Facta Health Inc v. Pharmadent LLC

• Court: Court of Appeals for the Third Circuit
• Decided: September 30, 2024
• Docket: 23-2224
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

________________

No. 23-2224 ________________

FACTA HEALTH INC; FRANK J. COZZARELLI; ROBERT MANGONE; PAUL KAPP; ROBERT LAUDADIO; GOTTA GUY INC, Appellants

v.

PHARMADENT LLC; ALAN WICKENHAUSER; STEPHEN PEIPERT _____________

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 2-20-cv-09631) District Judge: Honorable Stanley R. Chesler ________________

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) on April 12, 2024

Before: CHAGARES, Chief Judge, PORTER, and SCIRICA, Circuit Judges.

(Filed: September 30, 2024) ________________

OPINION * ________________

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. SCIRICA, Circuit Judge

After a four-day hearing, an American Arbitration Association Panel found that

Facta Health, Inc. breached its Patent Purchase Agreement with Pharmadent, LLC. The

Panel rescinded the agreement and returned the intellectual property to Pharmadent, but

also permitted Pharmadent to keep Facta’s initial payment. Pharmadent and its members

Dr. Alan Wickenhauser and Stephen Peipert moved to confirm the Final Award, and

Facta and its principals Frank J. Cozzarelli, Robert Mangone, Paul Kapp, Robert

Laudadio, and Gotta Guy, Inc. moved to vacate it. The District Court confirmed the

Final Award. Facta now appeals the District Court’s judgment. Because the District

Court did not err in confirming the Final Award, we will affirm.

I.

Facta and Pharmadent entered into a Patent Purchase Agreement (“PPA”), under

which Pharmadent sold Facta patents and intellectual property for a topical anesthetic

developed by Wickenhauser and Peipert. In exchange, Pharmadent would receive a

$400,000 initial payment and a royalty payment plan, which included a $3,000,000

advance upon the product’s approval by the Food and Drug Administration (“FDA”) or

the Department of Defense (“DOD”). The PPA provided that the Parties would resolve

any dispute before a three-member American Arbitration Association (“AAA”) Panel

under its Commercial Arbitration Rules. The PPA further provided that the hearing

conducted by the Panel would last no longer than a day, but that the time limit was not

jurisdictional and could be extended for good cause. Finally, the PPA specified that

Pharmadent’s remedies included, inter alia, rescission of the agreement if Facta failed to

2 pay the royalty fee, as well as “equitable relief, which may be appropriate in the

circumstances.” App. 1369.

Although the PPA contemplated the Parties’ cooperation in seeking the product’s

approval, the relationship soured, leading to an arbitration, state court proceeding, and

two amendments to the PPA. The relationship deteriorated further, and Facta initiated a

second arbitration and state court action. Pharmadent removed the matter to federal court

on diversity grounds, where the District Court granted its motion to stay the litigation and

compel arbitration. In the arbitration, Pharmadent asserted counterclaims, including

breach of contract and breach of the implied covenant of good faith and fair dealing, and

sought, inter alia, rescission of the PPA and return of the intellectual property.

The Panel determined that due to the number of witnesses the Parties wished to

present, good cause existed to schedule ten days of evidentiary hearings, which the Panel

later reduced to four days. Facta also filed thirteen applications for pre-hearing

dispositive motions, which the Panel denied.

In its pre-hearing briefing, Facta urged the Panel to apply certain legal doctrines

when it interpreted the PPA and addressed issues in the dispute. Facta also asserted that

Dr. Robert Lake, the regulatory director of Pharmadent, should be prohibited from

offering an expert report and testimony. During the four-day hearing, the Panel heard

testimony from four witnesses and considered some 350 exhibits. The Panel addressed

Facta’s contentions respecting Lake’s testimony, explaining that it would assign the

report and testimony “the weight [it] believe[d] is appropriate.” App. 980. At the

conclusion of the hearing, Facta’s counsel confirmed that Facta was satisfied that it had

3 the opportunity to present its case to the Panel.

