Cornell University et al v. Illumina Inc.
Filing
676
MEMORANDUM AND ORDER re 602 MOTION to Set Aside Judgment [Motion to Vacate Stipulation of Dismissal Pursuant to Rule 60 and to Rescind Settlement Documents for Fraud or, Alternatively, for Leave to Conduct Discovery] filed by Cornell Resea rch Foundation Inc., Cornell University, 625 Cross MOTION to Dismiss MOTION to Stay re 602 MOTION to Set Aside Judgment [Motion to Vacate Stipulation of Dismissal Pursuant to Rule 60 and to Rescind Settlement Documents for Fraud or, Alternatively, for Leave to Conduct Discovery] MOTION to Compel Mediation or Arbitration filed by Life Technologies Corporation, Applied Biosystems LLC. Signed by Judge Mary Pat Thynge on 1/19/18. (cak)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CORNELL UNIVERSITY, CORNELL
RESEARCH FOUNDATION, INC., LIFE
TECHNOLOGIES CORPORATION, and
APPLIED BIOSYSTEMS, LLC,
Plaintiffs,
v.
ILLUMINA, INC.,
Defendant.
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C. A. No. 10-433-LPS-MPT
MEMORANDUM ORDER
I.
INTRODUCTION
Cornell University and Cornell Research Foundation, Inc. (referred to collectively
as “Cornell” and individually as “Cornell University” and “CRF”) are plaintiffs in this
action, jointly with Life Technologies Corporation and Applied Biosystems, LLC
(collectively “Life Tech”). On May 24, 2010, plaintiffs brought this lawsuit against
defendant Illumina, Inc. (“Illumina”) alleging infringement of certain patents.1 The parties
entered into a settlement agreement effective April 14, 2017 (the “Settlement
Agreement”),2 and a stipulation of dismissal pursuant to the Settlement Agreement (the
“Dismissal”) was entered on April 24, 2017.3 Shortly after the dismissal Cornell filed a
Cornell’s Motion to Vacate Stipulation of Dismissal Pursuant to Rule 60 and to Rescind
Settlement Documents for Fraud or, Alternatively, for Leave to Conduct Discovery
1
D.I. 1.
D.I. 606-2.
3
D.I. 598.
2
(“Motion to Vacate”).4 Life Tech then filed a Cross-Motion to Dismiss or Stay Cornell’s
Motion and to Compel Mediation or Arbitration (“Cross-Motion”).5 This Memorandum
Order addresses Life Tech’s Cross-Motion.
In its Motion to Vacate, Cornell seeks vacatur of the Dismissal entered in this
action because it was submitted pursuant to the Settlement Agreement with Life Tech
and Illumina that Cornell was purportedly fraudulently induced to agree to.6 It further
seeks rescission of the Settlement Agreement and an April 27, 2017 sublicense
agreement entered into between Life Tech and Illumina (the “Sublicense Agreement”)
that was also part of the same allegedly fraudulent scheme.7 Alternatively, if the court
believes more evidence is needed to support Cornell’s requested relief, it asks for the
opportunity to conduct discovery, which would also help determine to what degree
Illumina conspired in Life Tech’s allegedly fraudulent scheme.8
In its Cross-Motion, Life Tech asserts the parties’ 2010 New Exclusive License
Agreement (“NELA”) and Settlement Agreement each require the disputes raised in the
Motion to Vacate be submitted to mediation or arbitration.9 Based on that assertion, Life
Tech requests Cornell be ordered to mediate or arbitrate and the Motion to Vacate be
4
D.I. 602.
D.I. 625.
6
D.I. 603 at 1.
7
Id. Cornell also alleges a suit brought by Illumina against Life Tech in the
Southern District of California (the “Illumina California Action”) which Life Tech settled
very soon after this case was dismissed is an additional part of Life Tech’s alleged
fraudulent scheme. Id. at 3.
8
Id. at 3.
9
D.I. 626 at 1. The NELA was executed on February 22, 2010. D.I. 606-1 at p.
1.
5
2
dismissed or stayed.10
II.
LIFE TECH’S CROSS-MOTION
In its Motion to Vacate, Cornell alleges Life Tech fraudulently induced it to enter
the Settlement Agreement and consent to the Dismissal pursuant to that agreement,
entered into the allegedly improper Sublicense Agreement, and exchanged consideration
with Illumina for settlement of this action outside the scope of the Settlement
Agreement.11 In its opposition to the Motion to Vacate, Life Tech disputes Cornell’s
allegations and purportedly demonstrates it acted entirely within the scope of its
exclusive, discretionary rights under the NELA to control and settle litigation with Illumina
and to grant sublicenses on any terms.12 Life Tech argues, however, to the extent there
is any dispute concerning whether it acted within its rights by entering into these
agreements, those disputes must be submitted to mediation or arbitration pursuant to the
NELA and the Settlement Agreement.13
Life Tech contends the NELA between Cornell and Life Tech contains a valid,
enforceable, arbitration clause which provides that, except in the case of royalty
disputes, Cornell gave up its right to “proceed with direct judicial remedies” against Life
Tech.14
10
D.I. 626 at 2.
Id. at 1 (citing D.I. 603 at 12-19).
12
Id.
13
Id.
14
Id. at 2 (citing 606-1 at §§ 16.1-16.2). Illumina filed a response to the CrossMotion stating it takes no position on the motion to the extent that it seeks mediation or
arbitration to resolve the dispute between Life Tech and Cornell over whether Life
Tech’s conduct in making the Settlement Agreement and Sublicense Agreement with
Illumina impaired Cornell’s rights under the NELA. D.I. 647 at 1. It states the
agreement between Cornell and Life Tech conferred authority to Life Tech to control the
11
3
Section 16.1 of the NELA provides:
All disputes over the meaning and interpretation of this Agreement shall be
resolved by conciliation and mediation, and if mediation is unsuccessful,
then disputes shall be finally settled by binding arbitration according to the
procedures set forth at Appendix C.15
Section 16.2 of the NELA provides:
Notwithstanding Section 16.1, [Cornell] reserves the right and power to
proceed with direct judicial remedies against LICENSEE without
conciliation, mediation, or arbitration for breach of the royalty payment and
sales reporting provisions of this Agreement after giving written notice of
such breach to LICENSEE followed by an opportunity period of sixty (60)
days in which to cure such breach. In collecting overdue royalty payments
and securing compliance with reporting obligations, [Cornell] may use all
judicial remedies available.16
Life Tech also maintains the Settlement Agreement requires arbitration of any
disputes arising thereunder, including those relating to its enforceability, validity,
litigation against Illumina and enter into the agreements with it. Id. Illumina notes it is
not a party to the NELA and is not a party to the dispute between Cornell and Life Tech
about its terms. Id. Illumina does, however, oppose the Cross-Motion to the extent that
it seeks to compel Illumina to arbitrate or have its own rights determined in arbitration.
Id. Illumina states is not a party to the NELA and is not bound by its terms. Id.
Arbitration may not be compelled unless there is a valid agreement to arbitrate between
the parties and the dispute falls withing the scope of that agreement. Id. (citing Century
Indem. Co. v. Certain Underwriters at Lloyd’s, London, 584 F.3d 513-523 (3d Cir.
