ALTERNATIVE DISPUTE RESOLUTION IN DELAWARE

Prepared:November 21, 2001

THE HISTORY OF ALTERNATIVE DISPUTE RESOLUTION

IN DELAWARE

It was not until 1987 that Delaware saw its first official form of Alternative Dispute Resolution when the Superior Court adopted a trial ADR Program, which was later codified in Superior Court Rules 16.1 and 16.2. From that point on, the area of Alternative Dispute Resolution flourished in the state. Numerous organizations sprang forth, which ultimately merged in 1994 into the Delaware Federation for Dispute Resolution. The purpose of DFDR is to promote education and understanding of the state’s dispute resolution system.

Today, less than 5% of cases actually go to trial before a judge or jury, rather most are resolved through a form of alternative dispute resolution. Almost all of the Delaware Courts offer alternative dispute resolution in the form of either mediation and/or arbitration pursuant to Superior Court Rule 16.1 and 16.2. However, some of the courts such as the Bankruptcy Court have different variations on the rules and have implemented other programs. The Superior Court has provided an ADR Manual that is available online, which lists the Court Rules and the necessary forms to proceed in an arbitration.

Even in the tiny state of Delaware, the courts are overwhelmed with cases.

As the caseload continues to grow so to will the movement for alternative dispute resolution, which will serve to lighten the load on the court system.

The Superior Court codified Delaware’s alternative dispute resolution movement with two Court Rules, 16.1 and 16.2. Civil Rule 16.1 relates to arbitration, while Civil Rule 16.2 sets forth mediation guidelines.

RULE 16.1 COMPULSORY ARBITRATION

The Rule established a Court-annexed Arbitration Program in which all civil cases that do not exceed $100,000 in damages are referred to. The original complaint that is filed with the Court, must specify whether it is an arbitration case or non-arbitration case in the caption. If the caption designates that it is an arbitration case, it will then be referred to the Arbitration Program. The Program has been very successful for the Superior Court as it currently handles 75% of the Court’s civil cases.

As stated above, Rule 16.1 requires any civil claim to be referred to arbitration, however, it does exclude actions involving replevin, declaratory judgments, foreign or domestic attachments, interpleader, mortgage foreclosure, in forma pauperis actions, or an action to enforce a statutory penalty.

Once all parties have filed the initial responsive pleadings, the case will be referred to arbitration within ten days. The Rule does offer exceptions to the 10 day requirement for cases in which the claimant can certify that a defendant(s) is not ascertainable or if the defendant requests that a physical examination of claimant be completed. Additionally, the claimant in a personal injury suit must submit all medical records and any expert witness reports, which will then be provided to the arbitrator.

There are two ways in which an arbitrator may be assigned to a case. First, the parties may stipulate to a certain arbitrator of their choice. Within ten days from the time the case was referred to arbitration, the parties must file the signed stipulation with the Court, which will then assign the arbitrator to the case.

The other way that an arbitrator can be assigned to the case is by failure of the parties to stipulate. The court will provide the parties with a list of three arbitrators within 20 days from the referral of the case to arbitration at which point the parties must each strike one arbitrator within ten days of the Court distributing the list. The remaining arbitrator will then be appointed by the Court to serve for that particular case.

The list of arbitrators consists of members of the Delaware Bar and must be actively practicing law for more than five years. The attorneys must either have demonstrated an interest in litigation or be retired judges who volunteer.

Each party is responsible for the compensation of the arbitrator, which is $300.00. If the arbitrator is a retired judge, he/she will not receive compensation, as it is on a volunteer basis. The parties are expected to pay the arbitrator within twenty days of receiving notice of the appointment.

The hearing must be held within forty days from the time of appointment of an arbitrator, unless the answering party has requested an independent physical examination of the claimant. In which case the hearing will be held within forty days of receipt of the report. However, prior to the hearing, the arbitrator must consult with the parties regarding the hearing date. The arbitrator has the option of scheduling a preliminary conference with the parties.

If the parties so choose they may file motions and discovery, however, the responses to such requests will be stayed until or unless a trial de novo is requested. The Delaware Uniform Rules of Evidence will govern the arbitration hearing.

If either party fails to appear, it is within the arbitrator’s discretion to proceed with the hearing. However, the award of damages may not be based solely on the parties failure to appear. If the claimant was provided notice and failed to appear without just cause, the arbitrator must enter a decision against the claimant without a hearing. The party who fails to appear, is entitled to demand a trial de novo, but is responsible for all court cost including the arbitrator’s fee.

