17-548-cv Bergheim v. Sirona Dental Sys., Inc. UNITED STATES COURT OF APPEALS FOR THE SECO ND CIRCUIT SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DA TABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. At a stated term of the United States Cour t of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courth ouse, 40 Foley Square, in the City of New York, on the 11 th day of October, two thousand seventeen.

PRESENT: ROBE RT D. SACK, REENA RAGGI, SUSAN L. CARNEY, Circuit Judges

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---------------------------- ---------------------------- -------------- OLAV BERGHEIM, GHARIB MORTEZA, Petitioners-Appellees , v. No. 17-548-cv SIRONA DENTAL SYSTEMS, INC., ARGES IMAGING INC., Respondents-Appellants. *

---------------------------- ---------------------------- -------------- APPEARING FOR APPELLANTS: KE LSI BROWN CORKRAN, Orrick, Herrington & Sutcliffe LL P, Washington, D.C. (Mark A. Robertson, Norton Rose Fulbright US LLP, New York, New York; Joy M. Soloway, Norton Rose Fulbright US LLP, Houston, Texas, on the brief ).

APPEARING FOR APPELLEES: JOHN D. RO ESSER, Dechert LLP, New York, New York.

* The Clerk of Court is directed to am end the case caption as set forth above.2 Appeal from a judgment of the United St ates District Court for the Southern

District of New York (Laura Taylor Swain, Judge ). UPON DUE CONSIDERATION, IT IS HEREBY ORDERE D, ADJUDGED, AND DECREED that the judgment entered on January 26, 2017, is AFFIRMED. Sirona Dental Systems, Inc., and Arges Imaging Inc. (“Sirona”) appeal from a judgment confirming an arbitral award of da mages for Sirona’s breach of a May 5, 2011 merger agreement (the “Agreem ent”) with Petitioners, the form er shareholders of Arges Imaging Inc. Sirona argues that the dist rict court should ha ve vacated the award because the arbitrator (1) disr egarded the plain terms of the Agreement in concluding that Petitioners were entitled to recover a $3 million bonus (the “Accuracy Earn-Out Provision”) based on the prov en accuracy of Apollo, th eir dental-imaging product; and (2) manifestly disregarded De laware’s prohibition on specul ative damages in awarding Petitioners approximately $4 million under a provision tie d to Apollo’s expected revenues (the “Revenue Earn-Out Provision”). 1 On appeal from the confirmation of an arbitration award pursuant to the Federal Arbitration Act (“FAA”), see 9 U.S.C. § 1 et

seq. , we review the district court’s legal conclusions de novo and its factual findings for clear error, see Kolel Beth Yechiel Mechil of Tar tikov, Inc. v. YLL Irrevocable Tr. , 729 F.3d 99, 103 (2d Cir. 2013). In so doing, we assume the pa rties’ familiarity with the facts and record of prior pr oceedings, which we reference only as necessary to explain

our decision to affirm.

1 Sirona advances no independent argument for vacating the arb itrator’s award of interest, attorneys’ fees, or costs, which we will not address further.3 1. Arbitrator’s Interpretation of the Accuracy Earn-Out Provision Sirona argues that the arbitration award cannot be reconciled with “the plain terms” of the Agreement’s A ccuracy Earn-Out Provision. Appellants’ Br. 19. To secure vacatur on this ground, Sirona must do more than show that the arbitrator

“committed an error—or even a serious error.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. , 559 U.S. 662, 671 (2010); accord Jock v. Sterling Jewelers Inc. , 646 F.3d 113, 122 (2d Cir. 2011). Rather, it mu st show that the arbitrator acted “outside the scope of his contractually delegated authority—issuing an award that simply reflects his own notions of economic justice rather than drawing its essence from the contract.” Oxford

Health Plans LLC v. Sutter , 133 S. Ct. 2065, 2068 (2013) (internal quotation marks and alterations omitted). As long as “the arbitr ator (even arguably) in terpreted the parties’ contract,” then “whether he got its meaning right or wrong,” id. , confirmation is required if there is a “barely colorable jus tification for the outcome reached,” Leeward Constr. Co., Ltd. v. Am. Univ. of Antigua–Coll. of Med. , 826 F.3d 634, 638 (2d Cir. 2016) (internal quotation marks omitted). The ar bitrator here satisfied this standard. Under the Accuracy Earn-Out Provision, Petitioners were “entitled to receive” $3 million “[i]f, and only if,” within 18 months of the merger’s closing, Apollo satisfied a negotiated list of “Product Finalization” requirements and secured a “Key Accuracy Number” score of 75 or greater during cont rolled testing. App’x 93. There is no question that Sirona declined to certif y Apollo’s complianc e with the Product Finalization requirements during the 18-month period. The arbitrator determined,4 however, that (1) such testing as was conducted indicated that Apollo had achieved a Key Accuracy Number score of 77 during the 18-month threshold, and (2) Sirona improperly