2009)). Illumina contends the arbitration provision in the Settlement Agreement
concerns only disputes between “Life Tech and Cornell, on the one hand, and Illumina
on the other hand.” Id. (quoting D.I. 606-2 at § 9.2(a)). Similarly, the Sublicense
Agreement between Life Tech and Illumina concerns disputes “between [Life Tech], on
the one hand, and Illumina on the other hand.” Id. (quoting D.I. 606-3 at § 9.2(a)).
Illumina argues the dispute raised by Cornell is between it and its co-plaintiff Life Tech.
Id. Illumina avers that it and Life Tech agree that the Settlement Agreement, as well as
the separate Sublicense Agreement, are legally valid contracts; there is no dispute
between them on that point. Id. at 1-2. Illumina urges the court to deny the CrossMotion insofar as it seeks mediation or arbitration of the validity of the Settlement
Agreement and Sublicense Agreement and Illumina’s rights under those agreements.
Id. at 2.
15
D.I. 606-1 at § 16.1.
16
Id. at § 16.2.
4
interpretation, or breach.17
Section 9.2(a) of the Settlement Agreement provides, in relevant part:
Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach, termination, enforcement, interpretation or
validity thereof, including the determination of the scope or applicability of
this agreement to arbitrate, shall be determined by arbitration between Life
Tech and Cornell, on the one hand, and Illumina on the other hand.18
A.
Governing Law
The Federal Arbitration Act (the “FAA”) provides that written agreements to
arbitrate disputes “shall be valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of a contract.”19 “The FAA mandates that
district courts shall direct parties to proceed to arbitration on issues for which arbitration
has been agreed, and to stay proceedings while arbitration is pending.”20 “[D]istrict
courts may dismiss an action if all the issues raised are arbitrable and must be submitted
to arbitration.”21 Section 3 of the FAA “allows litigants already in federal court to invoke”
enforceable arbitration agreements.22 Where there is a valid and enforceable arbitration
clause, courts should compel arbitration “unless it may be said with positive assurance
that the arbitration clause is not susceptible of an interpretation that covers the asserted
dispute. Doubts should be resolved in favor of coverage.”23 When an arbitration
17
D.I. 626 at 2 (citing 606-2 at § 9.2(a)).
D.I. 606-2 at § 9.2(a).
19
9 U.S.C. § 2.
20
BAE Sys. Aircraft Controls, Inc. v. Eclipse Aviation Corp., 224 F.R.D. 581, 585
(D. Del. 2004) (citations omitted).
21
Id. (citations omitted).
22
Arthur Andersen LLC v. Carlisle, 556 U.S. 624, 630 (2009).
23
AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986)
(citation and internal quotation marks omitted); see also Moses H. Cone Mem. Hosp. v.
Mercury Constr. Corp., 475 U.S. 643, 24-25 (1983) (“[A]ny doubts concerning the scope
18
5
agreement provides the basis for a motion, “the court may ‘engage in a limited review [of
the document] to ensure the dispute is arbitrable’ and, if appropriate, enter an order to
compel or enjoin arbitration.”24 “Because arbitration is a matter of contract, before
compelling arbitration pursuant to the Federal Arbitration Act, a court must determine
that (a) a valid agreement to arbitrate exists, and (2) the particular dispute falls within the
scope of that agreement.”25 Delaware courts employ a two-part procedure for
determining whether a claim is arbitrable under an arbitration clause:
First, the court must determine whether the arbitration clause is broad or
narrow in scope. Second, the court must apply the relevant scope of the
provision to the asserted legal claim to determine whether the claim falls
within the scope of the contractual provisions that require arbitration. If the
court is evaluating a narrow arbitration clause, it will ask if the cause of
action pursued in court directly relates to a right in the contract. If the
arbitration clause is broad in scope, the court will defer to arbitration on any
issues that touch on contract rights or contract performance.26
Also, “[t]he party seeking to avoid arbitration bears the burden of proving the invalidity of
of arbitrable issues should be resolved in favor of arbitration . . . .”); GTSI Corp. v. Eyak
Tech., LLC, 10 A.3d 1116, 1121 (Del. Ch. 2010) (“In a case where there is any rational
basis for doubt about [substantive arbitrability], the court should defer to arbitration,
leaving the arbitrator to determine what is or is not before her.”) (alteration in original)
(citation and quotation marks omitted).
24
Wright v. Rent-A-Center E., Inc., C.A. No. 08-956-GMS, 2009 WL 4277243, at
*2 (D. Del. Nov. 30, 2009) (alteration in original) (quoting John Hancock Mut. Life Ins.
Co. v. Olick, 151 F.3d 132, 137 (3d Cir. 1998)).
25
Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir 2009)
(citations omitted); see also Century Indem. Co. v. Certain Underwriters at Lloyd’s,
London, 584 F.3d 513, 523 (3d Cir. 2009) (same, citing Kirleis, 560 F.3d at 160).
26
Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d 149, 155 (Del. 2002);
see also Local 827, Int’l Bhd. of Elec. Workers, AFL-CIO v. Verizon New Jersey, Inc.,
458 F.3d 305, 310 (3d Cir. 2006) (“Where the arbitration provision is narrowly crafted,
‘we cannot presume, as we might if it were drafted broadly, that the parties here agreed
to submit all disputes to arbitration[.]’”) (quoting Trap Rock Indus. v. Local 825, Int’l
Union of Operating Eng’rs, 982 F.2d 844, 888 n.5 (3d Cir. 1992)).
6
an arbitration agreement.”27
B.
Discussion
Life Tech maintains the first requirement, whether the parties entered into an
agreement to arbitrate, is clear as to both the NELA and the Settlement Agreement.28
Section 16.1 of the NELA provides that “[a]ll disputes over the meaning and
interpretation” of the agreement “shall be resolved by conciliation and mediation . . . [or]
binding arbitration.”29 Life Tech argues that, when negotiating the NELA, Cornell knew
how to carve out exceptions to the arbitration clause, as evidenced by § 16.2 which
reserved Cornell’s right “to proceed with direct judicial remedies” against Life Tech
“without conciliation, mediation, or arbitration for breach of the royalty payment and sales
reporting provisions” of the NELA.30 Life Tech states there are no exceptions to the
arbitration clause for claims of fraud, the settlement of litigation, or otherwise.31
Cornell contends the arbitration clause in the NELA is too vague to be
enforceable.32 Section 16.1 provides that “disputes shall be finally settled by binding
arbitration according to the procedures set forth at Appendix C.”33 Exhibit C, however, is
a document titled “Licensed Products and Accessory Products”; it does not set forth
arbitration procedures.34 Cornell argues that because the NELA provides no guidance
27
Ins. Newsnet.com v. v. Pardine, C.A. No. 1:11-CV-00286, 2011 WL 3423081,
at *2 (M.D. Pa. Aug. 4, 2011) (citing Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 92
(2000)).
28
D.I. 626 at 6.
29
Id. (quoting D.I. 606-1 at § 16.1).
30
Id. (quoting D.I. 606-1 at § 16.2).
31
Id.
32
D.I. 643 at 11.
33
D.I. 606-1 at § 16.1.
34
D.I. 606-1, Ex. C.
