On August 30, 2012, U.S. District Court Judge McLaughlin of the U.S. District Court for the Eastern District of Pennsylvania, sitting by designation for the U.S. District Court for the District of Delaware, ruled 10 Del. Code § 349 and Court of Chancery Rules 96-98, which established a confidential arbitration procedure, are unconstitutional in violation of the First Amendment. Delaware Coalition for Open Gov’t v. Hon. Leo E. Strine, Jr., et al, C.A. No. 1:11-1015, 2012 U.S. Dist. LEXIS 123980 (D. Del. Aug. 30, 2012).

To briefly recap, in April 2009, the Delaware State Legislature passed 10 Del. Code § 349, granting to the Delaware Court of Chancery “the power to arbitrate business disputes when the parties request a member of the Court of Chancery … to arbitrate a dispute.” The Legislature’s rationale in enacting this law was “to preserve Delaware’s pre-eminence in offering cost-effective options for resolving disputes, particularly those involving commercial, corporate, and technology matters.” Del. H. R. No. 49 (2009).

In order to participate in an arbitration proceeding, the parties needed to consent to do so, either before a dispute arose between them, or when they submitted the dispute to arbitration. 10 Del. Code § 349(a). At least one of the parties was required to be a business entity, and one party (which could be the same party) was required to be a citizen of the State of Delaware. 10 Del. Code § 347(a)(2), (3). If monetary damages were sought, the amount in controversy was required to be more than $1 million. Moreover, consumers, defined as individuals who purchased or leased merchandise for personal use, were not eligible for the arbitration procedure. 10 Del. Code § 347 (a)(4); 6 Del. Code § 2731(1).