Upon consideration of the Parties’ arguments presented at the hearing, as well as

their pre- and post-hearing briefing, the Panel issued a Final Award in favor of

Pharmadent and rejected all Facta’s claims. Notably, the Panel rejected Facta’s

fraudulent inducement claim and other “vague allusions to [Pharmadent’s] . . . fraud,”

App. 330, explaining that Facta’s principals testified that Pharmadent “had not made any

intentional misrepresentation to, or concealed any information from, Facta,” App. 331.

The Panel concluded that Facta breached the PPA by terminating Wickenhauser from his

role in overseeing the approval process and that Facta breached the implied covenant of

good faith and fair dealing by “repeatedly and intentionally interfer[ing] with

Pharmadent’s ability to lead and control the DOD/FDA approval and testing process[].”

App. 324, 327. Observing that the Parties agreed that the PPA entitled Pharmadent to

equitable relief, and that the plain language of the PPA vested the Panel with “the sound

discretion” to fashion “the specific parameters of any equitable remedy,” the Panel

rescinded the PPA and assigned the intellectual property to Pharmadent. App. 335. The

Panel also permitted Pharmadent to keep the initial payment, concluding that

Pharmadent’s retention of the payment “equitably addresse[d]” Facta’s “wrongful

conduct in frustrating and delaying Pharmadent’s pursuit of FDA approval,” which

“deprived Pharmadent . . . of the opportunity to enjoy the potential rewards of DOD/FDA

approval and reduced the remaining life of” the patents. App. 337.

The District Court granted Pharmadent’s motion to confirm the Final Award and

denied Facta’s cross-motion to vacate, finding that Facta’s arguments did not warrant

4 vacatur under 9 U.S.C. § 10(a). Facta Health, Inc. v. Pharmadent, LLC, No. CV 20-9631

(SRC), 2023 WL 3965921, at *3 (D.N.J. June 13, 2023).

Facta timely appealed.

II.

As a threshold matter, Facta argues that the District Court may have lacked subject

matter jurisdiction. Facta explains that when Pharmadent removed on the stated basis of

diversity jurisdiction, Wickenhauser filed a declaration that he and Peipert were the only

two members of Pharmadent. Facta argues that this declaration is suspect because some

four months later, Wickenhauser submitted a new drug application to FDA in which he

wrote that Pharmadent consisted of four members.

Diversity jurisdiction must exist at the time the complaint was filed and at the time

of removal, and the burden is on the moving party to establish federal jurisdiction.

Johnson v. SmithKline Beecham Corp., 724 F.3d 337, 346 (3d Cir. 2013).

Wickenhauser’s declaration established complete diversity among the Parties, and there

was no contrary evidence in the record at the time of removal. See Lincoln Ben. Life Co.

v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015) (explaining that for diversity purposes,

a limited liability company is a citizen of every state in which a member is a citizen).

Facta does not explain how the new drug application demonstrates that Pharmadent failed

to meet its burden to establish jurisdiction at the time of removal.

Accordingly, the District Court exercised diversity jurisdiction over the matter

under 28 U.S.C. §§ 1332(a) and 1441(b). We have jurisdiction under 28 U.S.C. § 1291

and the Federal Arbitration Act. See 9 U.S.C. § 16(a)(1)(D) (“An appeal may be taken

5 from . . . an order . . . confirming or denying confirmation of an award or partial

award . . . .”).

III.

“On appeal from a district court’s ruling on a motion to confirm or vacate an

arbitration award, we review its legal conclusions de novo and its factual findings for

clear error.” Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 219 (3d Cir. 2012) (citing

First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 947–48 (1995)), as amended (Apr. 4,

2012), aff’d, 569 U.S. 564 (2013). “A more deferential standard of review applies to the

arbitration award itself,” and it “begin[s] with the presumption that the award is

enforceable.” Id. (citing Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460

U.S. 1, 24–25 (1983)). “We do not entertain claims that an arbitrator has made factual or

legal errors,” id., and “will ‘vacate [an award] only under [the] exceedingly narrow

circumstances’ listed in 9 U.S.C. § 10(a),” France v. Bernstein, 43 F.4th 367, 377 (3d

Cir. 2022) (quoting Freeman v. Pittsburgh Glass Works, LLC, 709 F.3d 240, 251 (3d Cir.