7
on how any arbitration is to be conducted, that clause is fatally vague, indeterminate, and
unenforceable.35
Life Tech acknowledges that the NELA did not include the Appendix C referenced
in § 16.1, stating the incorrect exhibit was included due to a “clerical error” in compiling
the executed version of the NELA.36 In its opening brief, Life Tech cites the declaration
of Rip Finst, in-house litigation counsel for Life Tech, stating his belief that the
procedures for arbitration to which the parties intended to refer were attached to an
earlier Amended and Restated Exclusive License Agreement which had a nearly
identical arbitration clause.37
In her declaration, Valerie Cross Dorn, in-house counsel for Cornell University
who was involved in the NELA negotiations, declares that: during those negotiations
none of several drafts of the agreement exchanged included the appendix of arbitration
procedures referenced in § 16.1; at no time did the parties discuss or agree to any
procedures for arbitration in connection with the NELA; and that the final executed
version of the NELA also did not include the appendix referenced in § 16.1.38 Dorn
states that Finst was not a participant in the communications regarding the NELA
negotiations and could not know what the parties intended.39 Cornell reiterates,
35
D.I. 643 at 11.
D.I. 626 at 3 n.2.
37
D.I. 624 (Finst Decl. at ¶¶ 1, 12 (citing IC Ex. 18)). In addition to the parties’
briefing, certain documents were submitted for in camera review to assist the court in its
assessment of both pending motions. Those documents are cited in this Memorandum
Order as “IC Ex. __.”
38
D.I. 644 (Second Dorn Decl.) at ¶¶ 1, 5-7, 10-11.
39
D.I. 644 at ¶ 8. Finst represents that “[w]ith respect to the contract matters
between Cornell and Life Tech that pre-date my employment with Life Tech, the facts
provided [in his declaration] are based on information and belief, informed by knowledge
36
8
therefore, the NELA provides no guidance for its implementation or for how any
arbitration would be conducted between the parties.40
Cornel maintains that for a contractual clause to be binding, it must address the
material terms of the bargain clearly and definitely.41 Cornell argues the failure to
provide any guidance on any procedures or logistics for even basic issues, such as
whether an entity would administer the arbitration, how to select an arbitrator, or where
an arbitration would take place, renders the clause impossible to enforce.42
In its reply brief, Life Tech expanded on its contention that the NELA arbitration
clause is enforceable despite the lack of an exhibit specifying arbitration procedures. In
his declaration, Brian Griffith, Life Tech’s Divisional Counsel for the Genetic Science
Division and the Clinical & Next-Generation Sequencing Division, states the facts therein
are based on his role and responsibilities with respect to the drafting of the NELA.43
Griffith states the parties entered into the NELA as part of the resolution of a prior
and experience I obtained in my position and as part of my responsibilities for managing
the Illumina litigation.” D.I. 624 at ¶ 3.
40
D.I. 643 at 12.
41
Id. (citing In re Radiology Assocs., Inc., Civ. A. No. 9001, 1990 WL 67839, at *
2 (Del. Ch. May 16, 1990) (“An agreement cannot be enforced if, among other things,
material provisions of that agreement are uncertain or indefinite.”); Most Worshipful
Prince Hall Grand Lodge of Fee & Accepted Masons of Delaware v. Hiram Grand Lodge
Masonic Temple, Inc., (80 A.2d 294, 295 (Del. Ch. 1951) (“It is well settled that an
agreement in order to be a legally binding agreement must be reasonably definite and
certain in its terms.”) (citation omitted); Scarborough v. Delaware, 945 A.2d 1103, 1112
(Del. 2008) (“As every first year law student learns, one of the central tenets of contract
law is that a contract must be reasonably definite in its terms to be enforceable.”)
(citation omitted)).
42
D.I. 643 at 12. As an example, Cornell imagines Life Tech could prevent
Cornell from ever obtaining any relief in arbitration by refusing to agree to procedures to
arbitrate. Id.
43
D.I. 664 (Griffith Decl.) at ¶¶ 1-2.
9
arbitration between Life Tech and Cornell and that the NELA restated the parties’ July 1,
2001 Amended and Restated Exclusive Licence Agreement (“July 1, 2001 Licence
Agreement”) in large part, to specifically address dealings with Illumina.44 According to
Griffith, the NELA also adjusted how the parties would handle sublicenses with, and the
initiation of litigation against, third parties other than Illumina and compensation relating
thereto.45 The agreement also took into account certain changes in ownership of the
patents that were the subject of the NELA.46 Section 1.1 of the NELA identifies the July
1, 2001 License Agreement as the predecessor agreement being replaced by the
NELA.47 Provisions of the July 1, 2001 License Agreement that were not changed or
renegotiated were intended by the parties to be carried over from that agreement to the
NELA.48 Griffith states the arbitration clause contained in § 16.1 of the NELA was one
such provision that was carried over.49 The only change in the arbitration clause of the
NELA (§ 16.1) over the arbitration clause of the July 1, 2001 Licence Agreement (also
§ 16.1) is the appendix letter citation.50 The July 1, 2001 License Agreement refers to
Appendix B for the arbitration procedures and the NELA refers to Appendix C.51 Griffith
explains the change from Appendix B was because the NELA included additional
appendices, listing Life Tech’s affiliates and listing products that were subject to a royalty
44
D.I. 664 at ¶ 5.
Id.
46
Id.
47
Id.
48
Id. at ¶ 6.
49
Id.
50
Id. at ¶ 7.
51
Id.
45
10
obligation not included in the prior agreement.52 Thus, the arbitration procedures from
the July 1, 2001 Licence Agreement (Appendix B) should have been included as an
appendix to the NELA.53 Griffith states he was responsible for compiling the final version
of the NELA with appendices and, having reviewed the final NELA archived in his files,
notes the arbitration procedures were inadvertently omitted from the final agreement.54
He avers this omission was an oversight, not intentional, and was likely due to the
urgency to execute the NELA to meet a reporting deadline set by the arbitrator.55 Life
Tech contends none of Cornell’s arguments rebut Griffith’s conclusion or explain why
§ 16.1 of the NELA would refer to procedures in an appendix had none been intended.56
Alternatively, Life Tech argues even if no arbitration procedures had been
provided, the FAA or state law would provide gap fillers for an agreement to arbitrate.57
For instance, in Marzano v. Proficio Mortg. Ventures, LLC,58 the arbitration clause at
issue stated, in relevant part:
THE PARTIES HERETO WAIVE LITIGATION AND TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO WHICH THEY MAY BE PARTIES,
ARISING OUT OF, OR IN ANY WAY PERTAINING OR RELATING TO,
THIS AGREEMENT. . . . ALL PROCEEDINGS WILL BE MANAGED
THROUGH BINDING ARBITRATION.59
In Marzano, the plaintiffs argued “the arbitration provision is ‘hopelessly vague and
52
Id.
Id.
54
Id. at ¶ 8.
55
D.I. 664 at ¶ 8 (citing IC Ex. 27).
56
D.I. 663 at 7.
57
Id. Delaware has adopted its own version of the Uniform Arbitration Act. 10
Del. C. § 5701 et seq.
58
942 F. Supp. 2d 781 (N.D. Ill. 2013).
59
Id. at 791.
53
11
indefinite’ because it lacks procedural and substantive rules, time limitations, cost
information, and venue provisions.”60 The plaintiffs maintained “that the vagueness gives
[the defendant] complete discretion to ‘demand arbitration anywhere at any time at any
cost under any set of rules or no rules at all.’”61 The court rejected that argument finding
that “any matters of uncertainty in the . . . arbitration provision can be made complete
under the FAA and the [state] Uniform Arbitration Act.”62 Life Tech argues, therefore,
Cornell cannot avoid its purported agreement to arbitrate by relying on a mere oversight
in failing to attach to the NELA previously agree-upon procedures.63
The court agrees with Life Tech that the NELA contains a valid arbitration clause.
