CHAPTER 151

FORMERLY

SENATE BILL NO. 151

AS AMENDED BY

HOUSE AMENDMENT NO. 1

AN ACT TO AMEND TITLE 6 OF THE DELAWARE CODE TO PROVIDE FOR VOLUNTARY ALTERNATIVE DISPUTE RESOLUTION.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Title 6 of the Delaware Code is amended by adding thereto a new Chapter 77 to read as follows:

"CHAPTER 77: VOLUNTARY ALTERNATIVE DISPUTE RESOLUTION

§7701. Short Title; Purpose.

(a) This chapter shall be known and may be cited as the Delaware Voluntary Alternative Dispute Resolution Act.

(b) The purposes of the Delaware Voluntary Alternative Dispute Resolution Act are to provide a means to resolve business disputes without litigation and to permit parties to agree, prior to any disputes arising between them, to utilize alternative dispute resolution techniques if a dispute occurs. An interpretation of the provisions of this chapter shall seek to achieve these purposes.

§7702. Definitions.

As used in this chapter, unless the context other-wise requires:

(a) 'ADR' means the alternative dispute resolution method provided for by this chapter unless the parties to a dispute adopt by written agreement some other method of ADR in which event 'ADR' shall refer to the method they adopt.

(b) A 'dispute subject to ADR' means any dispute that (1) involves at least $100,000 in contention, and (2) is not a summary proceeding under 8 Del.C, Section 211, 215, 220 or 225.

(c) 'ADR Specialist' means an individual who has the qualifications provided for in Section 7708 of this chapter to conduct an ADR proceeding.

(a) 'Person' means any individual, corporation, association, partnership,
business trust, limited liability company or other entity whether or not organized for profit.

§7703. How ADR is Selected.

(a) Any person, by filing the certificate provided for in Section 7704, shall be deemed to have agreed to submit all disputes subject to ADR to the ADR provided for by this chapter. Upon the filing of such certificate, the filer shall be bound by the provisions of this chapter until a certificate of revocation has become effective under Section 7707.

(b) In addition to persons covered by subparagraph (a), any person who enter into a written agreement with a person who has filed the certificate provided for in Section 7704 when such agreement incorporates (by reference or otherwise) the ADR requirements of this chapter will be bound by the ADR requirements of this chapter with regard to disputes arising out of the subject matter of such written agreement. For purposes of compliance with this provision, it shall be sufficient for such writing to state: 'The undersigned hereby agree to be bound by the provisions of the Delaware Voluntary Alternative Dispute Resolution Act with respect to any dispute which arises out of the subject matter of this agreement.

§7704. Contents of Certificate.

(a) The certificate of agreement to submit to ADR shall set forth (I) the name of the person filing the certificate, (2) the address of such person (which shall include the street, number, city and state) at which it shall be given notice of any dispute, and (3) the agreement of such person that by filing the certificate that person is bound to follow the provisions of this chapter and submits to the power of any court with jurisdiction over it to require it to participate in ADR with any other person who invokes the provisions of this chapter for any dispute subject to ADR.

(b) Any provision in a certificate that purports to limit the disputes that are subject to ADR shall be of no force or effect.

§7705. Place of Filing.

(a) The certificate accepting ADR shall be filed with the Secretary of State of the State of Delaware and shall be executed and acknowledged by the chairman or vice-chairman of the board of directors or by the president or vice-president of any corporation, by a general partner of any partnership, or by a person with equivalent authority in any other entity.

(b) The Secretary of State shall keep such records as are required to determine who has filed a certificate accepting ADR or revoking such a certificate, together with the date of any such filing.

§7706. Filing Fee.

No certificate accepting ADR or revoking ADR shall be filed unless it shall be accompanied by the payment of $1,000.00 to the State of Delaware, except that the filing fee shall be $100.00 for every corporation, limited partnership, business trust, limited liability company or other entity organized under the laws of the State of Delaware.

