GTSI CORP. v. Eyak Technology, LLC
10 A.3d 1116
| Del. Ch. | 2010Background
- GTSI Corp. is a 37% member of Eyak Technology, LLC (EyakTek) and served as its mentor in the SBA Section 8(a) program.
- EyakTek and Eyak Corp. sought early graduation from the Section 8(a) program, which led to dissolution implications under EyakTek's LLC Agreement.
- GTSI asserted that EyakTek must dissolve upon graduation unless 65% of the members vote to continue EyakTek’s business.
- GTSI demanded a meeting of EyakTek's members under the LLC Agreement, which EyakTek declined to hold while proposing a $7 per GTSI share acquisition.
- GTSI filed a multi-count lawsuit seeking relief for governance and fiduciary issues, including claims routed to arbitration per the LLC Agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides substantive arbitrability under the LLC Agreement? | GTSI argues the Equitable Remedy Provision allows court action and arbitration should not apply to those claims. | EyakTek contends the Arbitration Provision clearly assigns arbitrability to the arbitrator. | Arbitrator decides substantive arbitrability; court defers to arbitration. |
| Does the Arbitration Provision clearly and unmistakably assign arbitrability to the arbitrator? | GTSI claims the Equitable Remedy Provision creates a court role for certain claims. | EyakTek asserts the language that disputes shall be settled by arbitration including arbitrability shows clear intent for arbitrator to decide. | Yes; the clause assigns the arbitrator to decide arbitrability. |
| Is the exception for wholly groundless arbitrability invoked by GTSI applicable? | GTSI argues not wholly groundless and should be considered by the court. | EyakTek contends non-frivolous arguments exist; court should defer. | Non-frivolous arguments exist; defer to arbitrator. |
| Does read-as-a-whole analysis affect whether all disputes must be arbitrated? | Equitable Remedy Provision could carve out court relief, potentially undermining mandatory arbitration. | Arbitration Provision contemplates arbitrator resolution of disputes and matches a unitary remedial scheme. | Arbitration provision, read as a unit, supports arbitration of disputes; court ordered stay pending arbitrator's decision. |
Key Cases Cited
- BAYPO Ltd. P'ship v. Tech. JV, LP, 940 A.2d 20 (Del. Ch. 2007) (interpreting clear and unmistakable intent to arbitrate arbitrability)
- McLaughlin v. McCann, 942 A.2d 616 (Del. Ch. 2008) (presumes court decides arbitrability unless contract clearly assigns to arbitrator)
- Willie Gary, 906 A.2d 76 (Del. 2006) (AAA rule reference may show intent to arbitrate arbitrability when clause silent)
- Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008) (enforcement of specific performance as a contractual remedy)
- True N. Commc'ns Inc. v. Publicis S.A., 711 A.2d 34 (Del. Ch. 1997) (irreparable harm established by contractual stipulation)