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In a stand-alone arbitration agreement to resolve a party’s withdrawal as shareholder of a corporation, a United States District Court in Delaware held that the parties agreed to arbitrate the entire despite, absent any indication to the contrary.
In Millennium Validation Services, Inc. v. Thompson, C.A. No. 02-1430 (GMS), 2006 WL 3159821 (D. Del. Nov. 3, 2006), Thompson was forced out as shareholder of Millennium Validation Services, Inc. (Millennium). Millennium facilitated a buy-out of his shares, but ceased payments and sued Thompson once it learned that he had accepted employment with a rival company. The parties agreed to arbitration, where Thompson prevailed. The arbitrator determined the value of Thompson’s shares, and awarded him a lump sum in exchange for his remaining shares of capital stock.
The Court granted Thompson’s motion to confirm the arbitration award. Millennium contended that the arbitrator had exceeded his authority by determining share values and awarding the lump sum. Yet, Millennium had clearly manifested its intent to submit the entire agreement to binding arbitration.
Unlike the cases cited by Millennium, which dealt with general arbitration clauses contained within broader contractual arrangements, the contract with Thompson was an individual, voluntary agreement to settle all disputes through arbitration. See Katz v. Feinberg, 290 F.3d 95 (2d Cir. 2002) (finding that arbitrators exceeded their authority by deciding specific issues not authorized by a general arbitration clause). Therefore, the agreement was sufficiently broad to allow the arbitrators to decide in favor of Thompson on the lump sum and non-compete issues.
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