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PNY Technologies, Inc. v. Netac Technology Co., Ltd.

United States District Court, D. New Jersey

February 6, 2019

PNY TECHNOLOGIES, INC. Plaintiff,
v.
NETAC TECHNOLOGY CO., LTD., Defendant.

          OPINION & ORDER

          STANLEY R. CHESLER, U.S.D.J

         This matter has come before the Court on the motion to confirm the arbitration award by Defendant Netac Technology Co., Ltd. (“Netac”), and the cross-motion to vacate the arbitration award or stay confirmation by Plaintiff PNY Technologies, Inc. (“PNY”). For the reasons that follow, the motion to confirm will be granted, and the motion to vacate will be denied.

         Previously, this Court granted in part Netac's motion to compel arbitration. The parties completed an arbitration process and, on July 27, 2018, the Arbitrator issued the Final Award. Netac now moves to confirm the Final Award, and PNY cross-moves to vacate it.

         PNY contends that a portion of the Final Award should be vacated and modified to exclude an award of $2.2 million in royalties on a set of products that is the subject of a dispute (the “Disputed Units.”) The parties dispute whether the Disputed Units are COB products, not subject to royalties, or PCBA products, subject to royalties. The Arbitrator ruled that the Disputed Units are PCBA products, subject to royalties, and awarded $2.2 million in royalties. (Dickey Dec. Ex. H at 6-8.)

         PNY argues that the Arbitrator's basis for the award of $2.2 million is “completely irrational and not supported by the record.” (Pl.'s Opp. Br. 10.) PNY states:

The decision is inherently irrational because it directly contradicts Arbitrator Bassler's earlier, agreed-upon ruling that COB units were not licensed or royalty-bearing under the Settlement Agreement. The Arbitrator also lacked any support in the record to determine that the units at issue were in fact royalty-bearing PCBA units and not royalty-free COB units.

(Pl.'s Opp. Br. 11.)

         Plaintiffs have misread the Final Award, which does not support either of their two assertions: 1) the Final Award contradicts the earlier ruling by the Arbitrator; and 2) the Arbitrator's determination that the Disputed Units are PCBA products has no basis in the evidence of record.

         As to the first assertion, there is no dispute that the Arbitrator had previously ruled that COB products are not subject to royalties. PNY attempts to style the Final Award as doing a 180º turn, relying on the contrary proposition that COB products are subject to royalties, but this is an incorrect reading. The very first sentence of the section of the Final Award at issue states: “I previously determined that PCBA products, not COB products, generate royalties.” (Dickey Dec. Ex. H at 6.) Nothing in the section that follows contradicts that statement. There is simply no basis for PNY's contention that the Arbitrator reversed himself on this basic point. Instead, the Arbitrator examined the evidence and made a factual determination that the Disputed Units are PCBA products, subject to royalties. (Id. at 7.) PNY has failed to persuade this Court that the Final Award of $2.2 million for the Disputed Units contradicts any of the Arbitrator's previous decisions.

         As to the second assertion, again, it is not supported by the Final Award. The Arbitrator explained the issue as follows:

I previously determined that PCBA products, not COB products, generate royalties. PNY argues Netac is not entitled to $2, 214, 000.00 in royalties for COB units that PNY alleges have been wrongly categorized as PCBA products. PNY contends that the many technical distinctions between the PCBA and COB products preclude Netac from trying to characterize any COB products as PCBA ones. PNY argues, based on supply data, that the units in question cannot be PCBA units. PNY argues the evidence is insufficient to find that PNY sold PCBA products sufficient to generate $2.24 million in royalties because the supply records are more reliable than the sales records and the supply figures cannot support the sales figures. According to PNY, the PCBA royalties should not include $2.2 million because the supply data shows fewer PCBA products than are recorded in the PNY sales data, and the supply data is the more accurate way to calculate royalties.
Netac, on the other hand, argues that royalties are due for these products because PNY's own sales receipts and business records use the PCBA coding numbers for what PNY itself says is COB product. As Netac points out, the PCBA sales data that PNY produced to Netac was relied upon both at the evidentiary hearing and by the parties' experts and demonstrates the units in question are PCBA products and thus are royalty-bearing.

(Dickey Dec. Ex. H at 6.) There is more to the decision, but this section by itself demonstrates that PNY is incorrect in its assertion that the “Arbitrator also lacked any support in the record to determine that the units at issue were in fact royalty-bearing PCBA units and not royalty-free COB units.” (Pl.'s Opp. Br. 11.) As the section just quoted makes clear, the Arbitrator relied on PNY's sales data. His decision has a basis in evidence of record. Furthermore, the Arbitrator went on to explain that PNY and its expert had previously relied on the sales records, and that PNY had now changed its position, arguing that its own sales records were erroneous. The Arbitrator decided that there was no basis to conclude that PNY's sales records were erroneous, and that these records supported the award of $2.2 million.

         The parties agree on the very limited scope of judicial review of arbitration awards: “if an examination of the record before the arbitrator reveals no support whatever for his determinations, his award must be vacated.” NF&M Corp. v. United Steelworkers of Am., 524 F.2d 756, 760 (3d Cir. 1975). While PNY has argued that the record reveals no support for the decision to award $2.2 million for the Disputed Units, the ...


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