RULE 16.2 VOLUNTARY MEDIATION

The Voluntary Mediation Program became effective in 1992 under Superior Court Civil Rule 16.2 and became permanent in 1993. The process of mediation differs from that of arbitration in that the purpose is to reach a mutually agreeable outcome for all parties. The role of the mediator is to act as a neutral third party, which helps facilitate settlement discussions and negotiations. The mediator does not, however, render a decision.

Rule 16.2 provides that any civil case is eligible for voluntary mediation and unlike Rule 16.1, there is no monetary limit of damages that will preclude a case from going to mediation. A case may be referred to mediation if all parties involved agree to the program or based on specific guidelines established by the Office of Mediation Services.

Once mediation has been agreed upon, all parties, including their attorneys and a representative of the insurance carrier, if it is a personal injury case, are required to attend. Should any party to the mediation fail to appear or participate in the conference in good faith, they may be subject to sanction.

The Office of Mediation Services must provide each party with a written statement regarding the procedures necessary to participate in the mediation conference. The parties are then required to file a Mediation Conference Statement within ten days prior to the conference. Before mediation begins, the parties, their attorneys and the mediator must sign a written consent to the mediation, which must include the confidentiality of the conference and the rights and obligations of the parties.

The mediator must be an impartial third party (not necessarily an attorney). The mediator will either be appointed by the Court or agreed upon by the parties in the same manner as agreement is reached under Superior Court Civil Rule 16.1(d)(1)(4). The mediator shall receive a total of $300.00 in compensation from the parties, unless otherwise agreed upon prior to appointment. Retired judges serving as mediators will not be compensated for their service.

Mediators are required to complete at least twenty-five hours of training in conflict resolution techniques subject to the approval of the President Judge. The director of the Office of Mediation Services is permitted to create classifications of disputes and subsequently require that the mediator serving in that type of case have specialized training. Furthermore, the President Judge may establish additional criteria for a mediator.

The mediation conferences are informal proceedings that generally take one to four hours. The mediator must encourage discussion and negotiation by both parties in order to reach a mutually acceptable outcome. The mediator is not permitted to impose a decision or any penalty upon the parties. However, if the parties are not able to agree to a settlement, the mediator must terminate the conference and the case will then proceed to trial. If, on the other hand, an agreement is reached, it must be signed by all parties and the mediator. Once signed, the agreement is binding and will be part of the Court record once the mediator files it.

In an effort to relieve the Court of the civil cases pending, the Bar and the Court have created the Settlement Week Program. During the year, each county will be designated two weeks in which a mediator will be appointed to cases for possible settlement. Anyone who is eligible to serve as a mediator may be appointed to cases and the new trainees must serve in five mediations on a pro bono basis.

The United States 3^rd Circuit Court of Appeals has established an Appellate Mediation Program pursuant to Rule 33 of the Federal Rules of Appellate Procedure and LAR 33.1. Rule 33.1 provides that appeals in civil cases, petitions for review or for enforcement of administrative actions will be referred to the Program before being heard by the Court on appeal. However, L.A.R. 33.2 prohibits cases from being referred to the Program that are original proceedings, social security cases, immigration and deportation or black lung cases, prisoner petitions, habeas corpus petitions, petitions for leave to file a second or successive habeaus petition and pro se cases. A special master or the program director will review the cases and determine which cases are eligible for the Appellate Mediation Program.

Cases that do proceed to the Appellate Mediation Program will be scheduled for a confidential mediation conference conducted by the program director or assistant, Senior Circuit and District Court Judges. Once, or if, a settlement is reached, it is binding on all parties. Counsel for the movant must than file a Stipulation of Dismissal of the Appeal.

Mediation in the Delaware Bankruptcy Court is governed by Del. U.S. Bankruptcy LR 9019-3 (2001). The statute provides that any dispute arising in an adversary proceeding, contended matter, or other bankruptcy case is eligible for mediation. However, a case that is subject to mediation is not relieved from complying with any other Court Orders.

Once the parties have gone to mediation, the mediator has the option of presenting a written recommendation for settlement to the parties. The recommendation does not go to the Court, unless the parties reach settlement at mediation. If settlement is reached, the mediator will designate one of the parties to submit the stipulation and proposed order to the Court within 20 days after the conclusion of the mediation conference. If the designated party fails to submit the stipulation and proposed order to the Court, sanctions may be imposed by the Court. Additionally, the mediator must file a certificate of completion with the Court showing compliance or noncompliance with the mediation conference requirements.

