Hart Surgical, Inc. v. Ultracision, Inc.
| Decision Date | 25 April 2000 |
| Docket Number | C.A. No. 97-594-T. |
| Citation | 92 F.Supp.2d 40 |
| Parties | HART SURGICAL, INC. v. ULTRACISION, INC., and Ethicon Endo-Surgery, Inc. |
| Court | U.S. District Court — District of Rhode Island |
Thomas A. Lynch, Lynch & Greenfield, Providence, RI, Michael J. Tuteur, Epstein, Becker & Green, P.C., Boston, MA, for plaintiff.
John H. Blish, Blish & Cavanagh, Providence, RI, Richard A. Ripley, Margaret M. Zwisler, Howrey & Simon, Washington, DC, for defendants.
UltraCision, Inc. and Ethicon Endo-Surgery, Inc. ("UltraCision") brought this action pursuant to the Federal Arbitration Act (the "FAA"), 9 U.S.C. § 1 et seq., and the Rhode Island Arbitration Act (the "RIAA"), R.I.G.L. § 10-3-1 et seq., which they have styled as a Motion to Vacate Portions of Arbitration Award. The "award" in question found UltraCision liable for wrongfully terminating a contract between UltraCision and Hart Surgical, Inc. ("Hart").
On September 27, 1999, this Court issued an Order for UltraCision to show cause why its motion to vacate should not be dismissed without prejudice on the ground that the arbitrators' "award" with respect to liability, is not a final award that is appealable within the meaning of the Federal Arbitration Act, 9 U.S.C. § 10(d).
Because UltraCision has failed to show cause; and, because I find that the arbitrators' decision with respect to liability alone is not an appealable final award, UltraCision's motion to vacate the arbitrators' award is denied and this case is dismissed without prejudice.
In 1993, Hart and UltraCision entered into an agreement under which Hart became the exclusive Canadian distributor for endoscopic surgery devices made by UltraCision, and UltraCision was required to purchase a minimum number of those devices each year. UltraCision alleges that, in 1995, Hart failed to purchase the required number of devices; and, therefore, UltraCision terminated the agreement. Hart contends that UltraCision breached the agreement by wrongfully terminating it.
Hart initiated arbitration of the dispute pursuant to an arbitration clause in the agreement. The parties agreed to arbitrate liability, first, and to arbitrate damages only if the arbitrators found that UltraCision had breached the agreement.
On August 19, 1997, the arbitrators made an "award" finding UltraCision liable for wrongfully terminating the agreement, and the parties began discovery for the damages phase of the arbitration.
On October 20, 1997, UltraCision filed its "motion to vacate" that "award". However, since the parties anticipated that the damages stage of the arbitration would be completed by the Spring of 1998, and that it could facilitate a settlement of the dispute, they agreed that the matter should be stayed in order to avoid the unnecessary expenditure of time and effort.
This Court granted several stays; but, when it became apparent that the damages stage of the arbitration had stalled, this Court issued an Order requiring UltraCision to show cause why the case should not be dismissed without prejudice on the ground that the arbitrators' decision with respect to liability is not an appealable final award under the Federal Arbitration Act, 9 U.S.C. §§ 1-14.
UltraCision responded by filing a memorandum in which it argues that the agreement of the parties determines what constitutes a final award; and, here, the parties agreed to arbitrate the issue of liability. Hart concedes that the Court has broad discretion to either hear the appeal now, or dismiss the appeal, but urges the Court to decide whether the liability "award" should be vacated.
UltraCision's "motion to vacate" the arbitrators' award is based on section 10(d) of the Federal Arbitration Act, which empowers a district court to:
make an order vacating the award upon the application of any party to the arbitration;
(d) 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.
(emphasis added).
This provision confers jurisdiction on the district court only when the arbitrators have made a "final" award. Thus, "[i]t is essential for the district court's jurisdiction that the arbitrator's decision was final, not interlocutory." El Mundo Broadcasting Corp. v. United Steelworkers of America, AFL-CIO CLC, 116 F.3d 7, 9 (1st Cir.1997).
The requirement of finality is rooted both in the policy of encouraging parties to resolve their disputes through arbitration and the desire to avoid the needless expenditure of judicial resources. Courts have recognized that arbitration provides an expeditious and relatively inexpensive method of resolving disputes. See, e.g., Fradella v. Petricca, 183 F.3d 17, 19(1st Cir. 1999)("The primary purpose served by the arbitration process is expeditious dispute resolution."); Diapulse Corp. v. Carba Ltd., 626 F.2d 1108 (2d Cir.1980)(arbitration provides quick and efficient resolution of disputes, thereby reducing costly litigation and delay to both the parties and the courts); Dutson v. Nationwide Mutual Insurance Co., 119 R.I. 801, 383 A.2d 597, 599 (1978)("The whole purpose of arbitration is to provide an alternative procedure whereby two or more parties can finally resolve their differences in an expeditious and economical proceeding."). Recognition that arbitration is a preferred method of resolving disputes is implicit in statutory provisions that make agreements to arbitrate binding on the parties, see 9 U.S.C. § 4, and that require litigation to be stayed pending completion of arbitration. See 9 U.S.C. § 3.
Courts have also recognized that permitting appeals from interlocutory decisions made during the arbitration process would defeat the purpose of arbitration and would waste judicial resources. Michaels v. Mariform Shipping, S.A., 624 F.2d 411, 414 (2d Cir.1980)("a district court should not hold itself open as an appellate tribunal during an ongoing arbitration proceeding, since applications for interlocutory relief result only in a waste of time, the interruption of the arbitration proceeding, and ... delaying tactics in a proceeding that is supposed to produce a speedy decision.")(internal quotations omitted). Moreover, judicial review of rulings made before a dispute has been fully arbitrated would cast a district court in the role of rendering advisory opinions on issues that might become moot if the arbitration were allowed to proceed to its conclusion.
An arbitrator's decision, however labeled, is not a "final" award within the meaning of section 10(d) unless it "resolve[s] all issues submitted to arbitration, and determine[s] each issue fully so that no further litigation is necessary to finalize the obligations of the parties under the award." Bull HN Information Systems Inc. v. Hutson, 983 F.Supp. 284, 289(D.Mass.1997), quoting Puerto Rico Maritime Shipping v. Star Lines, Ltd., 454 F.Supp. 368, 372 (S.D.N.Y.1978). See Fradella v. Petricca, 183 F.3d 17, 19 (1st Cir.1999)("[n]ormally, an arbitral award is deemed `final' provided it evidences the arbitrators' intention to resolve all claims submitted in the demand for arbitration ...").
In this case, the arbitrator's decision does not address the damages issue that also was submitted to arbitration. Nor does it fully and finally resolve the dispute that was the subject of the arbitration in a way that makes clear the rights and obligations of the parties under the "award".
In this respect, the "award" is no different from a district court's decisions with respect to liability, alone, which consistently have been held to be non-appealable interlocutory orders. See Republic Natural Gas Co. v. Oklahoma, 334 U.S. 62, 68, 68 S.Ct. 972, 976-77, 92 L.Ed. 1212 (1948) (); Forschner Group, Inc. v. Arrow Trading Co., 124 F.3d 402, 410 (2d Cir.1997) (); Wahl v. Bellissimo, III, 831 F.2d 298, 1987 WL 44955 (6th Cir.1987) (). There is no discernable reason for permitting such piecemeal appeals in the arbitration context either.
UltraCision argues that because the parties may determine what matters are submitted to arbitration, they also have the power to determine what decisions should be deemed "final"; and, therefore, reviewable by...
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