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Halide Group, Inc. v. Hyosung Corp.

November 8, 2010

HALIDE GROUP, INC.
v.
HYOSUNG CORPORATION



The opinion of the court was delivered by: O'neill, J.

MEMORANDUM

On or about November 15, 2005, plaintiff Halide Group, Inc. entered into a contract with defendant Hyosung Corporation for the design, engineering, and licensing of a Fluorine (F2) Gas and Nitrogen Trifluoride (NF3) Gas production facility to be constructed in Ulsan, South Korea.*fn1

Halide seeks a declaration that it has not breached the Agreement and that Hyosung has an obligation to pay it the remaining balance due under the contract. Halide also seeks a preliminary injunction restraining Hyosung from the use of Halide's technology pending a resolution of the dispute between the parties.

Now before me are Halide's first amended motion for a preliminary injunction, Hyosung's motion to dismiss plaintiff's second amended complaint in favor of arbitration and the parties' responses to each.*fn2

For the reasons that follow, I will grant Hyosung's motion to dismiss plaintiff's second amended complaint*fn3 and will deny Halide's motion for a preliminary injunction.

BACKGROUND

Pursuant to Article 2.1 of the Agreement, Hyosung agreed to pay Halide a $1,750,000.00 license fee for "a license with the exclusive right in Korea and China to use any intellectual property right and Technical Information in order to construct, operate and maintain the [Ulsan] Plant or Additional Plants, and to produce, sell, and export the Products [F2 Gas and NF3 Gas]" (the "License"). Pursuant to Article 3.1 of the Agreement Hyosung also agreed to pay Halide a $3,800,000 engineering fee for a Basic Engineering Design Package, a Detail Engineering Design Package, Technical Services, Training, and Procurement Services (all as defined in the Agreement) and other services if requested by Hyosung and mutually agreed to by the parties. Halide asserts that Hyosung has not yet paid it $741,000 of the engineering fee and $800,000 of the license fee. Hyosung does not deny that it has withheld certain payments from Halide.

Instead, Hyosung asserts that Halide breached the Agreement and that it has properly withheld payment from Halide pursuant to Article 14 of the Agreement. Halide disputes the allegation that it has breached the Agreement and thus disputes the propriety of Hyosung's withholding of payments. Halide also contends that Hyosung has no right to use the License until Hyosung has paid the remaining balance due for the License under the Agreement.

Article 23.7 of the Agreement provides for arbitration of disputes as follows:

Arbitration. The parties shall use best efforts to negotiate and amicably resolve any dispute or claim arising out of or in connection with this Agreement. Any such dispute or claim which cannot be settled amicably by the parties hereto shall be finally resolved by arbitration in the defendant's country. The arbitration proceedings shall be conducted in the English language by a panel of three arbitrators, with one arbitrator selected by each of the parties, and the third arbitrator selected by the two arbitrators selected by the parties. Any award rendered shall be final and binding on the parties and judgment may be entered thereon in any competent jurisdiction. Notwithstanding the foregoing, either party hereto may seek preliminary injunctive relief from any court of competent jurisdiction pending the outcome of such arbitration proceedings.

Absent an amicable resolution of the dispute between the parties, Halide filed this action. No arbitration proceeding has been commenced between the parties.

DISCUSSION

I. Count I: Declaratory Judgment

Count I of Halide's second amended complaint seeks a declaratory judgment that Halide's conduct has not breached the Agreement and that it is owed the remaining balance due under the Agreement. In its motion to dismiss, Hyosung asserts that Halide's claims must be dismissed in favor of arbitration as the parties agreed to a provision requiring the parties to arbitrate "any dispute or claim arising out of or in connection with th[e] Agreement." Def.'s Mot. to Dismiss Second Am. Compl. Ex. A, pp. 26-27, art. 23.7. In response, Halide does not dispute the validity of the Agreement's arbitration clause but instead asks me to "decide whether or not there is a need for any arbitration" by issuing the requested declaratory judgment. Pl.'s Resp. to Def.'s Mot., p. 2. Although a party such as Halide which is reluctant to arbitrate"has a right to a judicial determination of [its] obligation to arbitrate," PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 515 (3d Cir. 1990), overruled on other grounds by Howsam v. Dean Witter Reynolds, 537 U.S. 79, 85 (2002), the Court's function is "very limited [if] the parties have agreed to submit all questions of contract interpretation to the arbitrator." Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., ...


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