803 F. Supp. 2d 270
S.D.N.Y.2011Background
- Life Technologies Corp. sold its mass spectrometry business to DH Technologies Development Pte. Ltd. (Danaher affiliate) under a 2009 Purchase Agreement that required execution of Ancillary Agreements, including a License Agreement.
- Section 11.6 of the Purchase Agreement provides a sequence: mutual discussions, mediation under JAMS Rules, then final and exclusive arbitration under JAMS International Rules for unresolved Disputes.
- The License Agreement, executed January 29, 2010, granted AB Sciex licenses to use specified Life Tech/Biosystems trademarks but did not contain an arbitration clause.
- Life Tech and Biosystems filed suit on January 18, 2011 for breach, trademark infringement, and related claims; the court denied a preliminary injunction.
- On April 22, 2011, plaintiffs demanded arbitration with JAMS naming DH Tech and AB Sciex; AB Sciex moved to enjoin arbitration as a non-signatory.
- The district court concluded AB Sciex was estopped from avoiding arbitration because it knowingly benefited from the Purchase Agreement’s arbitration clause via the License Agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AB Sciex can be compelled to arbitrate through estoppel | AB Sciex knowingly benefited from the Purchase Agreement’s arbitration clause. | AB Sciex is not a signatory to the Purchase Agreement and thus cannot be compelled to arbitrate. | Yes; estopped to avoid arbitration. |
| Whether benefits to AB Sciex were direct benefits of the arbitration clause | License Agreement was contemplated by the Purchase Agreement and AB Sciex benefited directly from it. | Benefits were incidental to licensing and not a direct benefit of the arbitration clause. | Direct benefit; supports estoppel. |
| Whether the estoppel doctrine applies given controlling Second Circuit authorities | Cases like Tencara Shipyard, MAG Portfolio, and Deloitte Noraudit support binding non-signatories who exploit direct benefits. | Thomson-CSF and related cases limit estoppel to direct exploitation; facts here align with direct-benefit theory. | Estoppel applies; AB Sciex bound to Purchase Agreement arbitration. |
Key Cases Cited
- Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 115 (2d Cir. 2010) (arbitration as contract-based; general principle that parties cannot be forced to arbitrate absent agreement)
- JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004) (arbitration prerequisites; contract-based analysis of consent)
- Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349 (2d Cir. 1999) (direct-benefit estoppel where non-signatory receives direct contractual benefits enabling arbitration)
- MAG Portfolio Consult, GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58 (2d Cir. 2001) (direct vs. indirect benefits; limits on estoppel where benefits do not flow from the arbitration clause itself)
- Deloitte Noraudit A/S v. Deloitte Haskins Sells, 9 F.3d 1060 (2d Cir. 1993) (affiliates bound by arbitration through knowingly accepting benefits of a contract containing an arbitration clause)
- Thomson-CSF, S.A. v. American Arbitration Assoc., 64 F.3d 773 (2d Cir. 1995) (illustrates limitation of estoppel when benefits are indirect to non-signatory)
- Best Concrete Mix Corp. v. Lloyd's of London Underwriters, 413 F. Supp. 2d 182 (E.D.N.Y. 2006) (courts recognize estoppel where non-signatory had knowledge of arbitration-related contents and benefited)
- Ryan, Beck & Co., LLC. v. Fakih, 268 F. Supp. 2d 210 (E.D.N.Y. 2003) (investment contracts; estoppel where investors benefit from arbitration-related agreements)