Justia Arbitration & Mediation Opinion Summaries

Vicor Corporation supplied power converter modules to Foxconn for years. Vicor alleged that Foxconn switched to manufacturing and importing knock-off modules that infringed Vicor's patents. In July 2023, Vicor filed a complaint with the International Trade Commission (ITC) alleging patent infringement by Foxconn. Simultaneously, Vicor sued Foxconn for patent infringement in the United States District Court for the Eastern District of Texas, which stayed the case pending the ITC's resolution. Foxconn then initiated arbitration in China, claiming Vicor had agreed to arbitrate disputes based on terms in purchase orders. Vicor filed a new lawsuit in the United States District Court for the District of Massachusetts, seeking to enjoin the arbitration and declare it was not bound by the arbitration or license terms.The district court granted a temporary restraining order (TRO) and later a preliminary injunction against the arbitration, despite Foxconn's request for a stay under 28 U.S.C. § 1659. The court acknowledged that Section 1659 applied but concluded it could still grant preliminary relief based on the All Writs Act and its inherent authority to preserve its jurisdiction.The United States Court of Appeals for the First Circuit reviewed the case. The court concluded that Section 1659 required the district court to stay proceedings because Vicor's claims involved issues also present in the ITC proceeding. The appellate court held that the district court erred in granting the preliminary injunction despite Foxconn's request for a stay. Consequently, the First Circuit vacated the preliminary injunction and remanded the case for further proceedings consistent with its opinion. View "Vicor Corp. v. FII USA Inc." on Justia Law

Jason and Kacie Highsmith hired Shelter, LLC to manage a home renovation project and later contracted with Design Gaps, Inc. to design and install cabinets and closets. The contracts required arbitration for disputes but did not specify completion dates. Design Gaps failed to meet multiple promised deadlines, leading the Highsmiths to terminate the contracts and hire another company. The Highsmiths shared Design Gaps' copyrighted drawings with the new contractor. They then filed for arbitration, alleging breach of contract and other claims, while Design Gaps counterclaimed for various issues, including copyright infringement.The arbitrator held a three-day hearing, during which the Highsmiths presented multiple witnesses, while Design Gaps only presented David Glover. The arbitrator found in favor of the Highsmiths, awarding them damages and attorney’s fees, and denied Design Gaps' counterclaims, including the copyright claim, citing fair use and lack of evidence for copyright registration.Design Gaps petitioned the United States District Court for the District of South Carolina to vacate the arbitration award, arguing the arbitrator disregarded the law and failed to issue a reasoned award. The district court denied the petition and confirmed the arbitration award, also granting the Highsmiths' motion for attorney’s fees.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court dismissed the appeal, citing lack of federal jurisdiction based on the precedent set in Friedler v. Stifel, Nicolaus, & Co., which held that federal courts do not have jurisdiction over motions to vacate arbitration awards unless there is an independent basis for federal jurisdiction beyond the Federal Arbitration Act. The court concluded that the petition did not meet this requirement. View "Design Gaps, Inc. v. Shelter, LLC" on Justia Law

Dr. John Insall, an orthopedic surgeon, developed and patented knee replacement devices, which he licensed to Zimmer Biomet Holdings, Inc. In return, Zimmer agreed to pay royalties to Insall, and later to his estate after his death. When Insall’s last patent expired in 2018, Zimmer ceased royalty payments, claiming the obligation had ended. The dispute was submitted to arbitration, where the Estate prevailed. Zimmer then sought to vacate the arbitration award in district court, arguing that continuing royalty payments violated public policy. The district court confirmed the arbitration award.The United States District Court for the Northern District of Illinois reviewed the case. Zimmer argued that the arbitration award should be vacated based on public policy grounds, citing Supreme Court decisions in Brulotte v. Thys Co. and Kimble v. Marvel Entertainment, LLC, which prohibit collecting royalties on expired patents. The district court rejected Zimmer’s argument and confirmed the arbitration award, leading to Zimmer’s appeal.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court emphasized the limited scope of judicial review over arbitration awards under the Federal Arbitration Act (FAA). The court found that the arbitration panel had correctly interpreted the 1998 amendments to the agreement, which untethered the royalty payments from the patents themselves, making them based on the marketing and branding of the NexGen Knee products. Consequently, the court held that the arbitration award did not violate public policy as outlined in Brulotte and Kimble. The Seventh Circuit affirmed the district court’s decision and confirmed the arbitration award in favor of Insall’s Estate. View "Zimmer Biomet Holdings, Inc. v. Insall" on Justia Law