The Delaware Bankruptcy Court offers other alternatives besides mediation under the Court Annexed Alternative Dispute Resolution Program, Del. U.S. Bankruptcy LR 9019-5. Those alternatives include mediation/early neutral evaluation and mediation/arbitration. The mediation/early neutral evaluation program allows the parties to discuss offers and weigh settlement proposals. The mediation/arbitration process allows the parties to submit to mediation, however, if it is unsuccessful, they may agree to begin arbitration using the mediator as arbitrator.

The Court of Common Pleas has adopted the Superior Court Rules regarding alternative dispute resolution, with one adjustment. Rule 16.1 follows Superior Court Rule 16.1, except that it requires the amount of damages to be in excess of $15,000 rather than less than $100,000. Both arbitration and mediation in the Court of Common Pleas is binding.

Alternative dispute resolution is used in the Family Court Rules, which incorporate both Superior Court Rules 16.1 and 16.2. ADR is perhaps more beneficial in Family Court than in any other Court considering the types of cases that are on the docket. ADR may be used in cases involving juvenile delinquents, spousal support, property division, dependent, neglected and/or abused children, just to name a few.

Arbitration in Family Court is voluntary, unlike the Superior Court Rule 16; however, it is still binding. Proceedings that are eligible for voluntary arbitration include property division, spousal support and alimony issues. Cases that are prohibited from using voluntary arbitration are Protection From Abuse cases, custody and/or visitation proceedings. If the parties agree to arbitration, it must be reduced to writing and a Stipulation to Proceed must be filed with the Court. Such a filing stays all matters pending in the Court with the exception of Protection From Abuse proceedings, disciplinary actions, enforcement of prior orders and matters related to custody and visitation.

Should either party fail to appear, the arbitration officer is permitted to proceed, but any award granted cannot be based solely on that parties failure to appear. A decision must be presented to the parties within ten days after the conclusion of the hearing. If done so within five days of receiving of the arbitrator’s order, both parties have the option of filing for reargument, clarification or request to expand findings of fact. If, however, by the sixth day, neither party has filed, the order becomes final.

Arbitration – Family Court Criminal Rule 6A

Criminal cases pending in Family Court may also be subject to arbitration. Upon receipt of a complaint, the Court has discretion as to whether the case should be referred to arbitration. Under Fam.Ct.Crim.R. 6A, the arbitration is not voluntary, as the defendant is required to appear (or their parent or guardian) and failure to do so may result in a Court issued capias for the defendant’s arrest. However, the defendant is permitted to withdrawal from arbitration, but the case will then be reviewed by the Attorney General’s Office for further action. Similarly, if the arbitration process is not complied with, by either party, the arbitrator, a master, or a judge may terminate the arbitration.

The arbitrator in a criminal proceeding must determine what conditions would be appropriate in the case. Reasonable conditions set forth in Rule 6A include restitution or community service requirements. If the conditions agreed to in the settlement are not complied with or new charges are filed the arbitrator, a master, or a judge has the authority to terminate the arbitration. If, on the other hand, conditions established by the arbitration are completed, the action will be dismissed by the Court.

While the Rule does not state which types of cases will be referred to arbitration, it appears from the case law that typical criminal cases in which arbitration may be implemented include juvenile offenses or petty crimes, such as shoplifting. In State In Interest of Crawford, Del.Fam.Ct., 1992 WL 436225, the juvenile had in the past been charged with shoplifting, which according to the Investigative Services Officer, was arbitrated and successfully completed. In Rucker v. Colonial School Dist., Del.Super., 517 A.2d 703, (1986), a juvenile was suspended from school for possession of marijuana. While he was appealing on grounds of due process violations, the court noted that his criminal charge of possession had been dismissed upon successful completion of arbitration. Id. at 703.

Mediation - Family Court Rule 201

Family Court permits mediation conferences, if all parties agree, in child dependency, neglect and abuse proceedings, unless the case is of an emergency nature. The conferences are informal and non-binding. No evidence or testimony taken by either party may be used in subsequent proceedings. If the Division of Family Services is not a party to the action, the parties must agree to and sign a consent order after they have reviewed the information statements of one another.

