Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-19-01635/USCOURTS-ca3-19-01635-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 19-1635

_____________

PNY TECHNOLOGIES, INC.,

 Appellant

v.

NETAC TECHNOLOGY CO., LTD. 

_______________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 2-13-cv-06799)

District Judge: Hon. Stanley R. Chesler

_______________

Submitted Under Third Circuit L.A.R. 34.1(a)

January 13, 2020

Before: JORDAN, GREENAWAY, JR., and KRAUSE, Circuit Judges.

(Filed: February 10, 2020)

_______________

OPINION

_______________

 

 This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7, 

does not constitute binding precedent.

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JORDAN, Circuit Judge.

PNY Technologies, Inc. (“PNY”) appeals from the District Court’s confirmation 

of an arbitration award and denial of a stay. We see no persuasive reason to secondguess either ruling and will affirm.

I. BACKGROUND

PNY is a New Jersey-based electronics company that sells, among other things, 

flash memory devices. Appellee Netac Technology Co., Ltd. (“Netac”), based in the 

People’s Republic of China, is a manufacturer of flash memory devices. In 2006, Netac 

sued PNY, alleging that certain products PNY sold were infringing one of Netac’s U.S. 

patents. After a lengthy back and forth between the parties, including a settlement 

agreement and a previous arbitration, PNY filed suit in the United States District Court 

for the District of New Jersey in 2013. In that suit, PNY alleged that Netac was not 

entitled to royalties on a certain category of flash devices, known as chip-on-board (or 

COB) devices, that PNY sold. In December 2015, after the case was initially dismissed 

without prejudice and subsequently reopened, and after PNY unsuccessfully moved to 

stay the suit pending the United States Patent and Trademark Office’s reexamination of 

two of Netac’s patents, the District Court ordered the parties “to arbitrate Netac’s claims 

seeking royalties for the sale and/or manufacture of royalty producing products[.]” (App. 

at 30.) 

The court-ordered arbitration proceeded before a retired judge in January of 2016. 

As relevant here, the arbitrator concluded that COB products were not covered by the 

settlement agreement. PNY thus did not owe royalties on them. The arbitrator

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nevertheless ruled that PNY owed $2,214,000 in royalties for flash devices that were 

covered by the settlement agreement. He derived that figure from PNY’s sales data. 

And, in doing so, he rejected PNY’s argument that he should have used supply data 

instead. He also ordered PNY to make quarterly royalty reports to Netac, “consistent 

with the provisions of the Settlement Agreement.” (App. at 10.)

While the arbitration was ongoing, PNY filed a separate lawsuit in federal court in 

Hawaii, seeking a declaratory judgment that two of Netac’s patents are invalid and 

unenforceable. It also sought a preliminary injunction to enjoin the arbitration from 

proceeding. The district court in Hawaii denied PNY’s request for a preliminary 

injunction and transferred the action to New Jersey. 

The District Court in New Jersey confirmed the arbitration award and denied 

PNY’s motion to stay confirmation until the conclusion of the related declaratory 

judgment action.

PNY now appeals.

II. DISCUSSION1

PNY takes issue with two specific rulings in the arbitration award and one 

discretionary ruling by the District Court. First, PNY argues that the arbitrator’s damages 

figure is “completely irrational.” (Opening Br. at 27.) Second, PNY asserts that the 

arbitrator manifestly disregarded the law in ordering PNY to make quarterly royalty 

 

1 The District Court had jurisdiction pursuant to 28 U.S.C. § 1332 and 9 U.S.C. 

§ 10. We have jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(1)(D)-(E).

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reports to Netac. Finally, PNY argues that the District Court abused its discretion in 

denying a stay. 

“On appeal from a district court’s ruling on a motion to confirm or vacate an 

arbitration award, we review its legal conclusions de novo and its factual findings for 

clear error.” Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 219 (3d Cir. 2012)

(citation omitted). Review of the arbitration award itself is “extremely deferential[.]” 

Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003). Indeed, “we begin with the 

presumption that the award is enforceable[,]” and “do not entertain claims that an 

arbitrator has made factual or legal errors.” Sutter, 675 F.3d at 219 (citation omitted). 

Instead, “[a]n award may be vacated only upon one of the four narrow grounds 

enumerated in the Federal Arbitration Act[.]”2 Id. 

PNY invokes only one of those grounds here. According to 9 U.S.C. § 10(a)(4), a 

court may vacate an arbitration award if “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). Vacatur on that basis is 

appropriate only when the arbitrator “decides an issue not submitted to him, grants relief 

in a form that cannot be rationally derived from the parties’ agreement and submissions, 

 

2 Those grounds are (1) where “the award was procured ... by corruption, fraud, or 

undue means;” (2) where “there was evident partiality ... or corruption in the 

arbitrators[;]” (3) “where the arbitrators were guilty of misconduct in refusing to 

postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence 

pertinent and material to the controversy[,] or of any other misbehavior by which the 

rights of any party have been prejudiced;” or (4) “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)(1)-(4).

