Court Opinion

ID: 4198809
Source: CourtListenerOpinion
Date Created: 2017-08-24 21:04:51.74603+00
Date Added: 2024-06-11T14:40:15.639709
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CARL ZEISS VISION, INC.               :
                                      :
             Plaintiff,               :
                                      :
       v.                             :        C.A. No. 11513-VCS
                                      :
REFAC HOLDINGS, INC. and              :
U.S. VISION, INC.,                    :
                                      :
             Defendants.              :
                                      :
REFAC HOLDINGS, INC. and              :
U.S. VISION, INC.,                    :
                                      :
             Counterclaim Plaintiffs, :
                                      :
       v.                             :
                                      :
CARL ZEISS VISION, INC.,              :
                                      :
             Counterclaim Defendant. :

                         MEMORANDUM OPINION

                        Date Submitted: June 14, 2017
                        Date Decided: August 24, 2017

Gregory E. Stuhlman, Esquire of Greenberg Traurig, LLP, Wilmington, Delaware
and Jeff E. Scott, Esquire and Valerie W. Ho, Esquire of Greenberg Traurig, LLP,
Los Angeles, California, Attorneys for Plaintiff and Counterclaim Defendant.

William R. Denney, Esquire, Brian C. Ralston, Esquire, Andrew H. Sauder, Esquire
and Jordan A. Braunsberg, Esquire of Potter Anderson & Corroon LLP and Jon M.
Talotta, Esquire of Hogan Lovells US LLP, McLean, Virginia, Attorneys for
Defendants and Counterclaim Plaintiffs.

SLIGHTS, Vice Chancellor
          Delaware courts do not take lightly applications to vacate arbitration awards.

Indeed, the standard of judicial review with respect to such applications is among

“the narrowest . . . in all of American jurisprudence.”1 Acknowledging the nearly

vertical mountain it must climb, Defendants/Counterclaim Plaintiffs, REFAC

Holdings, Inc. and U.S. Vision, Inc. (collectively “USV”), nevertheless move the

Court to vacate an arbitration award that construed a supply agreement between USV

and Plaintiff/Counterclaim Defendant, Carl Zeiss Vision, Inc. (“Zeiss”), in a manner

that supported Zeiss’ claim that USV had wrongfully terminated the agreement.

According to USV, the arbitration panel “eviscerate[d] the essential term” of the

agreement sua sponte and then “permit[ted] the agreement to remain in effect after

gutting that term.”2 This grave error, according to USV, was the product of an

arbitration panel that “abdicated its duties” and thereby “acted outside the scope of

its authority.”3

          USV’s motion would have the court turn the applicable standard of review on

its head. Indeed, although it has not expressly advocated for de novo review, the

tone of its motion suggests that the Court should construe the terms of the operative

1
    SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 750 (Del. 2014).
2
  Opening Br. in Supp. of Defs. and Countercl. Pls.’ Mot. to Vacate Arbitral Award
(“Opening Br.”) 1.
3
    Id.

                                             1
contract anew without any regard for the fact that a carefully selected, experienced

arbitration panel has already undertaken that exercise. In two words, USV seeks a

“do over.” That relief is rarely justified. It is not justified here. The motion to

vacate is DENIED.

                                   I. BACKGROUND

    The parties have submitted rather extensive exhibits from the arbitration

proceeding, including sworn testimony. I have drawn the facts from that record to

the extent necessary to determine whether the arbitration award “can be rationally

derived” from the contract the arbitrators were asked to construe and otherwise from

the evidence.4

4
  Brennan v. CIGNA Corp., F. App’x 132, 136–37 (3d Cir. 2008) (If “an arbitration award
rationally can be derived from either the agreement of the parties or the parties' submission
to the arbitrator, it will be enforced.”). I note that the procedural posture of the motion sub
judice is not entirely clear. The motion is styled as a “Motion to Vacate Arbitral Award.”
It does not purport to invoke any of this Court’s rules of procedure as the means by which
USV seeks this case dispositive relief. Cf. Beebe Med. Ctr., Inc. v. InSight Health Servs.
Corp., 751 A.2d 426, 431 (Del. Ch. 1999) (observing that the filing of cross motions for
summary judgment is the “common [method] for this court to determine whether to vacate
or confirm an arbitration award.”). As noted, the parties have submitted extensive record
evidence. If I had determined that material factual disputes were revealed in that record,
the murky procedural context might confound the analysis here. Since I have found that
no such material disputes of fact exist, I am satisfied that I may finally adjudicate this
motion as styled rather than kick the can down the road in search of more procedural clarity.

