Evidence Must Be Newly Discovered to Vacate Arbitration Award

Posted on June 11, 2008 by R. David Donoghue

Nilssen v. MagneTek, Inc., No. 05 C 2933, 2008 WL 1774984 (N.D. Ill. Apr. 16, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan confirmed an arbitration award and denied plaintiff's motion to vacate it. The arbitrator awarded plaintiffs (collectively "Nilssen") approximately $23M for defendant Magnetek's patent infringement. MagneTek argued that the Court lacked jurisdiction because the arbitration agreement did not expressly confer the right to confirm the arbitration award. But the Court held that the Seventh Circuit only required that the right to confirm be inferred from the arbitration agreement. While the arbitration agreement did not explicitly allow confirmation, the parties evidenced their intent to allow confirmation:

  • The parties' American Arbitration Association ("AAA") submission provided for confirmation;
  • The parties agreed to be bound by the AAA's Commercial Arbitration Rules which provide for court confirmation; and
  • MagneTek's post-arbitration press release said that the parties conducted binding arbitration which was not subject to appeal.

MagneTek also argued that certain prior art patents were new evidence which required vacating the award. But the Court held that MagneTek was aware of the patents during the arbitration. In fact, at least one patent was marked as an exhibit in the arbitration. Furthermore, MagneTek's post-arbitration prior art search could have been performed before the arbitration. And the Court would not reward MagneTek's late search with a second shot at invalidity.

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Court Upholds International Arbitration Provision

Posted on March 20, 2008 by R. David Donoghue

Dime Group Int’l, Inc. v. Soyuz-Victan USA, LLC, No. 07 C 4178, 2008 WL 450825 (N.D. Ill. Feb. 13, 2008) (Darrah, J.).

Judge Darrah stayed plaintiff’s trademark infringement-related claims pending international arbitration in Russia pursuant to Ukranian law, as required by the parties’ liquor distribution agreement. Plaintiff argued that the arbitration clause was prohibitively expensive, but the Court held plaintiff’s proof was not sufficient. Plaintiff failed to show it was financially incapable of bearing the arbitration costs. All plaintiff offered was that it had a $13,000 operating loss in 2006. But, that was balanced by plaintiff’s $7 million in sales and good credit rating. Additionally, if plaintiff prevails, defendants would bear all arbitration costs.

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Arbitration Clause Not Waived by Counsel's Delay In Seeking Arbitration Because Counsel Did Not Have Actual Knowledge of the Provision

Posted on December 29, 2006 by R. David Donoghue

DeVore Family Partnership LLP v. McDougal Littell, No. 06 C 3484, 2006 WL 3393844 (N.D. Ill. Nov. 22, 2006) (Conlon, J.).

Having already refused to dismiss this case (here), Judge Conlon held that defendants had not waived the arbitration clause in the parties' Agreement and stayed the case pending the results of the arbitration.  Plaintiff argued that defendants waived the arbitration clause by their delay in seeking arbitration.  Defendants countered that they had not delayed because when their counsel sought copies of the agreement on several occasions, defendants' employee sent copies of the front pages of the agreement, but omitted the back pages which included a set of preprinted terms and conditions including the arbitration clause at issue.  Defendants' counsel received the full agreement several months after the case was filed and sought arbitration and a stay of this proceeding within two weeks of reading the full agreement.

 

Plaintiff argued that defendants had constructive knowledge of the arbitration clause because they signed and still had possession of the entire agreement.  The Court did not accept the constructive knowledge argument because of, among other things, counsel's diligent efforts to get the entire agreement.  Additionally, the Court noted that arbitration clause was not a negotiated portion of the agreement, but was part of plaintiff's preprinted contract.
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