First, as Life Tech notes, the inclusion of § 16.1 in the NELA, signifies the parties’
agreement to mediate or arbitrate disputes relating thereto. Next, § 1.1 of the NELA
specifically identifies the July 1, 2001 License Agreement as being replaced by the
NELA.64 Sections 16.1 of both the July 1, 2001 License agreement and the NELA,
providing for mediation or arbitration, are identical with the exception of the appendix
60
Id. at 792.
Id. at 793.
62
Id.; see also Schulze & Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709, 71516 (7th Cir. 1987) (rejecting plaintiff’s argument that an arbitration clause stating “ALL
DISPUTES UNDER THIS TRANSACTION SHALL BE ARBITRATED IN THE USUAL
MANNER” was too vague to be enforced where the FAA could supply missing details
and noting “[the plaintiff] does not cite a case in which the court has found an arbitration
clause fatally vague, nor has our research unearthed one”); WeWork Cos. Inc. v.
Zoumer, No. 16-cv-457 (PKC), 2016 WL 1337280, at *5 (S.D.N.Y. Apr. 5, 2016)
(holding “[t]he lack of specific terms governing the arbitration’s procedure does not
invalidate the agreement, considering that the FAA provides an objective method to fill
gaps in arbitration agreements”) (citing 9 U.S.C. § 5).
63
D.I. 663 at 8.
64
D.I. 606-1 at § 1.1.
61
12
designation specifying arbitration procedures.65 Dorn’s statements that the parties had
no negotiations with respect to arbitration procedures is consistent with Griffith’s
representation that provisions of the July 1, 2001 Licence Agreement that were not
changed or renegotiated were intended to be carried over in the NELA. The court
concludes, therefore, the parties intended that the arbitration procedures set forth in
Appendix B of the July 1, 2001 License Agreement were to govern any arbitration with
respect to the NELA. Furthermore, if that conclusion is incorrect, the FAA or state law
would provide gap fillers for the NELA’s agreement to arbitrate.66
Having determined the NELA contains an enforceable arbitration clause, the court
must next determine whether the arbitration clause is broad or narrow and whether the
parties’ dispute falls within the scope of that clause. Cornell argues that even if the
arbitration clause in the NELA is deemed enforceable, it solely relates to disputes over
the “meaning and interpretation” of that agreement.67 Section 16.1 of the NELA
provides:
All disputes over the meaning and interpretation of this Agreement shall be
resolved by conciliation and mediation, and if mediation is unsuccessful,
then disputes shall be finally settled by binding arbitration according to the
procedures set forth at Appendix C.68
Cornell states courts have construed this type of limited arbitration clause as narrow in
65
See IC Ex. 18 at § 16.1; D.I. 606-1 at § 16.1.
None of the cases cited by Cornell involved arbitration clauses and Cornell has
provided no cases in which an arbitration clause was found unenforceable due to
vagueness.
67
D.I. 643 at 13 (quoting D.I. 606-2 at § 16.1).
68
D.I. 606-1 at ¶ 16.2 (emphasis added).
66
13
nature.69 Cornell contends that because the issues raised in the Motion to Vacate,
namely Life Tech’s allegedly fraudulent statements, actions, and omissions designed to
induce Cornell into executing the Settlement Agreement and consenting to the
Dismissal, are entirely outside the scope of the NELA’s arbitration clause because they
do not implicate the “meaning and interpretation” of the NELA, and, therefore, there is no
obligation to arbitrate.70 It also contends Life Tech’s argument that the NELA permits its
purportedly fraudulent acts is a contrivance that in no way can be relied on to force this
dispute into arbitration.71
Life Tech maintains Cornell’s assertion that § 16.1 of the NELA is narrow and
does not cover the dispute is contrary to decisions from the United States Supreme
Court, the Third Circuit, and this court interpreting similar provisions.72 The court agrees
69
D.I. 643 at 13-14 (citing CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165,
174 n.7 (3d Cir. 2014) (holding that an arbitration clause that “‘implicate[s only]
interpretation or performance of the contract per se,’ . . does not sweep beyond the
confines of the contract, and is therefore narrow in scope.”) (alteration in original)
(quoting Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Intern., Ltd., 1 F.3d 639, 642
(7th Cir. 1993)); Brown v. T-Ink, LLC, C.A. No. 3190-VCP, 2007 WL 4302594, at *15
(Del. Ch. Dec. 4, 2007) (determining arbitration clause that “cover[ed] disputes between
the parties that concern the ‘interpretation or performance’” of an agreement was
narrow and did not cover “extra-contractual claims, such as fraud or
misrepresentation”)).
70
D.I. 643 at 14.
71
Id.
72
D.I. 663 at 2 (citing AT&T Techs., Inc. v. Comm’cns Workers of Am., 475 U.S.
643, 650 (1986) (“Such a presumption [of arbitrability] is particularly applicable where
the clause is broad as the one employed in this case, which provides for arbitration of
‘any differences arising with respect to the interpretation of this contract or the
performance of any obligation hereunder . . . .’”) (emphasis added) (quoting
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 584-85 (1960)); United
Steel v. E.I. DuPont de Nemours & Co., 549 F. Supp. 2d 585, 590 (D. Del. 2008) (“The
Court concludes that the arbitration clause of the CBA at issue, which provides for the
arbitration of ‘[a]ny question as to the interpretation, or any alleged violation of the
provision of this Agreement,’ is clearly ‘broad’ for the purpose of determining
14
with Life Tech.
The court finds Cornell’s reliance on the Third Circuit’s CardioNet decision
unpersuasive. There, the plaintiffs were providers of medical outpatient telemetry
(“OTC”) services that permitted physicians to monitor cardiac arrhythmias on an
outpatient basis.73 The defendant was an insurer that reimbursed providers for that
service for several years pursuant to agreements with the providers.74 In 2012, the
insurer terminated its coverage of OTC explaining in a Physician Update that it
considered the services “experimental, investigational, and unproven.”75 This action
prompted the plaintiffs’ suit against the insurer asserting claims on their own behalf
(“direct claims”) and claims “as assignees of the rights and claims of patients”
(“derivative claims”).76 The direct claims were based on purported harm stemming from
the insurer’s distribution of the Physician Update, alleging that distribution constituted
tortious interference with current and prospective business relationships, misleading and
deceptive commercial or promotion in violation of the Lanham Act, and trade libel.77 The
derivative claims alleged violations of ERISA, or to the extent the claims were found to
not arise from or were exempt from ERISA, that the insurer breached its contractual
arbitrability.”) (emphasis added), aff’d, 338 Fed. App’x 209 (3d Cir. 2009); E.M.
Diagnostic Sys., Inc. v. Local 169, Int’l Broth. of Teamsters, Chauffeurs, Warehousemen
& Helpers of Am., 812 F.2d 91, 92, 95 (3d Cir. 1987) (interpreting clause requiring
arbitration of “[a]ny dispute arising out of a claimed violation of this Agreement” as a
“broad” arbitration clause) (emphasis added)).
73
CardioNet, 751 F.3d at 168.
74
Id. at 169.
75
Id.
76
Id. at 169-70.
77
Id. at 170.
