Photopaint Technologies, LLC v. Smartlens Corp.

• Decision Date: 13 June 2002
• Docket Number: No. 01 Civ. 8877(WK).,01 Civ. 8877(WK).
• Citation: 207 F.Supp.2d 193
• Parties: PHOTOPAINT TECHNOLOGIES, LLC, Petitioner, v. SMARTLENS CORPORATION and Steven Hylen, Respondents.
• Court: U.S. District Court — Southern District of New York

207 F.Supp.2d 193

PHOTOPAINT TECHNOLOGIES, LLC, Petitioner, v. SMARTLENS CORPORATION and Steven Hylen, Respondents.

No. 01 Civ. 8877(WK).

United States District Court, S.D. New York.

June 13, 2002.

Kevin M. Hart, Craig S. Hilliard, Stark & Stark, A Professional Corporation, Princeton, NJ, for Petitioner.

Michael J. Sweedler, Kandis M. Khan, Darby & Darby, PC, New York City, for Respondents.

OPINION & ORDER

WHITMAN KNAPP, Senior District Judge.

Petitioner Photopaint Technologies, LLC ("Photopaint") moves this Court to confirm an arbitration award pursuant to 9 U.S.C. § 9. Respondents Smartlens Corporation ("Smartlens") and Steven Hylen ("Hylen") (hereinafter collectively the "Respondents") oppose the confirmation of the arbitration award and cross-move to dismiss the petition underlying Photopaint's motion, or in the alternative, for summary judgment, on the grounds that the petition is time-barred.

For the reasons that follow, we grant the Respondents' cross-motion for summary judgment, dismiss Photopaint's action, and thereby deny Photopaint's motion to confirm the arbitration award.

BACKGROUND

In 1997, Photopaint entered into a License Agreement with Smartlens for the purpose of developing certain patented technology. That agreement contained an arbitration clause which provided in pertinent part that "any dispute arising out of or relating to this Agreement ... shall be finally settled by arbitration to be held in New York, New York, in accordance with the rules then applicable of the American Arbitration Association (`AAA'), or such body as the AAA may designate." Hilliard Aff., Ex. A.

Thereafter, in 1998. Smartlens asserted that Photopaint had breached the License Agreement and attempted to terminate that contract. After the parties unsuccessfully tried to resolve their dispute, Photopaint filed a Demand for Arbitration with the AAA on approximately October 21, 1998. Pursuant to the terms of the License Agreement, the arbitration was held in New York, New York.

On May 26, 2000, the arbitrator hearing the dispute signed an arbitration decision to which he referred as a "Final Award" (hereinafter similarly referred to as the "Final Award") and transmitted it to the AAA so that the Final Award could be sent on to the parties. The AAA did not deliver that Final Award to either party until October 3, 2000.

Between July 2000 and October 2000, Smartlens sent a number of letters to the AAA wherein they, in effect, sought to reopen the arbitration hearing based on additional evidentially submissions. The arbitrator considered these additional submissions and treated them collectively, as an application for the modification of the arbitration award. On October 23, 2000, after reiterating that he had rendered a final decision on May 26, 2000, the arbitrator denied Smartlens' application for the modification of that award on the grounds that the application did not fall within the applicable grounds for modification.

In accordance with the terms of the Final Award, either party had the option to rescind the License Agreement "[w]ithin thirty (30) days after receipt" of the Award. Hilliard Aff., Ex. C. If Photopaint chose to rescind, it would be entitled to receive $319,932.55 from Smartlens. If Smartlens elected to rescind. Photopaint would be entitled to receive $384,141.75 from Smartlens, as well as Photopaint's share of the AAA's costs.

On October 31, 2000, Photopaint and Smartlens agreed to extend the recission deadline enumerated in the Final Award from November 2, 2000 to November 16, 2000. The purpose of the extension was to allow the parties to engage in settlement negotiations in an attempt to reach a resolution with respect to the License Agreement and the obligations thereunder which would not limit the parties to the consequences set forth in the Final Award. The initial extension of time was memorialized in a letter agreement prepared by Smartlens' counsel. The parties continued to pursue settlement negotiations from November 2000 through July 2001 and continued to extend the rescission deadline by a series of successive letter agreements (including one agreement to an indefinite extension of the rescission deadline which remained in effect from approximately February 4, 2001 through April 17, 2001).

