the “arbitrator[] w[as] guilty of misconduct.”....

Both the statute and rules governing Delaware’s proceedings bar public access. Arbitration petitions are “considered confidential” and are not included “as part of the public docketing system.”

There is so much that is wrong with this system I don't know where to begin.

The Third Circuit held this program unconstitutional because the proceedings were held in secret, and the State of Delaware is appealing this decision to the U.S. Supreme Court.  There is a long standing tradition that both criminal and civil trials are held in public, and the Supreme Court has long held that the public has a First Amendment right of access to criminal trials, and most of the Circuit courts have recognized a right of access to civil trials.  It will be interesting to see whether the Supreme Court takes the case and, if so, whether it agrees with the Circuits.

To me, this is just another example of the increasing and insidious tendency of our governments (at all levels, federal and state) to pull a veil of secrecy over its operations.  I have long felt that there is very little that the government should be permitted to do that is kept secret from the people.  We can't have government by consent of the governed if the governed are kept in the dark about what the government is doing.  Outside of criminal investigations and national security, there is no context for government action in which secrecy is warranted.

But even beyond the secrecy aspects of this, there is so much wrong here.  What the State of Delaware has set up is an expedited process whereby legal entities with disputes can leapfrog over others and obtain expedited access to the judicial system over and above individual citizens.  It effectively grants legal entities such a corporations and limited liability companies with preferred access to the wheels of justice over voting citizens of the state.  This is beyond "corporations are people too" - this is corporations are "super-people" entitled to preferred rights.  The fact that the amount in dispute has to be greater than $1 million just makes this worse.

How can anyone think this sort of thing is ok?

Davos (UPDATED)

You know, a decade ago all of the major news outlets were covering the World Economic Forum at Davos and the web was alive with people writing stories and expressing opinions about what was going on there.

This year I haven't seen anything about it.  In fact, I didn't even know it was going on until one of my facebook friends linked to it a minute ago.  And today's the third day.

Seems to have fallen off everyone's radar screen.  Not that that's a bad thing....

UPDATE:  From the NY Times on why some people are staying away from Davos:

[T]he leaders of some of the largest and most transformative companies are demonstrating, with their absence, the difficulty of convening a global conversation with all the main stakeholders. Given that one of the themes this year is how to address economic inequality, it would be helpful to have the world’s largest employers participate in that discussion, not to mention a sampling of rank-and-file workers, who never receive an invitation.

Obviously not a topic that interests them....

Christie and Sandy Aid - Hypocrisy Personified

Remember when Chris Christie was chastising the Republican Congress on the unconscionable delays in passing Sandy aid?

Noting that lawmakers on both sides of the aisle provided relief for victims of past national disaster at a greatly expedited pace, Christie charged that Republicans put politics “before our oaths to serve our citizens.” “Last night, the House of Representatives failed that most basic test of public service and they did so with callous indifference to the suffering of the people of my state,” he said.

“There is only one group to blame for the continued suffering of these innocent victims: the House majority and their Speaker John Boehner (R-OH),” Christie declared. Historically, “disaster relief was something that you didn’t play games with, but now in this current atmosphere everything is a subject of one-upmanship,” he continued. “It is why the American people hate Congress.”

Kind of ironic that a year later he's being accused of doing the same thing, no?

You know, Christie's stance in support of his state ingratiated him with all the citizens in his state and was probably the biggest reason for his overwhelming victory in November, including strong support from Democratic voters.  They have every right to feel betrayed by his hypocrisy.

Freedom Bankruptcy

Freedom Industries that is.  The company whose chemical leak knocked out water to over 300,000 people filed for bankruptcy today.

The company was just acquired in December by Cliff Forrest, who has a number of interests in the coal industry according to this Washington Post article.

According to the bankruptcy filing, Freedom Industries owes back taxes to the IRS dating to 2000.

It also, reportedly, has no insurance to cover damages from the leak.

So how stupid was this guy for buying this Company?

Answer: as stupid as the federal, state and local governmental officials that let this happen in the first place.

In Case You're Wondering

If there  is an unduly long time between posts, its either because (i) I'm up against a deadline in my "real" job, or (ii) reading something really interesting.

Currently, it's (ii).  I'm reading this:

Fascinating....and scary.

Almost done.....

My Reaction to the Benghazi Report

The Senate Select Committee on Intelligence came out with its Benghazi report two days ago.  This passage is from the "Additional Views" of the Republican members of the committee:

The failures of Benghazi can be summed up this way: the Americans serving in Libya were vulnerable; the State Department knew they were vulnerable; and no one in the Administration really did anything about it. The Intelligence Community does not collect intelligence about threats to our security in dangerous place so it can be ignored by senior decisionmakers. Nor should a Regional Security Officer's repeated warnings go unheeded. Yet, the intelligence and warnings from the field were met by this Administration with a deafening silence. The four Americans who perished in Benghazi deserved better from their country.

OK.  Let's take this as a given. But....

The 26 women and children who died at the Sandy Hook Elementary School deserved better from their country, as do the hundreds of children - CHILDREN - who die gun deaths each year.

The 15 people killed and 160-plus people injured in West Texas deserved better from their country, as do the 4,000 plus people who die in workplace injuries each year.

The 300,000 who get their water from the Elk River in West Virginia deserved better from their country.

The millions of people who lost their homes in the wake of the financial crisis deserved better from their country.

If, over the last 6 years, employment grew at the same rate as the growth of our population, 15 million more people would have jobs today.  They deserve better from out country.

Until Senators Chambliss, Burr, Riche, Coats, Rubio and Coburn display the same level of concern about these people as they do about the four people who died in Benghazi, I won't believe they are saying these words for any reason other than scoring political points.

Until they show that concern, all they'll get from me is a big "fuck you."

The Taxpayer Advocate Report

My take on it is here.