§7707. Revocation of ADR.

A certificate accepting ADR may be revoked by the filing of a certificate stating that it revokes a previously filed certificate. A certificate of revocation shall be executed and acknowledged in the same manner as a certificate accepting ADR. A certificate of revocation shall be effective upon filing and payment of the filing fee, except with respect to disputes arising under contracts requiring ADR and which were entered into prior to the filing of the certificate of revocation.

§7708. Qualifications of ADR Specialist.

The ADR proceedings shall be conducted by any individual meeting one of the following criteria:

(a) successful completion of 25 hours of training in resolving civil disputes in a course approved by the department or division of the government authority charged with responsibility over adult education in the jurisdiction where that individual resides, or

(b) admission to the bar of the jurisdiction in which that individual resides, together with a minimum of 5 years' experience as a practicing attorney.

§7709. Selection of ADR Specialist.

(a) In the case of ADR proceedings that are to be held in the State of Delaware, the party who initiates the proceedings shall select a panel of three ADR Specialists in Delaware to be considered by the parties. Unless the parties otherwise agree in writing, the ADR Specialist shall thereafter be chosen in accordance with the procedures set forth in subparagraphs (c) - (f) below.

(b) In all disputes not to be submitted to ADR in the State of Delaware and unless the parties otherwise agree in writing, the ADR Specialist shall be selected by the following procedure:

(A) When there are 2 parties to the dispute, the party who initiates the ADR proceedings shall choose a panel of three ADR Specialists from those qualified persons who reside or have an office in either (I) the state of incorporation or domicile of the other party to the dispute, or (ii) the jurisdiction where the other party to the dispute resides as determined from the address stated on the ADR certificate on file with the Secretary of State.

(B) When there are more than 2 parties to the dispute, the party who initiates the ADR proceedings shall choose a panel of three ADR Specialists from those qualified persons who reside or have an office in the jurisdiction where the greatest number of the other parties to the ADR proceeding (I) are incorporated or domiciled, or (ii) reside as determined from the address stated on any ADR certificate on file with the Secretary of State. If no jurisdiction has the greatest number of parties then the person initiating ADR shall choose panelists from any of the states of incorporation, domicile or residence of the other parties.

(c) The identity of the panel of the ADR Specialists shall be included in the ADR notice provided for in §7710 of this Chapter.

(d) Within 14 days of receiving the ADR notice provided for in §7710 of this Chapter a person receiving such notice shall:

(i) select one of the members of the panel of ADR Specialists contained in the notice by advising the person initiating the ADR in writing of the selection; or

(ii) advise the party initiating the ADR that none of the members of the panel are acceptable.

When more than two persons are involved in the ADR proceedings, the ADR Specialist shall be the person chosen by the greatest number of parties and in the case of a tie in a vote, the person initiating the ADR proceedings shall choose the ADR Specialist from the ADR Specialists who received the same number of votes.

(e) Upon receiving the selection of the ADR Specialist by the other person or persons to the dispute, the person initiating the ADR proceedings shall promptly notify the ADR Specialist of his or her selection and send copies of such notice to the other parties. If a party receiving an ADR notice provided for in §7710 of the Chapter does not select an ADR Specialist in a timely manner, or advise that none of the members of the panel are acceptable, the person sending the ADR notice (1) may select the ADR Specialist, or (2) in the case of more than two parties to a dispute, may cast a vote for the ADR Specialist on behalf of the party who failed to respond to the ADR notice.

(t) If none of the ADR Specialists selected by the party initiating the ADR proceedings are acceptable to the other parties to the dispute, in the ADR proceedings that are to be held in Delaware the ADR Specialist shall be selected in accordance with the rules of the Superior Court of the State of Delaware as may be adopted by that Court and approved by the Delaware Supreme Court. In ADR proceedings to be conducted outside of Delaware, in the case of a failure of the parties to agree on the ADR Specialist the Specialist shall be selected in accordance with such rules as may apply in the jurisdiction where the ADR proceedings are to be conducted or, if no such rules have been adopted, then by the American Arbitration Association.

