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AVR Communs., Ltd. v. American Hearing Sys., Inc.

United States Court of Appeals, Eighth Circuit

July 14, 2015

AVR Communications, Ltd., an Israeli corporation; Sonovation, Inc., a Minnesota corporation, Petitioners - Appellees
v.
American Hearing Systems, Inc., doing business as Interton, Inc., a Minnesota corporation, Respondent - Appellant

Submitted February 12, 2015

Appeal from United States District Court for the District of Minnesota - Minneapolis.

For AVR Communications, Ltd., an Israeli corporation, Sonovation, Inc., a Minnesota corporation, Petitioners - Appellees: Jonathan Millea Bye, Bryan A. Welp, Lindquist & Vennum, Minneapolis, MN.

For American Hearing Systems, Inc., doing business as: Interton, Inc., a Minnesota corporation, Respondent - Appellant: Hugh Balsam, Terrence Patrick Canade, Locke & Lord, Chicago, IL; Andrew S. Birrell, Gaskins & Bennett, Minneapolis, MN.

Before BYE, BEAM, and BENTON, Circuit Judges.

OPINION

BYE, Circuit Judge.

American Hearing Systems, Inc., doing business as Interton, Inc. (Interton), challenges an order of the district court[1] granting the petition of AVR Communications, Ltd. (AVR) to confirm a foreign arbitration award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention), June 10, 1958, 21 U.S.T. 2517, implemented at 9 U.S.C. § § 201-208. We affirm.

I

AVR is an Israeli corporation based in Israel. Interton is a Minnesota corporation based in Minnesota. Both companies are in the business of producing and selling hearing aids and hearing aid technology. In 2004, the two companies entered into a written Investment Agreement which gave Interton a seat on AVR's Board of Directors as well as a twenty percent interest in AVR. During the negotiations that led to the Investment Agreement, the contemplated business relationship between the parties included discussions of these two aspects: (1) integrating AVR's DFC technology into Interton's products, and (2) Interton's purchase of AVR's W.C. components for use in wireless FM Cross products. As part of the Investment Agreement, Interton paid $412,000 to AVR dedicated to research and development projects for wireless FM communications and digital signal processing. The Investment Agreement stated it was " [t]he parties' intention . . . that Interton will acquire from [AVR] products deriving from such R & D projects." Appendix at 19. According to AVR, the R & D projects referred to in the Investment Agreement included the DFC technology and the W.C. components.

The Investment Agreement also incorporated by reference certain terms from a Stock Purchase Agreement that AVR had previously signed with other investors. Significantly, two of the incorporated provisions were a " Governing Law" provision as well as an " Arbitration" provision. Both of the incorporated provisions indicated the Investment Agreement would be governed by and construed in accordance with the laws of the State of Israel. In addition, the Arbitration provision stated as follows:

Any dispute between the parties relating to (or arising out of) the provisions of this Agreement or any of its Exhibits will be referred exclusively to the decision of a single arbitrator appointed by mutual consent, and failing such consent within 10 days from the date on which an affected party first requested arbitration - the Arbitrator will be appointed by the President of the Israel Bar Association. The Arbitrator will be bound by Israeli substantive law but will not be bound by the rules of evidence or the rules of civil procedure. The Arbitrator will be required to provide the grounds for his ruling in writing.
The competent court will have such supplementary jurisdiction for all issues arising and/or relating to the Arbitration as is provided by the Arbitration Law of 1968, and/or may be necessary to resolve such dispute.

Id. at 64 (emphasis added).

Subsequent to signing the Investment Agreement, various disputes arose between the parties which included disputes about Interton's purchase of W.C. components and the integration of DFC technology into Interton's products. In March 2007, AVR commenced an arbitration proceeding in Israel against Interton asserting a number of claims relating to the Investment Agreement, ...


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