Title 6 of the Delaware Code – Chapter 77

Title 6 of the Delaware Code governs commerce and trade practices in the state of Delaware. The following is a brief description of various sections of Chapter 77 (please note that not all of the sections of this chapter are listed):

• 6 Del.C. §7701 - this section states that the chapter will be known as the Delaware Voluntary Alternative Dispute Resolution Act and that the purpose is to provide another means, besides litigation, to resolve business disputes.

• 6 Del.C. §7702 – this chapter defines certain terms such as ADR and establishes that only disputes in excess of $100,000 will be subject to this chapter.

• 6 Del.C. §7703 – this section established that ADR is selected when any person files a certificate of agreement or when any person enters into an agreement with someone who has filed a certificate of agreement.

• 6 Del.C. §7704 - this section enumerates the specific contents that are required in a certificate of agreement to submit to ADR.
• 6 Del.C. §7707 – this section provides that ADR may be revoked by properly filing a certificate of revocation.
• 6 Del.C. §7709 – this sections provides for the selection of the ADR specialist either by agreement of the parties, domicile/incorporation of the non-filing party, or if no specialist is agreeable, pursuant to the Superior Court Rules.
• 6 Del.C. §7710 – this section states that to begin ADR proceedings written notice must be given to the parties involved stating the nature of the dispute and the identities of the ADR Specialists. Note that ADR can proceed even if an interested party did not receive notice.
• 6 Del.C. §7711 – this section provides that parties who are not bound to participate in the ADR proceeding may elect to if they choose an ADR Specialist to sit on the panel. By selecting specialist, the party in effect agrees to the provisions of this chapter for the purposes that the party selected a specialist.
• 6 Del.C. §7714 – this section provides the means for conducting an ADR proceeding. Within seven days prior to the initiation of the ADR each party must submit a statement of its position. The parties will then have no more than one hour to present its position to the specialist and then up to an hour of answering questions of the non-presenting parties. The specialist must meet with parties in an effort to resolve the dispute as soon as possible. If no resolution is possible, the parties may terminate the proceeding.
• 6 Del.C.§7715 – this section provides that if a settlement is obtained then it must be reduced to writing by the specialist and signed by all the parties. The settlement will then be binding upon the parties.
• 6 Del.C. §7716 – this section provides that any statement, notes or materials made during the ADR proceedings will be confidential and not subject to discovery.
• 6 Del.C. §7718 – this section provides that all parties and/or their representative(s) must be present at the initial ADR proceeding.
• 6 Del.C. §7719 – this section states that the right to ADR is enforceable by any court with jurisdiction over the parties. Also, by filing a certificate of agreement, a party thereby consents to the jurisdiction of the Court of Chancery for the purpose of enforcement.
• 6 Del.C. §7720 – this section provides that upon initiation of ADR, the statute of limitations applicable to a dispute will be suspended for fourteen days after the conclusion of the ADR proceeding.
• 6 Del.C. §7721 – this section provides that once litigation involving the dispute that is the subject of the ADR proceeding is initiated, this chapter will cease to have any force or effect.

Title 10 of the Delaware Code – Chapter 57

Chapter 57 of Title 10 of the Delaware Code governs Special Proceedings under the Uniform Arbitration Act passed by the Delaware Legislature. The following is a brief description of some of the important sections (please note that not all of the sections are listed below):

• 10 Del.C. §5701 – States that a written agreement submitting to arbitration is valid and enforceable under the jurisdiction of the Chancery Court.
• 10 Del.C. §5702 – Confers jurisdiction upon the Chancery Court. The action is commenced by the filing of the initial complaint. If the statute of limitations have run at the time of the demand for arbitration, the limitation may be used to bar arbitration or as a defense.
• 10 Del.C. §5703 – A party seeking arbitration must notify the other party of their intent to arbitrate. The Court must compel arbitration if a party failed to arbitrate and the other party is aggrieved by such failure and files a complaint to order arbitration. However, a party ordered to arbitrate may request to enjoin the arbitration if no valid agreement to arbitrate was made.
• 10 Del.C. §5704 – The arbitrator shall be appointed either by agreement of the parties or may be appointed by the Court if a complaint or application is filed.
• 10 Del.C. §5709 – The award must be delivered to each party in writing and signed by the arbitrators, unless otherwise agreed. The arbitrators must render a decision within a time specified by agreement or in the time ordered by the Court.
• 10 Del.C. §5711 – A party may request, in writing within twenty days of delivery of the award, that the award be modified based on grounds stated in §5715 or to clarify the award. Upon notice, the other party has ten days to file an objection to the modification. If an objection is made the arbitrator must dispose of the application for modification.
• 10 Del.C. §5714 – If a party so requests, the Court must vacate an award if it was procured by corruption, fraud or other undue means; the arbitrator was partial towards one party; the arbitrators abused their discretion; the arbitrators failed to follow procedures set forth in this chapter so as to substantially prejudice a party; or if there was no valid arbitration agreement.
• 10 Del.C. §5715 – The Court must modify an award if there was evident miscalculation or mistake in the description of any person, thing or property referred to in the award; the award was based on a matter not submitted to arbitration; or the award is imperfect in a matter of form, not affecting the merits of the dispute.
• 10 Del.C. §5719 – Appeals may be granted for a final order denying to compel arbitration; an order granting to enjoin arbitration, a final order confirming or denying confirmation of an award; a modification or correction of an award; a final order vacating an award without directing a rehearing; or a final judgment of decree.