§7710. Initiation of ADR Proceeding.

ADR proceedings are initiated by written notice to the other parties to a dispute who have filed an ADR certificate in accordance with Section 7704 or who have agreed to be bound by the ADR requirements of this chapter. The notice shall state in summary form: (1) the dispute is subject to the provisions of this Act, (2) the nature of the dispute to be submitted to ADR and (3) the identities of the members of the panel of ADR Specialists chosen pursuant to Section 7709. A failure to send such a notice to a person who has an interest in the dispute shall not prevent the ADR proceedings from going forward between or among parties who did receive such notice.

§7711. Participation By Other Parties.

When not all the parties to a dispute have filed an ADR certificate or have agreed to be bound by the Delaware Voluntary Dispute Resolution Act, such other parties may be given the opportunity to participate in the ADR proceedings by delivering to them the notice provided for in Section 7710. Parties to the dispute who are not bound to participate in the ADR proceedings may elect to participate in the ADR by selecting an ADR Specialist in accordance with Section 7709 of this chapter. Such selection shall constitute the agreement of the party to be subject to the provisions of this Chapter for purposes of the dispute in which the election to participate is made. After the passage of the time for selection of the ADR Specialist, the ADR shall proceed without further notice to or involvement by those parties to the dispute who have not elected ADR.

§7712. Scheduling of ADR Proceedings.

Promptly after notification of appointment, the ADR Specialist shall: (a) advise if he or she is willing to serve as the ADR Specialist for this dispute, (b) notify the parties of his or her expected rate of compensation, and (c) set the time and date of the ADR proceedings which shall be within 60 days of notice of appointment unless the parties and the ADR Specialist agree to another date. Unless otherwise agreed, the ADR proceedings shall be held in the offices of the ADR Specialist.

§7713. Compensation of ADR Specialist.

(a) The ADR Specialist shall be reimbursed for all reasonable out-of-pocket expenses. The ADR Specialist shall be compensated on the basis of the Specialises regular hourly fees for professional services for time spent during the day of the actual ADR proceeding and for any subsequent continuation of the proceedings agreed to by parties. In addition to this compensation for the actual ADR proceeding, the ADR Specialist may charge for up to 10 hours spent in preparing for the ADR proceeding, unless the parties agree to additional preparation time.

(b) The ADR Specialist may require the parties, on a pro rata basis, to advance his or her fees for preparation and the actual proceeding within 10 days of the notice of the scheduling of the ADR proceedings.

(c) Unless otherwise agreed, the fees and expenses of the ADR Specialist shall be divided among the parties to the proceedings on a pro rata basis.

(d) The parties and the ADR Specialist may agree on any method or rate of compensation other than as set forth in this section, provided that such agreement is in a writing sign by the parties to the agreement.

§7714. Conduct of the ADR Proceedings.

Subject to any agreement of the parties to adopt different rules of proceeding and the power of the ADR Specialist to modify these procedures in appropriate instances, the ADR shall be conducted as follows:

(a) No later than 7 days prior to the commencement of the ADR, each party

shall submit to the ADR Specialist and the other parties a statement of its position in the dispute and such supporting documents as it deems appropriate, provided that such statement of position shall not exceed 25 pages in length.

(b) Upon the commencement of the ADR, each party shall have no more than I hour to present its position to the ADR Specialist in the presence of the other parties. This presentation may be made by counsel, by examining witnesses or by any other means that is reasonable under the circumstances. Upon conclusion of any party's presentation, the ADR Specialist may permit the other parties to have up to I hour to ask questions of the presenting party, with such hour to be divided among the other parties as determined by the ADR Specialist.

