The U.S. Supreme Court on Monday effectively killed a Delaware law that allowed state judges to preside over secret arbitration in high-stakes business disputes.
Lower courts had agreed with a Delaware open government group that the 2009 law allowing violated the constitutional right to court proceedings and records, and the justices rejected the state’s appeal without comment.
Democratic Gov. Jack Markell’s office issued a statement from one of several private attorneys hired at taxpayer expense to defend the law.
“We believe that our nation and Delaware have lost an important opportunity to provide cost-effective options to resolve business-to-business disputes to remain competitive with other countries around the world,” said attorney Andrew Pincus.
David Finger, an attorney representing the Delaware Coalition for Open Government, said he was glad the case is over. Finger suggested that the state’s desire to cater to corporations does not trump the rights of its citizens.
“I hope the state of Delaware in any future actions will recognize that the constitutional rights of its citizens outweigh the interests of cost-effectiveness,” he said.
Andrew Bouchard, another private attorney who was hired by the state to defend the law, referred questions to the governor’s office and Pincus. Bouchard was recently tapped by Markell to become the new head of the Chancery Court
Records obtained by The Associated Press earlier this month under the Freedom of Information Act showed that Bouchard’s firm, which was hired in November 2011, had been paid more than $94,000 as of December, before the petition to the U.S. Supreme Court was filed in January.
Pincus and his firm had billed taxpayers $62,500 for 363 hours of work as of July 31, 2013, three months before a federal appeals court in Philadelphia upheld a decision declaring the secret arbitration law unconstitutional.
Messages for former chancellor Leo Strine Jr., a defendant in the lawsuit, were not immediately returned. Strine, who was sworn in as Delaware’s new chief justice last month, defended the secret arbitration at his Senate confirmation hearing, and in a judiciary branch budget presentation to lawmakers.
In response to lawsuit in 2011, Strine issued a statement saying the secret proceedings were designed to ensure that Delaware, corporate home for many of the world’s largest companies, remains “the most attractive domicile in the world for the formation of business entities.”
The law allowed secret arbitration in business disputes involving claims for damages exceeding $1 million. The Chancery Court charged a fee of $12,000 for filing an arbitration petition, and a daily fee of $6,000 for each day after the first day that a judge was engaged in arbitration.
Markell administration officials have acknowledged that only about six such arbitrations were conducted.
State Rep. Melanie George Smith, the primary sponsor of the arbitration law, said she believed it was “good for business and good for Delaware.”
“It’s unfortunate that legislation was struck down that was crafted to help meet the needs of businesses and streamline the litigation process by offering litigants opportunities to resolve their disputes in a fair and efficient matter,” Smith said in a statement.