Lapine Technology Corp. v. Kyocera Corp., C-87-20316-WAI

• Decision Date: 11 December 1995
• Docket Number: C-91-20159-WAI.,No. C-87-20316-WAI,C-87-20316-WAI
• Citation: 909 F. Supp. 697
• Court: U.S. District Court — Northern District of California
• Parties: LAPINE TECHNOLOGY CORPORATION, a California Corporation, Plaintiff, v. KYOCERA CORPORATION, a corporation organized under the laws of Japan, Defendant. KYOCERA CORPORATION, Plaintiff and Counterdefendant, v. PRUDENTIAL-BACHE TRADE SERVICES, INC., formerly Prudential-Bache Trade Corporation; Prudential Capital & Investment Services, Inc.; Lapine Technology Corporation; and Lapine Holding Company, Inc. Defendants and Counterclaimants.

909 F. Supp. 697

LAPINE TECHNOLOGY CORPORATION, a California Corporation, Plaintiff, v. KYOCERA CORPORATION, a corporation organized under the laws of Japan, Defendant.

KYOCERA CORPORATION, Plaintiff and Counterdefendant, v. PRUDENTIAL-BACHE TRADE SERVICES, INC., formerly Prudential-Bache Trade Corporation; Prudential Capital & Investment Services, Inc.; Lapine Technology Corporation; and Lapine Holding Company, Inc. Defendants and Counterclaimants.

Nos. C-87-20316-WAI, C-91-20159-WAI.

United States District Court, N.D. California.

December 11, 1995.

Paul H. Dawes, David A. York, Charles S. Treat; and Timothy P. Crudo, Latham & Watkins, San Francisco, CA, for Plaintiff, Defendants and Counterclaimants.

James J. Brosnahan, Kathleen V. Fisher, James F. McCabe, Tamu K. Sudduth, Morrison & Foerster, San Francisco, CA; and William E. Johnson, Spensley Horn Jubas & Lubitz, Los Angeles, CA, for Defendant, Plaintiff and Counterdefendant.

MEMORANDUM OF DECISION

INGRAM, Senior District Judge.

I. INTRODUCTION

The matters now pending before this court arise out of an arbitration conducted before a panel of the International Court of Arbitration of the International Chamber of Commerce. Subsequent reference to the arbitrators and the sponsoring entity will be as "the Panel." The Panel bifurcated the arbitration into two segments called, respectively, Phase 1 and Phase 2. The Panel rendered a final award which included extensive findings of fact and conclusions of law. The awards of the Panel were in favor of LaPine Technology Corporation and against Kyocera Corporation. LaPine Technology Corporation, (hereinafter referred to as "LaPine"), has petitioned this court to confirm the awards of the Panel upon them; Kyocera Corporation ("Kyocera") opposes such confirmation and seeks this court's order vacating, modifying and/or correcting the awards.

This court now orders that the Application for Confirmation be granted and that an appropriate judgment in favor of Plaintiff and against Defendant, approved as to form by Defendant, be entered herein. This court further orders that the Application to Vacate, Modify and/or Correct the Awards is denied.

In the later-filed action numbered C-91-20159, Kyocera sues for a declaration that the Phase I award was not a final award and therefore not ripe for enforcement proceedings in the federal court or, in the alternative, for vacatur of the Phase I award. Claimants counterclaim for a declaration that the Phase I award was a final award and for confirmation of that award. The court finds the declaratory relief claim and counterclaim to be moot at this point and therefore dismisses them. The second counts of the claim and counterclaim, seeking vacatur and confirmation, are merged into the motions for the same relief made in Case No. C-87-20316 and are denied and granted respectively.

The foregoing disposition of the pending motions is necessitated because the court's options are limited by the provisions of the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq. and may not be extended by agreement of the parties.

A. THE PARTIES

In addition to LaPine and Kyocera, Prudential-Bache Trade Corporation ("Prudential Trade"), Prudential Capital and Investment Services, Inc. ("Prudential Capital"), and LaPine Holding Company ("LaPine Holding") are parties to the arbitration proceeding before the court, and are parties to the counterclaim in the instant action. Only LaPine and Kyocera are initial parties to the instant action.