                                              2
   A. The Parties

      Zeiss manufacturers ophthalmic lenses used in eyeglasses. USV operates as

a retailer of ophthalmic products in the United States. Zeiss has supplied ophthalmic

lenses to USV for the past 16 years.

   B. The 2011 Supply Agreement

      The contract at the heart of the parties’ dispute is the Amended and Restated

Supply Agreement dated December 28, 2011 (the “Agreement”). Pursuant to the

Agreement, USV committed to purchase 95% of its lenses from Zeiss, subject to

certain identified conditions. In exchange, Zeiss committed to supply the lenses

ordered by USV and to extend $20 million of unsecured financing to USV at below-

market interest. The term of the Agreement is ten years. It is governed by Delaware

law and requires the parties to submit disputes relating to the Agreement to binding

arbitration.

      The conditions to USV’s purchase obligation are set forth in Paragraph 3.2(a)

of the Agreement. Specifically, USV need only purchase 95% of its lenses from

Zeiss if: (1) Zeiss makes the products required by USV in the quantities USV

requires; (2) Zeiss’s products comply with industry quality standards; and (3) “CZV

                                         3
[Zeiss] offers USV competitive pricing with respect to the CZV Lenses.”5

Paragraph 3.5 confirms that the purchase prices of Zeiss lenses are set forth on an

exhibit attached to the Agreement and that “the purchase price to be charged USV-

Refac for the various CZV Lenses. . . shall be no higher than the prices charged by

CZV to any other customer making an equivalent volume of purchases of CZV

Lenses.”6 The parties have referred to this as a “most favored nation” or “MFN”

provision.

         The present dispute arises under the “competitive pricing” provision in

Section 3.2(a)(ii). USV maintains that it may avoid the 95% purchase requirement

in the Agreement if it is able to obtain more competitive (i.e., better) pricing from

another lens supplier. Zeiss interprets the competitive pricing provision as allowing

USV to purchase its lenses elsewhere only if Zeiss does not provide pricing to USV

that is competitive with what it offers other similarly situated customers, as further

addressed in the Agreement’s MFN provision.

5
  Transmittal Aff. of Gregory E. Stuhlman in Supp. of Pl. and Countercl. Def. Carl Zeiss
Vision, Inc.’s Opp’n to Defs. and Countercl. Pls.’ Mot. to Vacate Arbitral Award Ex. 55
(“Agreement”) ¶ 3.2(a). Zeiss is referred to in the Agreement as CZV.
6
    Agreement ¶ 3.5.

                                           4
    C. The Arbitration

       USV filed a Demand for Arbitration with the American Arbitration

Association on August 28, 2015 (the “Demand”).7 The Demand sought a declaration

that the Agreement (specifically Paragraph 3.2(a)(ii)) authorized USV to engage in

price checks of the market to determine if Zeiss was offering competitive prices and,

if not, to purchase some or all of its lenses from the suppliers offering the best price.

