Chiron Corp. v. Ortho Diagnostic Systems

Chiron Corporation (plaintiff) entered an agreement with Ortho Diagnostic Systems, Inc. (Ortho) (defendant). Chiron was to develop and manufacture blood tests for detecting hepatitis C and AIDS, and Ortho would market and distribute the tests. Strategy and budget issues were determined by a supervisory board. In a board deadlock, Ortho would decide the issues. The agreement had an arbitration provision to resolve disputes related to the agreement. Chiron and Ortho each developed a machine to run diagnostic testing. The board became deadlocked regarding which company’s machine to use. Ortho decided to use its own machine, disallowing use of Chiron’s machine. A dispute arose, and the parties arbitrated with a final and binding award issued in favor of Ortho and later confirmed by the court. Subsequently, Chiron presented Ortho with a proposal to amend their business plan, which Ortho rejected. Chiron requested a second arbitration, which Ortho refused, arguing preclusion based on res judicata. Chiron filed a declaratory action in district court to compel arbitration. Otho cross-moved for summary judgment, asserting its res judicata defense. The district court ruled that the res judicata issue was subject to arbitration and granted Chiron’s motion. Ortho appealed, arguing that the issue was to be decided by the court pursuant to Federal Arbitration Act (FAA) § 13. Chiron responded, arguing that res judicata involved the merits of the claims and fell under the agreement to arbitrate.