Kuhn Constr. Co. v. Diamond State Port Corp., No. 124, 2009 (Del. Supr. Mar. 8, 2010), read opinion here. In this rare reversal of the Court of Chancery, the Delaware Supreme Court determined that the claims at issue were not subject to arbitration based on the wording of the arbitration provision in the agreement involved.
The Diamond State Port Corp. (DSPC) and Kuhn had disputes about a construction project. DSPC sent Kuhn a notice of intent to arbitrate and a demand for arbitration. Kuhn replied by filing a complaint for injunctive relief pursuant to Section 5703(b) of Title 10 of the Delaware Code (Delaware Uniform Arbitration Act). DSPC filed a motion to dismiss pursuant to Rule 12(b)(6). Chancery granted the motion to dismiss.
The Delaware Supreme Court reversed and began its analysis with the public policy of Delaware that supports arbitration but the predicate of that policy is that the parties have clearly and expressly agreed to arbitrate. Delaware’s highest court emphasized that it would not enforce a contract that "unclearly or ambiguously reflects the intention to arbitrate." The Court then discussed basic contract interpretation principles and the standard for determining if a contract is ambiguous.
There were three primary reasons for the Court’s decision. First, the applicable clause in the parties’ agreement did not clearly and unambiguously indicate the intention to arbitrate the claims at issue. Second, despite isolated terms that may support the view of DSPC, the contract as a whole favored Kuhn’s argument that the arbitration clause was not intended to cover all claims. Third, the trial court relied on the 1968 Delaware Supreme Court case in Ruckman that it found controlling, however, Delaware’s High Court determined that Ruckman neither controls nor guides the resolution of the instant dispute.
This relatively short opinion is helpful for addressing the frequent litigation that arises in connection with the "coverage" of arbitration provisions.