Molecular Dynamics, Ltd. v. Spectrum Dynamics Med. Ltd.

At a glance

Parties

Molecular Dynamics, Ltd., SDBM Limited and Chauncey Capital Corp. (Petitioners-Appellants) v. Spectrum Dynamics Medical Limited and Biosensors International Group Ltd. (Respondents-Appellees)

Case no.

Second Circuit Docket No. 24-2209-cv (appeal from S.D.N.Y. No. 22 Civ. 5167)

Court

United States Court of Appeals for the Second Circuit; Circuit Judges Sack (author of the opinion), Wesley and Robinson

Forum and rules

Petition to vacate under 9 U.S.C. § 10 and the New York Convention. Underlying arbitration under the Swiss Rules of International Arbitration, seated in Geneva.

Treaty

Contract (License Agreement) arbitration clause; New York Convention as implemented by Chapter 2 of the Federal Arbitration Act

Underlying award(s)

Partial Award of 18 May 2022 and Final Award of 8 July 2022 (tribunal: Jennifer Kirby, presiding, Philip Allen Lacovara, Joel Adler)

Sector

Medical-imaging technology; joint venture

Outcome

The court affirmed the district court's dismissal for lack of subject-matter jurisdiction: a petition in a U.S. court to vacate a Swiss-made award does not fall under the New York Convention, so 9 U.S.C. § 203 gives no jurisdiction.

Amount

The awards granted Spectrum repayment of a USD 7.5 million loan with interest and about USD 6.9 million in costs and attorneys' fees, plus further costs and fees in the Final Award. The counterclaims for USD 173.8 million were rejected.

The dispute

Biosensors, SDBM and Chauncey formed the medical-imaging joint venture Molecular Dynamics in October 2013 under a Joint Venture and Investor Agreement, a License Agreement and other contracts. Spectrum later acquired Biosensors' rights and liabilities under these contracts. Spectrum terminated the License Agreement, alleging that Molecular Dynamics had developed a cardiology camera outside its field of use, and claimed repayment of a USD 7.5 million loan. In a Geneva-seated arbitration, Spectrum won and the joint-venture parties' counterclaims failed. The losing parties then petitioned the Southern District of New York to vacate the awards. They relied on a License Agreement clause giving New York courts exclusive jurisdiction over "matters [] concerning the Chosen Arbitration", and alleged fraud, a tainted tribunal, refusal to reopen the proceedings, and manifest disregard of New York law.

Key holdings

1. The district court lacked subject-matter jurisdiction. The court affirmed on a different ground from the district court: the question is the court's power to hear the case, not whether the Convention allows vacatur as relief. pp. 2–4, 15–16
2. Under 9 U.S.C. § 203, a district court has jurisdiction only over an action "falling under" the New York Convention. The Convention covers the recognition and enforcement of foreign and nondomestic awards, related ancillary proceedings, and vacatur by the competent authority of the country in which, or under the law of which, the award was made (Articles V(1)(e) and VI). pp. 30–32
3. The Convention's silence on vacatur is not a gap that domestic law or private contract can fill. A petition in a U.S. court, as a secondary jurisdiction, to vacate awards made in and under the arbitral law of Switzerland is not a proceeding the Convention addresses. pp. 32–34
4. 9 U.S.C. § 202 does not add classes of cases. It codifies the United States' commercial-relationship reservation under Article I(3) of the Convention and cannot enlarge the treaty's reach. pp. 34–37
5. Parties cannot confer subject-matter jurisdiction by consent. The court left open whether parties may, consistent with the Convention, designate one country as the seat and another as the venue for vacatur proceedings. pp. 29, 37–38

Procedural history

1. April 2018Spectrum initiates arbitration before the Swiss Arbitration Centre in Geneva; Biosensors is later joined as respondent to the counterclaims.
2. September–October 2020Seven-day hearing before Albert Jan van den Berg (presiding), Philip Allen Lacovara and Joel Adler.
3. 17 March 2021The tribunal declares the proceedings closed.
4. September–December 2021The petitioners accuse van den Berg of bias and he withdraws. In December 2021 the tribunal appoints Jennifer Kirby as presiding arbitrator.
5. 18 May 2022Partial Award: Spectrum's claims are upheld, the counterclaims are rejected, and costs and fees are awarded.
6. June 2022Petition to vacate the Partial Award is filed in the S.D.N.Y.; it is later amended to cover the Final Award as well.
7. 8 July 2022Final Award grants additional costs and attorneys' fees.
8. 23 July 2024District Judge Katherine P. Failla dismisses for lack of subject-matter jurisdiction.
9. 14 May 2025Appeal argued before the Second Circuit.
10. 2 July 2025The Second Circuit affirms.

Tribunal, counsel and experts

For the claimant

Pashman Stein Walder Hayden P.C. · Kilpatrick Townsend & Stockton LLP

For the respondent

Holwell Shuster & Goldberg LLP

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Keywords

• New York Convention
• vacatur
• set-aside
• subject-matter jurisdiction
• 9 U.S.C. § 203
• 9 U.S.C. § 202
• Federal Arbitration Act Chapter 2
• primary jurisdiction
• secondary jurisdiction
• forum selection clause
• Swiss Rules
• Geneva seat
• foreign arbitral award
• arbitrator challenge
• medical imaging
• Veriton
• joint venture
• Article V(1)(e)

Summary generated with AI from the published documents — refer to the award for the authoritative text.