15
obligation by failing to cover medically necessary services.78 The insurer sought to
compel arbitration on all its claims.79
The Third Circuit found the direct claims were not subject to arbitration because
their resolution “does not require construction of, or even reference to, any provision in
the Agreement [with the device providers].”80 The court agrees with Life Tech, that in
contrast to the claims at issue in CardioNet, the issue of whether Life Tech and Cornell
performed their obligations under the NELA has a clear bearing on whether Cornell could
have been harmed by Life Tech’s actions.81
Therefore, based on the authority cited by Life Tech, the court determines the
arbitration clause in the NELA is broad.
Next, Life Tech asserts the disputes between it and Cornell fall within the scope of
both the NELA and the Settlement Agreement, because those disputes concern Life
Tech’s and Cornell’s respective rights and obligations under the NELA with respect to
78
Id.
Id.
80
Id. at 175; id. (“Quite the contrary, whether [the insurer] performed its
obligations under the Agreement has no bearing on whether it harmed the Providers by
providing physicians with misleading information on OTC.”). The court also held the
derivative claims were not subject to arbitration: “we do not agree that the allegations
underlying these claims concern the interpretation or performance of the
Agreement. . . . The claims clearly do not concern the performance and interpretation
of the Agreement.”). The Third Circuit distinguished a case relied upon by the insurer,
Simula, Inc. v. Autoliv, Inc., 175 F.3d 716 (9th Cir. 1999), similar to the present action,
which compelled arbitration of a Lanham Act claim where the claims “clearly do relate to
the performance and interpretation of the parties’ contracts.” CardioNet 175 F.3d at 176
(emphasis added) (distinguishing Simula compelling arbitration where “resolving
Simula’s factual allegations against Autoliv requires interpreting Autoliv’s performance
and conduct under the [parties’] Agreement”) (quoting Simula, 175 F.3d at 724).
81
D.I. 663 at 4.
79
16
the Settlement Agreement and Sublicense Agreement.82 Further, Life Tech maintains
the disputes also concern Cornell’s allegation that the Sublicense Agreement and the
settlement of the Illumina California Action83 constitute “other consideration” for the
settlement of this action under NELA § 14.3.84 Life Tech repeats that “[a]ll disputes”
regarding the parties’ rights and obligations fall within the NELA’s arbitration clause and
the NELA “constitutes the sole existing license agreement between the Parties”
concerning the patents.85 Life Tech argues there is no question that the instant disputes
and Cornell’s requests for relief fall within the NELA’s scope.86
Life Tech maintains Cornell does not really contest this position in its brief in
support of the Motion to Vacate. Instead, Cornell argues arbitration should not come into
play because “nothing in the [NELA] authorizes Life Tech to defraud Cornell or obligated
Cornell to sign the Settlement Agreement[, which] is why Life Tech had to deceive
Cornell to obtain Cornell’s signature.”87 While Life Tech vigorously disputes Cornell was
defrauded or that any deception occurred, it contends these accusations are a red
herring because they have noting to do with arbitrability, or with allegations that a party
was fraudulently induced to enter into an agreement, which are frequently arbitrated.88
82
D.I. 626 at 7.
Illumina, Inc. v. Life Technologies Corp, et al., No. 11-CV-03022 (S.D. Cal).
84
D.I. 626 at 7.
85
Id. (quoting D.I. 606-1 at §§ 16.1, 19.2).
86
D.I. 626 at 7.
87
Id. (quoting D.I. 603 at 17 n.2).
88
D.I. 626 at 8 (citing Coleman v. Prudential Bache Sec., Inc., 802 F.2d 1350,
1352 (11th Cir. 1986) (claim of fraudulent inducement to enter into agreement was
subject to arbitration where party did not present evidence that clause to arbitrate itself
was induced by fraud); Prima Paint Corp. v. Flood & Conklin Mfg Co., 388 U.S. 395,
400 (1967) (agreeing with the appeals court that “a claim of fraud in the inducement of
the contract generally–as opposed to the arbitration clause itself–is for the arbitrators
83
17
The court rejects Cornell’s implication that Life Tech’s purportedly fraudulent actions in
inducing Cornell to enter the Settlement Agreement and consent to the Dismissal are not
subject to mediation or arbitration and find that the issues raised in the Motion to Vacate
fall within the scope of the NELA’s arbitration clause.
Cornell contends, however, that even if the arbitration clause in the NELA is
deemed enforceable and the issues in the Motion to Vacate fall within the scope of its
arbitration clause, under § 16.2 of the NELA, this dispute would fall within an exception
to any obligation to arbitrate because the issues raised implicate a breach of Life Tech’s
royalty payment and sales reporting obligations under Article 6 (Royalties and Minimum
Royalties to be Paid During the Agreement) Article 7 (Accounting and Payment
Schedule), and § 14.8 of the NELA.89
and not for the courts”); Telepet USA, Inc. v. Qualcomm, Inc., No. 14-568-GMS-PAL,
2014 WL 6826833, at *2-3) (rejecting the plaintiff’s argument that arbitration should not
be compelled because it was allegedly induced to enter a patent license and settlement
agreement by fraud and misrepresentation and granting the defendant’s motion to
compel arbitration and its motion to dismiss)); see also Hannah Furniture Co. v.
Workbench, Inc., 651 F. Supp. 1243, 1245 (W.D. Pa. 1983) (“Plaintiff added counts
alleging a breach of fiduciary duty owing from defendant to plaintiff, which can only arise
out of the contract between them, and fraud in the inducement. Such matters as these
arise because of a contractual relationship between the parties, hence they are
‘complaints, disputes or grievances involving questions of interpretation of any of the
provisions of this Agreement’ as defined in the Arbitration Clause.”).
89
D.I. 643 at 14-15. Section 14.8 of the NELA provides: “If LICENSEE and/or its
Affiliates obtains damages, awards, or other monetary or non-monetary consideration in
a legal proceeding referenced in this Article 14, or settlement thereof (exclusive of (a)
any post-sublicense execution date royalty payments or other consideration received in
lieu of royalty payments for post-sublicense execution date activities, which shall be split
as set forth in Section 14.7 above, (b) any value that can be assessed based on
dismissal or withdrawal of counterclaims related to the Licensed Patents under this
Agreement, including but not limited to antitrust counterclaims related to the Licensed
Patents under this Agreement, that are brought in the legal proceeding) having a total
fair market value in excess of ten million U.S. dollars ($10 million), LICENSEE shall pay
the appropriate percentage under Article 6 to LICENSORS on such excess, but only
18
Cornell alleges that by pursuing its secret side deals with Illumina, the Sublicense
Agreement and settlement of the Illumina California Action, and concealing its conduct
through allegedly fraudulent statements and omissions, Life Tech sought to circumvent
its royalty payment and sales reporting obligations to Cornell under the NELA. Articles 6
and 7 of the NELA address Life Tech’s royalty payment and sales reporting obligations
to Cornell.90 The NELA then applies those same obligations to consideration received by
Life Tech in connection with this action. Pursuant to § 14.8 of the NELA, if Life Tech
“obtains damages, awards, or other monetary or non-monetary consideration in a legal
proceeding referenced in Article 14," it is obligated to pay royalties to Cornell based on
the “appropriate percentage under Article 6,” subject to certain conditions and thresholds
detailed in that section.91
Cornell contends that through its alleged fraudulent scheme, Life Tech received
substantial consideration not addressed in the Settlement Agreement, including the
Sublicense Agreement and the settlement of the Illumina California Action.92 Life Tech
has not accounted for that consideration as required by § 14.8 of the NELA.93 Cornell
contends that Life Tech’s alleged fraudulent scheme necessarily implicates and involves
breaches of its royalty payment and sales reporting obligations to Cornell under the
after LICENSEE first recovers any of its/their enforcement or other legal proceeding
expenses (to the extent that such enforcement or other legal proceeding expenses are
not compensated through awards of attorney fees or costs during the course of the legal
proceeding).” D.I. 606-1 at § 14.8 at 16.