USV identified in its Demand that one of Zeiss’s biggest competitors, Essilor

Laboratories of America (“Essilor”), was, in fact, able to offer more competitive

pricing than Zeiss and it alleged that it was therefore entitled to purchase lenses from

Essilor under the Agreement.8

       A panel of three arbitrators (the “Panel”) was selected as called for in the

Agreement. As the parties moved closer to the arbitration hearing, the Panel asked

USV to state definitively the relief it would be seeking at the hearing. USV

responded by expanding, or refining, the relief it was seeking to include declarations

that: (1) when it compared Zeiss’s pricing with that of other manufacturers it could

do so on a “portfolio” or “product line” basis; (2) if USV buys lenses from another

7
 Transmittal Aff. of Andrew H. Sauder in Supp. of Opening Br. in Supp. of Defs. and
Countercl. Pls.’ Mot. to Vacate Arbitral Award (“Sauder Transmittal Aff.”) Ex. F.
8
 After filing its Demand, USV began to purchase lenses from Essilor. This prompted Zeiss
to initiate an action in this Court for, inter alia, injunctive relief. The parties ultimately
agreed to stay the litigation in this Court in favor of arbitration.

                                              5
supplier offering lower prices, USV would have ten days to notify Zeiss when that

supplier’s prices increase; (3) if Zeiss offers to lower its pricing after USV moves to

another supplier in order to return to “competitive pricing,” then USV will have three

months to transition its purchasing back to Zeiss; (4) the pricing for Essilor’s product

portfolio is more competitive than the pricing for Zeiss’s product portfolio; (5) the

pricing of certain Essilor products is more competitive than the pricing of certain

Zeiss products; and (6) USV could purchase any amount of lenses from Essilor until

Zeiss matches Essilor’s pricing. Importantly, USV did not seek rescission of the

Agreement or damages for breach of contract.

      The hearing lasted seven days. As one would expect after a seven-day

hearing, the evidentiary record was extensive. The parties offered closing arguments

at the conclusion of the hearing and, in doing so, addressed the specific questions

posed to them by the Panel. By agreement, the parties then submitted post-hearing

briefs. It was in this submission that USV argued for the first time that the

Agreement should be rescinded if the Panel concluded that the competitive pricing

provision was ambiguous.9 Zeiss objected. Among other grounds, it stressed that

the Agreement could not be rescinded because USV had already taken and spent

9
 USV’s request for rescission at the close of the arbitration hearing is curious given the
extensive extrinsic evidence that both parties developed and then presented to the panel
during the hearing to assist in the construction of the Agreement should the panel find the
Agreement was ambiguous.

                                            6
most the $20 million that it had loaned to USV as consideration for the Agreement.

USV responded to Zeiss’s objection and the issue was joined for decision by the

Panel along with USV’s other claims for relief.

           The Panel issued its unanimous decision denying all of USV’s requested relief

on July 14, 2016. With respect to USV’s request for a declaration relating to its

interpretation of the competitive pricing provision, the Panel found that while “USV

intended that the provisions set forth market check language,” “the evidence is

undisputed that Labeeuw [a USV negotiator of the Agreement] never intended, or

understood, that the new language was market check language, and there is no

evidence (other than by implication from the execution of the [Agreement] by Zeiss)

that anyone employed by Zeiss, or representing Zeiss, intended or understood before

the [Agreement] was executed that the [competitive pricing] provisions set forth

market check language.”10 The Panel also determined that “even if one were to

conclude Zeiss accepted USV’s proposed language, that does not indicate any

agreement by Zeiss or, for that matter, USV, to any mechanism for implementation

of any market check right. This is only illustrative of the absence of terms supporting

the forms of relief requested by USV.”11

10
     Sauder Transmittal Aff. Ex. M (“Award”) 6.
11
     Id.

                                             7
          After completing its construction of the relevant language in the Agreement,

the Panel concluded that USV was not authorized by the Agreement to engage in a

market check to determine if Zeiss was offering competitive pricing. It further

concluded, under the Uniform Commercial Code (“UCC”) and Delaware case law,

that it had no reasonably certain basis to fashion an appropriate remedy if it were to

agree that USV’s construction was reasonable since the Agreement was silent as to

how a market check would work under the MFN clause.12 It expressly declined to

“rewrite” the parties’ Agreement.13

          The Panel then addressed USV’s belated request for rescission.          After

acknowledging USV’s argument that it “would not have entered into the

[Agreement] ‘unless it could exclude lenses that were not competitively priced,” the

Panel determined that USV had failed to cite any evidence in support of this

statement and noted that the Panel’s own assessment of the evidence found no

support for this position either.14

      D. Procedural Posture

          This matter first came to the Court on Zeiss’s Verified Complaint for Specific

Performance, filed on September 16, 2015, in which Zeiss sought an order declaring

12
     Id. at 7.
13
     Id. at 6–7.
14
     Id. at 8.

                                             8
that the Agreement precluded USV from purchasing lenses from Zeiss competitors,

including Essilor. Zeiss sought a temporary restraining order to that same effect.