Despite these settlement discussions, the prospect of settlement fell through. As such, on July 27, 2001, Photopaint notified Smartlens' counsel that it had elected to rescind the License Agreement and demanded payment in the amount of $319,932.55 in accordance with the terms of the Final Award. When Smartlens failed to pay that amount, Photopaint commenced this action by filing a petition with this Court on October 3, 2001 for the summary confirmation of the arbitration award under 9 U.S.C. § 9. Thereafter, on November 13, 2001, Photopaint acted on that petition by moving to confirm the arbitration award on the same grounds enumerated in its petition. Smartlens answered Photopaint's petition with objections and simultaneously cross-moved to dismiss that action, or in the alternative for summary judgment, on the grounds that the petition was time-barred by 9 U.S.C. § 9.

We have diversity jurisdiction over Photopaint's petition pursuant to 28 U.S.C. § 1332(a)(1).¹ Venue in this Court is proper under 28 U.S.C. § 1391(a).

DISCUSSION

On October 3, 2001, Photopaint filed a petition pursuant to Section 9 of the Federal Arbitration Act, 9 U.S.C. § 9, to confirm an arbitration award. Thereafter, on November 13, 2001, Photopaint acted on that petition by moving to confirm the arbitration award in accordance with the foregoing statute.

Under the Federal Arbitration Act, "a party wishing to confirm an arbitration award may apply to the court for a confirmation order any time within one year `and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in'" 9 U.S.C. § 10 and 9 U.S.C. § 11. Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175 (2d Cir.1984). "`The confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the Court.'" Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys "R" Us. Inc., 126 F.3d 15, 23 (2d Cir.1997), cert. denied 522 U.S. 1111, 118 S.Ct. 1042, 140 L.Ed.2d 107 (1998). Hence, "the showing required to avoid summary confirmation is high." Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir.1987). "Absent a statutory basis for modification or vacatur, the district court's task ... [is] to confirm the arbitrator's final award as mandated by section 9 of the Act." Id.

The Respondents do not seek to avoid the confirmation of the award through either modification or vacatur. However, they contend that Photopaint's action, which was commenced via the petition, is time-barred under 9 U.S.C. § 9 and accordingly cross-move to dismiss that petition, or in the alternative for summary judgment, on that ground. Since both parties have introduced evidence outside the four corners of the original petition in briefing or responding to that cross-motion and thereby treated it, in effect, as a cross-motion for summary judgment, we similarly treat the cross-motion as one for summary judgment. See In re G. & A. Book, Inc., 770 F.2d 288, 295 (2d Cir.1985) cert. denied, M.J.M. Exhibitors, Inc. v. Stern, 475 U.S. 1015, 106 S.Ct. 1195, 89 L.Ed.2d 310 (1986); German v. Pena (S.D.N.Y. 2000) 88 F.Supp.2d 216, 219.²

"Summary judgment is appropriate where the Court is satisfied `that there is no genuine issue of any material fact and that the moving party is entitled to judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "The function of the district court in considering the motion for summary judgment is not to resolve disputed issues of fact but only to determine whether there is a genuine issue to be tried." Eastman Machine Co., Inc. v. United States, 841 F.2d 469, 473 (2d Cir. 1988). In making this determination, we "must resolve all ambiguities and draw all reasonable inferences in the light most favorable to the party opposing the motion [for summary judgment]." Cifarelli v. Village of Babylon, 93 F.3d 47, 51 (2d Cir. 1996).

With these considerations in mind, we turn to the merits of the arguments before us.

A. The Federal Arbitration Act Statute Of Limitations

"Section 9 of the Federal Arbitration Act, 9 U.S.C. § 9 ... sets forth the procedures under which arbitration awards are to be confirmed by district courts." Ottley, 819 F.2d at 375. That section of the Federal Arbitration Act ("FAA") provides in pertinent part:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified or corrected in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

9 U.S.C. § 9. Thus, "the district court must grant a petition to confirm arbitration if it is properly brought within one year of the date of the award." Ottley, 819 F.2d at 375.

The Respondents contend that the foregoing provision of the FAA imposes a mandatory one-year statute of limitations on petitions for the summary confirmation of arbitration awards brought under 9 U.S.C. § 9. Under their interpretation of § 9, a party which fails to apply for the summary confirmation of an arbitration award within one year of the date upon which the award is made would be timebarred from pursuing such summary confirmation in accordance with § 9. Hence, since Photopaint failed to...