90
D.I. 643 at 15.
91
Id. at 15 & 15 n.7 (quoting D.I. 606-1 at § 14.8).
92
Id. at 15.
93
Id.
19
NELA.94 That issue, however, is excluded from the scope of the arbitration provision in
the NELA by § 16.2 which provides:
Notwithstanding Section 16.1, [Cornell] reserves the right and power to
proceed with direct judicial remedies against LICENSEE without
conciliation, mediation, or arbitration for breach of the royalty payment and
sales reporting provisions of this Agreement after giving written notice of
such breach to LICENSEE followed by an opportunity period of sixty (60)
days in which to cure such breach. In collecting overdue royalty payments
and securing compliance with reporting obligations, [Cornell] may use all
judicial remedies available.95
Cornell states it notified Life Tech on May 5, 2017 of its concerns regarding Life
Tech’s conduct, and gave Life Tech written notice of its improper conduct by letter dated
May 19, 2017.96 According to Cornell, Life Tech has not taken any steps to try to remedy
its improper conduct in response to this written notice.97
Life Tech maintains this is not a dispute about the payment of royalties or failure
to report royalty payments.98 Life Tech states Cornell has not claimed it is entitled to
some specific amount of money that was not already paid.99 Life Tech also insists this is
not a dispute about accountings, calculations, or sales reporting: rather Cornell is trying
to undo agreements, as demonstrated by the title of its motion–“Motion to Vacate
Stipulation of Dismissal Pursuant to Rule 60 and to Rescind Settlement Documents.”100
Life Tech dismisses Cornell’s argument that Life Tech received “substantial
consideration nowhere addressed in the Settlement Agreement, including the Sublicense
94
Id.
Id. at 15-16 (quoting D.I. 606-1 at § 16.2) (emphasis added).
96
Id. at 16 (citing IC Ex. 17).
97
Id. at 16.
98
D.I. 663 at 8.
99
Id.
100
Id.
95
20
Agreement and the dismissal of the Illumina California Action,” and that “Life Tech has
not accounted for that consideration as required by § 14.8 of the NELA.”101 Life Tech
notes the Sublicense Agreement, which did not involve the products at issue in this
litigation, did not involve “consideration in a legal proceeding referenced in this Article 14,
or settlement thereof.102 Life Tech contends, therefore § 14.8 is inapplicable.103 Life
Tech also notes the Illumina California Action concerned entirely unrelated patents in
which Cornell holds no interest and argues, therefore, that the entirety of the NELA is
inapplicable, including § 14.8.104
Life Tech also states it paid Cornell its portion of the consideration received from
the Sublicense Agreement as required by § 14.1 of the NELA and Cornell does not
dispute receiving that payment.105 Life Tech also maintains that Cornell did not provide
any written notice of breach or opportunity to cure under § 16.2 of the NELA, which
Cornell would have been required to do had royalties really been at issue.106
The court agrees with Life Tech that the disputes raised in the Motion to Vacate
do not fall into the exception to arbitrate contained in § 16.2. Cornell does not argue Life
Tech failed to pay consideration to Cornell that was due under the Sublicense
Agreement and its Motion to Vacate does not demand an accounting of that amount.
Rather it seeks to rescind the entire agreement. The Illumina California Action did not
101
Id. (quoting D.I. 643 at 15).
Id. at 8-9.
103
Id. at 9.
104
Id.
105
Id. Life Tech states there is no dispute that Cornell received one-half of the
proceeds of the Sublicense Agreement. Id.
106
Id. at 9.
102
21
involve Cornell or patents to which it had rights. Cornell merely asserts that the
settlement of that action was part of an allegedly fraudulent scheme by Life Tech.107
The court finds that the issues raised in the Motion to Vacate, whether Life Tech
complied with its rights and obligations under the NELA and whether it engaged in a
fraudulent scheme to induce Cornell to agree to the Settlement Agreement and the
Dismissal of this action, should be decided in mediation or arbitration.
Life Tech argues the Settlement Agreement also contemplates that all disputes
will be resolved by arbitration.108 Section 9.2(a) provides:
Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach, termination, enforcement, interpretation or
validity thereof, including the determination of the scope or applicability of
this agreement to arbitrate, shall be determined by arbitration between Life
Tech and Cornell, on the one hand, and Illumina on the other hand.109
Although § 9.2(a) requires arbitration of those issues that are “between Life Tech and
Cornell, on the one had, and Illumina on the other hand,” Life Tech is dubious that the
parties contemplated a dispute between plaintiffs and Illumina would be arbitrated,
whereas a dispute between co-plaintiffs would not.110 It notes there is no carve-out for
107
Also, even if § 16.2 were applicable, Cornell did not provide written notice of
breach and an opportunity to cure as required by that section. Cornell states it “gave
Life Tech written notice of its improper conduct by letter dated May 16, 2017.” D.I. 643
at 16 (citing IC Ex. 17) (emphasis added). The cited letter does specify what Cornell
perceived to be Life Tech’s fraudulent activities, but it does not demand an accounting
pursuant to § 14.8 of the NELA. After detailing Life Tech’s purported fraudulent
activities, the letter simply demands a response from Life Tech as to “how [Life Tech]
proposed to address the injuries caused to the Cornell Parties by [Life Tech’s]
fraudulent conduct.” IC Ex. 17 at 3.
108
D.I. 626 at 1.
109
D.I. 606-2 (§ 9.2(a)) at p. 14 (emphasis added).
110
D.I. 626 at 6.
22
judicial determination of such a dispute, as there is in the NELA for royalty disputes.111
Life Tech argues that, regardless, here there is a dispute between adversaries because
Cornell seeks the same relief against Illumina as it does against Life Tech: vacatur of
the Dismissal and recision of the Settlement Agreement and Sublicense Agreement.112
Cornell argues the Settlement Agreement contains no valid arbitration
requirement applicable this dispute.113 Cornell describes the dispute in its Motion to
Vacate as between Life Tech and Cornell, specifically Life Tech’s allegedly fraudulent
acts, omissions, and actions designed to induce Cornell to execute the Settlement
Agreement and consent to the Dismissal.114 Cornell contends the language of the
arbitration clause in the Settlement Agreement shows the parties only agreed to arbitrate
disputes “between Life Tech and Cornell, on the one had, and Illumina on the other
hand.”115 Cornell states the Settlement Agreement does not contain any language or
provision where Cornell agreed to arbitrate any dispute with Life Tech relating to the
Settlement Agreement, and that Life Tech has offered no evidence that the parties
intended to form an agreement to arbitrate such a dispute.116 Cornell maintains that the
lack of a provision in the Settlement Agreement to arbitrate disputes between it and Life
Tech compels denial of its Cross-Motion.117 In response to Life Tech’s contrary position,
Cornell argues Life Tech’s interpretation is inconsistent with basic rules of contract
111
Id.