2013) (alterations in original)). These four circumstances are:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

6 9 U.S.C. § 10(a).

Facta argues that the Final Award should be vacated because the Panel exceeded

its legal authority, committed numerous legal errors, and displayed partiality for

Pharmadent—all of which violated § 10(a) and deprived Facta of due process. Facta’s

arguments largely concern errors by the Panel, rather than the District Court’s application

of the § 10(a) factors, which are not grounds for vacatur. See Sutter, 675 F.3d at 219

(starting that vacatur can only be based upon one of the four factors).

Moreover, as Pharmadent rightly observes, Facta has failed to preserve a number

of these arguments. In many instances, Facta does not cite caselaw or the parts of the

record that support its arguments or describe what § 10(a) factors are implicated by the

District Court’s or Panel’s purported errors. See Fed. R. App. P. 28(a)(8)(A); L.A.R.

28.1(c). Where Facta has failed to do so, its arguments are improperly presented and thus

forfeited. See Doeblers’ Penn. Hybrids, Inc. v. Doebler, 442 F.3d 812, 821 n.10 (3d Cir.

2006) (explaining that “passing and conclusory statements do not preserve an issue for

appeal” and that an appellant’s brief requires “argument [and] legal support” to develop a

claim); Barna v. Bd. of Sch. Dirs. of Panther Valley Sch. Dist., 877 F.3d 136, 145–47 (3d

Cir. 2017) (noting that inadvertent failure to properly preserve an issue under Rule 28

constitutes forfeiture). Nevertheless, we conclude that the District Court did not err in

confirming the Final Award.

A.

The majority of Facta’s arguments concern error under §§ 10(a)(3) and (4),

7 although in many instances Facta fails to note under which factor the District Court erred.

Accordingly, we will address Facta’s arguments under these two factors, consistent with

the District Court’s opinion. See Facta Health, Inc., 2023 WL 3965921, at *3.

Under § 10(a)(3), a court may vacate an arbitration award where the Panel is

“guilty of misconduct” in refusing to postpone a hearing or hear relevant evidence or

engage in other “misbehavior” that prejudices a party. “‘Misconduct’ is conduct that ‘so

affects the rights of a party that it may be said that he was deprived of a fair hearing.’”

CPR Mgmt., S.A. v. Devon Park Bioventures, L.P., 19 F.4th 236, 245 (3d Cir. 2021)

(quoting Newark Stereotypers’ Union No. 18 v. Newark Morning Ledger Co., 397 F.2d

594, 599 (3d Cir. 1968)). “A ‘fair hearing’ is one where the parties have notice and an

opportunity to present evidence and arguments before an impartial arbitrator.” Id. (citing

Newark Stereotypers’ Union, 297 F.2d at 600).

Under § 10(a)(4), a court may vacate an award when the Panel exceed its powers.

This occurs when an arbitrator “decides an issue not submitted to him, grants relief in a

form that cannot be rationally derived from the parties’ agreement and submissions, or

issues an award that is so completely irrational that it lacks support altogether.” Sutter,

675 F.3d at 219–20 (citing Ario v. Underwriting Members of Syndicate 53 at Lloyds for

the 1998 Year of Acct., 618 F.3d 277, 295–96 (3d Cir. 2010)).

First, Facta argues that the Panel committed misconduct by denying it a pre-

arbitration hearing on certain dispositive motions, which would have narrowed the scope

8 of issues in the arbitration. 1 We are not persuaded.

The Panel did not “deprive[] [Facta] of a fair hearing” on these motions because it

was not required to hear them in the first place. See CPR Mgmt., 19 F.4th at 245 (internal

quotation marks omitted). The PPA specified that the Panel would resolve any dispute

under the AAA’s Commercial Arbitration Rules. Rule R-33, in turn, provides that an

arbitrator “may allow the filing of and make rulings upon a dispositive motion only if the

arbitrator determines that the moving party has shown that the motion is likely to succeed

and dispose of or narrow issues in the case.” A.A.A. Commercial Arb. R. 33 (emphasis

added). The Panel instructed the Parties to address this standard in any application for a

dispositive motion they wished to file. The Panel denied Facta’s applications for

dispositive motions because Facta failed to do so, and because Facta’s applications

concerned fact-intensive inquiries “not susceptible to a dispositive motion.” App. 1256.

