UPM-Kymmene Corporation v. Renmatix, Inc.
CA 2017-0363-AGB
| Del. Ch. | Oct 6, 2017Background
- Renmatix and UPM entered a Bi-Lateral Joint Development Agreement (May 16, 2013) between them requiring arbitration of "all disputes" before the International Chamber of Commerce (ICC) in Toronto after a 30‑day negotiation period.
- Six months later Renmatix, UPM, and BASF executed a Tri‑Lateral Joint Development Agreement (Nov. 20, 2013) governed by Delaware law that (a) incorporated certain prior NDAs/MTAs, (b) provided that disputes "arising pursuant to this Agreement" go to the American Arbitration Association (AAA) in Wilmington after settlement discussions, and (c) stated the Tri‑lateral would not supersede the Bi‑lateral JDAs.
- Renmatix filed an AAA demand (Apr. 24, 2017) asserting claims based on Sections 2.2(a) and 2.2(e) of the Tri‑lateral Agreement (ownership/disclosure of inventions and patent rights), alleging UPM filed patent applications that violated those provisions.
- UPM sued in the Court of Chancery (May 10, 2017) seeking declaratory and injunctive relief to prevent AAA arbitration, arguing Renmatix seeks to litigate claims that belong under the Bi‑lateral ICC forum.
- Renmatix moved to dismiss for lack of subject‑matter jurisdiction (adequate remedy at law via AAA arbitration); UPM moved for summary judgment to enjoin AAA arbitration. The court treated the dispute as one of substantive arbitrability (which forum controls) and applied Delaware contract principles.
Issues
| Issue | UPM's Argument | Renmatix's Argument | Held |
|---|---|---|---|
| Which forum controls disputes between Renmatix and UPM: ICC (Bi‑lateral) or AAA (Tri‑lateral)? | The Tri‑lateral was a three‑party contract and Renmatix cannot assert Tri‑lateral claims against UPM alone; any UPM–Renmatix dispute falls under the Bi‑lateral ICC clause. | The Tri‑lateral permits Renmatix to bring claims under its terms against UPM alone and its arbitration clause (AAA) governs disputes "arising pursuant to" that agreement. | Held for Renmatix: Tri‑lateral claims (including those asserted) may be brought against UPM alone and are subject to AAA arbitration. |
| Who decides substantive arbitrability (court or arbitrator) given conflicting arbitration clauses? | Willie Gary framework should not apply because two agreements contain conflicting dispute‑resolution clauses; court should decide which clause governs by contract interpretation. | Tri‑lateral invokes AAA rules that empower arbitrators to decide arbitrability; arbitrator should decide. | Held: Court decides which forum controls here because there is no clear and unmistakable intent to have one arbitrator (over the other) decide arbitrability when contracts contain dueling clauses. |
| Whether the Tri‑lateral supersedes the Bi‑lateral or leaves Bi‑lateral rights intact | Tri‑lateral should be read as only operating concurrently and not displacing Bi‑lateral; UPM stresses concurrency limits Tri‑lateral reach. | Tri‑lateral expressly preserves Bi‑lateral agreements but nonetheless grants independent rights and remedies under its terms (including against a single party). | Held: Integration clause expressly preserved Bi‑lateral JDAs; the Tri‑lateral operates concurrently and its terms (including AAA arbitration) govern disputes arising under it. |
| Whether Renmatix’s AAA Demand actually asserts Tri‑lateral claims (vs. Bi‑lateral claims dressed as Tri‑lateral) | The Demand’s reference to "multiple agreements" suggests Renmatix may be trying to litigate Bi‑lateral claims in AAA. | The Demand specifically cites Tri‑lateral sections as the basis for claims; Renmatix represented it asserted Tri‑lateral claims only. | Held: Demand sufficiently alleges Tri‑lateral claims (Sections 2.2(a) and 2.2(e)); ambiguity noted but arbitrator may police any attempt to assert pure Bi‑lateral claims in AAA. |
Key Cases Cited
- James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76 (Del. 2006) (establishes test when parties clearly and unmistakably intend an arbitrator to decide substantive arbitrability)
- McLaughlin v. McCann, 942 A.2d 616 (Del. Ch. 2008) (refines Willie Gary and adds inquiry to prevent frivolous referrals of arbitrability)
- Osborn v. Kemp, 991 A.3d 1153 (Del. 2010) (court must give unambiguous contract terms their plain meaning and avoid absurd results)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (federal standard: ordinary state‑law contract principles govern whether parties agreed to arbitrate arbitrability)
- Allied‑Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995) (Federal Arbitration Act principles govern arbitration agreements involving interstate commerce)