On May 23, 2016, the Fifth Circuit upheld an arbitrator’s approximate $1.45 million award in favor of McKool Smith P.C., a law firm who represented Curtis International Ltd., a Canadian electronics wholesaler, in patent infringement cases.
The background of the case is as follows. McKool Smith represented Curtis in two patent litigations which were filed in 2013, and settled in January 2014. Curtis and McKool Smith then had disputes over unpaid invoices. McKool Smith commenced arbitration, seeking approximately $1.3 million in unpaid legal invoices, plus expert witness fees, along with pre and post-award interest. The arbitrator awarded the firm the full $1.45 million requested. McKool Smith then moved in Texas federal court to confirm the award, but Curtis filed a cross-motion to vacate it, arguing that the award was contrary to public policy, that the arbitrator had exceeded his powers and that the arbitrator had manifestly disregarded Texas state law by allowing the firm to collect fees that involved the use of unauthorized experts and that had been block-billed. The Texas federal court confirmed the award. In particular, the district court found that Curtis’ arguments that the award violated public policy and was in manifest disregard of the law rested on non-statutory grounds for vacatur that the Fifth Circuit had previously foreclosed. Curtis appealed to the Fifth Circuit, asserting that the arbitrator exceeded his powers within the meaning of the Federal Arbitration Act (the “FAA”) because the arbitration agreement between the parties incorporated Texas law, and the arbitrator manifestly disregarded that law in issuing the award and that the award violated public policy.
In an unpublished decision, the Fifth Circuit noted that it had previously held that the statutory grounds set forth in the Federal Arbitration Act (the “FAA”) are the exclusive means for vacatur under the FAA. However, the Court declined to decide whether manifest disregard of law and public policy fall within those FAA’s statutory grounds, saying it “need not decide this issue today.” The Court noted that Curtis had not shown any ground to vacate the award, holding that “Curtis fails to overcome our deferential standard of review and to demonstrate that the arbitrator manifestly disregarded the law or issued the arbitration award in violation of public policy.” Thus, the Fifth Circuit upheld the award. On June 6, 2016, Curtis filed a petition for rehearing, which was denied by the Fifth Circuit on June 21, 2016.
McKool Smith, P.C. v. Curtis International Ltd., No. 15-11140 (5th Cir. May 23, 2016).
