Tres Tech v. CareFusion Corporation

Filing 38

Memorandum Opinion and Order denying 1 Motion to Confirm Arbitration Award, denying 11 Cross MOTION to Vacate Arbitration Award, and denying 12 MOTION to Transfer Case out of District/Division. The Award is Remanded to the American Arbitration Association for clarification of the ambiguity concerning the proper respondent. (Ordered by Judge Ed Kinkeade on 8/29/2013) (jrr)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
TRES TECH CORPORATION,
Petitioner/Plaintiff
v.
CAREFUSION CORPORATION and
CAREFUSION 202, INC.,
Respondents/Defendants

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CIVIL ACTION No. 3:13-CV-1800-K

MEMORANDUM OPINION AND ORDER
Before the Court are the following motions: (1) Motion to Confirm Arbitration
Award (Doc. No. 1) filed by Tres Tech Corporation (“Tres Tech”); (2) Cross-Motion
to Vacate Award (Doc. No. 11) filed by Carefusion Corporation; and (3) Motion to
Transfer Action to Northern District of California (Doc. No. 12) filed by Carefusion
Corporation. The Court has reviewed the above motions, the briefing, the materials
submitted by the parties, and the applicable law. The Court hereby DENIES Tres
Tech’s Motion to Confirm Arbitration Award (Doc. No. 1); DENIES Carefusion
Corporation’s Cross-Motion to Vacate Award (Doc. No. 11); DENIES Carefusion
Corporation’s Motion to Transfer Action (Doc. No. 12); and REMANDS the matter
to the American Arbitration Association for resolution of an ambiguity in the award.
I.

Factual and Procedural Background
In 1995, Tres Tech entered into a Royalty Agreement with SensorMedics

Critical Care Corporation (“SensorMedics”). The 1995 Royalty Agreement provided
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for royalty payments related to the sales and rentals of certain medical products that
used High Frequency Ventilator technology developed by Tres Tech’s predecessor.
Carefusion Corporation, an entity that Tres Tech claims is a successor-in-interest to
SensorMedics, tendered royalty payments for several years leading up to May 2011.
Alleging that the 1995 Royalty Agreement had expired, Carefusion Corporation
ceased these payments in May 2011. Tres Tech and Carefusion Corporation were
unable to agree as to when the 1995 Royalty Agreement terminated. Tres Tech filed a
demand for arbitration seeking an award based on its claim that the 1995 Royalty
Agreement was effective through March 17, 2018.
Tres Tech named Carefusion Corporation as the respondent in the arbitration
proceeding. In its response to the demand for arbitration, Carefusion Corporation
substituted Carefusion 202, Inc. in the case style and stated that Carefusion
Corporation was not the proper respondent. However, the attorneys signed the
response on behalf of Carefusion Corporation. The same attorneys represent both
Carefusion Corporation and Carefusion 202, Inc. From then on, Carefusion
Corporation’s attorneys indicated that they were, in fact, representing Carefusion
202, Inc., not Carefusion Corporation. Following Carefusion Corporation’s allegation
that Carefusion 202, Inc. was the proper respondent party, Tres Tech named only
Carefusion 202, Inc. in its response to Carefusion Corporation’s counterclaims. At no
time did Carefusion Corporation specifically request that the arbitration panel dismiss
Carefusion Corporation because it was not the proper party to the arbitration

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proceeding. At no time did Carefusion 202, Inc. seek to have itself substituted as the
proper party.
At the conclusion of the arbitration, the panel issued an award (“the Award”)
and styled its findings as an award in the arbitration of Tres Tech against Carefusion
Corporation (“the Award”). The panel referred to the respondent as simply
“Carefusion.” In the last paragraph of the Award, the panel expressly referred to
Carefusion Corporation as the entity that was a party to the arbitration. The Award
never expressly referred to Carefusion 202, Inc.
After expiration of 20 days from the transmittal of the Award, Tres Tech filed
its Motion to Confirm Arbitration Award with this Court. The next day, Carefusion
202, Inc. filed a Motion to Vacate Arbitration Award in the Northern District of
California. Carefusion Corporation subsequently moved to transfer this action to the
Northern District of California and moved to vacate the Award in this Court.
II.