Accordingly, the Panel did not commit misconduct because Facta was able to present its

applications for dispositive motions to the Panel for its review. Lastly, to the extent Facta

1 Facta also explains that the improper denial of its applications for dispositive motions resulted in the Panel’s incorrect determination that good cause existed for exceeding the PPA’s one-day hearing limitation. Facta’s claim that the Panel exceeded its authority by failing to adhere to the PPA’s one-day hearing limitation also fails. First, Facta forfeited this argument by failing to present it to the District Court. See Higgins v. Bayada Home Health Care Inc., 62 F.4th 755, 763 (3d Cir. 2023) (explaining that failure to develop arguments before the district court results in forfeiture on appeal). Next, the PPA explicitly provided that this limitation was not jurisdictional, that the hearing could be extended for good cause, and that extensions of time would not affect an award’s validity. Accordingly, the Panel did not exceed its authority when it determined that good cause existed to extend the hearing beyond one day given the amount of evidence the Parties wished to present. Nor can Facta argue that the Panel’s extension of the hearing was somehow misconduct; indeed, at the close of the hearing, Facta acknowledged that it was satisfied with its ability to present its case to the Panel.

9 argues that the Panel exceeded its authority under § 10(a)(4) by denying its pre-hearing

dispositive motions, it is clear that the PPA and Commercial Arbitration Rules gave the

Panel the authority to rule on the motions in this fashion.

Second, and relatedly, Facta argues that the Panel “refused to apply the law on

settlements and claim preclusion” to the instant dispute when it denied Facta’s

applications for dispositive motions on these topics. Facta Br. 42. Facta has failed to

preserve this claim, however, as its arguments are devoid of record citations. See Fed. R.

App. P. 28(a)(8)(A). And much like in its filings before the Panel and District Court,

Facta does not explain how these doctrines should have applied to this dispute. To the

extent Facta argues that the Panel committed misconduct or exceeded its authority by

denying Facta’s applications for dispositive motions on these topics, this argument fails

because the Panel had the authority under the PPA and Commercial Arbitration Rules to

deny them. Moreover, Facta cannot credibly argue that the Panel committed misconduct

by denying Facta to present its preclusion arguments at all when its counsel told the Panel

at the close of the hearing that Facta was satisfied with its ability to present its case.

Third, Facta argues that the Panel improperly permitted Lake to testify as a fact

and expert witness and failed to apply the net opinion rule to Lake’s expert report. As the

District Court correctly observed, “in making evidentiary determinations, an arbitrator

need not follow all the niceties observed by the federal courts.” Century Indem. Co. v.

Certain Underwriters at Lloyd’s, London, 584 F.3d 513, 557 (3d Cir. 2009) (internal

quotation marks omitted) (quoting Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

481 F.3d 813, 816 (D.C. Cir. 2007) (internal quotation marks omitted)). “Rather, an

10 arbitrator ‘need only grant the parties a fundamentally fair hearing.’” Id. (quoting Lessin,

481 F.3d at 816). The Panel explained it would give Lake’s report and testimony “the

weight [it] believe[d] [was] appropriate,” which reflected its awareness and consideration

of Lake’s qualifications. App. 980. Accordingly, the Panel did not commit misconduct

in its evaluation of Lake’s testimony. Nor did the Panel exceed its authority because, as

we have already discussed, the Panel evaluated the testimony under the Commercial

Arbitration Rules, which gave it greater flexibility in making evidentiary determinations.

See, e.g., A.A.A. Commercial Arb. R. 34(a) (“Conformity to legal rules of evidence shall

not be necessary.”).

Fourth, Facta argues that the Panel erred by refusing to apply New Jersey’s parol

evidence rule to the PPA. Facta explains that the Panel engaged in an oral rewriting of

the contract by admitting parol evidence about unambiguous provisions of the PPA. But

Facta does not explain how the Panel’s purportedly erroneous application of New Jersey

contract law constitutes grounds for vacatur, nor does it identify the unambiguous

provisions of the PPA to which the Panel allegedly misapplied the parol evidence rule. In

any event, Facta’s claims respecting the Panel’s interpretation of the PPA fail.

