(Reuters) - Delaware asked the U.S. Supreme Court on Tuesday to review a lower court decision that stopped the state’s nationally important business court from overseeing private arbitrations, a process critics compared to secret trials.
The U.S. Court of Appeals in Philadelphia upheld in October a ruling that found the five judges on Delaware’s Court of Chancery had violated the U.S. Constitution by overseeing private arbitrations in their courtrooms.
All court filings and even the existence of the cases was secret.
“Because of the importance of this issue, and the job-creating potential for Delaware and the nation of finding innovative solutions to temper the growing costs and delays of resolving business disputes, a definitive answer is being sought from the Supreme Court concerning the constitutionality of the Delaware statute,” said a statement from Andrew Pincus, a Mayer Brown attorney hired by Delaware.
The 2-1 decision by the Philadelphia appeals court upheld a 2012 U.S. District Court ruling that found the arbitration amounted to a civil trial, which must be conducted in public.
The arbitration process was seen by Delaware attorneys as a key to boosting the attractiveness of the Court of Chancery. It was also considered economically important to the state, as at least one company in an arbitration dispute had to be incorporated in Delaware.
Fees associated with incorporating businesses accounts for as much as 40 percent of Delaware’s general budget.
The U.S. Supreme Court only grants a tiny number of requests to review a lower court ruling. If the request is denied, the lower court ruling stands.
The case was brought by a group that promotes government transparency against the chief of the Court of Chancery, Leo Strine.
Governor Jack Markell nominated Strine earlier this month to become the chief justice of Delaware’s Supreme Court. A confirmation hearing is scheduled for later this month.
The petition is Leo E. Strine Jr v Delaware Coalition for Open Government.
Reporting by Tom Hals in Wilmington, Delaware; Editing by Lisa Shumaker