Upon reviewing Delaware case law in the area of Alternative Dispute Resolution, it is apparent that the Uniform Arbitration Act governs how the Courts handle cases regarding arbitration. As §5701 of the Uniform Arbitration Act states, the Chancery Court holds jurisdiction over enforcement of arbitration awards. Many of the cases that were appealed to the Delaware Supreme Court from a judgment of the Chancery Court enforcing arbitration are upheld, usually based on the notion that public policy of the state favors arbitration. Graham v. State Farm Ins. Co., Del. Supr., 565 A.2d 908, 911 (1989). The Courts appear to be reluctant to vacate an award and will only do so if the statutory bases set forth in the Uniform Arbitration Act are met. Most of the court decisions are either Delaware Chancery Court, which has enforcement jurisdiction or Delaware Supreme Court cases on appeal from the Chancery Court decisions. The following are just a few of the leading cases in Delaware regarding Alternative Dispute Resolution.

• State Farm v. Clark, 1999 Del. Ch. LEXIS 174 – Plaintiff, in a personal injury suit, sought appeal from an arbitration award to the Court of Chancery, arguing that the arbitrator’s decision was legally incorrect. Id. The Court held that it did not have the authority to overturn an arbitrator’s decision unless one of the five statutory bases set forth in 10 Del.C. §5714 was established. Id. at 2. Nor was there a basis for modifying or correcting the award under 10 Del.C. §5715. Id. Finding that none of the statutory bases had been satisfied, the Court upheld the arbitrator’s award in favor of Defendant. Id.
• New Hampshire Ins. Co. v. State Farm Ins. Co., 1994 WL 125038, Del.Ch., 1994 – This case was an appeal de novo from an award granted in an automobile accident. Upon notice of the hearing date, New Hampshire Ins. contended that its attorney filed a deferment of the hearing, however, State Farm Ins. claims to have never received the deferment. Id. at 2. New Hampshire Ins. failed to appear at the hearing and an award was entered against them. Id. New Hampshire Ins. appealed on numerous grounds, but specifically under 10 Del.C. §5714(a)(4) alleging that the arbitrator erroneously denied their request to defer the arbitration hearing. Id. at 4. The Court noted that under State Ex Rel. Hall v. Camper, Del.Super., 347 A.2d 137, there is a rebuttable presumption that "mailed matter, correctly addressed, stamped and mailed, was received by the party to whom it was addressed." Id. The Court held that State Farm Ins. failed to rebut the presumption and therefore the arbitrator failed to follow procedures, which is grounds to vacate the arbitrator’s award. Id. at 4.
• Graham v. State Farm Mutual Automobile Insurance Company, Del.Supr., 565 A.2d 908 (1989) – This case came before the Supreme Court on appeal from a Superior Court judgment upholding an arbitration clause. Plaintiffs sought payment from their insurer after they suffered injuries in an automobile accident in which the other driver was uninsured. State Farm argued that Plaintiffs were subject to binding arbitration pursuant to the insurance policy agreement and therefore waived their right to a jury trial. Id. at 909. Plaintiffs argued that arbitration was against public policy as it deprives courts of jurisdiction over a matter, as well as deprived them of their constitutional right to a trial by jury. Id. at 909, 910. The Court disagreed, however, citing 10 Del.C. §5701 for the proposition that a valid written agreement is enforceable and supports public policy. Id. at 911. The Court affirmed the Superior Court’s holding.