(b) Upon conclusion of the initial presentations of positions by all the parties
and such questioning of the parties as thereafter occurs pursuant to subsection (b), the ADR Specialist as soon as possible shall attempt to resolve the dispute by meeting with the parties, either separately or as a group as the Specialist determines is appropriate. Such meetings shall conclude when the dispute is resolved or at the regular close of business on the day the ADR commenced, whichever first occurs.

(b) If the parties thereafter agree, the ADR Specialist may continue to discuss the resolution of the dispute with them, either separately or together, until any party notifies the ADR Specialist that such discussions are at an impasse.

§7715, Conclusion of ADR.

Any settlement of the dispute submitted to ADR shall be reduced to writing as soon as soon as possible after the settlement is reached, with such writing to be prepared by the ADR Specialist (unless the parties otherwise agree as part of their settlement that they will prepare the writing) and shall be signed by the parties to be valid and binding upon them. If no settlement is reached at the close of business on the day the ADR is commenced or after further mediation at the parties' request until an impasse is declared, the ADR Specialist shall declare the ADR has concluded by advising the parties in writing.

§7716. Confidentiality.

All ADR proceedings shall be confidential and any memoranda submitted to the ADR Specialist, any statements made during the ADR and any notes or other materials made by the ADR Specialist or any party in connection with the ADR shall not be subject to discovery or introduced into evidence in any proceeding and shall not be construed to be a waiver of any otherwise applicable privilege. Nothing in this section shall limit the discovery or use as evidence of documents that would have otherwise been discoverable or admissible as evidence but for the use of such documents in the ADR proceeding.

§7717. Immunity.

The ADR Specialist shall have such immunity as if he or she were a judge acting in a court with jurisdiction over the subject matter and the parties involved in the dispute that led to ADR.

§7718. Attendance at ADR.

A person may be represented by counsel in all stages of the ADR proceeding. In addition to its counsel, each party must attend the initial ADR proceeding in which the parties make their presentations and submit to questioning and meet with the ADR Specialist. A person may attend through its chief executive officer (or person holding an equivalent position in such entity) or through any other person authorized in writing by the entity's governing body -to so attend, provided such authorized person files his or her written authorization to attend with the ADR Specialist. The authorization shall state that the representative has the authority to settle the dispute (subject to any limits that are deemed appropriate by the governing body and which limits need not be revealed) and such person is charged with the responsibility of reporting to the party's governing body on what occurred during the ADR proceedings. Any such report shall be confidential in accordance with Section 7716 of this Chapter.

§7719. Enforcement of ADR Rights.

(a) The right to ADR provided for under this chapter may be enforced by any court with jurisdiction over the parties. Any person who files a certificate under Section 7704 of this Chapter thereby consents to the jurisdiction of the Court of Chancery of the State of Delaware for the purpose of enforcing in a summary proceeding the rights provided for by this chapter.

(b) In addition to the right to compel ADR provided by subsection (a), any party to an ADR proceeding to be conducted pursuant to this chapter shall be entitled to reasonable attorneys' fees incurred in compelling ADR.

(c) Any party failing to pay the reasonable fees and expenses of an ADR Specialist shall be subject to suit by the ADR Specialist for three times the amount of such fees and expenses, together with the attorneys' fees and other costs incurred in such litigation.

§7720. Tolling of Limitations.

The initiation of ADR under Section 7710 of this Chapter shall suspend the running of the statute of limitations applicable to the dispute that is the subject of the ADR until 14 days after the ADR is concluded in accordance with Section 7715 of this Chapter.

§7721. Effect of Commencing Litigation.

Other than a proceeding to require ADR under Section 7719 of this Chapter, this statute and the procedures provided for herein shall cease to have any force or effect upon the commencement of litigation concerning the dispute that is the subject of the ADR proceedings. The parties to any such litigation shall be exclusively subject to the rules of the tribunal in which such litigation has been commenced and nothing in this statute shall be construed to infringe upon or otherwise affect the jurisdiction of the courts over such disputes."

Section 2. This legislation shall become effective 90 days after its enactment into law.

Approved July 7, 1995