Carefusion Corporation’s Motion to Transfer Venue
The Court first turns to whether or not to transfer this action to the Northern

District of California under 28 U.S.C. § 1404. Carefusion Corporation argues that
the Northern District of California is a more convenient forum because the federal
courts in California have more familiarity with California law and because the
Northern District of California has a localized interest in arbitrations conducted
within its jurisdiction. Carefusion Corporation bears the burden of demonstrating to
the Court that it should transfer the case and the decision rests within the sound

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discretion of the Court. Peteet v. Dow Chem. Co.¸ 868 F.2d 1428, 1436 (5th Cir.
1989). In this context of affirming or vacating an arbitration award, the Court
concludes that these factors do not weigh significantly enough to disregard the
Plaintiff’s choice of forum and to make the Northern District of California the clearly
more convenient forum.
In analyzing whether to transfer an action for convenience the plaintiff’s choice
of venue is entitled to some deference. AT&T Intellectual Prop. I, L.P. v. Airbiquity Inc.,
No. 3:08-CV-1637-M, 2009 WL 774350, at *1 (N.D. Tex. Mar. 24, 2009). The
movant’s burden to overcome this deference is significant. Id. Carefusion Corporation
has the burden to show that the transferee venue is clearly more convenient than the
venue chosen by the plaintiff. In re Volkswagen of America, Inc., 545 F.3d 304, 315 (5th
Cir. 2008) (en banc). The Court considers private and public interest factors for
determining whether a transferee venue is clearly more convenient than the venue
chosen by the plaintiff. Id. The private interest factors include: (1) the relative ease of
access to sources of proof; (2) the availability of compulsory process to secure the
attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all
other practical problems that make trial of a case easy, expeditious, and inexpensive.
Id. The public interest factors include: (1) the administrative difficulties flowing from
court congestion; (2) the local interest in having localized interests decided at home;
(3) the familiarity of the forum with the law that will govern the case; and (4) the
avoidance of unnecessary problems of conflict of law or in the application of foreign

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law. Id. Of the private and public interest factors, the relative convenience to the
witnesses is often the most important factor to be considered in ruling on a
Section 1404(a) motion. Gundle Lining Const. Corp. v. Fireman’s Fund Ins. Co., 844 F.
Supp. 1163, 1166 (S.D. Tex. 1994).
Carefusion Corporation admits that most of the public and private interest
factors do not favor transfer in this case. The relative ease of access to sources of
proof and the availability of compulsory process to secure the attendance of witnesses
are not relevant to confirming or vacating an arbitration award. Additionally, this case
raises no issues of administrative difficulties related to court congestion or problems
of conflict of law. The most important factor in the Section 1404 analysis, the
convenience of witnesses, does not tip the balance in favor of transfer to California.
See Eastman Med. Prods., Inc. v. E.R. Squibb & Sons, Inc., 199 F. Supp. 2d 590, 596
(N.D. Tex. 2002).
Carefusion Corporation’s argument, at its most basic level, is that because two
factors weigh “heavily” in favor of transfer, transfer under 28 U.S.C. § 1404 is
warranted. The Court disagrees that the factors weigh heavily in favor of transfer.
A.

Local Interest in Having Localized Interests Decided at Home

First, Carefusion Corporation argues that the Northern District of California
has a localized interest in arbitrations that take place within its jurisdiction.
Carefusion Corporation cites no law to support this proposition, and the Court
doubts its logical force. Because of the narrow review in an action to confirm or

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vacate an arbitration award, most of the private and public interest factors will always
be neutral, as they are here. If Carefusion Corporation’s argument is taken at face
value there would be few, if any, convenient venues to confirm an arbitration award
other than the jurisdiction of the arbitration. Moreover, the Court doubts whether an
arbitration proceeding, in and of itself, is a localized interest. The arbitration took
place within the Northern District of California only because the parties negotiated to
hold it there. Thus, the arbitration proceeding is not a localized interest of the
Northern District of California, but an interest of the parties to the proceeding.
Carefusion Corporation’s argument also ignores that Tres Tech and
SensorMedics freely contracted to allow either company to enforce an arbitration
award in any court of competent jurisdiction. Tres Tech is a Texas company and has
filed this action pursuant to the rights it gained in an arms-length negotiation. Texas
Courts have a localized interest in the proper enforcement of freely negotiated
contract rights of Texas companies.
The Northern District of California’s localized interest in arbitration
proceedings held in its jurisdiction is slight. Whatever interest exists is balanced by
the interest of the Northern District of Texas in enforcing contract rights of citizens
and businesses within its jurisdiction. Thus, the Court concludes that the local
interest in having localized interests decided at home does not weigh in favor of
transfer to the Northern District of California.

