A federal appeals court has upheld a ruling declaring that a Delaware law allowing chancery judges to oversee secret arbitration in high-stakes business disputes is unconstitutional.

A three-judge panel of the Third U.S. Circuit Court of Appeals ruled 2-to-1 Wednesday to uphold a federal judge's ruling in favor of the Delaware Coalition for Open Government, which challenged the law.

DelCOG, backed by The Associated Press, The New York Times and several other major news organizations, claimed in its lawsuit that the secret arbitration conducted by Delaware's Chancery Court violated the First Amendment rights of citizens to attend judicial proceedings and access court records.

Attorneys for the state argued that secret arbitration made the Chancery Court more efficient and generated revenue for Delaware, corporate home to thousands of companies.