Board of Trustees of the Univ v. Organon Teknika Corporation, L ( 2010 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-3375
B OARD OF T RUSTEES OF THE U NIVERSITY OF ILLINOIS,
Plaintiff-Appellee,
v.
O RGANON T EKNIKA C ORPORATION LLC,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 C 4251—Ronald A. Guzmán, Judge.
A RGUED A PRIL 1, 2010—D ECIDED JULY 27, 2010
Before EASTERBROOK, Chief Judge, and BAUER and
HAMILTON, Circuit Judges.
E ASTERBROOK, Chief Judge. Organon Teknika, a subsid-
iary of the pharmaceutical manufacturer Merck & Co.,
licenses from the University of Illinois some intellectual-
property rights needed to make Tice ® BCG, a drug for
cancer. The royalty that the University receives depends
on what Organon Teknika collects from its customers.
2 No. 09-3375
Because the license allows Organon Teknika to sell to
affiliated firms, the University was concerned that the
transfer prices would be too low and depress its royalty
revenue. The license permits the University to reopen the
royalty rate if it believes that Organon Teknika’s intra-
corporate-family prices are lower than the price it charges
(or would charge) after arms’-length negotiations with
unrelated buyers. The contract provides that an arbitrator
will look at comparable pharmaceutical transactions to
determine whether Organon Teknika is charging arms’-
length prices.
In 2006 the University exercised its option to arbitrate
the pricing question. The parties selected as their
arbitrator William Albrecht, III, a consultant with C ONSOR
Intellectual Asset Management. Albrecht received evidence
about 39 supposedly comparable selling arrangements.
The University denied that any of the 39 was the sort of
comparable arms’-length deal that the license contem-
plated. Albrecht eventually concluded that four particular
transactions serve as benchmarks, that they had been
negotiated at arms’ length, and that they establish that
the University is continuing to receive the return for
which it negotiated. Albrecht entered an award that
closed the proceeding without changing the royalty rate.
The report was accompanied by a cover letter that de-
scribed the award as “final”; C ONSOR sent a “final” bill for
its services. (The award itself was withheld until the
bill had been paid.)
The University was not satisfied with this defeat, but
it did not seek judicial review of the award or ask Albrecht
No. 09-3375 3
to modify it within the 90 days allowed by 9 U.S.C. §12.
Six months after the bills had been paid and the award
released to the parties, the University asked Albrecht
to reconsider, contending that two of the four transac-
tions he selected as comparable had not actually been
negotiated at arms’ length. It relied on these two sen-
tences from Albrecht’s opinion:
The foregoing opinions and conclusions contained
in this report are based upon the documents,
information, and research undertaken as of the
date of this report. I reserve the right to revisit
my analysis and amend my conclusions, should
additional information become available for re-
view.
C ONSOR asked its lawyers whether it was legally permitted
to reopen the arbitration; counsel said yes, but that it
should not do so unless the parties agreed. C ONSOR re-
layed this conditional willingness (adding, as an addi-
tional condition, the parties’ undertaking to pay for
the extra work). The University promptly consented;
Organon Teknika did not.
Frustrated by this lack of cooperation, the University
filed this suit and asked the district court to compel
Organon Teknika to resume the arbitration. It describes
its claim for relief as a demand that Organon Teknika
honor its commitment to arbitrate any dispute about
reopening the royalty rate. Organon Teknika replied that
it did honor its obligation, that the arbitration was com-
pleted, that the University lost, and that the time for
further review has expired.
4 No. 09-3375
Instead of resolving the parties’ dispute, the district
court held that there was no dispute to resolve. The
district judge wrote a brief order dismissing the suit on
the ground that Albrecht had not made a final award, so
the matter remained before him and there was nothing
for a court to do. Both sides were stunned by this dis-
position, which neither had suggested.
Surprisingly, Organon Teknika has appealed. Its ap-
peal is surprising because it is the apparent victor. The
University commenced this litigation in quest of an order
requiring Organon Teknika to resume the arbitration; it
emerged empty-handed. Organon Teknika asked the
district court to deny the University’s request. The judge
obliged—and though the judge’s reason differs from
Organon Teknika’s, a victory for the “wrong” reason is
still a victory. Yet the University, which lost, did not
appeal; and Organon Teknika, which won, did. What’s
going on?
