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Nano Gas Technologies, Inc. v. Roe

United States District Court, N.D. Illinois, Eastern Division

November 14, 2017

CLIFTON ROE Defendant.


          Sharon Johnson Coleman Judge

         Clifton Roe, the plaintiff in the underlying action, petitions this court to vacate the arbitration award entered against him. Nano Gas Technologies (“Nano Gas”), the defendant in the underlying action, separately filed a case against Roe in this district to enforce the arbitration award. For the reasons set forth herein, Roe's petition to vacate the arbitration award [17-cv-2241, 65] is denied.


         Roe invented a nozzle capable of dissolving and dispersing gasses into liquids in a manner previously believed to be unattainable. Nano Gas and Roe entered into a collaboration to commercialize the technology, the terms of which were set forth in a “Collaboration and Non-Compete Agreement” (“the Agreement”). The Agreement contained a dispute resolution clause providing, in pertinent part, for the arbitration of all disputes. Roe worked in Nano Gas' Michigan facility alongside Nano Gas employees to develop a machine utilizing his invention and related intellectual property. However, the working relationship between Roe and Nano Gas began to deteriorate after the collaboration was slow to produce the desired results. Ultimately, Roe removed the machine and related intellectual property from Nano Gas' facility and began independently using the machine and collaborating with others.

         Roe subsequently filed a civil action against Nano Gas in the United States District Court for the Eastern District of Michigan. The court held that the parties' claims were subject to arbitration pursuant to the Agreement, and accordingly dismissed the case without prejudice. Roe subsequently initiated an arbitration proceeding against Nano Gas, which filed a counter-complaint against Roe.

         The arbitration was conducted in Chicago, Illinois over approximately fourteen days. The arbitrator concluded that Roe had assigned the rights to the machine and related intellectual property to Nano Gas, and that Roe therefore had no right to remove the machine or related intellectual property from Nano Gas' facility or share it with others. The arbitrator also found that Roe improperly removed a box of papers prepared by Nano Gas employee Jeff Hardin containing intellectual property related to the machine, and accordingly ordered that Roe return the box of “Hardin papers” or pay Nano Gas $150, 000 in damages. The arbitrator issued a permanent injunction against Roe, prohibiting him from directly or indirectly engaging in any commercial activity relating to the technology without express consent from Nano Gas. In response to Nano Gas' subsequent Rule 50 petition for correction and clarification, the arbitrator corrected several typographical errors and clarified the interpretation of the Decision and Final Award.

         Roe filed a petition to vacate the arbitration award in the underlying case. Soon afterwards, Nano Gas filed a separate action in this court to enforce the arbitration award. The Eastern District of Michigan transferred the underlying case to this district, where it was consolidated with Nano Gas' action to enforce the arbitration award. The petition to vacate the arbitration award is now before this Court.

         Standard of Review

         It is well established that courts must give “great deference” to an arbitrator's decision. Cremin v. Merrill Lynch, Pierce, Fenner, & Smith, Inc., 434 F.Supp.2d 554, 559 (N.D. Ill. 2006) (Castillo, J.) (quoting Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004)). Judicial review of arbitration awards is narrowly limited in order to “maintain arbitration's essential virtue of resolving disputes straightaway.” Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 588, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). Accordingly, the party petitioning to vacate an arbitration award “bears the heavy burden of showing that the award falls within a very narrow set of circumstances delineated by statute and case law.” Cremin, 434 F.Supp.2d at 559 (quoting Wallace, 378 F.3d at 189).

         Under 9 U.S.C. § 10(a), there are four instances in which a district court may vacate an arbitration award. As is relevant here, an arbitration award may be vacated “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(a)(4). The requirements of finality and definiteness are ones of form rather than substance and must not be confused with whether the arbitrators' award was correct or reasonable, because “neither error nor clear error nor even gross error” is a ground for vacating an award. IDS Life Ins. Co v. Royal Alliance Assocs., Inc., 266 F.3d 645, 650 (7th Cir. 2001). Similarly, in assessing whether arbitrators exceeded their powers, courts consider only whether the arbitrators arguably interpreted the parties' contract and not the accuracy of that interpretation. See Oxford Health Plans L.L.C. v. Sutter, 569 U.S. 564, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013); Prostyakov v. Masco Corp., 513 F.3d 716, 723 (7th Cir. 2008).


         Roe contends that the arbitrator exceeded his authority when he determined that Roe took the box of “Hardin papers, ” and must return the box or pay Nano Gas $150, 000. Roe asserts that this is the case because the box was not described in Nano Gas' counter complaint, the arbitrator never specifically identified the box's contents, and the arbitrator made no specific finding that the box of “Hardin papers” contained intellectual property, technology, or trade secrets. Roe therefore argues that the Hardin papers were never at issue in the arbitration, and that the arbitrator's decision therefore went beyond the scope of the dispute subject to arbitration.

         Roe's mischaracterizations aside, the arbitrator clearly found that the “Hardin papers” constituted a box of notes produced by Nano Gas employee Jeff Hardin concerning his work on the machine and that Roe took that box when he also took possession of the machine. Although Roe is correct that the “Hardin papers” were not addressed in Nano Gas' counterclaim, they contained notes regarding the parties' work on the machine and their removal therefore constituted part of the dispute subject to arbitration. Accordingly, the fact that the arbitrator addressed the “Hardin papers” is not a basis for vacating the arbitration decision. See Johnson Controls, Inc., v. Edman Controls, Inc., 712 F.3d 1021, 1025 (7th Cir. 2013) (quoting Local 15, Int'l Bhd. Of Elec. Workers v. Exelon Corp., 495 F.3d 779, 782 (7th Cir. 2007)) (holding that courts must uphold an arbitration award “so long as an arbitrator is even arguably construing or applying the contract and acting within the scope of this authority”).

         Roe also argues that the arbitration award should be vacated because the arbitrator failed to make a final and definite award. This argument is based on the fact that the arbitrator never specifically described the content of the box, which Roe asserts leaves open the door to further litigation regarding the box's contents.[1] The only authority Roe cites in support of this proposition, however, is an unrelated half-century old decision from the Wisconsin Supreme Court. See Goldmann Trust v. Goldmann, 131 N.W.2d 902, 907, 26 Wis.2d 141 (1965) (holding that a contract did not require arbitration of a particular dispute based, in part, on the fact it was devoid of a mechanism by which the arbitration decision could be implemented once reached). To the contrary, an arbitrator's decision is incomplete only if the award itself “in the sense of judgment, order, bottom line, is incomplete in the sense of having left unresolved a portion of the parties' dispute.” IDS Life Ins. Co., 266 F.3d 645, 651 (7th Cir. 2001). If a district judge is satisfied that an arbitrator resolved the entire ...

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