Ascension Data & Analytics, Rocktop Partners, and Rocktop Holdings II (collectively, "Ascension") entered into a contract with Pairprep, Inc. for data extraction services. The contract was terminated due to an alleged data breach and Pairprep's failure to extract reliable data. Ascension then contracted with another vendor, Altada Technologies Solutions, but that contract was also terminated early due to Altada's financial crisis. Ascension initiated arbitration proceedings against Pairprep to recover remediation costs incurred as a result of the data breach. Pairprep counterclaimed, alleging breach of contract and violation of the federal Defend Trade Secrets Act. The arbitration panel rejected Ascension's defenses and granted Pairprep a monetary award.Ascension filed an application in the Northern District of Texas to vacate the arbitration award, arguing that Pairprep's counterclaims were barred by res judicata due to a previous dismissal of identical claims against Altada. Pairprep filed an application to confirm the arbitral award in a Texas state court, which was granted. The district court dismissed Ascension's application for lack of subject matter jurisdiction and denied its motion for preliminary injunctive relief.The United States Court of Appeals for the Fifth Circuit affirmed the district court's decision. The court applied the Supreme Court's decision in Badgerow v. Walters, which held that a district court must have an independent jurisdictional basis to consider applications to confirm, modify, or vacate arbitral awards under the Federal Arbitration Act. The court found that Ascension had not established an independent basis for subject matter jurisdiction, as the parties were not diverse and Ascension did not identify any federal law entitling it to relief. Therefore, the court concluded that the dispute over the enforceability of the arbitral award must be litigated in state court. View "Ascension Data v. Pairprep" on Justia Law

In a dispute between SmartSky Networks, LLC and DAG Wireless, Ltd., DAG Wireless USA, LLC, Laslo Gross, Susan Gross, Wireless Systems Solutions, LLC, and David D. Gross over alleged breach of contract, trade secret misappropriation, and deceptive trade practices, the United States Court of Appeals for the Fourth Circuit ruled that the district court did not have the jurisdiction to enforce an arbitration award. Initially, the case was stayed by the district court pending arbitration. The arbitration tribunal found in favor of SmartSky and issued an award, which SmartSky sought to enforce in district court. The defendants-appellants argued that, based on the Supreme Court decision in Badgerow v. Walters, the district court lacked subject matter jurisdiction to enforce the arbitration award. The Fourth Circuit agreed, noting that a court must have a basis for subject matter jurisdiction independent from the Federal Arbitration Act (FAA) and apparent on the face of the application to enforce or vacate an arbitration award. The court concluded that the district court did not have an independent basis of subject matter jurisdiction to confirm the arbitration award. As such, the court reversed and remanded the case to the district court for further proceedings. View "Smartsky Networks, LLC v. DAG Wireless, LTD." on Justia Law

Lai, an engineer, had access to Applied’s trade secrets and participated in highly confidential meetings. Mattson, Applied's direct competitor, recruited 17 Applied employees. Lai accepted a job with Mattson. Before his last day at Applied, Lai accessed proprietary information from Applied’s cloud-based storage system and sent e-mails attaching highly confidential Applied documents—many clearly marked as such—to his personal email accounts. He signed a separation certificate stating he had not retained any Applied information and confirmed this in two exit interviews. After starting his new job, Lai logged into his personal email accounts on his Mattson computer. Lai claims never disclosed any Applied information to Mattson. Mattson denies any knowledge of Lai’s actions.Applied sued Mattson and Lai, citing the Uniform Trade Secrets Act (Civ. Code 3426) and breach of Lai’s employment agreement. Lai then deleted the emails he had sent to one account, and, after communicating with Mattson’s lawyers, downloaded a confidential Applied document to his Mattson laptop, deleting it a moment later. Mattson put Lai on leave. cut off his access to his personal email accounts. and sequestered his iPhone and computers. The defendants moved to compel arbitration based on a provision in the Applied-Lai employment contract. The court of appeal affirmed a preliminary injunction prohibiting the defendants from accessing or using Applied’s confidential information and an order compelling arbitration as to Lai. Mattson, a non-party, is not entitled to arbitration. The litigation should be stayed pending arbitration. View "Mattson Technology, Inc. v. Applied Materials, Inc." on Justia Law

