Arbitrability Issue Addressed by Supreme Court

The Delaware Supreme Court issued an opinion on March 14 that is must reading for anyone who drafts or needs to interpret an arbitration clause in an agreement governed by Delaware law. In James and Jackson LLC v. Willie Gary LLC, download file, Delaware’s highest court affirmed the trial court and with pithy reasoning addressed the issues of: (i) who decides arbitrability if the agreement incorporates the rules of the American Arbitration Association (AAA); and (ii) based on the terms of the specific agreement at issue, whether the claims raised were governed by the arbitration clause. The Court determined that based on the terms of the particular agreement involved, the parties intended that the trial court determine the threshold issue of arbitrability, and that likewise injunctive relief should be decided by the trial court. CAVEAT: If the parties to an agreement simply incorporate the rules of the AAA without more, one should be aware that the AAA will likely be empowered to not only decide the issue of arbitrability, but the AAA will also be the forum to dispense equitable relief. FULL DISCLOSURE: The author of this blog argued the winning side in the expedited appeal and in the trial court–whose decision was summarized here. I would have reported both opinions as important decisions nonetheless, even if I lost (though not with as much cheerfulness.)
UPDATE: Steve Jakubowski of The Bankruptcy Litigation Blog kindly references me and this decision in his post today. Prof. Larry Ribstein also comments on the case here.