On October 26, 2016, the parties stipulated that this action should be stayed in favor

of arbitration that would address the “merits of their dispute relating to the []

Agreement.”15 The arbitration hearing was held May 18–26, 2016. The Panel issued

its award on July 14, 2016. USV filed its Motion to Vacate Arbitral Award on

October 12, 2016.

           USV argues that the Panel “abdicated its duties and ignored basic tenets of

UCC law by declaring the Competitive Pricing Exceptions [in the Agreement]

unenforceable and then compounded the problems it created by refusing to terminate

the contract as the UCC requires.”16 According to USV, the Panel “refused to

interpret” the Agreement as requested by the parties and, instead, resolved issues

that it raised sua sponte at the conclusion of the arbitration hearing.17 By proceeding

in this manner, the Panel “acted outside the scope of its authority, [] issued an award

that did not resolve the disputes submitted to arbitration, [] manifestly disregarded

governing law, [] gutted USV’s bargained-for contractual protections, and []

15
     Stipulation (DI 36).
16
     Opening Br. 2.
17
     Id.

                                            9
ultimately decided the parties’ disputes based on the Panel members’ own

idiosyncratic views of justice.”18

          Zeiss, of course, emphasizes the extraordinarily narrow standard of review

within which the Court must operate––a standard that USV has not come close to

meeting here. It also challenges USV’s characterization of the Panel’s award.

According to Zeiss, USV asked the Panel to declare that the Agreement allowed

USV to seek out competitively priced lenses in the marketplace and to acquire such

lenses if Zeiss did not match the pricing. The Panel considered USV’s proffered

construction of the Agreement in this regard and rejected it.           Accordingly,

dissatisfied with the Panel’s award, USV cannot now be heard to argue that the Panel

somehow acted outside of the scope of its authority when it decided precisely what

USV asked it to decide.

                                     II. ANALYSIS

          Although the parties have cited to both Delaware and federal authority with

respect to the standard of review, they appear to agree that the Federal Arbitration

Act (“FAA”) applies here.19 This consensus regarding the standard of review is well

placed given that the Agreement does not expressly reference the Delaware Uniform

18
     Id. at 2–3.
19
     9 U.S.C. §§ 1–16.

                                           10
Arbitration Act (“DUAA”) or otherwise reflect the parties’ “desire to have [the

DUAA] apply to their agreement.”20 With regard to the appropriate deference to

which an arbitrator’s award is entitled, however, the decision to apply the FAA over

the DUAA (or vice versa) is of limited moment since precedential decisions applying

both statutes require reviewing courts to give practically the highest degree of

deference, short of “untouchable,”21 recognized in the law to an arbitrator’s award.22

Indeed, to overturn an award, the court must be satisfied that “there [is] absolutely

no support at all in the record justifying the arbitrator’s determinations.”23

20
   10 Del. C. §§ 5702(a)(c) (unless the parties expressly agree that the DUAA shall apply
to their agreement any motions to vacate or enforce an arbitrator’s award shall be decided
“in conformity with the [FAA]”).
21
     As any trial judge will attest, the “untouchable” standard of review does not exist.
22
   Compare SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 750 (Del. 2014) (noting the
DUAA “tracks” the FAA with regard to standard of review and further observing that the
“review of an arbitration award is one of the narrowest standards of judicial review in all
of American jurisprudence”); Brentwood Med. Assocs. v. United Mine Workers of Am.,
396 F.3d 237, 241 (3d Cir. 2005) (“There is a strong preference under the [FAA] in favor
of enforcing arbitration awards.”); Hamilton Park Health Care Ctr. Ltd. v. 1199 SEIU
United Healthcare Workers, 817 F.3d 857, 861 (3d Cir. 2016) (noting that arbitration
awards must be reviewed under an “extremely deferential standard, the application of
which is generally to affirm easily the arbitration award”).
23
  United Transp. Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376, 379 (3d Cir.
1995).