NuVasive, Inc. manufactures medical products and equipment to treat spinal diseases. In central Florida, NuVasive sold its products through an exclusive distribution agreement with Absolute Medical, LLC. Under the agreement, Absolute Medical employed independent-contractor sales representatives who marketed and sold NuVasive’s products to doctors and medical practices in the region. NuVasive sued Absolute Medical, Soufleris, AMS, and two of Absolute Medical’s sales representatives who began working for AMS for breaching the exclusive. The district court enforced a dispute resolution clause in the agreement, ordering NuVasive and Absolute Medical to arbitrate NuVasive’s breach-of-contract claim seeking money damages. Absolute Medical, Soufleris, AMS, and the sales representatives appealed the district court’s order granting NuVasive’s motion to vacate the arbitration panel’s final award.   The Eleventh Circuit affirmed. The court held that the district court did not err by equitably tolling the three-month filing deadline and considering NuVasive’s motion as timely. The court explained that the district court’s findings of fact were not clearly erroneous, and they supported the district court’s conclusion that NuVasive satisfied both prongs of the equitable tolling analysis. Defendants’ conduct presented extraordinary circumstances, and NuVasive was diligent once it learned that there was reason to pursue vacatur. Further, the court held that the district court did not err by vacating the final award. The district court correctly concluded that the fraud was materially related to that issue. Finally, the court held that the district court did not abuse its discretion by declining to direct a rehearing by the arbitration panel. View "Nuvasive, Inc. v. Absolute Medical, LLC, et al." on Justia Law

Direct Biologics, LLC (“DB”) brought claims for breach of covenant to not compete and misappropriation of trade secrets against Adam McQueen, DB’s former employee, and Vivex Biologics, Inc. (“Vivex”), McQueen’s new employer. After granting DB a temporary restraining order based on its trade secret claims, the district court denied DB’s application for a preliminary injunction. Finding that DB’s claims were subject to arbitration, the district court also dismissed DB’s claims against McQueen and Vivex and entered final judgment.   The Fifth Circuit vacated the district court’s orders denying DB’s motion for a preliminary injunction and dismissing DB’s claims and remanded. The court held that the district court did not abuse its discretion by declining to presume irreparable injury based on McQueen’s breach of his non-compete covenants. The court held that remand is thus proper to allow the district court to make particularized findings regarding irreparable harm; specifically, the likelihood of misuse of DB’s information and the difficulty of quantifying damages should such misuse occur. View "Direct Biologics v. McQueen" on Justia Law

In 2007, ROHM Japan and MaxPower entered into a technology license agreement (TLA). ROHM Japan was permitted “to use certain power [metal oxide semiconductor field-effect transistors (MOSFET)]-related technologies of” MaxPower (Licensor) developed under a Development and Stock Purchase Agreement in exchange for royalties paid to MaxPower. The TLA, as amended in 2011, includes an agreement to arbitrate “[a]ny dispute, controversy, or claim arising out of or in relation to this Agreement or at law, or the breach, termination, or validity thereof.” Arbitration is to be conducted “in accordance with the provisions of the California Code of Civil Procedure.”In 2019, a dispute arose between ROHM Japan and MaxPower concerning whether the TLA covers ROHM’s silicon carbide MOSFET products. MaxPower notified ROHM Japan of its intent to initiate arbitration. Shortly thereafter, ROHM's subsidiary, ROHM USA, sought a declaratory judgment of noninfringement of four MaxPower patents in the Northern District of California and four inter partes review petitions. The district court granted MaxPower’s motion to compel arbitration and dismissed the case without prejudice, reasoning that the TLA “unmistakably delegate[s] the question of arbitrability to the arbitrator.” The Federal Circuit affirmed. In contracts between sophisticated parties, incorporation of rules with a provision on the subject is normally sufficient “clear and unmistakable” evidence of the parties’ intent to delegate arbitrability to an arbitrator. View "ROHM Semiconductor USA, LLC v. MaxPower Semiconductor, Inc." on Justia Law

The Second Circuit affirmed the district court's confirmation of an arbitration award under 9 U.S.C. 9 for petitioners and other individuals. This case involved a dispute between two groups of the Bobov Hasidic Jewish community in Brooklyn that agreed to arbitration before a rabbinical tribunal. The tribunal ruled that petitioners owned the "Bobov" trademark, and the district court confirmed the ruling.The court held that district courts should "look through" a 9 U.S.C. 4 petition to the underlying controversy to determine whether subject matter jurisdiction exists to confirm the arbitration award pursuant to 9 U.S.C. 9. The court held that the district court properly looked through the arbitration petition here to the underlying controversy to determine that it had subject matter jurisdiction. In this case, the district court properly turned aside respondent's non-jurisdictional arguments, found the petition "effectively" unopposed and that no issue of material fact precluded confirmation, and did not err in confirming the award. View "Landau v. Rheinold" on Justia Law