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B.

Familiarity of the Forum with the Law That Will Govern the Case

Carefusion Corporation argues that the Northern District of California’s
familiarity with California law also weighs heavily in favor of transfer. Tres Tech
argues that familiarity with California law is not a factor given the limited review of
the courts when deciding whether to confirm or vacate an arbitration award. The
Court concludes familiarity with California law weighs only slightly in favor of
transfer.
Familiarity of the forum with the law that will govern the case is always a
factor the court considers when deciding whether transfer is appropriate. See
Volkswagen, 545 F.3d at 315. This factor weighs more heavily when the dispute
centers on interpretation of law used in the transferee district. See, e.g., USPG Portfolio
Two, LLC v. John Hancock Real Estate Finance, Inc., No. 3:10-CV-2466-D, 2011 WL
1103372, at *7 (N.D. Tex. Mar. 25, 2011).
However, a district court’s review of an arbitration award under the Federal
Arbitration Act is an extraordinarily narrow review. Glover v. IBP, Inc., 334 F.3d 471,
473–74 (5th Cir. 2003). Whether to confirm or vacate an arbitration award is related
to whether the arbitration panel exceeded its legal authority in granting the remedies
included in the final award. See Eastman Med. Prods. Inc., 199 F. Supp. 2d at 596–97.
The court’s legal analysis does not center on the intricacies of interpreting the
substantive law at issue in the arbitration. Id.

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Carefusion Corporation insists that interpreting California law will be
necessary to determine whether or not the arbitrators exceeded their powers as
provided for by 9 U.S.C. § 10. Whatever expertise the California Courts have in
interpreting California law will be of little importance, because the Ninth Circuit has
held that “exceeded their powers” does not mean interpreting or applying the
governing law incorrectly, but only rendering an award that is completely irrational or
exhibits a manifest disregard of the law. French v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 784 F.2d 902, 906 (9th Cir. 1986); Todd Shipyards Corp. v. Cunard Line, Ltd.,
943 F.2d 1056, 1060 (9th Cir. 1991). Even if the California court’s expertise in
California law revealed misinterpretations of California law, confirmation would still
be required. French, 784 F.2d at 906.
C.

Transfer Is Not Warranted

The most important factor for transfer, the convenience of the parties and
witnesses is absent in this case. Tres Tech decided to seek confirmation of the Award
in Texas, where it resides, as allowed by the terms of the agreement between it and
SensorMedics. Carefusion Corporation has not met its burden to show that the
Northern District of California is the clearly more convenient venue, so the Court will
respect Tres Tech’s venue decision and deny the motion to transfer.
II.

Tres Tech’s Motion to Confirm Arbitration and Carefusion
Corporation’s Cross-Motion to Vacate.
Tres Tech initiated this action by bringing its Motion to Confirm Arbitration