                                               11
       When considering “whether the arbitrator exceeded its authority,” the court

must “resolve all doubts in favor of the arbitrator.”24 “Even if the arbitrator did not

state the grounds for a grant or denial of relief, the grant or denial of relief will be

deemed to be within the scope of the arbitrator’s authority [i]f grounds for the award

can be inferred from the facts of the case.”25 This court will not “pass an independent

judgment on the evidence or applicable law,” and “[i]f any grounds for the award

can be inferred from the facts on the record, the Court must presume that the

arbitrator did not exceed his authority and the award must be upheld.”26

     A. The Award does not Disregard Controlling Law

       USV contends that the Panel disregarded controlling law when it determined

that the Supply Agreement was enforceable even after it struck, or at least refused

to enforce, an essential term of the contract (the competitive pricing provision). To

demonstrate that an arbitral award was rendered in disregard of the law such that the

award should be vacated, the party seeking to vacate the award must demonstrate

24
  TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Sec., Inc., 953 A.2d 726, 732 (Del. Ch.
2008).
25
   World-Win Mktg., Inc. v. Ganley Mgmt. Co., 2009 WL 2534874 (Del. Ch. Aug. 18, 2009)
(internal quotation marks omitted).
26
   TD Ameritrade, 953 A.2d at 733 (citation omitted) (emphasis added). See also
Neuronetics, Inc. v. Fuzzi, 552 F. App’x 134, 135 (3d Cir. 2014) (“We will vacate an award
only under the exceedingly narrow circumstances listed in 9 U.S.C. § 10(a) or to correct a
manifest disregard of the law.”) (citations omitted)

                                           12
that “the arbitrator (1) knew of the relevant legal principle, (2) appreciated that this

principle controlled the outcome of the disputed issue, and (3) nonetheless willfully

flouted the governing law by refusing to apply it.”27           This showing must be

“something beyond and different from a mere error in the law or failure on the part

of the arbitrators to understand or apply the law.”28 USV has not come close to

meeting this burden.

      The Panel concluded that the competitive pricing language in the Agreement

could not reasonably be construed on its face to allow USV to stop buying lenses

from Zeiss if it found better pricing elsewhere.29 In reviewing the plain language of

the Agreement, the Panel reasonably found that the phrase “competitive pricing with

respect to the CZV Lenses” in Paragraph 3.2(a)(ii) could be a reference to the MFN

pricing structure described in Paragraph 3.5 (pricing competitive with Zeiss’s other

customers), as Zeiss argued, or the phrase could mean competitive pricing as

27
  Paul Green Sch. Of Rock Music Franchising, LLC v. Smith, 389 F. App’x 172, 177 (3d
Cir. 2010).
28
   TD Ameritrade, 953 A.2d at 732–33. See also RBC Capital Mkts. Corp. v. Thomas
Weisel P’rs, LLC, 2010 WL 681669, at *8 (Del. Ch. Feb. 25, 2010) (“as long as [an honest]
arbitrator is even arguably construing or applying the contract and acting within the scope
of his authority,’ the fact that ‘a court is convinced he committed serious error does not
suffice to overturn his decision.” (alteration in original)).
29
   Award 5, Ex. A (“taking into consideration the MFN provisions of section 3.5, the Panel
finds the CP provisions ambiguous, and susceptible of different meanings, regarding
whether these provisions set forth market check language.”).

