Legislation in 2003 passed by the Delaware Legislature expands the Delaware Court of Chancery’s jurisdiction over major business disputes involving technology issues, and also adds a cutting-edge and controversial provision that allows for confidential mediation by the Court of substantial business disputes.

The mediation provision is especially noteworthy because it appears to be the first of its kind in the United States and is a drastic departure from the general policy of court filings being available to the public. Although existing Court of Chancery Rule 174 allows for mediation for cases pending in the Delaware Court of Chancery, in order for that Rule to apply, a conventional lawsuit must first be filed, and generally speaking, the court filings in that lawsuit are available to the public for inspection.
Senate Bill No. 58, which was passed at the end of May 2003, adds a new Section 347 to Title 10 of the Delaware Code. The new Section 347 allows parties to request that a member of the Court of Chancery, or “such other person as may be authorized under the rules of the Court”, to assist the parties in reaching a resolution of their dispute through mediation, with the groundbreaking and virtually unprecedented provision that: “mediation proceedings shall be considered confidential and not of public record.” Although it is not unprecedented for cases to be “filed under seal”, and for courts to grant confidentiality orders, it is unprecedented to have a presumption of confidentiality before a lawsuit is even filed. This “instant confidentiality” without the need for a court to order it, or for a case to be filed under seal, is tempered by the requirement that before any such business dispute is filed with the Court, both parties must have consented to such confidential mediation being conducted by the Court of Chancery either by agreement or stipulation. In order to avail themselves of this forward-thinking and creative dispute resolution advance, at least one of the parties must be a Delaware entity, and in those cases where only monetary damages are in dispute, which traditionally falls outside the scope of Chancery Court jurisdiction, the amount in controversy must be not less than $1,000,000.
The Court of Chancery will be adopting rules to clarify the procedures that apply to this new jurisdiction, which is intended to expand the scope of complex corporate commercial disputes that the Court of Chancery now handles.
Senate Bill No. 58 also adds a new Section 346 to Title 10 of the Delaware Code, which allows the Court to hear traditional lawsuits involving technology disputes. Similar to the new confidential mediation provision, in order to avail themselves of the benefit of having a dispute resolved by the Court of Chancery, the technology dispute of this nature must not involve a party who is a consumer, but must involve a Delaware entity, and must include the consent of all parties to the jurisdiction, of or mediation by, the Court of Chancery. As in the new confidential mediation provision, technology disputes involving solely claims for monetary damages must involve not less than $1,000,000. Of great importance to businesses is that neither punitive damages nor jury trials are available for technology disputes heard by the Court of Chancery. Technology disputes for purposes of this expanded jurisdiction includes disputes involving the purchase or lease of computer hardware or software, biological, pharmaceutical or other technology of a complex or scientific nature that has commercial value, including intellectual property rights; the creation or operation of Internet websites or rights related thereto. The legislation specifically provides that the term “technology dispute” should be liberally construed to effectuate the intent of the legislation which is to provide “an expeditious expert forum for the handling of technology disputes involving parties who have agreed to resolve their disputes in the Court of Chancery even if their initial intent is only to have the dispute mediated or to initially mediate, and if that fails, to adjudicate the dispute”.
The Court of Chancery will need to adopt new rules to address the procedural and logistical issues raised by this legislation. The legislation is designed to attract additional businesses to the State of Delaware, in addition to the existing companies that benefit from a forum where the decision makers are widely considered to be experts in business disputes and with a long history of fairness in resolving such disputes.