We asked that question at oral argument. Organon
Teknika’s lawyer says that it appealed because it
disagrees with the district judge’s reason for entering a
judgment in its favor. It believes that the reason may
come back to haunt it if, in the future, the University
files another suit and insists that Organon Teknika is
liable for abandoning the arbitration before its comple-
tion. Yet litigants can’t appeal from district judges’ opin-
ions; only their judgments are subject to appellate review.
California v. Rooney, 483 U.S. 307, 311–14 (1987); In re UAL
Corp., 468 F.3d 444, 449 (7th Cir. 2006); United States v.
Accra Pac, Inc., 173 F.3d 630, 632 (7th Cir. 1999).
No. 09-3375 5
We called for post-argument briefs about appellate
jurisdiction. It is apparent from these briefs, and from
some further thought about the subject, that Organon
Teknika’s root concern deals with the terms of the judg-
ment rather than the language of the opinion. What
Organon Teknika wanted from this litigation (given that
it had to endure suit in the first place) was an order
dismissing the University’s claim with prejudice, so that
the controversy about the royalty rate would be over.
(At least until the University’s next opportunity to
exercise the reopener clause.) It didn’t get that. The
University’s suit has been dismissed without resolution,
and thus without prejudice to renewal whenever the
University deems the time ripe to complain about
Organon Teknika’s continuing refusal to submit evi-
dence and arguments to arbitrator Albrecht. Perhaps the
University thinks that, armed with the district judge’s
decision, it can persuade Albrecht to revise his award
without Organon Teknika’s participation. No matter. It
is enough to say that Organon Teknika is aggrieved by
the terms of the judgment as well as the language of the
opinion and therefore is entitled to appellate review. See,
e.g., Schering-Plough Healthcare Products, Inc. v. Schwarz
Pharma, Inc., 586 F.3d 500, 506 (7th Cir. 2009) (collecting
cases).
The merits of the appeal will not long detain us. The
district court plainly erred in thinking that Albrecht’s
award was not final. It resolves the parties’ dispute; it
was accompanied by a cover letter calling it the final
decision; the parties paid their final bills. Nothing
further happened for six months—and neither side sug-
6 No. 09-3375
gested to the other that something should have been
happening to get the proceeding wrapped up. It had been
wrapped up already. See Olson v. Wexford Clearing
Services Corp., 397 F.3d 488, 491 (7th Cir. 2005); McKinney
Restoration Co. v. Bricklayers Union, 392 F.3d 867, 872
(7th Cir. 2004).
The language to which the district court pointed is
the arbitral equivalent of Fed. R. Civ. P. 60(b)(2), which
allows a judgment to be reopened to consider “newly
discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a
new trial under Rule 59(b)”. No one thinks that the possi-
bility of reopening a district court’s judgment under
Rule 60(b)(2) six months after its entry makes the judg-
ment non-final and hence precludes an appeal. See Fed. R.
Civ. P. 60(c)(2). Likewise no one should think that the
equivalent language in an arbitrator’s opinion makes the
decision non-final. See Glass Molders Union v. Excelsior
Foundry Co., 56 F.3d 844 (7th Cir. 1995). The parties have
regaled us with discussions of the “functus officio doc-
trine” and other technicalities of arbitral law, but none
of them matters. The situation is as simple and straight-
forward as we have described it.
Organon Teknika is entitled to a decision, on the merits,
in its favor. Rule 60(c)(1) gives the parties one year to
present newly discovered evidence in support of a
motion under Rule 60(b)(2). Arbitrator Albrecht did not
tell the parties how long they had to use the opportunity
he contemplated, but the Federal Arbitration Act does:
90 days. 9 U.S.C. §12. The parties did not supersede
No. 09-3375 7
that rule by contract. They bargained for a final and
conclusive decision, not for perpetual arbitration. So
the University’s request came too late. This arbitration
is over.
The judgment is vacated, and the case is remanded
with instructions to enter a judgment dismissing the
suit with prejudice.
7-27-10