United States District Court, S.D. New York
Decided November 25, 2014.
[Copyrighted Material Omitted]
For Landmark Ventures, Inc., Plaintiff: William B. Flynn, McCabe & Flynn LLP, New York, NY.
For Insightec, Ltd., Defendant: Eli C. Schulman, LEAD ATTORNEY, Schulman & Charish LLP, New York, NY.
OPINION AND ORDER
John G. Koeltl, United States District Judge.
This action arises out of a contract dispute between the petitioner, Landmark Ventures, Inc. (" Landmark" ), and the respondent, InSightec, Ltd. (" InSightec" ). Pursuant to the terms of the contract, the dispute was submitted to an arbitration governed by the Rules of Arbitration of the International Chamber of Commerce (" ICC" ) and presided over by Stephanie Cohen, Esq. (the " Arbitrator" ), an independent arbitrator selected fro the ICC's roster of arbitrators.
On October 8, 2013, a final arbitration award (" Award" ) was issued in favor of InSightec. Landmark has filed a petition to vacate the Award and InSightec has filed a cross-petition to confirm the Award. For the reasons explained below, the petition to vacate the Award is denied, and the cross-petition to enforce the Award is granted.
Unless otherwise indicated, the following facts are accepted as true for purposes of the pending petitions.
InSightec is a corporation that is incorporated in and has its principal place of business in Israel; Landmark is a corporation that is incorporated in and has its principal place of business in New York State. InSightec develops medical devices and Landmark provides financial advice and banking services. Pet. to Vacate ¶ ¶ 3-6, Ex. 4 (" Award" ) ¶ ¶ 2-7.
On July 28, 2011, Landmark executed a letter of engagement (" Agreement" ) with InSightec to provide strategic banking and financial advisory services. Schulman Decl. Ex. 3. The Agreement provided that InSightec would retain Landmark to be " its exclusive financial advisor" for an exclusive engagement period of six months with respect to (1) an Offering, defined as " a best efforts private placement transaction . . . of any equity debt or convertible securities" ; (2) a strategic partnership; or (3) a possible Sales Transaction, defined as " a sale or other disposition of a majority of the Company's assets or stock or a merger of the Company with another entity." Agreement § 1.
Landmark was to " pursue prospective strategic and/or financial investors and partners," provided that these prospective investors did " not include the Company's existing shareholders or their affiliates on the date hereof." Agreement § 1. The Agreement specified the fees to which Landmark was entitled for its services. Agreement § 3. For each qualified Strategic Partnership initiated during the exclusive engagement period or a specified Tail Period, Landmark was entitled to at least
a minimum strategic partnership fee. Agreement § 3(iii).
Section 10 provides that disputes under the Agreement are " governed by the laws of the State of New York," and contains a broad, mandatory arbitration clause providing that,
All disputes arising out of or in connection with this Letter Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one arbitrator appointed in accordance with the said Rules.
Agreement § 10.
A dispute arose when GE Healthcare invested $27.5 million in InSightec. Award ¶ ¶ 9, 23, 25. At the time the Agreement was executed, GE Healthcare was an affiliate of GE, an InSightec shareholder. Award ¶ 25. Landmark asserted that InSightec owed it a " minimum strategic partnership fee" in the amount of $450,000, and that InSightec breached the Agreement when it refused to pay Landmark what it was owed. Award ¶ ¶ 32, 37. The dispute turned on the proper interpretation of the Agreement. See Award ¶ 98.
On July 5, 2012, Landmark submitted a Request for Arbitration to the ICC to arbitrate the dispute pursuant to the Agreement. Award ¶ 48. The Secretary of the ICC determined that the arbitration had officially commenced on July 5, 2012. Award ¶ 48. InSightec received Landmark's Request for Arbitration on August 5, 2012. Award ¶ 49.
On December 20, 2012, after the parties failed to agree to nominate an arbitrator jointly, the ICC appointed the Arbitrator from the ICC roster to serve as the sole arbitrator presiding over the case pursuant to Article 13(3) of the ICC Rules. Schulman Decl. Ex. 4, pp. 3-4.
Attorneys for both parties in the arbitration practice before arbitral tribunals, and InSightec's lawyer Maya Steinitz is a member of the arbitration committee of the ICC and the roster of arbitrators for the ICC Court of Arbitration. She is a member of the ICC's Commission on Arbitration, and also serves on the Court of the ICC's Jerusalem Arbitration Center. Pet. to Vacate, Ex. 7, ¶ 5.
