Aris Multi-Strategy Fund, LP v. Southridge Partners LP, C.A. No. 5422-CC (Del. Ch. May 21, 2010), read letter decision here. Although barely three-pages long, this ruling is noteworthy for the important issue that it decides.
This matter was presented to the Court of Chancery on a motion to dismiss a suit that demanded books and records of a limited partnership pursuant to 6 Del. C. Section 17-305 of Delaware’s Revised Uniform Limited Partnership Act. The motion was granted based on a provision in the LP agreement that required all claims related to the LP to be submitted to arbitration. Despite Section 17-305(e) giving the Court of Chancery exclusive jurisdiction over such claims, Section 17-109(d) was relied on by the Court as allowing a limited partner to "altogether waive its right to bring actions ‘relating to the organization or internal affairs of a limited partnership’ in the Delaware courts, so long as it does so by agreeing to arbitrate such claims." Thus the Court granted the motion to dismiss because the demand for books and records was subject to arbitration.
The Court reasoned that this result was consistent with the right in the corporate context to submit statutory proceedings to arbitration. For example, advancement actions under DGCL Section 145 can be submitted to arbitration despite the Court of Chancery’s exclusive jurisdiction over such a statutory proceeding. See case cited at footnote 4. So too, in the LLC context, parties can agree to submit derivative actions against management under Section 18-110(a) of the LLC Act, and related statutes, to arbitration, despite Chancery’s exclusive jurisdiction over such matters. See footnote 5 for supporting citation.