A federal court in Delaware denied a motion to vacate an arbitration award, rejecting an argument that the arbitrator "failed to make findings of fact and provide reasons for his decision on liability" in accordance with the parties' agreement, with respect to the arbitrator's "tentative ruling" on liability.

In Remote Solution Co., Ltd. v. FGH Liquidating Corp, Civ. No. 06-004-SLR, 2008 WL 2944659 (D. Del. Jul. 31, 2008), FGH Liquidating Corp. (Contec), a seller of universal remote control units that operated by storing codes from remotes to other appliances, purchased code entry methods from suppliers.

Contec and RSC's predecessor entered into a manufacturing purchase agreement (MPA), whereby RSC would design universal remote control units upon receipt of specifications, including the code entry methods, from Contec. The agreement included clauses for patent protection, indemnification and dispute resolution.

Subsequently, Contec was sued for patent infringement involving use of the code entry methods and sought indemnification from RSC, which it did not receive. In a second matter, Contec was sued for patent infringement and RSC was joined in the action. Contec settled, but the suit proceeded against RSC. RSC filed a cross-claim, seeking indemnification from Contec. Contec then refused to pay for a shipment received from RSC, claiming the funds had been applied to offset indemnification of the first matter.

Contec filed for arbitration against RSC. After protracted procedural issues, arbitration ensued. The arbitrator issued a letter stating his "tentative ruling" and asking the parties if it was necessary to issue a formal award on the basis of the findings in the letter. Five months later, the arbitrator issued a damages opinion which constituted a formal award, stating that the basis for damages were as stated in the previous letter.

RSC moved to vacate the award, claiming that the arbitrator failed to make findings of fact and conclusions of law as required by the MPA.

This Court rejected this argument. The major facts in the case were undisputed diverging at the determination of who was to blame for the patent infringement. Further, in regards to "conclusions of law," the MPA required only that the arbitrator state his reasons for issuing the award.

The arbitrator's reasoning, as provided in his tentative ruling, was ascertainable and sufficiently stated the reasons he was willing to issue an award. According to the arbitrator, the parties' MPA clearly overrode the applicable UCC provision and RSC's asserted defenses did not "avail it" of indemnification as provided for under the MPA.

Neither party asked for a more definite statement of reasons in the MPA or after the tentative ruling was issued; thus, the Court declined to do so here.

Accordingly, RSC's motion to vacate the arbitral award was denied.