withheld Product Finalization certificati on pending satisfaction of non-contractual criteria, some of which the parties had sp ecifically negotiated to exclude from the Agreement. Thus, the arbitrator did not di sregard the Agreement a nd base the award on extracontractual considerations, as in the cases Sirona cites. Cf. Harry Hoffman Printing, Inc. v. Graphic Comm c’ns Int’l Union Local 261 , 950 F.2d 95, 99 (2d Cir. 1991) (affirming vacatur of award in which arbitrator relied on notions of “elementary due process” rather than on contract); In re Marine Pollution Serv., Inc. , 857 F.2d 91, 93, 96 (2d Cir. 1988) (reversing confirmation of aw ard premised on “practical effect[s]” and “guiding principle of equity” where no contract language authorized arbitrator’s actions). Rather, she found the terms of the Agreemen t satisfied. Whether or not we would ourselves construe the Agreemen t to preclude Sirona from withholding certification in this manner, the arbitrator’s in terpretation was supported by at least a “barely colorable justification,” which suffices to confirm the award. Leeward Constr. Co. Ltd. v. Am. Univ. of Antigua–Coll. of Med. , 826 F.3d at 638. Sirona’s argument that its certifica tion was an express condition precedent merits little discussion, as the arbitrator conclude d that Sirona’s impr oper withholding of

certification excused Petitioners’ co mpliance with the condition. See, e.g. , Seven Invs., LLC v. AD Capital, LLC , 32 A.3d 391, 400 (D el. Ch. 2011) (explaining that party “may not escape contractual liability by reliance upon the failure of a condition precedent5 where the party wrongfully prevented performan ce of that condition precedent” (internal quotation marks omitted)). Sir ona’s claim that the arbitrator found it not to have acted wrongfully, but to have engaged in good-fa ith commercially reasonable actions, is belied by the record. The arbitrator’s good-fa ith finding related to Petitioners’ Revenue Earn-Out claims, not its Accuracy Earn-Out claims. Indeed, the arbitrator explained that Sirona’s breaches of these respective pr ovisions were “two fundamentally different things.” App’x 26. 2. Application of Delaware Law to the Revenue Earn-Out Provision

Sirona concedes the arbitrato r’s authority to find that it breached its obligation to make “commercially reasonable efforts” to promote Apollo pursuant to the Revenue Earn-Out Provision, under which Petitioners were entitled to 10% of Apollo’s revenues and 25% of its license fees for six years. Sirona argues only that the damages awarded for its breach were so speculative as to manife st disregard for Delaware law. To secure vacatur on this ground, Sir ona bears a “heavy burden” beca use a court must “find[] both that (1) the arbitrator[] knew of a governin g legal principle yet refused to apply it or ignored it altogether, and (2) the law ignore d by the arbitrator[] was well defined, explicit, and clearly applicable to the case.” Zurich Am. Ins. Co. v. Team Tankers A.S. , 811 F.3d 584, 589 (2d Cir. 2016 ) (internal quotation marks omitted). Because Sirona fails to satisfy the first requirement , we need not consider the second. The arbitrator here did not ignore or re fuse to apply Delaware law. To the contrary, she cited Delaware precedent pros cribing awards of “speculative” damages,6 App’x 52, and specifically concluded th at Petitioners’ damages calculations met Delaware’s requirement that “damages be shown with reasonable certainty,” id. at 53. Nothing more was required. See, e.g. , Siga Techs., Inc. v. PharmAthene, Inc. , 132 A.3d 1108, 1131 (Del. 2015) (explaining that Delaware law require s that expectation damages be proven “with reasonable cert ainty,” not “precise certainty” ). The arbitrator also did not disregard the “general rule” in Delaware prohibiting damages based on evidence of expected profits from a new business or technology. Re v. Gannett Co ., 480 A.2d 662, 668 (Del. Super. Ct. 1984). A general rule is , by definition, not an absolute bar, and Petitioners cite no caw law establishing that Delaware prohibits such damages.

Nor was the factual basis for the ar bitrator’s $4 million damages award speculative, as it was based on calculations pe rformed by Petitioners’ expert witness, who “relied on projections developed by Sirona itself.” App’x 53; see id. at 53 n.10 (noting that Sirona’s expert “did not offer” an al ternative proposal and claimed that damages were “impossible” to calculate). To the exte nt Sirona disputes th e arbitrator’s factual findings on damages, they are beyond our review. See Westerbeke Corp. v. Daihatsu Motor Co., Ltd. , 304 F.3d 200, 213 (2d Cir. 2002) (“An arbitrator’s factual findings are generally not open to judicial challenge, and we accept the facts as the arbitrator found them.”) (internal quotation marks omitted).7 3. Conclusion We have considered Sirona’s other argumen ts and conclude that they are without merit. Accordingly, we AFFIRM th e judgment of the district court.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court