The Panel informed Facta that it did not need to lodge its parol evidence-based

objections on the record and could instead address the issue in its post-hearing briefing.

The Panel asked the Parties to “set forth [their] contentions regarding the meaning or

interpretation” of the PPA provisions that formed the basis of any claim, as well as to

discuss “authorities on any aspect of this proceeding that they believe may be helpful for

the Panel’s . . . preparation of the award.” App. 1286. Although Facta identified these

11 provisions and “how they should be interpreted,” App. 1164, in its post-hearing briefing,

it did not raise the parol evidence rule or explain which evidence presented at the hearing

should be considered or excluded under the rule. Because the Panel gave Facta the

opportunity to make parol evidence arguments in its post-hearing briefing, it did not

commit misconduct. Cf. CPR Mgmt., 19 F.4th at 245.

Moreover, the Panel’s award was not irrational because it was derived from the

PPA and governing law. See 9 U.S.C. § 10(a)(4). The Panel had the authority to

interpret the PPA, including the ability to look beyond the text of the PPA when

construing it. See Brentwood Med. Assocs. v. United Mine Workers of Am., 396 F.3d

237, 243 (3d Cir. 2005) (holding that a party merely “tak[ing] issue with [an arbitrator’s]

contractual interpretation . . . is not sufficient to justify vacatur of the award,” so long as

the arbitrator meets a “minimum rationality threshold” in interpreting the contract); cf.

Am. Cyanamid Co. v. Fermenta Animal Health Co., 54 F.3d 177, 181 (3d Cir. 1995).

And its conclusions respecting Facta’s breach of the PPA and implied covenant of good

faith and fair dealing were supported by the PPA and record evidence. 2

Finally, Facta argues that the Panel rendered an incomplete award by rescinding

the PPA but permitting Pharmadent to retain the initial payment. Facta maintains that the

2 For similar reasons, Facta’s arguments that the Panel refused to apply all New Jersey Law, misapplied the Patent Act, and incorrectly determined that Facta breached the PPA and Pharmadent exercised its best efforts to pursue product approval all fail. See, e.g., Sutter, 675 F.3d at 219 (explaining that legal error is not a basis for vacatur of arbitrator’s decision); Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013) (“[A]n arbitral decision ‘even arguably construing or applying the contract’ must stand, regardless of a court's view of its (de)merits.” (quoting E. Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62 (2000))).

12 Panel disregarded New Jersey law on rescission and made no effort to restore the Parties

to their status quo ex ante. 3 We are not persuaded.

When a party breaches the implied covenant of good faith and fair dealing, a court

may exercise its equitable powers and rescind the contract. See Medivox Prods., Inc. v.

Hoffmann-LaRoche, Inc., 256 A.2d 803, 814 (N.J. Super. Ct. Law. Div. 1969); Roach v.

BM Motoring, LLC, 155 A.3d 985, 995 (N.J. 2017). “The object of . . . rescission is to

restore the parties to the status quo ante and prevent the party who is responsible for the

misrepresentation from gaining a benefit.” Bonnco Petrol, Inc. v. Epstein, 560 A.2d 655,

662 (N.J. 1989). “As a general rule a contract is not to be partially rescinded,” id., but

“this is not an absolute requirement.” Notch View Assocs. v. Smith, 615 A.2d 676, 680

(N.J. Super. Ct. Law. Div. 1992). “Rescission remains a form of equitable relief in

whatever setting its need arises, and courts wielding that remedy retain the discretion and

judgment required to ensure that equity is done. In furtherance of that objective, a court

may shape the rescission remedy in order to serve substantial justice.” Rutgers Cas. Ins.

Co. v. LaCroix, 946 A.2d 1027, 1035 (N.J. 2008); see also First Am. Title Ins. Co. v.

Lawson, 827 A.2d 230, 241 (N.J. 2003) (explaining that rescission “properly depends on

the totality of circumstances in a given case and resides within a court's discretion.”).

