Lawyers, other representatives, expert(s), tribunal’s secretary

Order No. 3

Respondents have moved to dismiss the Statement of Claim for failure to state any cognizable claim upon which relief may be granted. For the reasons stated below, these motions are granted in part and denied in part.


In late 2004 Primenergy Process Technologies, Inc. ("Primenergy") and PR.M Energy Systems, Inc. ("PRM") filed arbitration claims and counterclaims against each other arising out of contracts they entered in 1999 (the "1999 Agreements"). Both parties alleged various breaches of contract. On April 22, 2005, the Arbitrator issued a Final Ruling and Award (the "Arbitration Award"), finding:

1. The 1999 Agreements were terminated as a matter of law as of April 22, 2005, except for the Confidentiality Agreement, whose obligations will terminate on April 22, 2008 (or "earlier if it can be shown that the confidential information is generally known and in the public domain through no act or omission of Primenergy").

2. PRM gave confidential information regarding gasifier technology to Primenergy, including eleven categories of information. The Arbitrator ordered Primenergy to return this information to PRM on or before May 22, 2005, and not retain any copies thereof

3. Primenergy, as licensee of technology owned by PRM, made improvements, advances, and refinements to that technology. PRM is entitled to compensation for these improvements.

4. As joint owner of the ‘505 and ‘978 patents, PRM is free to use and to license others to use the invention covered by those patents. Primenergy was ordered to assign an individual one-half interest on those patents to PRM on or before May 22, 2005.

5. On numerous occasions, Primenergy breached its contractual obligation to provide PRM with prompt notice of any improvements to the licensed technology. Nevertheless, PRM did not offer specific evidence of damages caused by these breaches.

6. PRM is entitled to a payment of $449,948.87 from Primenergy for Primenergy’s use of confidential information ("know-how" and "show-how"), consulting fee, and sums which Primenergy acknowledged that it owed. The Arbitrator ordered that this amount be paid on or before May 22, 2005.

7. Both parties committed breaches regarding their respective obligations for the territory of Japan. Although Primenergy failed to provide PRM with copies of proposals it was making to Kobe Steel, as required by contract. PRM admitted in testimony that it was unable to reach an agreement with Kobe because it could not come to terms on a confidentiality agreement— i.e., no causation. Also, "PRM. has not shown any specific dollar damages attributable to Primenergy’s breach of its obligations under the 1999 agreements based on the undisclosed dealings with Kobe Steel."

8. The Arbitrator enjoined Primenergy from any further discussions or business relationships with Kobe Steel until April 22, 2007.

9. The Arbitrator made detailed findings about the extent to which Primenergy could or could not use the licensed technology in the future.

After a complex series of procedural moves, the Arbitration Award found its way to the United States District Court for the Western District of Arkansas, where PRM had filed tort claims against Primenergy, its affiliate Energy Process Technologies, Inc. ("BPTI"), and Kobe Steel. In an order dated November 15, 2005, that court specifically held:

...[B]oth the tort and contract claim asserted by PRM against Primenergy are "disputes under" the General Agreement and subject to arbitration.

The court referred the matter to further arbitration (now before this Panel) and directed:

To the extent that issues raised in this case, as between PRM and Primenergy, were or could have been resolved in the now-completed arbitration, res judicata will bar their relitigation here. To the extent they could not have been resolved in the arbitration that has now been completed—either because they did not yet exist or were then unknown— they must be submitted to arbitration before this Court can act on them.

Then, in March 2006, the court confirmed the prior Arbitration Award in its entirety. In June 2006 the court declined to enter final judgment as to the confirmation, reasoning that the remaining claims were to be arbitrated and that all issues should be determined "as a whole rather than in piecemeal fashion." The court also ordered PRM’s claims against Kobe Steel to arbitration.

Res Judicata

The doctrine of res judicata gives binding effect to the judgment of a court of competent jurisdiction and prevents the party to an action, and those in privity with them, from later relitigating any issues that were or could have been raised in the prior proceeding arising from the same grouping of facts. Indeed, on this basis, the court which compelled the instant arbitration essentially has directed this Panel to determine which claims, if any, could not have been raised in the prior arbitration proceeding and are thus subject to arbitration.
The court further held that tort claims could have been raised in the prior arbitration, since the arbitration provision at issue was broad enough to cover such claims. PRM’s claims herein arise out of the same grouping of facts at issue in the prior arbitration proceeding, which resulted in a confirmed Award. Therefore, the doctrine of res judicate bars all of PRM’s claims against Primenergy and its affiliates EPTI, Mellot, Scott, HIS, and Mohawk except claims of damages for breach of legal duties extending past May 22, 2005. For example, PRM is entitled to an opportunity to prove that it has suffered damages by reason of Primenergy’s ongoing withholding of the confidential information which the Arbitrators ordered Primenergy to turn over to PRM. Our decision is not, strictly speaking, an effort to enforce the prior Arbitration Award. Rather, the Arbitrator found that certain contractual duties survived the Award and res judicata does not bar claims, whether legal in contract or tort, arising after the date of the Award.

Collateral Estoppel

The Arbitration Award has been confirmed. According to the doctrine of collateral estoppel, any material issues decided therein are binding as to PRM and Primenergy in this proceeding. In particular, the Arbitrator found that PRM failed to prove damages allegedly caused by Primenergy’s undisclosed dealings with Kobe Steel. In this arbitration PRM seeks damages from Kobe Steel for the same injury PRM alleged in the prior arbitration. The arbitrator found no damages, and PRM is thus collaterally estopped from proving otherwise herein.

Ruling :

Accordingly it is hereby ordered:

1) All claims against Kobe Steel are dismissed.

2) As to the claims against the other respondents:

I. The contempt claim is dismissed, but we will grant leave to amend the Statement of Claims to assert ongoing breaches of contract beyond the date of the Arbitration Award.

II. The Fraud claim is dismissed.

III. The conspiracy claim is dismissed, except for the alleged conspiracy to convert intellectual property during the post-Award period. The Panel observes, however, that a corporation cannot conspire with its own employees or, except in narrow circumstances, its affiliates.

IV. The claim for misappropriation of trade secrets is dismissed except as to post-Award conduct and damages.

V. The claim for tortious interference is dismissed.

The Panel believes that the Statement of Claims does not allege fraud or tortious interference extending beyond the date of the Arbitration Award. If we have misread the Statement, we will consider a motion for leave to amend, supported by nonconclusory, specific allegations.
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