                                            13
compared to other lens manufacturers, as USV argued.30 Because the parties elected

to leave the phrase “competitive pricing” undefined, the Panel did its best to construe

the term first by reference to the language within the four corners of the Agreement,

and then, when that analysis did not yield a clear construction, by reference to

extrinsic evidence.31 This hardly reveals that the Panel “flouted the governing law”;

indeed, the analysis was entirely consistent with settled Delaware law in the area of

30
     Specifically, the Panel determined:
        As previously set forth, the language of the CP [competitive pricing]
        provisions was never negotiated between the parties. Other than its
        appearance in the final draft of the SA [supply agreement], there is no
        evidence the language was addressed between the parties before execution
        of the SA, either in any conversation, or in any writing. The course of dealing
        between the parties after execution of the SA also provides no guidance, as
        the CP provisions were never acted on or invoked until years later when the
        Essilor offer was presented to Zeiss. Other than the language of the CP
        provisions, and that Zeiss rejected the previous language that would permit
        US to continually shop Zeiss prices for any Zeiss lenses, there is no evidence
        that provides guidance as to the meaning, or intent, or operation of the CP
        provisions.
Award, at 6–7.
31
   As the Panel observed, Paragraph 3.2(a)(ii) of the Agreement states “competitive pricing
with respect to the CZV Lenses”; it does not state “competitive pricing with respect to the
lens market” or “competitive pricing with respect to other lens manufacturers,” all
language that actually appeared in prior drafts of the Agreement that Zeiss rejected.
Agreement ¶ 3.2(a)(ii). When the parties referred to competitive pricing elsewhere in the
Agreement, they always took care to identify precisely what prices will be compared. See
id. at ¶ 5.2(a) (. . . to timely accommodate USV’s customer orders at prices competitive
with other available wholesale optical laboratories.”); ¶ 5.2(b) (“. . . to timely accommodate
USV’s customer orders at prices that are relatively competitive with (but not necessarily
the lowest price available) other available wholesale optical laboratories.”). In this regard,
the term “competitive pricing” in Paragraph 3.2(a)(ii) stands alone in its failure to provide
context and for that reason alone, as the Panel determined, the term is ambiguous.

                                              14
contract construction.32 As the party seeking declaratory relief, USV had the burden

to prove that Section 3.2(a)(ii) meant what USV claims it meant.33 USV did not

meet its burden.       Consequently, the Panel did not adopt USV’s proposed

interpretation.

         Having determined that USV’s proffered construction of the Agreement was

not reasonable, the Panel was under no obligation to declare the entire agreement

unenforceable. According to USV, the Panel’s refusal to accept USV’s proffered

construction of the competitive pricing language left the Supply Agreement without

an essential “quantity” term. I note that USV raised this argument to the Panel for

the first time after the hearing had concluded. Notwithstanding that the argument is

of post-hearing vintage, and therefore arguably not properly joined in the arbitration

proceedings, USV’s attempt to assail the Panel’s treatment of this argument fails in

any event because it misconstrues the Panel’s decision and applicable Delaware

law.34

32
   Paul Green Sch. Of Rock Music Franchising, 389 F. App’x at 177. See also GMG
Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 783 (Del. 2012)
(“[W]here reasonable minds could differ as to the contract’s meaning, a factual dispute
results and the fact-finder must consider admissible extrinsic evidence.”)
33
 Zimmerman v. Crothall, 62 A.3d 676, 691 (Del. Ch. 2013); Lillis v. AT&T Corp., 2008
WL 2811153, at *4 (Del. Ch. July 21, 2008).
34
  USV’s demand for rescission was likely received with some surprise given that USV had
already received and likely spent the $20 million loan that Zeiss had extended to it (on
highly favorable terms) in connection with, and as partial consideration for, the Agreement.
See Stenta v. Gen. Motors Corp., 2009 WL 1509299, at *10 (Del. Super. May 29, 2009),
                                            15
       In essence, what USV asked the Panel to do after the hearing was to rescind

the Agreement.35 Yet it can hardly be said that the Panel “flouted the applicable

law” when it concluded that USV did not meet its burden of demonstrating that the

