Pharmaniaga Berhad v. EHealthline.com, Inc.
Pharmaniaga Berhad v. EHealthline.com, Inc.
Opinion of the Court
This Memorandum and Order disposes of the following currently pending motions (the "Motions"): (1) Petitioner Pharmaniaga Berhad's ("Pharmaniaga") Motion for Confirmation of Foreign Arbitral Award, Entry of Judgment, and Attorney's Fees Incurred in Confirming the Award (ECF No. 16, the "Motion to Confirm"); (2) Respondent E*Healthline.com, Inc. ("EHL")'s Motion to Dismiss (ECF No. 23, the "Motion to Dismiss"); (3) EHL's Motion to Vacate Arbitral Award (ECF No. 26, the "Cross-Motion to Vacate"); and (4) Pharmaniaga's Motion for Right to Attach Order and Writ of Attachment (ECF No. 43, the "Attachment Motion"). For the following reasons, the Motion to Confirm is GRANTED, and the remaining Motions are DENIED.
*1140BACKGROUND
All of the Motions arise from the London-seated arbitration titled E*HealthLine.com Inc. v. Modern Industrial Investment Holding Group Co. Ltd. & Pharmaniaga Berhad, ICC Case No. 20125/RD (the "Arbitration"), in which EHL was the claimant and Pharmaniaga and Modern Industrial Investment Holding Group Co. Ltd. ("Modern") were the respondents. A three-member arbitral tribunal (the "Tribunal") presided over the Arbitration.
The procedural history of the Arbitration involved:
• Significant document productions by all parties;
• Extensive pre-hearing pleadings (with evidentiary exhibits and written fact and expert testimony) by all parties throughout 2014-2016;
• A five-day hearing (with opening and closing statements, live witness testimony, and cross-examination) in April 2016;
• Post-hearing submissions by all parties on the merits in May 2016; and
• Post-hearing submissions by all parties on the allocation of the Arbitration's costs.
The Arbitration concluded on November 2, 2016, when the Tribunal issued its unanimous, 174-page "Final Award," which is included as an exhibit to Pharmaniaga's Motion to Confirm. ECF No. 1-2. In the Final Award, the Tribunal rejected all of EHL's claims, finding that Pharmaniaga and Modern succeeded on all "material issues addressed by the Tribunal" and EHL "ha[d] not succeeded upon any of the Tribunal's Principal Issues[.]" Id. at 170.
During the Arbitration, "[a]ll three Parties [were] agreed" that the Tribunal's decision on the allocation of costs "should reflect the Parties' relative success and failure in the [A]rbitration." Id. at 169. Applying this standard after rejecting EHL's claims, the Tribunal ordered EHL to pay for the costs of the Arbitration (including the parties' legal fees) for a total of £2,000,000.00 (at a post-award interest rate of 4% per annum) and $872,953.00 (at a post-award interest rate of 3% per annum). Id. at 172. Although the Final Award awarded part of that total to Pharmaniaga and part to Modern, Modern assigned Pharmaniaga its interest in the Final Award pursuant to an Assignment of Rights Agreement dated November 5, 2017. See ECF No. 1-5 ("Assignment Agreement") at ¶ 5(a).
Throughout 2016 and 2017, Pharmaniaga asked (through counsel) for EHL to pay the amounts ordered by the Final Award, but EHL refused. See ECF No. 1-1 ("First Harrison Affidavit") at ¶¶ 7-8. On December 21, 2017, Pharmaniaga initiated this action to enforce the Final Award. See ECF No. 1. On February 2, 2018 and February 8, 2018, respectively, EHL filed its Motion to Dismiss and Cross-Motion to Vacate. On March 19, 2018, Pharmaniaga filed its Attachment Motion.
ANALYSIS
A. The Final Award Is Confirmed
Pharmaniaga's Motion to Confirm, and EHL's Motion to Dismiss and Cross-Motion to Vacate, all address the question of whether the Final Award should be confirmed. For the reasons stated below, the Court finds that the Final Award should be confirmed, and hereby GRANTS Pharmaniaga's Motion to Confirm and DENIES EHL's Motion to Dismiss and Cross-Motion to Vacate.
1. The New York Convention Governs Confirmation of the Final Award
The confirmation of the Final Award is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (the "New *1141York Convention"). See Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co.,
2. Pharmaniaga Has Met Its Burden To Confirm The Final Award
A petitioner seeking the confirmation of a foreign arbitral award satisfies its burden by submitting copies of (1) the award and (2) the agreement to arbitrate. 21 U.S.T. 2517, Art. IV. Pharmaniaga has met this burden by submitting the Final Award and the agreement to arbitrate found in the Memorandum of Collaboration ("MOC"), which is the same agreement to arbitrate that EHL invoked in submitting its claims to arbitration in the first place. ECF No. 1-2 at p. 10.
