Access Bio, Inc. v. Division 5 Labs, Inc.

Background

Access Bio, Inc. asked the court to confirm an arbitration award against Division 5 Labs, Inc. The parties’ October 19, 2021, contract required Division 5 Labs to package ten million COVID test kits around the end of the fourth quarter of 2021. The contract required disputes to be resolved through arbitration in New York under the American Arbitration Association’s rules.

The contract addressed Access Bio’s $1 million deposit, including provisions stating that the deposit would be applied to packaging costs and that $500,000 would be nonrefundable if the contract ended early. Division 5 Labs did not provide ten million kits by the end of the fourth quarter. After Access Bio terminated the contract in March 2022, Division 5 Labs sought to keep $500,000 of the deposit and raised production prices. Access Bio then began arbitration.

Division 5 Labs participated in the arbitration but was unresponsive to document requests and missed deadlines. On May 23, 2023, the arbitrator found that Division 5 Labs breached the contract and awarded Access Bio $347,937.36, $11,877.51 in pre-award interest, and $31,876.25 in arbitration fees, for a total of $391,691.12. The arbitrator also ordered Division 5 Labs to transfer withheld regulatory documents and materials related to finished products packaged under the contract.

Court’s analysis

Under the Federal Arbitration Act, a court generally must confirm an arbitration award unless it is vacated, modified, or corrected. The court treated Division 5 Labs’ failure to answer the petition as an unopposed motion for summary judgment, meaning a request for judgment when no genuine dispute of material fact exists and the moving party is entitled to judgment under the law.

The court found no genuine issue of material fact. Both parties had entered the contract and participated in arbitration, and Division 5 Labs had not moved to vacate, modify, or correct the award. The court concluded that the arbitrator’s finding that Division 5 Labs breached the contract had more than the minimal justification required for confirmation.

Attorney’s fees and costs

The court held that Access Bio was entitled to reasonable attorney’s fees and costs incurred while trying to collect from Division 5 Labs because Division 5 Labs had failed to comply with the award without justification. However, Access Bio had not submitted documents sufficient to determine whether the requested amounts were reasonable. The court directed Access Bio to submit a fee application by November 17, 2023, with time records, tasks performed, billing rates, and information about the attorneys involved.

Interest and disposition

The court granted Access Bio’s request for 9% annual prejudgment interest on the award from May 23, 2023, through entry of judgment. It also awarded post-judgment interest at the federal statutory rate under 28 U.S.C. § 1961, beginning on the date judgment was entered and continuing until payment.

The Petition to Confirm Arbitration was GRANTED. The order required the respondent to pay $391,691.12 as provided in the award, plus the specified prejudgment and post-judgment interest. It also required the respondent, by November 28, 2023, to transfer withheld compliance documents, materials, regulatory documentation, and retained regulatory samples related to finished products packaged under the contract.