“extreme remedy” of rescission was appropriate here.36 Specifically, as the Panel

observed, USV “cite[d] no evidence” to support its claim that the competitive pricing

term was material to its decision to enter into the Agreement and “the Panel finds

the evidence does not so prove.”37 Indeed, looking beyond the competitive pricing

language, the Panel was reasonable in its perception that Paragraph 3.2(a) still

aff’d, 7 A.3d 485 (Del. 2010) (rejecting rescission claim where the circumstances present
at the time the claim was adjudicated made it “impossible for the Court to ‘unscramble the
eggs’”).
35
   Opening Br. 14 (“The Panel was clearly aware of the relevant principals at issue under
the UCC, but improperly refused to apply them to invalidate the whole agreement when it
invalidated an essential element of the quantity term, the Competitive Pricing
Exceptions.”).
36
  Liberto v. Bensinger, 1999 WL 1313662, at *5 (Del. Ch. Dec. 28, 1999) (noting that the
court must have a “high degree of confidence” in the propriety of imposing the “extreme
remedy” of rescission). See also Neuronetics, Inc., 552 F. App’x at 135 (“We will vacate
an award only under the exceedingly narrow circumstances listed in 9 U.S.C. § 10(a) or to
correct a manifest disregard of the law.”).
37
   Award, at 8 (emphasis added). See Home Ins. Co. v. Honaker, 1983 WL 102619, at *1
(Del. Ch. Nov. 2, 1983) (holding that a party’s unilateral mistake as to the meaning of a
term of the contract will justify rescission only when the term is material); Asten, Inc. v.
Wangner Sys. Corp., 1999 WL 803965, at *4 (Del. Ch. Sept. 23, 1999) (same). See also
Hildreth v. Castle Dental Ctrs., Inc., 939 A.2d 1281, 1283–84 (Del. 2007) (stating that
under Delaware law, “[a]n invalid term of an otherwise valid contract, if severable, will
not defeat the contract”); Tracey v. Franklin, 67 A.2d 56, 61 (Del. 1949) (stating that under
Delaware law, “[w]hether or not the terms of a contract are severable is purely a question
of the intent of the parties”).

                                             16
adequately addresses pricing in that it contains a definite quantity term that provides

a formula for determining USV’s purchase obligations: Paragraph 3.2(a) provides

that Zeiss “shall be the preferred supplier of ophthalmic lenses”; “USV-Refac shall

order from [Zeiss] substantially all of the ophthalmic lenses required by USV” to the

extent that Zeiss makes the lenses and they comply with industry quality standards;

and “substantially all of the ophthalmic lenses required by USC-Refac shall mean at

least 95% of the aggregate number of all ophthalmic lenses sold by USV-Refac in

connection with its sale of ophthalmic eyeglasses through the USV Stores during

any consecutive 3-month period of the Term.”38 Under these circumstances, there

is no basis to conclude that the Panel manifestly disregarded the applicable law when

it declined USV’s eleventh-hour invitation to rescind the Agreement.39

38
     Agreement, at ¶ 3.2(a); Award at 8.
39
  Contrary to USV’s position here, the UCC does not dictate a different result. As USV
points out, “UCC Section 2-204 ‘reflects the common law principle that a meeting of the
minds on all essential contract terms is critical for contractual formation.’” Opening Br.
14 (citing Hardwire, LLC v. Zero Int’l, Inc., 2014 WL 5144610, at *9 (D. Del. Oct. 14,
2014)). And, to be sure, “quantity” is an essential term. See 2 E. Farnsworth, Farnsworth
on Contracts § 6.7, at 141 (2d ed. 1990) (noting that the UCC “significantly relaxes the
requirement that the memorandum state all the essential terms by insisting only that it state
the quantity of goods”). But, as noted, the Panel did not commit manifest error in
determining that, even without the competitive pricing provision, the Agreement still more
than adequately addressed the quantity of lenses USV was to purchase. There was no
essential term missing here even after the Panel declined to construe the competitive
pricing provision according to USV’s construction of that term.
                                             17
     B. The Award was not Irrational