B. THE FACTS

LaPine is a corporation formed in 1984 to design, market and sell 3.5 inch Winchester disk drive devices with a ten megabyte capacity. LaPine did not have the resources and plant necessary to manufacture and market the product. At the time of its incorporation, LaPine was financed by a limited partnership, the general partner of which was an affiliate of Prudential Trade, an entity in the business of financing international business ventures. LaPine and Prudential Trade approached Kyocera suggesting that Prudential Trade would arrange the financing necessary for the manufacture of LaPine's disk drive products if Kyocera, acting as a licensee of LaPine, would manufacture the product. In November 1984 LaPine, Prudential Trade and Kyocera entered into an Agreement of Principles under the terms of which LaPine was to design and market the disk drive product, Prudential Trade was to finance the manufactured output of Kyocera which was in compliance with the schedule of product agreed upon by the parties. Prudential Trade was also obligated to provide necessary working capital related to product and to accounts receivable financing. Subsequently, in 1985, the same parties and a subsidiary of Prudential Trade executed the Trading Agreement, which covered sales of the LaPine product after its manufacture by Kyocera, and the Technology Transfer and Manufacturing Agreement, covering the licensing of LaPine technology to Kyocera.

The parties agreed that LaPine would order the disk drive product from Kyocera pursuant to a quantity and delivery schedule. A subsidiary of Prudential Trade would purchase the product from Kyocera, then resell the product at a markup to Prudential Trade which would then resell the product to LaPine on credit.

LaPine licensed to Kyocera a recently developed 3.5 inch Winchester disk drive with twenty megabyte capacity, and production commenced in late 1985. On January 18, 1986, LaPine, Kyocera and Prudential Trade, acting through its subsidiary K.K. PB Trade Corporation ("KK Trade"), entered into an agreement which provided certain actions to be taken by the parties in 1986, including an obligation on the part of KK Trade to maintain the then current level of funding of LaPine until the latter achieved "break even" status and to facilitate communication between the parties. In 1986 Kyocera experienced production problems which necessitated a shutdown of two months duration. Management problems at LaPine were encountered in 1986, which resulted in Kyocera's request for assurances that it would be paid for goods manufactured and shipped by it, pursuant to the terms of the agreements between the parties. The root of the problem was the failure of LaPine to make payments to Prudential Trade enabling the latter to pay Kyocera for goods manufactured and shipped by it. By summer of 1986 LaPine had failed to pay Prudential Trade for product delivered by Kyocera, and was insisting that Prudential Trade continue to pay Kyocera for product ordered by LaPine.

In order to bring about a refinancing and reorganization of LaPine the parties entered into negotiations to reach an agreement which would ensure both the development of LaPine and a workable commercial relationship between all the parties. In August 1986 a document entitled "Agreement in Principle" between Kyocera and Prudential Trade was forwarded by Prudential Trade to Kyocera for its consideration. This proposed agreement provided for an advance to LaPine by Prudential Trade of up to ten million dollars, secured by unfactored accounts receivable of LaPine, and that Prudential Trade would continue to buy and pay for disk drive product purchased from Kyocera for resale to LaPine. The proposed agreement contained the agreement of Kyocera to sell all LaPine products manufactured by it to Prudential Trade in accordance with a schedule of payment. The proposed Agreement in Principle also provided that all losses associated with uncollected LaPine receivables would be shared evenly by Prudential Trade and Kyocera.

On October 9, 1986, LaPine, Prudential Trade, KK Trade, the limited partnership which initially organized LaPine and Kyocera executed and delivered an Agreement in Principle which purported to restructure LaPine and to obligate the parties to negotiate the terms of a proposed Definitive Agreement ("DA"). This proposed Definitive Agreement was to be submitted to the respective boards of the corporate parties for final approval and, by its terms, was required to be signed by November 12, 1986. The proposed DA provided additionally that nothing contained in other agreements would be binding upon the parties until the execution, delivery and board approval of the Definitive Agreement.

The Agreement in Principle provided for the reorganization of LaPine by means of a "merger" by which LaPine would become the wholly owned subsidiary of LaPine Holding Company of which two-thirds of the voting stock would be owned by Prudential Trade and one-third by Kyocera. Prudential Trade and Kyocera were to be obligated to make additional capital contributions and other adjustments. While these provisions were stated to be non-binding, the Agreement in Principle contained binding provisions for the liquidation of LaPine if its operations were unsuccessful, for access to information and confidentiality, and for the selection of arbitration as the appropriate means of settling disputes arising under either the Agreement in Principle or the Definitive Agreement.

Commencing in early November 1986, revised drafts of a proposed Definitive Agreement, a proposed Financing Agreement and proposed revisions of the Trading Agreement and of the Technology Transfer and Manufacturing Agreement were prepared and circulated to counsel. On November 13, 1986, the parties completed the collection of the various signature pages to the proposed Definitive Agreement, including one purportedly signed by the chairman of Kyocera, and the DA was then filed with the California Corporations Commissioner in order to comply with California law concerning corporate reorganization.

On November 14, 1986, certain revised pages of the Definitive Agreement, the Amended Trading Agreement, the Financing Agreement and the Amended Technology Transfer and Manufacturing Agreement were circulated to all parties and their counsel. Also on that date, eight signature pages for the Definitive Agreement, not including the one previously signed...