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SPONSOR: Sen. Adams & Rep. Smith;
Sen. Vaughn & Rep. Wagner
AN ACT TO AMEND TITLE 10 OF THE DELAWARE CODE RELATING TO THE COURT OF CHANCERY.
Section 1. Amend Title 10 of the Delaware Code by adding a new Section 346 to read as follows:
“§346. Technology Disputes.
(a) Notwithstanding any other provision in this Code, and without limiting the jurisdiction vested in any court in this State, the Court of Chancery shall have power to mediate and jurisdiction to hear and determine technology disputes as defined herein when (i) the parties have consented to the jurisdiction of or mediation by the Court of Chancery by agreement or by stipulation, (ii) at least one party is a business entity as defined herein, (iii) at least one party is a business entity formed or organized under the laws of this State or having its principal place of business in this State, (iv) no party is a consumer, as that term is defined in § 2731 of Title 6, with respect to the technology dispute, and (v) in the case of technology disputes involving solely a claim for monetary damages, the amount in controversy is no less than one million dollars or such greater amount as the Court of Chancery determines by rule. Neither punitive damages nor a jury trial shall be available for a technology dispute heard and determined by the Court of Chancery pursuant to this Section. Mediation proceedings shall be considered confidential and not of public record.
(b) A ‘business entity’ means a corporation, statutory trust, business trust or association, a real estate investment trust, a common-law trust, or any other unincorporated business, including a partnership (whether general (including a limited liability partnership) or limited (including a limited liability limited partnership)) or a limited liability company.
(c) A ‘technology dispute’ means a dispute arising out of an agreement and relating primarily to: the purchase or lease of computer hardware; the development, use, licensing or transfer of computer software; information, biological, pharmaceutical, agricultural or other technology of a complex or scientific nature that has commercial value, or the intellectual property rights pertaining thereto; the creation or operation of Internet web sites; rights or electronic access to electronic, digital or similar information; or support or maintenance of the above. The term does not include a dispute arising out of an agreement (i) that is primarily a financing transaction, or (ii) merely because the parties’ agreement is formed by, or contemplates that communications about the transaction will be by, the transmission of electronic, digital or similar information.
(d) The Court shall interpret the term ‘technology dispute’ liberally so as to effectuate the intent of this section to provide an expeditious and expert forum for the handling of technology disputes involving parties who have agreed to resolve their disputes in the Court of Chancery, whether the parties are seeking to have the Court of Chancery (i) mediate the dispute only, (ii) mediate the dispute initially, and if that fails, adjudicate the dispute; or (iii) adjudicate the dispute. The Court shall adopt rules to facilitate the efficient processing of technology disputes, including rules to govern the filing of mediation only technology disputes, and to set filing fees and other cost schedules for the processing of technology disputes.”
Section 2. Amend Title 10 of the Delaware Code by adding a new §347 which shall read in its entirety as follows:
“§347. Mediation Proceedings For Business Disputes.
Without limiting the jurisdiction of any court of this State, the Court of Chancery shall have the power to mediate business disputes when (i) the parties have consented to the mediation by the Court of Chancery by agreement or by stipulation, (ii) at least one party is a business entity as defined in § 346 of this Title, (iii) at least one party is a business entity formed or organized under the laws of this State or having its principal place of business in this State, (iv) no party is a consumer, as that term is defined in § 2731 of Title 6, with respect to the business dispute, and (v) in the case of disputes involving solely a claim for monetary damages, the amount in controversy is no less than one million dollars or such greater amount as the Court of Chancery determines by rule. A mediation pursuant to this section shall involve a request by parties to have a member of the Court of Chancery, or such other person as may be authorized under rules of the Court, act as a mediator to assist the parties in reaching a mutually satisfactory resolution of their dispute. Mediation proceedings shall be considered confidential and not of public record. By rule, the Court of Chancery may define those types of cases that are eligible for submission as a business dispute mediation. This section is intended to encourage the Court of Chancery to include complex corporate and commercial disputes, including technology disputes, within the ambit of the business dispute mediation rules. The Court of Chancery should interpret its rule-making authority broadly to effectuate that intention.”
The State of Delaware wishes to remain preeminent in its ability to meet the needs of its business community, including the needs of all business entities domiciled in Delaware. To that end, this legislation enables Delaware businesses voluntarily to submit disputes involving various kinds of commercial technology (e.g., computer, biological, and engineering technology) for resolution by the Court of Chancery, which is expert in handling business matters. The legislation does not limit the jurisdiction that the Court of Chancery or any other court of this State currently enjoys.
Many technology disputes center on important commercial relationships, and involve the need for a rapid decision on issues of great complexity. Moreover, many technology disputes often involve claims for injunctions or specific performance, traditionally within the jurisdiction of Chancery. By this Act, the State will permit businesses to have the certainty that any future technology disputes that arise between them may be heard in the Court of Chancery. Thus, the Act enables businesses, at least one of which is domiciled in Delaware, to contract to have any future technology disputes between them to be adjudicated in the Court of Chancery.
Significantly, the Act also permits parties to file a technology dispute involving a request for mediation only. Many technology businesses desire to have disputes resolved in a less expensive and litigious way. The Act also provides that the Court of Chancery may adopt rules to facilitate the processing of these disputes.
Consistent with the overall objectives of the Act, the Act also enables the Court of Chancery, by rule, to permit parties to request mediation in order to resolve high-stakes, complex business disputes. In these mediation proceedings, the Court would be asked to assist parties in reaching voluntary settlements of business disputes. This mediation remedy is not available at law and it is the intent of this legislation to permit the Court to define disputes eligible for submission under this section, without regard to whether the disputes otherwise fall within the Court’s traditional jurisdiction, similar to § 346’s grant of jurisdiction over technology disputes. This mediation option will provide a new type of service to Delaware businesses, at a time when businesses are more interested than ever in cost-effective and confidential methods to resolve litigable controversies consensually.
In sum, the Act provides additional benefits for businesses choosing to domicile in Delaware. It seeks to keep Delaware ahead-of-the curve in meeting the evolving needs of businesses, thus strengthening the ability of the State to convince such businesses to incorporate and locate operations here. Notably, all elements of the Act only increase the jurisdiction of the Court of Chancery to handle matters in situations involving parties who have agreed that Chancery is the forum that should resolve their dispute; that is, the Act does not compel any party that has not agreed to Chancery’s jurisdiction to submit to it, unless pre-existing law would enable Chancery to hear the case.
Author: Senator Adams