When the Arbitrator was appointed, she completed an ICC Arbitrator Statement of Acceptance, Availability, Impartiality and Independence form. In the space on the form to state whether the Arbitrator had any potential conflict of interest to disclose, the Arbitrator checked the box indicating that she had " nothing to disclose." Flynn Decl. Ex. A.
The Arbitrator, InSightec, and Landmark all signed the " terms of reference," outlining the procedural rules to be followed in the arbitration. Schulman Decl. Ex. 4. The terms of reference explained the location of the arbitration, applicable law, procedural rules, and listed five issues to be determined in the arbitration.
The terms of reference explained that, in accordance with the parties' Agreement, the arbitration hearing would occur in New York City, and would be governed by New York law. Schulman Decl. Ex. 4, ¶ ¶ 6-8. It further stated that the ICC Rules were the procedural rules that would govern the dispute. Schulman Decl. Ex. 4, ¶ 9. The terms of reference also explained that one of the issues in the arbitration was how costs should be fixed under Article 37 of the ICC Rules. Schulman Decl. Ex. 4, ¶ 5.
Before the evidentiary hearing, the Arbitrator issued Procedural Order No. 1 that further explained the rules for discovery, set out procedural deadlines, and provided
for each party to submit a statement of the case and statement in opposition detailing their arguments. Schulman Decl. Ex. 6 (as amended).
Because the ICC does not have any rules for taking evidence, the Order provided that discovery was to be governed by the IBA Rules on the Taking of Evidence in International Arbitration (2010) (" IBA Rules" ). Schulman Decl. Ex. 6, ¶ ¶ 8, 11. Each party was permitted to request documents and witness statements from the other as long as the requests were timely and complied with the IBA Rules. Schulman Decl. Ex. 6, ¶ ¶ 8, 11.
Landmark submitted ten document requests to InSightec, most of which were broad requests for " all documents" of a given type. Schulman Decl. Ex. 7, pp. 3-8 (tables summarizing orders). The IBA Rules limit document requests to detailed specific requests and do not permit broad discovery requests. The Arbitrator explained that under Article 3(3) of the IBA Rules, a request to produce documents must, among other requirements, (1) be sufficient to identify them or include a description of a " narrow and specific requested category of Documents that are reasonably believed to exist" and (2) must include a statement that the documents are not within the requesting party's control and why that party believes the documents are in the other party's control. Schulman Decl. Ex. 7, ¶ ¶ 8-11. In the Order denying some of Landmark's document requests, the Arbitrator explained that " [n]early all of [Landmark]'s requests fail[ed] to satisfy one or both of these standards." Schulman Decl. Ex. 7, ¶ 10.
The Arbitrator denied six of Landmark's ten requests outright and two requests in part for failing to meet the IBA Rules. Schulman Decl. Ex. 7, pp. 3-9. The Arbitrator granted two requests because InSightec agreed to provide the information. Schulman Decl. Ex. 7, pp. 3-9. For example, in Request No. 5, Landmark requested a copy of the executed Agreement, which was already in Landmark's control because it had already submitted a copy for the record; InSightec objected on these grounds, but agreed to produce the document. Schulman Decl. Ex. 7, p. 5.
Procedural Order No. 1 also included a procedural timetable which set out a list of deadlines for the proceeding. Schulman Decl. Ex. 6, ¶ 16. Deadlines were set for, among other things, submitting requests to produce and objections to those requests, resolving discovery disputes, submitting the parties' statement of the case and statement in opposition, and setting the dates for a pre-hearing conference and evidentiary hearing. Schulman Decl. Ex. 6, ¶ 16.
The Order " directed [each party] to submit comprehensive written statements detailing the factual and legal basis for its claims or defenses," with " all documents relied upon" and " witness statements for any fact or expert witness whose testimony is relied upon" attached to them. Schulman Decl. Ex. 6, ¶ 7.
Landmark failed to submit witness statements by the deadline as ordered. Schulman Decl. Ex. 9, ¶ 10. In response, InSightec moved to preclude Landmark from introducing evidence that had not been submitted by the deadline. Schulman Decl. Ex. 9, ¶ 3. Landmark asserted that it failed to submit the witness statements because it misinterpreted the Order and that it had put forth a " good faith" effort to comply. Schulman Decl. Ex. 9, ¶ 4. The Arbitrator responded that Landmark did not point out any place where the Order was ambiguous and that even assuming that Landmark acted in good ...