3 Relatedly, Facta argues that the partial rescission award stripped its principal Mangone of certain rights and benefits conferred to him under the First Amendment to the PPA even though no claims were asserted against him. Facta fails to explain what these purported rights and benefits are and provides no citations to the record to support its arguments. See Doeblers’ Penn. Hybrids, Inc., 442 F.3d at 821 n.10. Moreover, the Panel’s decision did not bind Mangone as the Panel awarded relief against Facta, and not its principals.

13 Under this standard, courts retain significant discretion to shape a rescission remedy.

See, e.g., Lawson, 827 A.2d at 232 (partially rescinding legal malpractice coverage

agreement as to law firm and defalcating partners because of equitable fraud, but

retaining coverage under policy for any innocent partner); 34 Label St. Assocs. v. Cecere,

No. A-0183-15T1, 2017 WL 5988064, at *4, *7 (N.J. Super. Ct. App. Div. Dec. 4, 2017)

(rescinding a ground lease but awarding the landlord money for the tenant’s use and

possession of the property).

Here, the Panel did not issue an irrational or incomplete arbitration award, nor did

the District Cour err in confirming the Final Award under § 10(a)(4). 4 First, in

construing the PPA, the Panel reasonably determined that it was authorized to fashion the

parameters of any equitable remedy for the injured party. Second, its chosen remedy of

partial contract rescission has some basis in New Jersey law of equitable remedies. The

rule that rescission requires the restoration of the Parties to their status quo is a general

one, but not an absolute requirement. See Notch View Assocs., 615 A.2d at 680. And this

comports with the principle that a court retains discretion to “shape the rescission remedy

in order to serve substantial justice.” Rutgers Cas. Ins. Co., 946 A.2d at 1035. So the

Panel had an adequate basis to fashion its partial rescission remedy, which was supported

by the Panel’s findings of fact from the record. In these circumstances, the District Court

4 It is also evident that the Panel did not commit misconduct because the Parties were afforded a fair hearing on the issue of rescission. See CPR Mgmt., 19 F.4th at 245. The Panel addressed the topic of rescission on the record and specifically ordered post- hearing briefing on the issue. Facta addressed the topic in its submissions, which the Panel considered in reaching the Final Award.

14 did not err under § 10(a)(4) by confirming the award. 5 See Major League Baseball

Players Ass’n v. Garvey, 532 U.S. 504, 509 (2001) (per curiam) (“[I]f an ‘arbitrator is

even arguably construing or applying the contract and acting within the scope of his

authority,’ the fact that ‘a court is convinced he committed serious error does not suffice

to overturn his decision.’” (quoting E. Associated Coal Corp., 531 U.S. at 597 (internal

quotation marks omitted))).

B.

5 Although Facta does not raise the doctrine by name, it also argues that the Panel manifestly disregarded New Jersey law on rescission. The Parties dispute whether the manifest disregard standard is good law after the Supreme Court’s decision in Hall Street Associates, LLC v. Mattel, Inc., which held that § 10(a) provides the “exclusive grounds for expedited vacatur” of an arbitration award. 552 U.S. 576, 584 (2008). This Court has yet to address on whether the manifest disregard for the law standard remains a valid basis for vacatur of an arbitration award, and we decline to do so now. See Whitehead v. Pullman Grp., LLC, 811 F.3d 116, 120–21 (3d Cir. 2016). Nevertheless, assuming that the manifest disregard standard persists, Facta has not shown that vacatur of the Final Award is warranted under that standard. See, e.g., Sabre GLBL, Inc v. Shan, 779 F. App’x 843, 849 (3d Cir. 2019) (assuming without deciding if the manifest regard standard remained good law in finding that arbitrator did not manifestly regard Texas law on damages).

To obtain vacatur under this “extremely deferential standard,” Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003), a party challenging an award must show more than arbitrator error in interpreting or applying the governing law. Whitehead, 811 F.3d at 121. Rather, a party must show that the arbitrator’s decision “‘fl[ies] in the face of clearly established legal precedent,’ such as where an arbitrator ‘appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it.’” Id. (first quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995); then quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986)).