Award. Following the arbitration hearing and two rounds of post-hearing briefing, the
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panel of three arbitrators issued the Award granting Tres Tech the relief it sought and
denying the relief sought by Carefusion Corporation. Tres Tech seeks to confirm the
Award, to obtain post-award, prejudgment interest and post-judgment interest on the
Award, and to have a final judgment entered against Carefusion Corporation.
In response, Carefusion Corporation filed a cross-motion to vacate the Award,
arguing first that the Award should be vacated for lack of jurisdiction and second,
that the Award should be vacated on any one of three substantive grounds. For its
first jurisdictional argument, Carefusion Corporation raises the claim that it was not
the entity that actually arbitrated against Tres Tech, but that Tres Tech arbitrated
against a completely different entity, Carefusion 202, Inc. In the alternative,
Carefusion Corporation argues that the panel exceeded its authority to bind
Carefusion Corporation to arbitration, because Carefusion Corporation did not sign
an arbitration agreement and none of the available theories for binding nonsignatories recognized by the Fifth Circuit apply. Finally, Carefusion Corporation
argues that if the panel properly exercised jurisdiction over Carefusion Corporation,
the Award should be set aside for any of the following reasons: (1) the panel exceeded
their authority because they ignored the contract and the applicable law in finding no
patent misuse as alleged by Carefusion Corporation’s counter-claim; (2) the panel
exceeded its authority by erroneously considering parol evidence; and (3) the panel
exceeded its authority by erroneously reforming the contract. For the reasons below,
the Court cannot reach a decision on the merits of either motion.

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When a party seeks confirmation of an arbitration award, the Court gives
deference to the decisions of the arbitrators. Glover, 334 F.3d at 473. Review of such
an award is extraordinarily narrow. Id. at 473–74. However, the Court may vacate an
award if: (1) the award was procured by corruption, fraud, or undue means; (2) there
is evidence of partiality or corruption among the arbitrators; (3) the arbitrators were
guilty of misconduct which prejudiced the rights of one of the parties; or (4) the
arbitrators exceeded their powers. 9 U.S.C. § 10(a). Additionally, the Fifth Circuit has
recognized that an arbitration award may be vacated if, in making the award, the
arbitrator acted with manifest disregard for the law. Glover, 334 F.3d at 474. A court
may only enforce an arbitration award as written by the arbitrator, so an ambiguous
award is unenforceable. Brown v. Witco Corp., 340 F.3d 209, 216 (5th Cir. 2003);
Mills v. James Helwig & Son, No. 3:04-CV-0936-B, 2005 WL 1421810, at *3 (N.D.
Tex. June 13, 2005); Luby’s Rests. Ltd. P’ship v. Credit Suisse Sec. (USA) LLC, No. H10-3212, 2011 WL 1740196, at *1(S.D. Tex. May 5, 2011). A court may not
attempt to resolve an ambiguity; rather, it must remand the award and instruct the
arbitrators to clarify the particular ambiguities. Brown, 340 F.3d at 216.
The Court is unable to reach a decision on either Tres Tech’s Motion to
Confirm Arbitration or Carefusion Corporation’s Cross-Motion to Vacate because of
an ambiguity in the Award. The original demand for arbitration named Carefusion
Corporation as the respondent and Carefusion Corporation appeared by submitting a
response to that demand. Though there was no official motion or filing to substitute

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parties, Tres Tech’s response to Carefusion Corporation’s counterclaims and all
subsequent filings named Carefusion 202, Inc. as the respondent. However, the
Award names Carefusion Corporation and makes no reference to Carefusion 202, Inc.
One possible explanation is that the arbitrators considered the issue of who the
proper respondent was and implicitly ruled that Carefusion Corporation was that
party. Another plausible explanation is that the arbitrators’ use of the original style
naming Carefusion Corporation as respondent was an error. The uncertainty of the
party against whom the Award should be enforced creates an ambiguity in the Award.
See Hyle v. Doctor’s Assocs., Inc., 198 F.3d 368, 371–72 (2d Cir. 1999) (finding an
arbitration award ambiguous under similar circumstances). Because the Court cannot
interpret the ambiguity and implement the Award, the Award must be remanded
back to the arbitrators in order to clarify which party it should be enforced against.
III.

Conclusion

For the reasons stated above, Carefusion Corporation’s Motion to Transfer Action is
hereby DENIED; Tres Tech’s Motion to Confirm Arbitration Award is DENIED;
Carefusion Corporation’s Cross-Motion to Vacate Award is DENIED. The Court
ORDERS that the Award be REMANDED to the American Arbitration Association
for clarification of the ambiguity concerning the proper respondent. The parties shall
cause a certified copy of this Memorandum Opinion and Order to be served upon the

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American Arbitration Association and the individual arbitrators, and shall file proof
of such service with the Court.
SO ORDERED.
Signed on August 29th, 2013.

____________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE

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