New Procedures for Mandatory Non-Binding Arbitration in Delaware

September 12, 2017

As every trial lawyer knows, and as Thomas Jefferson repeatedly asserted(1), “the availability of the trial courts to provide jury trials is critical to the American way of life to resolve peaceably issues between citizens that have brought people to an impasse.”  The financial and emotional costs of taking a case through jury verdict are extremely high, and Alternative Dispute Resolution processes have greatly expanded over the course of a few decades, being refined along the way.

Different areas of the law have differently nuanced dispute resolution requirements, but virtually all can be considered one form or another of either mediation or arbitration. Each should be considered critical in today’s practice of litigation representation.

In 1991, Delaware created the “16.1” rule providing for mandatory, non-binding arbitration. That process required every case initially and superficially evaluated by counsel to have a value not to exceed a given number, which was raised from time to time, to go to non-binding arbitration. Because of real and perceived problems, that process was terminated in 2008. The decision to do that was met with dismay by many lawyers, who believed that, imperfect as it may have been, “Rule 16 Arbitrations” were of great benefit in resolving cases that were significant, but financially difficult to take through a jury trial.

Recognizing that belief, a Committee of Plaintiff and Defense trial lawyers was established to draft and to propose to the Delaware Superior Court a “new Rule 16.1”. After considerable work, the “initial draft” was presented at a full Court meeting, where it was discussed extensively. Based on concerns and suggestions made, the Committee revised the proposal and resubmitted it to the Court this past spring. It has been approved by the Superior Court, and is awaiting approval by the Supreme Court of Delaware.

The new process, referred to as MNA, for mandatory non-binding arbitration, provides that all Superior Court civil actions, with several specified exceptions (2), such as a trial for money damages must be sought, and non-monetary claims may be only nominal, are subject to this process, only if counsel for the aggrieved party indicates the election of this arbitration on the Civil Case Information Sheet. The election may be made irrespective of any initial evaluation, but the arbitrator’s authority for an award is nevertheless limited to $50,000.00, exclusive of costs and interest.

This new rule has addressed two primary concerns previously expressed by the Court. It eliminated any Court, specifically the Prothonotary, from involvement in the collection of arbitrator’s fee, while simultaneously liberalizing fee structures for the arbitrators; and it defined a time frame for arbitration appointments, so that long delays setting the hearings would be eliminated.  Under the new rule a minimum 3-hour charge of the hourly rate set by the arbitrator (3) (“shared by the parties”) must be paid directly to the arbitrator. Failure to pay subjects the failing party to forfeiture of the privilege to file any civil proceedings.
Unless all of the parties expressly agree otherwise, the “Arbitration Order” is non-binding.  However, unless a party files with the court a Demand for Trial De Novo (an unsatisfied party’s sole remedy) within 20 days of the Court’s entry of the Arbitration Order, any party may file a motion for entry of an Order of Judgement. If the Motion is granted, the Prothonotary shall record the judgment as final. The intention is for this process to be virtually automatic.

This new rule is the result of tremendous diligence by the Committee. It covers: filing issues, mandatory and permissible discovery, arbitrator selection and authority, proceeding recordation, penalties for failure to obtain a verdict more favorable than the Arbitration Order, and other matters.

Unlike mediator eligibility, a selected Rule 16.1 arbitrator is not required to be certified through the Delaware State Bar ADR process, though it is recommended. Once Rule 16.1 goes into effect (scheduled for January 1, 2018) it will be of great benefit in efficiently resolving many matters.

For additional information, please contact Rob Young at ryoung@regerlaw.com or via phone at 203.257.4875.


References
  1. Inaugural Address of Thomas Jefferson: Trial by jury is the only anchor ever imagined by which a government can be held to the Principles of the constitution… [T]rial by jury impartially selected… is [one of the four] principles [which] form the bright constellation which has gone before us, and guided our steps.
  2. Rule 16.1 (a): Trial for money damages must be sought, and non-monetary claims may be only nominal; Rule 16.1 (b): Rule 23 and 81 (a) actions and various listed specialty actions.
  3. If the arbitrator advises the participants ahead of time (presumably done routinely in any arrangement correspondence) that time actually spent in excess of 3 hours will be charged separately, that agreement will be enforced by the Court.