08.18New York Federal Court Sustains Nonsignatory Arbitration Rights in Pharma License Dispute
The recent decision of a US court in New York confirming, under the New York Convention, an ICDR Panel award in favor of Hoffmann La Roche (HLR), and its US subsidiary and customer, comes a good news for at least two important reasons. One concerns arbitration rights of non-signatories; the other, the recovery of legal costs by prevailing parties of foreign and US citizenship in an international arbitration with a seat in New York and New York law applicable to the merits. F. Hoffmann La Roche Ltd. v. Qiagen Gaithersburg, 2010 U.S. Dist. LEXIS 81374 (SDNY Aug. 11, 2010)
The case involved a cross-license agreement originally between predecessors in interest of Claimant and HLR. A US wholly-owned HLR subsidiary used the licensed rights to develop diagnostic devices which it sold to a third party (also of US nationality). Claimant claimed that those sales violated the license.
The Tribunal granted HLR’s customer, which had no contract with Claimant, the right to join as a party to the arbitration. In this decision, the Court upholds that joinder. It reviews US jurisprudence concerning the doctrine of estoppel as a basis for permitting non-signatories to the agreement to participate in the arbitration. It holds that those principles permit a non-signatory, whose rights are closely intertwined with the disputed provisions of the contract that contains the arbitration clause, to compel the signatory party that contests its rights to arbitrate their dispute.
This decision also upholds the decision of the Tribunal to award legal costs including attorneys’ fees to HLR and its US subsidiary ($3.1 million!) and customer ($2.9 million!), based on Article 31 of the ICDR Rules, even though the place of arbitration was New York and the contract provided that the governing law was New York law. The court noted that the Panel correctly decided that the parties’ agreement on New York law was to be construed as a choice of law concerning the merits , and not concerning the allocation of legal costs, especially where the parties had agreed to arbitrate under ICDR Rules and ICDR Rule 31 is explicit in giving the arbitrators discretion in making allocation of legal costs between the parties.
The court also noted that the Tribunal in making the award of legal costs took note of the fact that the Claimant had itself repeatedly requested an award of legal costs in its favor.
Marc J. Goldstein Litigation & Arbitration Chambers frequently represents non-U.S. companies in arbitrations, and in litigations including those related to arbitrations, in the United States.
The firm’s principal Marc J. Goldstein was recently named to Best Lawyers in America 2011, in the specialty of international arbitration, a distinction that has been conferred on him in each year since he founded this firm in 2007.