3. There Is No Basis To Refuse Confirmation Under the New York Convention
Federal law implementing the New York Convention provides that a court "shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the [New York] Convention."
EHL has not challenged the Final Award on any ground for non-enforcement stated in Article V(2)(a)-(b), and the Court finds that none of these grounds applies in any event because the subject matter of the parties' dispute is arbitrable, and recognition or enforcement of the Final Award would not be contrary to the public policy of the United States. See, e.g., American Express Co. v. Italian Colors Restaurant,
EHL challenges the award based on the affirmative defenses stated under Article V(1)(e) and V(1)(b) only. This Circuit construes the defenses available under Article V narrowly. See, e.g., Ministry of Defense of the Islamic Republic of Iran v. Gould, Inc.,
*1142Article V(1)(e) applies where "[t]he award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made." 21 U.S.T. 2517, Art. V(1)(e). The Final Award was made in London under English law (see ECF No. 1-2 at pp. 21, 174), and EHL has not argued (or submitted any evidence) that the Final Award has been "set aside or suspended" by any court or other competent authority of the United Kingdom. EHL's argument under Article V(1)(e) thus fails.
Article V(1)(b) applies where "[t]he party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case[.]" 21 U.S.T. 2517, Art. V(1)(b). EHL does not dispute that it participated in the Arbitration (including the document production, pre- and post-hearing submissions of pleadings and evidence, and the five-day hearing in London). See ECF No. 1-2 at pp. 12-16. In addition, EHL's counsel confirmed on the record at the Arbitration, in response to the Tribunal's question, that it had "no grievances" regarding the Tribunal's handling of the Arbitration proceedings. See ECF No. 36-5 (Excerpt from the Arbitration Hearing Transcript) at pp. 163:24-165:16. "This concession, when given the opportunity to present objections to the alleged fundamental unfairness on the record, effectively operates as a waiver of [the] argument that the arbitrators deprived [that party] of a fundamentally fair proceeding." Urquhart v. Kurlan,
4. EHL's Non-New York Convention Arguments Also Fail
EHL's Motion to Vacate also argues under
a. The New York Convention provides the sole basis to vacate.
As a preliminary matter, EHL's
*1143b. EHL was not deprived of a fair hearing.
Even if the defenses set forth in
Indeed, EHL has not identified any evidence or argument that the Tribunal prejudicially prevented EHL from presenting or making, nor any misconduct tantamount to "bad faith" on the part of the arbitrators. See, e.g., Dastime Grp. Ltd. v. Moonvale Invs. Ltd., No. 17-cv-01859,
Instead, EHL argues that the 174-page Final Award improperly weighed the evidence. See, e.g., ECF No. 41 (Reply i/s/o Motion to Vacate) at 14:6-9. But a re-evaluation of the evidence is beyond this Court's scope of review.
None of the cases on which EHL relies involve the vacatur of an arbitral award based on the evidentiary conclusions in the award itself, rather than specific actions taken by arbitrators during the arbitral proceedings (such as the failure to admit evidence into the record or the failure to make reasonable accommodations necessary to hear critical witness testimony).
The Court therefore rejects EHL's argument that it was deprived of a fair hearing.
c. The Final Award was not tainted by bias.
EHL also argues under
In the Ninth Circuit, an arbitrator's failure to disclose a conflict of interest can warrant vacatur where the nondisclosure demonstrates a "reasonable impression of partiality." Schmitz v. Zilveti,
EHL does not meet this standard. The contacts between the arbitrator and Modern's witness were social, infrequent, and insignificant, as confirmed by the arbitrator's lack of recollection of having met the witness until reminded by Modern's counsel at the hearing. "[V]acatur could not be required 'simply because an arbitrator failed to disclose a matter of some interest to a party.' "
In addition, EHL already waived any bias challenge based on this disclosure. See ECF Nos. 36-1, 39-2. See, e.g., Fidelity Federal Bank, FSB v. Durga Ma Corp.,
The Court therefore rejects EHL's argument that the award was tainted by bias.
5. There Is No Basis To Dismiss Pharmaniaga's Petition
EHL seeks dismissal of Pharmaniaga's Petition to Confirm the Final Award under Rule 12(b) of the Federal Rules of Civil Procedure on grounds that the Final Award is not "final" because the Tribunal rejected three of EHL's 19 claims on jurisdictional grounds.
