Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.
No. 95 CV 5935 John A. Nordberg, Judge.
Before RIPPLE, KANNE and DIANE P. WOOD, Circuit Judges.
DECIDED SEPTEMBER 29, 1997
The litigation before us arises from a final arbitral award issued in August 1995 by an arbitrator of the International Court of Arbitration. The award concluded that Pharmaceutical Basics, Inc. ("PBI") had breached and repudiated its contract with Generica Limited ("Generica"). It granted to Generica $6,621,628 in damages and 392,482 in apportioned costs. In the district court, Generica filed a petition for an order confirming the foreign arbitral award and for judgment on the confirmed order. PBI responded with a cross-petition to vacate the award. The district court issued a final judgment confirming the award and denying PBI's cross-petition. See Fed. R. Civ. P. 54(b). PBI now appeals to this court, seeking a vacation of the arbitration award on the ground that the award may not be enforced under Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), 9 U.S.C. sec.sec. 201 et seq. For the reasons set forth in this opinion, we affirm the judgment of the district court.
The dispute in this case arises out of a contract between Generica and PBI. On December 20, 1989, the two parties entered into an "Agreement for Pharmaceutical Development, Manufacturing and Marketing of Clomiphene Citrate" (the "Agreement") that "called for Generica and PBI to cooperate in the development, regulatory approval, manufacturing and marketing of clomiphene citrate and to share in the profits therefrom." R.1 para. 1. Clomiphene citrate ("CC") is a pharmaceutical drug widely used in the treatment of anovulatory infertility in women; it was first marketed under the brand name "Clomid" in about 1961.
Some background to this Agreement is helpful. In about 1986 a British company named Hogens Ltd. was created by Dr. Richard Wiseman for the purpose of developing and producing CC in the United Kingdom. However, because it was not a manufacturer, Hogens turned to Athlone Laboratories ("Athlone"), a manufacturing company in the Republic of Ireland, to carry out the formulation and laboratory testing of CC. The managing director of Athlone was Tony Hynds. On the basis of Athlone's production, in 1989 Hogens obtained product licenses or their equivalent in the UK, Germany, the Republic of Ireland, and the Grand Duchy of Luxembourg. Interested in penetrating the American market, Dr. Wiseman and another individual formed Generica in March 1989 to develop and manufacture CC in the United States. They needed to find a manufacturer that was approved by the Federal Drug Administration ("FDA") and that could perform the stability testing and "bio-equivalent study" required by the FDA for approval of such a product. R.1, Ex.2 ("Interim Award") at 3-4. Eventually, as the result of a recommendation, Dr. Wiseman contacted PBI as a suitable manufacturer. After months of negotiations, PBI agreed to undertake the manufacture and testing of the hormone product in the United States for Generica.
Under the Agreement, Generica granted to PBI all the rights to manufacture and market the fertility drug, including rights to the manufacturing formula and procedures relating to the product. PBI agreed to perform the required pharmaceutical development and to test both the raw material and the finished product of CC for FDA approval. The parties agreed to conduct the required bioavailability study for FDA approval as soon as possible and to cooperate with each other "in all respects in their joint efforts to complete [the required] bioavailability study and to file an Abbreviated New Drug Application (ANDA)" with the FDA. R.1, Ex.1 para. 4(ii), (iii). PBI also agreed to manufacture a pilot batch, 100,000-150,000 tablets, of CC. The Agreement was to be interpreted in accordance with English law and any dispute arising from the Agreement was to be submitted to the arbitration of the International Chamber of Commerce ("ICC").
PBI began its initial development testing by creating a small 6,000-tablet test batch of CC using Generica's formula and procedures. It found that the consistency of the product was moist and sticky, like bread dough; however, when PBI expressed concern to Generica, Generica confirmed the "bread dough" consistency of its granulation. PBI next proceeded to manufacture a 100,000-tablet batch, the quantity needed to assess the bioavailability of the drug for FDA approval. *fn1 PBI performed the required analytical tests and compiled a draft ANDA for the FDA's consideration. The biostudy was complete by September 1991; PBI's Vice President of Research and Development and Regulatory Affairs wrote Dr. Wiseman that the "results certainly do suggest bioequivalence to Clomid." R.1, Ex.2 at 21. The draft ANDA was finalized in mid-1992.
At this point, however, the parties disagree about how the dispute and eventual dissolution of their relationship occurred. From PBI's perspective, its managers continued to be concerned about the "bread dough" consistency of Generica's formulation and about their ability to control the process. According to PBI, this concern caused PBI's president to advise Generica in September 1992 that the validation difficulties made FDA approval impossible without reformulation of the product and repetition of the bioequivalence study. Although PBI offered to undertake that reformulation, PBI claimed that Generica refused to proceed with the project.
Generica's description of the events is quite different. It had been told in September 1991 by PBI's vice president that the test results "certainly do suggest bioequivalence," id., and that PBI would be in touch shortly to discuss the ANDA application. Then Generica heard nothing. PBI's new president, who had not been involved with the Agreement, at some point told Generica's Dr. Wiseman that the Agreement was "a deal I would not have done" because it was too favorable to Generica; he did not respond to Generica's calls and letters and refused to meet. Id. at 21-22. Although PBI finalized its draft ANDA in mid-1992, when the parties met in September 1992, PBI's president told Dr. Wiseman that the ANDA was "not fileable" or "could not be approved by the FDA" and that PBI would not submit the ANDA as it then stood. Id. at 26. He stated that FDA approval was impossible without reformulation of the product and repetition of the bioequivalence study. According to ...