Id.
113
D.I. 643 at 8.
114
Id.
115
Id. (citing D.I. 606-2 at § 9.2(a)).
116
Id. at 8-9.
117
Id. at 9.
112
23
construction in that it improperly attempts to erase the express language of the
arbitration clause: “between Life Tech and Cornell, on the one hand and Illumina on the
other hand.”118 Cornell contends because of the Settlement Agreement’s previously
noted express limitation of arbitration to certain disputes, there is no arbitration clause in
that agreement to arbitrate any disputes between Cornell and Life Tech, including those
raised in the Motion to Vacate.119
The Third Circuit has held that courts “are required to read contract language in a
way that allows all the language to be read together, reconciling conflicts in the language
without rendering any of it nugatory if possible.”120 Likewise, in Seidensticker v.
Gasparilla Inn, Inc., Delaware’s Court of Chancery stated “[w]hen interpreting contracts,
the Court gives meaning to every word in the agreement and avoids interpretations that
would result in ‘superfluous verbiage.’”121
Life Tech responds that Cornell (and Illumina) misunderstand Life Tech’s purpose
in discussing the Settlement Agreement.122 Life Tech states the NELA is controlling here
and requires mediation and/or arbitration.123 It argues the Settlement Agreement leads
118
Id. (quoting D.I. 606-2 at § 9.2(a) (citing Seidensticker v. Gasparilla Inn, Inc.,
C.A. No. 2555-CC, 2007 WL 4054473, at *3 (Del. Ch. Nov. 8, 2007) (stating that “[w]hen
interpreting contracts, the Court gives meaning to every word in the agreement and
avoids interpretations that would result in ‘superfluous verbiage.’”) (quoting NAMA
Holdings, LLC v. World Market Center Venture, LLC, C.A. No. 2756- VCL, 2007 WL
208885, at *6 (Del. Ch. July 20, 2007)).
119
Id. at 9.
120
CTF Holdings, Inc. v. Marriot Intern., Inc., 381 F.3d 131, 137 (3d Cir. 2004)
(citation omitted).
121
C.A. No. 2555-CC, 2007 WL 4054473, at *3 (Del. Ch. Nov. 8, 2007) (quoting
NAMA Holdings, LLC v. World Market Center Venture, LLC, C.A. No. 2756- VCL, 2007
WL 208885, at *6 (Del. Ch. July 20, 2007)).
122
D.I. 663 at 5.
123
Id.
24
to the same result: it confirms the parties’ intent that any disputes as to the validity or
the enforceability of the Settlement Agreement must be arbitrated, not litigated.124 Life
Tech argues, therefore, that all paths lead to arbitration, and none to judicial
resolution.125
Section 9(a) of the Settlement Agreement requires arbitration of disputes arising
out of that agreement “shall be determined by arbitration between Life Tech and Cornell,
on the one hand, and Illumina on the other hand.”126 Life Tech’s argument that the
arbitration clause of the Settlement Agreement compels arbitration of disputes arising out
of that agreement between it and Cornell reads out the italicized language, improperly
rendering that language nugatory and merely superfluous verbiage. Had the parties
intended disputes among any of the signatories of the Settlement Agreement be subject
to arbitration, the above italicized language would not have been included in § 9(a). The
court, therefore, determines the Settlement Agreement does not have
a valid agreement to arbitrate as to disputes between Cornell and Life Tech.
Having made that determination, the court nevertheless addresses Cornell’s
contention that even if the Settlement Agreement’s arbitration clause encompasses
disputes between Cornell and Life Tech, arbitration is still inapplicable because of the
relief Cornell seeks is outside the scope of that clause. 127 Section 9.3 of the Settlement
Agreement:
Equitable Remedies. All parties judicially admit hereby for all purposes that
124
D.I. 663 at 5.
D.I. 626 at 7; D.I. 663 at 5.
126
D.I. 606-2 at § 9.2(a) (emphasis added).
127
D.I. 643 at 10.
125
25
damages for breach of this Agreement would be inadequate to remedy
such breach. The non-breaching Party shall be entitled to enforce the
provisions of this Agreement by injunction and seek other equitable relief
without the necessity of posting bond or proving the inadequacy of money
damages as a remedy. If the non-breaching Party employs attorneys to
enforce any of its right arising out of or relating to this Agreement, the
losing Party shall pay the prevailing Party its reasonable attorneys’ fees
and costs. Except as otherwise provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative
and not exclusive of any of any rights, powers, remedies and privileges
provided by applicable law.128
Cornell maintains a Rule 60 motion is by its nature akin to equitable relief.129 Cornell
also states its request for rescission of the Settlement Agreement and the Sublicense
Agreement seeks equitable relief.130 Cornell argues, therefore, that the equitable relief
requested in the Motion to Vacate is expressly excluded from the scope of the arbitration
clause in the Settlement Agreement, even if the parties had agreed to arbitrate disputes
between Cornell and Life Tech.131
The court disagrees with Cornell’s interpretation of that section as carving out
requests for equitable relief from arbitration. Section 9.3 merely states the parties agree
that damages would be inadequate to remedy a breach of the agreement and that an
128
D.I. 606-2 at § 9.3 (emphasis added).
D.I. 643 at 10 (citing U.S. v. One Toshiba Color Television, 213 F.3d 147, 157
(3d Cir. 2000) (“A motion under Rule 60(b) is equitable in nature, so it is reasonable to
believe that equitable doctrines apply.”)).
130
Id. at 10-11 (citing Schlosser & Dennis, LLC v. Traders Alley, LLC, No. N16C05-1490-RRC, 2017 WL 2894845, at *9 (Del. Super. Ct. July 6, 2017) (“Equitable
rescission . . . which is otherwise known as cancellation, is a form of remedy in which, in
addition to a judicial declaration that a contract is invalid and a judicial award of money
or property to restore plaintiff to his original condition is made, further equitable relief is
required.’”) (deletion and emphasis in original) (quoting E.I. du Pont de Nemours & Co.
v. HEM Research, Inc., C.A. No. 10747, 1989 WL 122053, at *3 (Del. Ch. Oct. 13,
1989)).
131
Id. at 11.
129
26
arbitrator can grant equitable relief.132
The court also agrees with Life Tech’s argument that Cornell’s request for recision
of the Settlement Agreement constitutes a dispute regarding its “validity” or
“enforceability” which falls within the scope of Settlement Agreement’s arbitration clause
and finds that clause to be enforceable as to disputes regarding that agreement between
Cornell and Life Tech.133
Finally, Cornell argues the relief it requests is not arbitrable.134 In its opening brief
in support of its Motion to Vacate, Cornell states that Rule 60 relief sought in its motion
cannot be granted by an arbitrator.135 In response, Life Tech contends the court should
not look to the requested relief in deciding arbitrability, but in any event, an arbitrator can
grant full relief to the parties here.136 First, Life Tech characterizes Cornell’s request for
relief under Rule 60 as a misnomer because, although it seeks vacatur of the Stipulation
of Dismissal and recision of the Settlement Agreement, and Sublicense Agreement, the
NELA itself grants Cornell no rights to control litigation against Illumina or the settlement
thereof, or to grant sublicenses, rights that reside exclusively with Life Tech.137
Consequently, Life Tech believes it is unclear what Cornell expects to accomplish if its
132
D.I. 663 at 5 n.4 (citing Sherrock Bros., Inc. v. DaimlerChrysler Motors Co.,
LLC, 260 Fed. App’x 497, 502 (3d Cir 2008) (“Moreover, ‘[e]xcept where prohibited by
the plain and express terms of the submission, an arbitrator is empowered to grant any
relief reasonably fitting and necessary to a final determination of the matter submitted to
him, including legal and equitable relief.’”) (emphasis in original) (quoting Bd of Educ. of
Dover Union Free School Dist. v. Dover-Wingdale, 95 A.D.2d 497, 502, 467 N.Y.S.2d
270 (N.Y.A.D. 2 Dept. 1983)).