The Court rejects EHL's argument that the Tribunal was required to assume jurisdiction over all of EHL's claims in order to render an enforceable *1145award. Arbitrators are required to assess their jurisdiction on a claim-by-claim basis, and numerous courts have confirmed arbitral awards on similar facts, where some (but not all) claims fell within the arbitrators' jurisdiction. See, e.g., Summer Rain v. Donning Co./Publishers, Inc.,
EHL does not cite any case yielding the opposite result, i.e., a case in which an arbitral award was vacated because the arbitrators determined they lacked jurisdiction over some (but not all) claims. See ECF No. 34 (Opposition to Motion to Dismiss) at pp. 13:10-14:2. Particularly in the context of this case, where the Final Award represents Pharmaniaga and Modern's legal costs incurred in defending against EHL's claims, the Court finds that Pharmaniaga is entitled to recover its costs as the "prevailing party" in the Arbitration. See, e.g., CRST Van Expedited, Inc. v. EEOC, --- U.S. ----,
Moreover, under Ninth Circuit law, EHL is estopped from challenging the Tribunal's jurisdiction on its claims because a party "may not voluntarily submit his claim to arbitration, await the outcome, and, if the decision is unfavorable, then challenge the authority of the arbitrators to act." Ficek v. S. Pacific Co.,
For the foregoing reasons, the Court CONFIRMS the Final Award.
B. Entry of Judgment
Pharmaniaga's Motion to Confirm also seeks entry of judgment. ECF No. 16 at p. 10. The Court finds that Pharmaniaga is entitled to payment by EHL of £2,000,000.00 (at a post-award interest rate of 4% per annum) and $872,953.00 (at a post-award interest rate of 3% per annum), i.e., the full amount EHL was ordered to pay to Pharmaniaga and Modern in the Final Award. ECF No. 16-2 at p. 172.
The Court finds that this amount is "a sum certain" within the meaning of Rule 58(b)(1)(B) of the Federal Rules of Civil Procedure, such that the clerk shall *1146"promptly prepare, sign, and enter the judgment" without further direction from the Court. See Fed. R. Civ. P. 58(b)(1)(B).
C. Pharmaniaga's Request For Attorney's Fees For Enforcement
Pharmaniaga's Motion to Confirm also seeks its attorney's fees incurred in enforcing the Final Award. Under the Ninth Circuit's case law, this Court is authorized to award attorney's fees where "an unjustified refusal to abide by an arbitrator's award" forces a party to file an enforcement proceeding under the New York Convention. Cubic Defense,
The Court finds that EHL's refusal to abide by the Final Award has been unjustified. The Arbitration was a proceeding that EHL voluntarily initiated, requiring respondents Pharmaniaga and Modern to expend millions of dollars in legal fees. See ECF No. 1-2 at ¶¶ 1.1-1.3, 6.16, 6.19. Consistent with governing English law and the applicable arbitral rules, the Final Award requires EHL to pay a portion of the legal costs of Pharmaniaga and Modern, as prevailing parties in the Arbitration. Id. at 6.20-6.35.
In addition, under the arbitral rules governing the Arbitration, the Final Award was supposed to be self-executing, but EHL refused payment and did not undertake any steps to correct, challenge, or appeal the award. See ECF No. 1-3 (Arbitration Agreement) at § 17.2; ECF No. 1-9 (ICC Rules) at Article 34(6) ("Every award shall be binding on the parties."). EHL's principal arguments against confirmation of the Final Award are disputes with the Tribunal's credibility determinations and weighing of the evidence, which are outside the scope of judicial review in an arbitral award enforcement proceeding. Accordingly, the Court finds it appropriate to award Pharmaniaga the reasonable costs it expended to confirm the Final Award.
Not later than thirty (30) days following the date this Memorandum and Order is electronically filed, Pharmaniaga shall file a motion pursuant to Rule 54(d) of the Federal Rules of Civil Procedure to address the amount of the attorney's fees and other costs it seeks. That motion need not address Pharmaniaga's entitlement to attorney's fees, which is established by this Order.
D. Pharmaniaga's Attachment Motion
Pharmaniaga's Attachment Motion seeks a right to attach order and a writ of attachment in the amount of $3,506,953, directed at "all corporate property which is subject to attachment pursuant to subdivision (a) of the Code of Civil Procedure Section 481.070." ECF No. 43-2 (Affidavit of Melanie M. Blunschi) at ¶¶ 3(b), 3(e). However, given that the Court is confirming the Final Award and directing that Judgment be entered forthwith, there is no further pre-judgment period for which attachment would be appropriate. Accordingly, the Attachment Motion is DENIED without prejudice.