Here, the Panel requested briefing on the issue or rescission, and then applied the law consistent with the discretion it retained—and explicitly conferred under the PPA—to shape an equitable remedy. See, e.g., id. In these circumstances, the Panel did not manifestly disregard New Jersey law on rescission.

15 Facta also urges that the Panel ignored Pharmadent’s purportedly fraudulent

statements about the patents to the FDA and DOD in its new drug applications, and that

the Panel instead characterized this allegedly fraudulent behavior as Pharmadent using its

best efforts to approve the product. To the extent that Facta argues that any perjury or

false testimony by Pharmadent influenced the Panel, Facta is mistaken.

Under § 10(a)(1), a court may vacate an arbitration award where it was “procured

by corruption, fraud, or undue means.” 9 U.S.C. § 10(a)(1). A party seeking vacatur

under this factor “must make a three-part showing: first, that there was a fraud in the

arbitration, which must be proven with clear and convincing evidence; second, that the

fraud was not discoverable through reasonable diligence before or during the arbitration;

and, third, that the fraud was materially related to an issue in the arbitration.” France v.

Bernstein, 43 F.4th 367, 378 (3d Cir. 2022).

First, Facta forfeited this issue by failing to raise it before the District Court. See

Barna, 877 F.3d at 145–47. Next, even if Facta had not forfeited this issue, Facta’s fraud

allegations are based on documents and testimony presented at the hearing, so it cannot

argue that Pharmadent’s fraud “was not discoverable through reasonable diligence before

or during the arbitration.” France, 43 F.4th at 378. Moreover, despite Facta’s

exhortations to the contrary, its witnesses at the arbitration testified that Pharmadent

never concealed any information or made any misrepresentations to Facta.

C.

Next, Facta argues that the Final Award should be vacated because the Panel

showed “strong favoritism” for Pharmadent. Facta Br. 40.

16 Under § 10(a)(2), “evident partiality or corruption in the arbitrators” is grounds for

vacatur of an award. 9 U.S.C. § 10(a)(2). For an arbitrator’s bias to be “evident,” it

“must be sufficiently obvious that a reasonable person would easily recognize it.”

Freeman, 709 F.3d at 253.

Facta insists that the Panel’s litany of erroneous, one-sided rulings in

Pharmadent’s favor can “only evidence bias.” Facta Br. 48. But Facta fails to explain

how these decisions, standing alone or considered cumulatively, are attributable to any

partiality by the Panel. See Freeman, 709 F.3d at 253 (“The conclusion of bias must be

ineluctable, the favorable treatment unilateral”). At most, Facta complains about legal

errors, which are not grounds for vacatur. See Sutter, 675 F.3d at 219.

D.

Lastly, Facta argues that many of the Panel’s purported errors, such as its denial of

Facta’s applications for dispositive motions and failure to conduct a review of Lake’s

expert report, constituted violations of Facta’s and Mangone’s due process rights. Facta

forfeited this argument because it made only a singular, passing, and unsubstantiated

reference to due process violations in its briefing before the District Court. See John

Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070, 1076 n.6 (3d Cir. 1997)

(“[A]rguments raised in passing . . . but not squarely argued . . . are considered waived.”).

In any event, Facta cites to no caselaw supporting its contention that a private arbitration

proceeding involves state action requisite for a constitutional due process claim. See

Davis v. Prudential Secs., Inc., 59 F.3d 1186, 1191 (11th Cir. 1995) (collecting cases and

finding that “the state action element of a due process claim is absent in private

17 arbitration cases”); see also Nat’l Collegiate Athletic Ass’n v. Tarkanian, 488 U.S. 179,

191 (1988) (explaining that due process protections “do not extend to ‘private conduct

abridging individual rights.’” (quoting Burton v. Wilmington Parking Auth., 365 U.S.

715, 722 (1961)). Moreover, Facta voluntarily entered into the PPA, in which it agreed

to private arbitration to resolve disputes that could arise, and, as we have already

discussed, was given ample opportunity to present its arguments to the Panel, so its

challenge fails. Cf. Bowen v. Amoco Pipeline Co., 254 F.3d 925, 940 (10th Cir. 2001).

IV.

For the foregoing reasons, we will affirm the District Court’s order enforcing the

Final Award.