       An arbitrator “subjects his award to judicial vacatur under [FAA] § 10(a)(4)

when he decides an issue not submitted to him, grants relief in a form that cannot be

rationally derived from the parties’ agreements and submissions, or issues an award

that is so completely irrational that it lacks support altogether. . . . [W]hen the

arbitrator ‘strays from interpretation and application of the agreement’ and

effectively ‘dispenses his own brand of industrial justice’ he exceeds his powers and

his award will be unenforceable.’”40 USV argues that the Panel abdicated its

responsibility to interpret the Agreement and instead “dispensed [its] own brand of

industrial justice” by finding that the competitive pricing provision was

unenforceable and, more importantly, by improperly refusing to find that the entire

Agreement was unenforceable based on the failure of the competitive pricing

provision. This argument is simply a recycling of the argument that the Panel

ignored controlling law. As before, I reject it as an unfounded characterization of

the Panel’s decision and an unsupported interpretation of Delaware law.

     C. The Panel Addressed All Issues it was Asked to Decide

       USV maintains that “[t]he Panel’s decision that ‘the [competitive pricing]

provisions lack[ed] sufficient definiteness, specificity, and mechanisms to be

40
  Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 219–20 (3d Cir. 2012), as amended
(Apr. 4, 2012), aff’d, 133 S. Ct. 2064 (2013).

                                         18
enforceable by declaratory relief’ (Award, p. 7) resulted in an imperfect execution

of the Panel’s powers such that ‘a mutual, final, and definite award upon the subject

was not made.’”41 According to USV, the Panel neglected to determine whether the

competitive pricing provision could be enforceable by an action for damages (as

opposed to the claim for declaratory relief that USV actually brought) and “whether

the Competitive Pricing Exceptions related to the prices of comparable ophthalmic

lenses offered by other lens suppliers (as USV argued), or whether they were simply

a re-iteration of the MFN clause of Section 3.5 (as [Zeiss] argued).”42 A review of

the Award reveals that the Panel decided every issue that was submitted by USV and

denied USV’s requests for declaratory relief.

         As an initial matter, it cannot be ignored that neither party submitted a breach

of contract claim to the Panel. The claims were plainly limited to prayers for

declaratory relief. Moreover, the fact that a breach of contract claim will not lie with

USV’s proffered construction of the Agreement is implicit in the Panel’s Award.

The Panel determined that the competitive pricing provision was not enforceable as

41
   Opening Br. 25 (citing 9 U.S.C. § 10(a)(1)(4), Certain Underwriters at Lloyd’s London
et al. v. BCS Ins. Co., 239 F. Supp. 2d 812, 816 (N.D. Ill. 2003)). Title 9 of the U.S. Code,
Section 10(a)(1)(4) provides that 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.”
42
     Opening Br. 26.

                                            19
drafted. Any breach of contract claim that USV might pursue based on an alleged

breach of the competitive pricing provision, therefore, would not be viable.

      The same analysis applies to USV’s argument that the Panel did not decide

whether the competitive pricing provision referred to the MFN pricing provision in

Section 3.5 of the Agreement. USV did not seek a decision from the Panel on that

issue. Its argument that the Panel should now be faulted for not deciding the issue,

therefore, is, at best, impertinent.

      The Panel’s Award was “mutual” and “final” in that it “resolved the entire dispute

(to the extent arbitrable) that had been submitted to them.”43 USV’s argument to the

contrary is unfounded.

                                    III. CONCLUSION

         USV has failed to state any grounds that justify the extraordinary relief of

vacating an arbitration award. Its Motion to Vacate Arbitral Award, therefore, must

be DENIED. The parties shall confer and submit a proposed final order addressing

the Motion to Vacate and the final disposition of this case within ten (10) days.

43
     IDS Life Ins. Co. v. Royal Alliance Assoc., Inc., 266 F.3d 645, 650 (7th Cir. 2001).

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