*1147CONCLUSION
Consistent with the foregoing rulings, the Court hereby ORDERS as follows:
1. Pharmaniaga's Motion for Confirmation of Foreign Arbitral Award, Entry of Judgment, and Attorney's Fees Incurred in Confirming the Award (ECF No. 16) is GRANTED and the Final Award is CONFIRMED;
2. Respondent E*Healthline.com, Inc.'s Motion to Dismiss (ECF No. 23) is DENIED;
3. EHL's Motion to Vacate Arbitral Award (ECF No. 26) is DENIED;
4. Pharmaniaga's Motion for Right to Attach Order and Writ of Attachment (ECF No. 43) is DENIED without prejudice;
5. The clerk shall promptly prepare, sign, and enter judgment against EHL and in Pharmaniaga's favor for payment of £2,000,000.00 (at a post-award interest rate of 4% per annum) and $872,953.00 (at a post-award interest rate of 3% per annum), with interest to be applied from the date of issuance of the Final Award on November 2, 2016;
6. Not later than thirty (30) days following the date this Memorandum and Order is electronically filed, Pharmaniaga shall file a motion pursuant to Rule 54(d) of the Federal Rules of Civil Procedure to address the amount of the attorney's fees and other costs it seeks, with the motion, opposition, and reply briefs due on the dates specified by Local Rule 293(a).
IT IS SO ORDERED.
Having determined that oral argument would not be of material assistance, the Court ordered the Motion submitted on the briefs pursuant to Local Rule 230(g).
EHL asserts the statement was a mere courtesy without legal effect, citing People of Territory of Guam v. Marquez,
EHL casts its argument regarding a "fundamentally fair hearing" as both a New York Convention argument and an argument under
In any event, the Final Award reflects substantial evidence supporting the Tribunal's conclusions. For example, there was evidence suggesting that Dr. Mekhamer (EHL's primary witness) was untruthful and unreliable in his testimony (see ECF No. 1-2 at ¶¶ 5.10, 5.13) and that Dr. Mekhamer's wife (EHL's only other witness) had no independent knowledge of key events (see ECF No. 1-2 at ¶¶ 4.26, 5.12-5.13). In addition, EHL's expert witness admitted that he removed critical information from his report at EHL's lawyers' "highly unusual" request (see ECF No. 36-4, Ex. 12 (Arbitration Hearing Transcript for Day 4) at 157:10-159:25), and EHL failed to call another witness available to it that may have been able to corroborate its claims (see ECF No 1-2 at ¶¶ 5.15, 5.43-5.72, 5.80). The following excerpts further highlight the Tribunal's reasoning and justification for weighing the evidence before it against EHL. The Tribunal concluded that (1) EHL based its claims to have provided Pharmaniaga and Modern with valuable intellectual property on "hopelessly vague, unspecific and unparticularised" assertions, and on "knowledge which was [not] unique to EHL" or obvious proposals for which there was "manifestly no special insight or analysis," (see ECF No. 1-2 at ¶¶ 5.143, 5.149, 5.151, 5.153); (2) "There is no case that [Pharmaniaga and Modern] misused [EHL]'s confidential information or work-product for their bilateral joint venture," (ECF No. 1-2 at ¶ 5.198); (3) "Dr. Mekhamer gave evidence to the Tribunal that he must have known to be untrue, as indeed it was," (ECF No. 1-2 at ¶ 5.13); (4) EHL alleged that many of its supposed "secrets" were transmitted over the phone by Dr. Mekhamer, yet "[d]espite [Dr. Mekhamer's] insistence that he made notes of such calls, none were provided to the Tribunal by [EHL]," (ECF No. 1-2 at ¶ 5.162); (5) EHL "falsified EHL Exhibits 61, 63 and 64," which were "deliberately presented by [EHL] to the Tribunal as genuine in a misplaced attempt to found its claim[,]" (ECF No. 1-2 at ¶ 5.108); see also ECF No. 35 (Pharmaniaga Berhad's Opposition to EHL's Cross-Motion to Vacate) at pp. 15-16 (discussing issue of forged evidence) ).
EHL appears to challenge this Court's subject matter jurisdiction. This Court finds that it has subject matter jurisdiction under both
Nothing in this Memorandum and Order should be construed to preclude Pharmaniaga from pursuing any post-judgment enforcement procedures that may be available. That Court does note, however, that it would have declined to grant Pharmaniaga's current attachment request in any event because it does not specifically identify property to be attached. While the Court is aware of the breadth of the statutory language pertaining to the attachment of corporate property, from a practical perspective, this Court also has to provide direction to the United States Marshal's Service personnel who will be called upon to execute the Court's attachment order. This Court will not ask Deputy United States Marshals to determine what property should be attached when the parties are in a much better position to do so.
Reference
- Full Case Name
- PHARMANIAGA BERHAD, a Malaysian Entity v. EHEALTHLINE.COM, INC., a Delaware Corporation
- Cited By
- 5 cases
- Status
- Published