Chameleon Dental Products, Inc. v. Jackson
| Decision Date | 22 February 1991 |
| Docket Number | No. 89-2962,89-2962 |
| Citation | 925 F.2d 223 |
| Parties | CHAMELEON DENTAL PRODUCTS, INC., Plaintiff-Appellant, v. James L. JACKSON, Albert R. Faunce and Frank R. Faunce d/b/a Jaff Investment Company, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Douglas J. Heckler, Barnes & Thornburg, Jack Schuman, B. Keith Shake, Henderson, Daily, Withrow & Devoe, Indianapolis, Ind., David W. Hauber, Kansas City, Kan., for plaintiff-appellant.
Guy E. Matthews, Houston, Tex., for defendants-appellees.
Before WOOD, Jr., FLAUM, and KANNE, Circuit Judges.
Jaff Investment Company * holds a majority interest in United States patents covering laminate dental veneers and their manufacturing methods. Chameleon Dental Products, Inc., is a company that makes porcelain laminate veneers. Chameleon sold the materials and trained dental laboratories to apply the veneers.
In September 1984, Jaff brought a federal suit against Myron's Dental Laboratories (owner of Chameleon) for patent infringement. This lawsuit was settled on November 3, 1984. Myron's Dental Laboratories (on behalf of Chameleon) and Jaff agreed to the entry of a consent decree which established the validity of the Jaff patents and Myron's infringement of those patents. As a part of the settlement provisions, the parties executed three licensing agreements between December 1984, and April 1985.
The first agreement, the Training Program Agreement, granted Chameleon a license to train Jaff's licensees in exchange for a specific payment for each laboratory location trained. Jaff also agreed to pay Chameleon certain royalty payments whenever Jaff granted a license under one of its patents. The second agreement, the Chameleon License Agreement, granted Chameleon a license for the use of the Jaff patents. Two of Chameleon's facilities would operate royalty-free with respect to orders from a dentist or a licensed laboratory. A third agreement, the Laboratory License Agreement, licensed Chameleon's new California lab and required it to pay royalties to Jaff.
Each of the three agreements contained an arbitration provision. The pertinent part for our purposes states:
If any matter involving claims and/or disputes or other question arising out of, or relating to this Agreement or to a breach hereof or default hereunder can not be settled by mutual agreement ... such matter may be submitted to arbitration in accordance with the practice and procedure of the American Arbitration Association then in force, and this Agreement so to arbitrate shall be specifically, enforceable.
In mid-1985, Jaff claimed that Chameleon was not complying with the terms of the Training Program Agreement. Jaff asserted that Chameleon was training unlicensed laboratories in violation of the agreement, thus causing Chameleon lost royalties. Jaff also alleged that Chameleon had fallen behind in its submission of reports and royalties. Jaff also alleged that Chameleon failed to establish FDA approval of all materials, was delinquent in forwarding to Jaff certifications indicating that certain labs had successfully completed their training, and failed to provide, and keep Jaff informed of, proper training. Based on these claims Jaff unilaterally claimed the Training Program Agreement to be terminated on August 7, 1985.
A little over five months later on January 24, 1986, Chameleon asserted wrongful termination of the Training Program Agreement and demanded arbitration. Jaff responded with a counterclaim. In addition, Jaff also claimed termination of the Chameleon License Agreement on February 26, 1986, asserting that Chameleon assisted others in infringing on Jaff's patents. Shortly thereafter, Jaff asserted unilateral termination of the Laboratory License Agreement, again alleging that Chameleon assisted others in patent infringement and failed adequately to explain royalty calculations.
The entire matter was submitted to an arbitration panel of the American Arbitration Association on July 28-30, 1986. On September 29, 1986, the arbitration panel declared the three disputed licensing agreements to be terminated, awarded damages to Chameleon of $73,056 for wrongfully withheld royalties, and denied Jaff any damages.
Chameleon returned to federal court on December 31, 1986, filing a motion to "Confirm in Part and Vacate in Part the Arbitration Award" in which they alleged that the arbitrators exceeded the scope of their powers in terminating all three agreements. The district court rejected Chameleon's request and confirmed the entire arbitration award.
The chances for a successful appeal of an arbitration award are not particularly good. As the district court correctly noted, judicial review of arbitration awards is extremely limited. When asked to set aside an arbitration award, our review is restricted to determining whether the arbitrator actually interpreted the contract. Hill v. Norfolk & W. Ry. Co., 814 F.2d 1192, 1195 (7th Cir.1987). If so, then their interpretation governs. Id. "[O]nce the court is satisfied that [the arbitrators] were interpreting the contract, judicial review is at an end, provided there is no fraud or corruption and the arbitrators haven't ordered anyone to do an illegal act." Id. We have declined invitations to change the arbitrator's interpretation of a contract even if the arbitrator clearly misinterprets it. E.I. DuPont de Nemours & Co. v. Grasselli Employees Indep. Ass'n, 790 F.2d 611, 614 (7th Cir.), cert. denied, 479 U.S. 853, 107 S.Ct. 186, 93 L.Ed.2d 120 (1986). On the other hand, if we...
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...1361, 4 L.Ed.2d 1424 (1960); Miller Brewing Co. v. Brewery Workers, 739 F.2d 1159, 1163 (7th Cir.1984); Chameleon Dental Products, Inc. v. Jackson, 925 F.2d 223, 225 (7th Cir.1991); Willoughby Roofing & Supply Co. v. Kajima International, Inc., 776 F.2d 269 (11th Cir.1985) (per curiam). So ......
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