BOARD OF TRUSTEES v. ORGANON TEKNIKA CORP. (July 27, 2010)
The University of Illinois licenses certain intellectual property rights to Organon Teknika for the manufacture of a cancer drug. In return, the University collects a royalty. Because the royalty depends on Organon's revenue and because Organon is allowed to sell to its affiliated companies, the license allows the University to challenge the royalty rate. In the case of a challenge, an arbitrator is asked to determine whether Organon is receiving the equivalent of an arms-length negotiated rate. The University did challenge the rate in 2006. After receiving evidence, the arbitrator concluded that the rate was appropriate and issued a final award closing the proceedings without modifying the rate. He also sent the parties his final bill. In the final two sentences of his award, he explicitly "reserve[d] the right" to amend his findings if new evidence became available. The University neither sought judicial review nor reconsideration under the Federal Arbitration Act. Instead, after six months, it asked the arbitrator to reconsider. When Organon refused to consent to any further proceedings, the University filed suit to compel the resumption of arbitration. Judge Guzmán (N.D. Ill.) dismissed the suit, though on a ground neither party had requested -- that the arbitrator had never issued a final award. Organon appeals.
In their opinion, Chief Judge Easterbrook and Judges Bauer and Hamilton vacated and remanded. At first blush, the Court questioned its appellate jurisdiction. In the court below, the University had requested an order compelling Organon to arbitrate and Organon had objected to such an order. The court dismissed the suit without granting the University its requested relief. Nevertheless, the University did not appeal -- but Organon did. On the face of it, it appears that Organon prevailed. A prevailing party cannot appeal the judgment even if it disagrees with the content or rationale of the opinion. Upon deeper analysis, however, the Court appreciated that Organon was in fact attacking the judgment. What it wanted was finality -- a dismissal with prejudice -- rather than the dismissal without prejudice entered by the court. Satisfied with its jurisdiction, the Court addressed the merits. It had little difficulty in concluding that the district court erred in concluding that the arbitration was still pending. The arbitrator resolved the dispute, referred to the award as his final decision, and sent his final bill. The reservation in the final two sentences, in the Court's opinion, was nothing more than the arbitration equivalent of Rule 60(b)(2). Just as Rule 60(b)(2) does not stand in the way of the finality of a judgment, neither does the arbitrator's reservation. Under the Federal Arbitration Act, the University had 90 days within which to present new evidence. It did not do so. The arbitration is over.