Del. 'Secret Courts' Case Denied Supreme Court Review

By Brett Snider, Esq. on March 24, 2014 | Last updated on March 21, 2019

The U.S. Supreme Court has declined to hear Delaware's appeal to revive what critics called "secret courts" for business litigants.

The case came from the 3rd U.S. Circuit Court of Appeals, which ruled that a Delaware law allowing state judges to conduct secret arbitration programs for business disputes valued at more than $1 million was unconstitutional, reports The News Journal.

Why are Delaware's so-called "secret courts" no good?

Del. Chancery Courts' Confidential Arbitrations at Issue

Delaware was asking the High Court to review a law it amended in 2009, allowing the Delaware Court of Chancery to conduct non-public arbitrations in high-value business cases. The law required at least one party to be a Delaware corporation and the dispute to be in excess of $1 million in order to be eligible for confidential arbitration by the state.

Many, many large companies are incorporated in Delaware, and this law essentially created a way for Fortune 500 companies to settle huge cases in secret. The 3rd Circuit reviewed the law and found that state-sponsored arbitrations need to be open to the public.

The First Amendment guarantees Americans a limited right to public access in certain government processes, like criminal trials and preliminary hearings. Because these secret state arbitrations were similar enough to trials, the 3rd Circuit reasoned that the public had a right to access them -- thus the law is unconstitutional.

Arbitration can still be private in Delaware and other states, but the companies have to pay a private arbitrator. Before, taxpayers were essentially subsidizing the costs of arbitration in these secret Delaware courts.

Secret Courts Do Exist

Although the U.S. Supreme Court has ended argument on Delaware's unconstitutional secret courts, there are still legal courts that operate mostly in secret.

Legislators may have requested more transparency from the Foreign Intelligence Surveillance Act (FISA) courts, especially after the NSA scandal(s), but these federal surveillance courts still operate with little to no public access. The public's constitutional right to access the courts is limited, after all, and interests like national security can make a secret court legal.

Citing privacy concerns, divorce courts may even allow cases to proceed under anonymous headings to protect children or their parents from public scrutiny.

The High Court declined to say why it rejected Delaware's appeal, but it appears for now that businesses do not get the luxury of state-sponsored confidential arbitration.

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