Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Silicon Power Corp. v. General Electric Zenith Controls

July 7, 2009

SILICON POWER CORPORATION
v.
GENERAL ELECTRIC ZENITH CONTROLS, INC.



The opinion of the court was delivered by: Padova, J.

MEMORANDUM

General Electric Zenith Controls, Inc. ("GE Zenith") has filed a Motion to Strike the Motion to Vacate Arbitration Award filed by Silicon Power Corporation ("Silicon Power"). By agreement of the parties, GE Zenith's Motion is being treated as a motion to dismiss. For the reasons that follow, the Motion is denied.

I. FACTUAL AND PROCEDURAL BACKGROUND

Silicon Power is a Pennsylvania corporation "engaged in designing, engineering and producing components and systems for the electrical power industry." (6/24/09 Hrg. Tr. at 11; Final Arb. Award at 1.) Its products are used in telecommunications, computer networks, office and industrial parks and computer data centers (collectively referred to as the "Critical Power Market"). (Final Arb. Award at 1.) GE Zenith, a division of General Electric, Inc., is a Delaware corporation involved in the manufacture, design and marketing of components for the Critical Power Market. (Id.) The dispute between Silicon Power and GE Zenith involves transfer switches (switches that are used to switch equipment to a new source of power when its primary power source fails). (Id. at 2.) In 2000, Silicon Power developed new technology for transfer switches. (Id.) Silicon Power and GE Zenith negotiated two agreements involving this technology, the Supply and Distribution Agreement, dated September 21, 2001 (the "SDA") and the Joint Development Agreement, also dated September 21, 2001 (the "JDA"). (Id. at 3-4.) Under the SDA, Silicon Power agreed to provide products using this new technology for distribution by GE Zenith on an exclusive basis in North American and, under the JDA, the parties agreed to work together on certain tasks relating to product development. (Id. at 4.)

In the end, only one product was introduced using the new technology and it had "abysmally low" sales. (Id.) Silicon Power then initiated an arbitration, claiming that GE Zenith failed to meet the sales targets in the SDA and that its failure was entirely the fault of GE Zenith. (Id.) John Wilkinson arbitrated the dispute in New York, New York. (Id. at 27.) Silicon Power initially sought damages in the amount of $12,000,000, and later raised its demand to $433,901,000. (Id. at 4.) Wilkinson denied all of Silicon Power's claims in a Final Arbitration Award dated June 11, 2008. (Id. at 26-27.)

Silicon Power filed its Motion to Vacate Arbitration Award (the "Motion to Vacate") in this court on September 9, 2008 and e-mailed a copy of the Motion to Vacate to GE Zenith's attorney that same day. (2/5/09 Cert. of Service.) On September 16, 2008, Silicon Power sent a timestamped copy of the Motion to Vacate to GE Zenith's attorney by Federal Express. (Silicon Power Ex. 2.) GE Zenith did not file a response to the Motion to Vacate, but instead filed the instant Motion.

II. DISCUSSION

GE Zenith asks us to dismiss the Motion to Vacate because it was not served in the manner required by the Federal Arbitration Act ("FAA") within the time limitations provided by the FAA. GE Zenith contends that this Court should dismiss this proceeding for failure to comply with Fed. R. Civ. P. 12(b)(4) ("insufficient process") or 12(b)(5) ("insufficient service of process"). (Mem. at 3.) "[A] Rule 12(b)(4) motion is proper only to challenge noncompliance with the provisions of Rule 4(b) or any applicable provision incorporated by Rule 4(b) that deals specifically with the content of the summons." 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 3d § 1353 (2004). As there was no summons in this case, because this proceeding was initiated by the filing of the Motion to Vacate, Rule 12(b)(4) is inapplicable. "A Rule 12(b)(5) motion is the proper vehicle for challenging the mode of delivery . . . ." Id. Consequently, we will consider GE Zenith's Motion pursuant to Rule 12(b)(5). When a motion to dismiss is brought pursuant to Rule 12(b)(5), "[t]he burden of proof is on the party asserting the validity of service." Marks v. Alfa Group, Civ. A. No. 08-5651, 2009 WL 1312599, at *1 (E.D. Pa. May 11, 2009) (citing Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476 (3d Cir.1993)).

The FAA requires that a motion to vacate an arbitration award be filed and served within three months after the award is filed or delivered:

Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.

9 U.S.C. § 12. This time limitation is strictly construed, and "'a party may not raise a motion to vacate, modify or correct an arbitration award after the three month period has run, even when raised as a defense to a motion to confirm.'" Wallace v. Buttar, 378 F.3d 182, 197-98 (2d Cir. 2004) (quoting Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175 (2d Cir. 1984)). See also Service Employees Int'l Union, Local No. 36 v. Office Ctr. Servs., Inc., 670 F.2d 404, 409 (3d Cir. 1982) (stating that the FAA disallows the raising of a defense to confirmation of an arbitration award more than three months after the award is issued). Consequently, if a party fails to serve a motion to vacate within the three month time period provided by Section 12 of the FAA, that party "forfeits the right to judicial review of the award." Piccolo v. Dain, Kalman & Quail, Inc., 641 F.2d 598, 600 (8th Cir. 1981). See also Webster v. A.T. Kearney, Inc., 507 F.3d 568, 572 (7th Cir. 2007) (noting that "service of a motion to vacate is the act that stops the three-month statute of limitations[,]" not the filing of the motion to vacate); Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155, 1158 (10th Cir. 2007) ("'A party to an arbitration award who fails to comply with the statutory precondition of timely service of notice forfeits the right to judicial review of the award.'" (quoting Int'l Bhd. of Elec. Workers, Local Union No. 969 v. Babcock & Wilcox, 826 F.2d 962, 966 (10th Cir. 1987))); Oberwager v. McKechnie Ltd., Civ. A. No. 06-2685, 2007 WL 4322982, at *5 (E.D. Pa. Dec. 10, 2007) ("A court may reach the merits of a motion to vacate an arbitration award only when notice of the motion is 'served upon the adverse party or his attorney within three months after the award is filed or delivered.'" (quoting 9 U.S.C. § 12 and citing Piccolo, 641 F.2d at 600)).

A. Residency in the Southern District of New York

GE Zenith argues that the Motion to Vacate should be dismissed because Silicon Power did not comply with the service requirements for adverse parties who are not residents of the district in which the arbitration took place. GE Zenith contends that it is not a resident of the Southern District of New York, where the arbitration took place and, consequently, Section 12 of the FAA mandated service by the marshal. GE Zenith has submitted evidence that: (1) it is a Delaware corporation with its principal office in Illinois; (2) it does not have an office in New York; and (3) it services its New York customers from its New Jersey office. (Duffy Aff. ¶¶ 2-3.)

The FAA does not define residency and the parties have submitted no authority that defines that term for purposes of the FAA. The United States District Court for the Southern District of New York has found a foreign corporation to be a resident of that district for purposes of Section 12 of the FAA where the corporation consented to arbitration in the Southern District of New York and "throughout the arbitration purposely availed itself of the benefits of New York and the laws of New York." Possehl, Inc. v. Shanghai Hia Xing Shipping, Civ. A. No. 00-5157, 2001 WL 214234, at *4 (S.D.N.Y. Mar. 1, 2001). We are also guided by the definition of residency found in 28 U.S.C. § 1391. Section 1391 states that "[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." 28 U.S.C. § 1391(c). GE Zenith has been registered with the New ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.