133
D.I. 626 at 8.
134
D.I. 643 at 16.
135
D.I. 302 at 17, n.2.
136
D.I. 626 at 9.
137
Id. at 9 (citing D.I. 606-1 at §§ 3.2, 14.1-14.4).
27
requested relief is granted.138 Life Tech maintains, to the extent Cornell contends some
settlement consideration was exchanged beyond the Settlement Agreement, that would
be an issue for the arbitrator to decide pursuant to NELA § 14.3.139 Life Tech maintains
this highlights that the fundamental dispute between the parties is their rights and
obligations under the NELA, and the compensation Life Tech received: rights that only
an arbitrator can address.140
Life Tech also contends Cornell’s argument ignores that the requested relief is not
considered in making a substantive arbitrability determination,141 and that courts should
not, and do not, consider the requested relief on this issue.142
Cornell states that it seeks vacatur of the Dismissal entered by this court pursuant
to Rule 60, which requires such a request be addressed by the court that issued the
order.143 Because Rule 60 requires the court to make the determination of whether to
vacate its Dismissal order, Cornell contends the relief it seeks is not arbitrable.144
Neither Cornell nor Life Tech have cited any case supporting their proposition that Rule
60 relief is subject to arbitration.145
138
D.I. 626 at 9.
Id.
140
Id.
141
Id. (citing AT&T Techs., Inc., 475 U.S. at 649-50) (instructing courts not to
consider the “potential merits of the underlying claim” when determining arbitrability).
142
Id. at 9-10 (citing LG Elecs., Inc. v. Interdigital Commc’ns, Inc., 98 A.3d 135,
140 (Del. Ch. 2014) (rejecting argument that because the arbitration tribunal could not
provide equitable relief that arbitration was unavailable), aff’d, 114 A.3d 1246 (Del.
2015)).
143
D.I. 643 at 16 (citing FED. R. CIV. P. 60(b) (“On a motion and just terms, the
court may relieve a party or its legal representative from a final judgment, order, or
proceeding for the following reasons . . . .”) (emphasis added)).
144
Id.
145
Id.
139
28
In response to Life Tech’s argument, citing LG Electronics, that on an arbitrability
question courts should not look to the relief requested, Cornell counters the issue here is
the mechanism for relief, not the nature of the claim.146 It contends Rule 60 is clear that
the mechanism to seek relief from a court order is a motion to the court that issued the
order.147 Cornell maintains that whether the relief requested is at law or equity is
irrelevant.148 Cornell also argues that LG Electronics does not stand for the proposition
that courts should ignore the relief requested when deciding whether to compel
arbitration.149 There, the court considered whether an arbitration tribunal “could not
provide prompt and complete justice because [the agreement] provide[d] that the
[t]ribunal shall act ‘as arbitrators at law only[,]’” thereby making the tribunal incapable of
awarding the injunctive relief plaintiff sought “because they constitute equitable relief.”150
The court determined the reference to “arbitrators at law” did not relate to the traditional
division between law and equity and did not prevent the tribunal from awarding equitable
relief.151
Cornell contends the present issue is not whether an arbitrator can provide
equitable relief, but that the specific relief requested, i.e., vacatur of the Dismissal, is
reserved for this court because the required mechanism to vacate an order of this court
is a motion to this court.152 Cornell concludes, therefore, that arbitration of a Rule 60
146
Id.
Id.
148
Id. at 17.
149
Id.
150
LG Elecs., 98 A.3d at 140.
151
Id. at 141, 145.
152
D.I. 643 at 17.
147
29
motion is not proper.153 Finally, Cornell insists that to require arbitration would be a
waste of judicial and party resources because, even if the issues were decided in
arbitration, Cornell would still need to seek the Rule 60 relief from the court because no
arbitrator could compel this court to vacate one of its orders.154
In response to Cornell’s Rule 60 argument, Life Tech notes Cornell ignores that
resolution of its Motion to Vacate requires the resolution of issues that are arbitrable.155
Life Tech reiterates what Cornell seeks to achieve by its requested relief is unclear given
that Cornell cannot control either the litigation or the settlement thereof.156 Life Tech
argues that even if this court were to vacate the Dismissal, it cannot rescind the
Sublicense Agreement (which involves only products not at issue in this litigation and is
an agreement to which Cornell is not a party), the Settlement Agreement in this action
(jurisdiction over which the court did not retain in the Dismissal), or the settlement
agreement in an entirely unrelated litigation between Life Tech and Illumina in a different
jurisdiction.157 Therefore, Life Tech requests its Cross-Motion be granted.158
The court agrees with Life Tech that Cornell’s Rule 60 argument does not prohibit
granting Life Tech’s motion. There is a “strong presumption” in favor of arbitration.159
“[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of
153
Id.
Id.
155
D.I. 663 at 10 (quoting D.I. 643 at 16).
156
Id. at 10.
157
Id.
158
Id.
159
Gay v. CreditInform, 511 F.3d 369, 387 (3d Cir. 2007).
154
30
arbitration.”160 “In a case where there is any rational basis for doubt about [substantive
arbitrability], the court should defer to arbitration, leaving the arbitrator to determine what
is or is not before her.”161
Because the fundamental dispute between Cornell and Life Tech relates to the
meaning and interpretation of the NELA and it contains a valid clause requiring
mediation or arbitration of disputes which are within the scope of that clause, it is
recommended that Life Tech’s Cross-Motion (DI 625) be granted and Cornell’s Motion to
Vacate (DI 602) be stayed pending the conclusion of the alternative dispute resolution
process between Cornell and Life Tech.
This Memorandum Order is filed pursuant to 28 U.S.C. § 636(b)(1)(A), FED. R.
CIV. P. 72(a), and D. Del. LR 72.1. The parties may serve and file specific
written objections within fourteen days after being served with a copy of this
Memorandum Order.162 The objections and response to the objections are limited to ten
pages each.
The parties are directed to the Court’s standing Order in Non Pro Se matters for
Objections Filed under FED. R. CIV. P. 72, dated November 16, 2009, a copy of which is
available on the Court’s website, www.ded.uscourts.gov.
The parties are directed to the Court’s standing Order in Non Pro Se
160
Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 475 U.S. 643, 24-25
(1983) (“[A]ny doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration . . . .”).
161
GTSI Corp. v. Eyak Tech., LLC, 10 A.3d 1116, 1121 (Del. Ch. 2010)
(alteration in original) (citation and quotation marks omitted).
162
FED. R. CIV. P. 72(a). See Tige Boats Inc. v. Interplastic Corporations, 2015
WL 9268423 at *3 (N.D. TX 2015).
31
matters for Objections Filed under FED. R. CIV. P. 72, dated November 16, 2009, a copy
of which is available on the Court’s website, www.ded.uscourts.gov.
January 19, 2018
/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE
32
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