Inficon, Inc. v. Verionix, Inc.

182 F. Supp. 3d 32, 2016 WL 1611379, 2016 U.S. Dist. LEXIS 52708
CourtDistrict Court, S.D. New York
DecidedApril 19, 2016
Docket15 Civ. 8044
StatusPublished
Cited by7 cases

This text of 182 F. Supp. 3d 32 (Inficon, Inc. v. Verionix, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Inficon, Inc. v. Verionix, Inc., 182 F. Supp. 3d 32, 2016 WL 1611379, 2016 U.S. Dist. LEXIS 52708 (S.D.N.Y. 2016).

Opinion

OPINION

Sweet, District Judge

The plaintiff Inficon (“Inficon” or the “Plaintiff’) has moved pursuant to Federal Arbitration Act § 101(a)(3) to vacate the arbitration award issued by the International Centre for Dispute Resolution International Arbitration Tribunal dated August 19, 2015 (“the Award”). Defendant Verionix, Inc. (“Verionix” or the “Defendant”) has cross moved to confirm the Award. Upon the conclusions set forth below, the motion of Inficon is denied, the cross motion of Verionix is granted, and the Award is confirmed,

Prior Proceedings

Inficon filed its complaint on October 13, 2015 seeking to vacate the Award which resulted from the arbitration provided for by § 9.13 of the Asset Purchase Agreement between the parties entered into on November 4,2009 (the “APA”).

Inficon manufactures, and sells to semiconductor manufacturers high-end sensors (called “RGAs”) that detect and identify small amounts of gases in the vacuum environments used to manufacture microchips. Verionix was founded in 2003 to develop a line of gas sensors for semiconductor manufacturing. The Verionix and Inficon sensors were intended for the same group of customers (semiconductor manufacturers and original equipment manufacturers supplying the large vacuum chamber manufacturing “tools” used by those semiconductor manufacturers), were in the same general price range.

In the late summer of 2008, Verionix and Inficon entered into discussions regarding Inficon’s potential acquisition of Verionix. The parties negotiated the terms of a sale and Inficon sent to Verionix a Letter of Intent on April 14, 2009, which provided that Inficon would acquire the Units. After the transmission of the letter of intent, a due diligence period commenced. After the due diligence period, on November 4, 2009, the parties executed the APA and closed the sale of Verionix’s specified assets to Inficon. The consideration for the acquired assets had two components: an up-front cash payment of $550,000 plus contingent earn-out payments that depended on the total unit sales of Verionix gas sensors during the four years from the closing of the agreement, defined as the “Earn-Out Period.”

The Asset

The parties defined in the APA the “commercially reasonable efforts” required of Inficon to sell the sensors (“Units”) during a four year Earn-Out Period:

“[C]ommercially reasonable efforts” to market and sell the Units shall mean such efforts as a prudent business person acting under similar circumstances would use to market and sell the Units and achieve the sale of 2000 units over the Earn-Out Period, including providing the working capital, experienced personnel, and manufacturing support reasonably required.

The APA also required Inficon to determine the sensors’ merchantability pre-clos-ing:

Prior to the Closing, Seller shall afford Buyer a reasonable opportunity to in[35]*35spect the units to determine their merchantability which determination shall be made in good faith by the parties.

Id. at § 1.2(b).

The APA conditioned a portion of Inficon’s initial payment on the merchantability of the sensors, providing for a reduction in the purchase price if Verionix was unable to deliver “merchantable” sensors. Id. As the Earn-Out Period drew to a close, Infi-con had sold fewer than 40 sensors.

Verionix initiated an' arbitration pursuant to APA § 9.13. The parties conducted extensive discovery, including sixteen depositions and exchanging over 70,000 documents, followed by a six and a half-day hearing involving ten fact witnesses, four expert witnesses with eight expert reports, and 476 exhibits admitted into evidence. The Panel received over 110 pages of written submissions, including 24 pages considering merchantability (including salability and manufacturability) issues and 25 pages dealing with damages. The Panel rendered a nine-page award on August 25, 2015 concluding that Inficon had breached its Earn-Out obligations, that Inficon’s merchantability claim was not “credible,” and awarded damages stating:

Accordingly we find that Inficon ought to have and could have attained the sale of 1,450 Units over the Earn-Out Period. Using Verionix’ (sic) method, its damages would be based upon the fraction 1450/2000=72.5%. Its claimed cumulative damages are in the total principal amount of $8,717,500. 72.5% of such amount, is $6,320,187.50, and we find that to be the principal amount of its damages.

After the Award was delivered, both parties made submissions to the Panel advising that certain errors were made in the above computation and requesting that the Panel correct such computational errors. Verionix asserted that the Panel improperly calculated interest (stating in the Award that the interest of the sale of 2,000 units would be reduced to 72.5% based on the reduction in principal, but reducing interest. by 72.5%- twice.) Inficon asserted that the Panel improperly calculated the principal amount of damages by assuming that the earn out due on the sale of 1,450 units was 72.5% of the amount due on the sale , of 2,000 units.

The Panel issued a “Disposition of Parties’Applications for Modification of Final Award” on October 9, 2015, granting Ver-ionix’s request and denying Inficon’s request for recalculation.'

The Applicable Standard of Review

Although courts “play only a limited role when asked to review the decision of an arbitrator,” and “only a very narrow set of circumstances delineated by statute and case law permit vacatur,” a “decision of an arbitrator ... is not totally impervious to judicial review.” Porzig v. Benson, 497 F.3d 133, 138 (2d Cir.2007) (internal quotation marks and citations omitted).

There are two relevant statutory grounds for vacating an arbitration award:

(1) where the arbitrators were guilty of misconduct 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
(2) 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.

9 USC § 10 (a).

“In addition, a court may vacate an award if it exhibits a manifest disregard of the law.” Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133, 139 (2d Cir.2007) (footnote and internal quotation [36]*36marks omitted); see also Siegel v. Titan Indus. Corp., 779 F.2d 891, 894 (2d Cir.1985).

The Second Circuit has held that “an arbitration award should be enforced ... if there is a barely colorable justification for the outcome reached.” Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255, 260 (2d Cir.2003) (internal citations omitted); Wallace v. Buttar,

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Cite This Page — Counsel Stack

Bluebook (online)
182 F. Supp. 3d 32, 2016 WL 1611379, 2016 U.S. Dist. LEXIS 52708, Counsel Stack Legal Research, https://law.counselstack.com/opinion/inficon-inc-v-verionix-inc-nysd-2016.