Shanghai Fosun Pharmaceutical Co., Ltd. v. Hajjar

Background

Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“Fosun”) sought confirmation of an arbitration award against Sovereign Medical Services, Inc. (“SMS”) and Sovereign Capital Holdings, LLC (“SCH”). The action also named Dr. John Hajjar, but the case was automatically stayed as to him after he filed for Chapter 11 bankruptcy. This order therefore applied only to SMS and SCH.

In 2015, Fosun and SMS entered into a Stock Purchase Agreement and an Investor Rights Agreement. Fosun purchased SMS shares and received a put option—a right to require SMS, SCH, or Dr. Hajjar to purchase some or all of those shares—if SMS failed to meet specified financial targets. The agreements provided that the purchase price would include Fosun’s original investment plus 5% annual compounded interest. Fosun alleged that SMS missed the required targets in 2016 and 2017, sent a notice exercising the option on January 15, 2019, and was not paid within 30 days.

The agreements required binding arbitration. After a hearing, the arbitrator issued an interim award, a second interim award, and a final award. The final award required payment of $40 million plus interest at 5% per year calculated daily from January 1, 2017. It also awarded Fosun $1,437,051.67 in attorney’s fees, $419,821.46 in costs and disbursements, and $190,637.50 for American Arbitration Association administrative fees and arbitrator compensation. The three respondents were jointly and severally liable for the fees and costs awarded.

Proceedings in Court

Fosun filed an amended petition under section 9 of the Federal Arbitration Act and moved to confirm the award. SMS and SCH moved to vacate the award and dismiss the petition. Their counsel later withdrew. The court repeatedly directed SMS and SCH, as corporate entities, to obtain new counsel because corporations cannot appear in federal court without lawyers. Neither company obtained counsel or contacted the court.

The court ordered SMS and SCH to explain why their motion should not be dismissed for failure to prosecute and why Fosun’s petition should not be treated as unopposed. No response was submitted. The court therefore treated Fosun’s amended petition and motion to confirm as unopposed against SMS and SCH and denied SMS and SCH’s motion to vacate the award and dismiss the amended petition because they failed to prosecute it.

Court’s Analysis

The Federal Arbitration Act generally requires a court to confirm an arbitration award unless the award is vacated, modified, or corrected. The court explained that confirmation is ordinarily a streamlined proceeding and that an award should be confirmed when there is at least a barely colorable justification for the arbitrator’s result. Even though Fosun’s petition was deemed unopposed, the court independently reviewed the record under the summary-judgment standard, which asks whether any genuine dispute over a material fact requires a trial.

The court found no material factual dispute. It concluded that the agreements required arbitration, that the arbitrator issued the final award after a lengthy arbitration process, that the award had more than a barely colorable justification, and that there was no basis to infer that the arbitrator exceeded its authority. The court therefore confirmed the final award against SMS and SCH.

Interest and Disposition

The court granted Fosun post-award, pre-judgment interest at 5% annually compounded on the amount of the final award from August 4, 2022, until the date of judgment. After judgment, interest would accrue at the federal post-judgment rate under 28 U.S.C. § 1961(a), rather than the contractual or arbitral rate.

Judge Rochon granted Fosun’s amended petition and motion to confirm the arbitration award as against SMS and SCH. The court denied SMS and SCH’s motion to vacate the arbitration award and dismiss the amended petition. Judgment was entered in favor of Fosun and against SMS and SCH only. The case remained stayed as to Dr. Hajjar, and Fosun was directed to serve the opinion and order on the respondents and file proof of service.