Delaware Court Denies Losing Party A Second Bite At the Arbitration Apple

In Gulf LNG Energy, LLC v. ENI USA Gas Marketing LLC,, the Delaware Supreme Court framed the issues before it as follows: “first, whether the Court of Chancery had jurisdiction to enjoin a second arbitration that collaterally attacks a prior arbitration award; and second, whether the second arbitration in fact collaterally attacked the prior arbitration award.”

The Court answered both questions affirmatively. As to the first question, the Court held:

“Once court review under the FAA is finished, the courthouse doors are closed to the dispute. Some parties, however, have tried to open a new door by filing a follow-on arbitration or legal proceeding. In the follow-on proceeding, the claims are changed but the goal is the same—trying to undo a loss in the prior arbitration award. Settled federal and state precedent recognizes these follow-on proceedings as improper end runs around the FAA’s exclusive review process. In the words of those cases, they are improper collateral attacks on the earlier final award.”

As to the second question, the Court held that the appropriate inquiry was not the specific articulation of claims raised by the challenging party, but rather that “the focus should have been on whether [the challenging party] sought through the Second Arbitration to, in effect, ‘appeal’ the Final Award outside the FAA’s review process.”

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