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or issues an award that is so completely irrational that it lacks support altogether.” Sutter, 

675 F.3d at 219-20 (citation omitted). That standard is, by its terms, very hard to meet, 

and PNY has failed to do so.

PNY contends that the arbitrator erred by using sales data instead of supply data in 

arriving at a damages figure. That, however, is precisely the type of decision we have no 

authority to second-guess under the Federal Arbitration Act. The arbitrator explicitly 

relied on PNY’s sales data and product coding data to calculate damages. It does not 

matter that using supply data may have been available as an alternate method. It would 

not even matter at this stage if the sales data were flawed. All that matters is that the 

arbitrator’s decision had some basis in the record. See Sutter, 675 F.3d at 220 (“[E]ven 

serious errors of law or fact will not subject” an arbitrator’s award to vacatur.).

PNY next argues that the arbitrator manifestly disregarded the law in ordering that

quarterly royalty payments must be made to Netac.3 Relying on Lear, Inc. v. Adkins, 395 

U.S. 653, 673 (1969), PNY emphasizes that a licensee cannot “be required to continue to 

pay royalties during the time they are challenging patent validity in the courts.” (Opening 

Br. at 48 (quoting Lear, 395 U.S. at 673).) PNY asserts that it cannot be made to pay 

royalties until its claims regarding patent invalidity and unenforceability have been 

 

3 PNY attempts to cast this decision as a “permanent injunction” that was outside 

the scope of the arbitrator’s authority to order. It is no such thing. As the District Court 

correctly observed, ordering the reports was simply a “straightforward declaration of the 

parties’ rights and obligations under the Settlement Agreement.” (App. at 10.)

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adjudicated. But PNY again fails to overcome the stringent standard of review.4 The 

arbitrator clearly grappled with the import of the Lear decision. He rejected PNY’s 

position and concluded that Netac’s arguments were “more persuasive.” (App. at 292.) 

That good faith effort is more than enough to demonstrate that he did not manifestly 

disregard Lear. There is no evidence that the arbitrator “ignor[ed]” a “clearly defined 

governing legal principle[.]” Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 

333 F.3d 383, 389 (2d Cir. 2003).5

Lastly, PNY contends that the District Court abused its discretion in denying a 

stay of confirmation until the conclusion of the declaratory judgment litigation. The 

District Court noted that “[t]he parties have fully and fairly litigated the motion to 

confirm the arbitration award,” and that “[d]elaying a decision that is ready to be made 

does not promote efficiency.” (App. at 12.) That conclusion rests neither on an error of 

fact nor law, and it was within the Court’s sound discretion. See United States v. Breyer, 

 

4 Under the manifest disregard theory, a court may vacate an arbitration award 

“where the arbitrator’s decision evidence[s] a manifest disregard for the law rather than 

an erroneous interpretation of the law.” Dluhos, 321 F.3d at 370 (internal quotation marks 

omitted). A party proceeding on that theory “bears the burden of proving that the 

arbitrators were fully aware of the existence of a clearly defined governing legal 

principle, but refused to apply it, in effect, ignoring it.” Duferco Int’l Steel Trading v. T. 

Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir. 2003) (citation omitted).

5 Because we conclude that the arbitrator did not manifestly disregard the law, we 

need not decide if the “manifest disregard” theory survives as a basis for vacatur after the 

Supreme Court’s ruling in Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 

(2008). 

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41 F.3d 884, 893 (3d Cir. 1994) (holding that we review a district court’s ruling on a 

motion to stay for abuse of discretion).

6

 

III. CONCLUSION

For the foregoing reasons, we will affirm the District Court’s confirmation of the 

arbitration award and denial of a stay.

 

6 PNY lost its declaratory judgment case, Case No. 19-3403. Several of its claims 

were dismissed for failure to state a claim or at the summary judgment stage, and its 

patent unenforceability and patent invalidity claims were dismissed for lack of subject 

matter jurisdiction. It appealed that suit to this Court, though why it chose to do so is 

unclear, since we have no jurisdiction over appeals in patent cases. Such appeals must be 

heard by the United States Court of Appeals for the Federal Circuit. 28 U.S.C. 

§ 1295(a)(1). That lack of jurisdiction also precludes us from consolidating the two 

appeals, as PNY has requested. See 20 James Wm. Moore et. al., Moore’s Federal 

Practice § 303.41 (2019) (noting that an appellate court “must have jurisdiction over each 

matter to be consolidated”). We thus decline to consolidate this appeal with Case No. 19-

3403, and will transfer that appeal to the Federal Circuit. 

PNY complains that failure to consolidate or stay this case until the conclusion of 

the declaratory judgment litigation will risk inconsistent judgments. It is not apparent, 

however, that that is a significant risk. Moreover, PNY appears to be largely responsible 

for the timeline of events in this drawn-out fight and in fairness can bear what little risk 

there may be.

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