Foxconn Ordered to Pay $8.45M in Defective Phone Dispute

A Texas federal judge has confirmed an arbitration award requiring Foxconn International Holdings Hong Kong Ltd. to pay Emblem Solutions LLC $8.45 million over claims involving defective 5G phones supplied to the U.S. market. The order, issued by U.S. District Judge Karen Gren Scholer, enforces a final arbitral decision rendered under the International Centre for Dispute Resolution (ICDR).

According to court filings, Emblem alleged that Foxconn’s Cricket Dream 5G and Cricket Innovate 5G devices suffered from severe defects shortly after launch. The defects reportedly caused system failures that impaired emergency calling functions and prevented users from powering the phones on or off. As consumer complaints increased, AT&T demanded a refund from Emblem, which in turn sought indemnification from Foxconn for more than $13 million.

After Foxconn declined to pay, Emblem initiated arbitration proceedings pursuant to the indemnity clause in their master purchase agreement. The ICDR panel ruled in favor of Emblem, awarding damages of $8.45 million plus $854,923 in fees and costs. Judge Scholer’s ruling confirmed that award, making it enforceable under the Federal Arbitration Act and the New York Convention.

The Court’s Ruling

Judge Scholer’s order emphasized that the arbitral award was final and enforceable, rejecting Foxconn’s challenge under Article V of the New York Convention. The court found no basis for vacatur or modification under Sections 10 or 11 of the Federal Arbitration Act.

“This action presents more than one claim for relief, and the petition for confirmation of arbitration award is a separate claim from relief from the pending complaint and counterclaim before the court,” the order stated.

The ruling effectively concluded the arbitration confirmation proceedings while Foxconn’s remaining contract claims continue separately in federal court.

Foxconn’s Contract Claims

Foxconn initially brought a federal lawsuit in June 2023, asserting that Emblem withheld over $5.4 million owed for phone shipments funded by AT&T and its affiliate, Cricket Wireless. The manufacturer argued that Emblem’s withholding of funds constituted a breach of contract unrelated to the indemnification claims presented in arbitration.

Foxconn maintained that the arbitration clause in its agreement with Emblem was narrowly tailored to cover indemnification disputes only, not broader commercial disagreements. “There can be no real dispute that the arbitration clause in the [master purchase agreement] is a narrow one,” Foxconn argued in its filings. It further asserted that the contract lacked a “clear and unmistakable” delegation clause giving arbitrators authority to decide questions of arbitrability.

Emblem’s Position in Arbitration

Emblem countered that Foxconn’s lawsuit was an attempt to circumvent the arbitration process agreed upon by both parties. In its motion to stay the litigation, Emblem urged the court to allow the arbitration to proceed to completion, contending that all relevant disputes—particularly those involving indemnification—fell within the clause’s scope.

In November 2023, the court agreed with Emblem, pausing Foxconn’s lawsuit until the arbitration concluded. The arbitration panel’s final decision in November 2024 and the subsequent appellate award issued in September 2025 fully confirmed Emblem’s entitlement to damages.

Implications for Contract Manufacturers

The enforcement of the arbitration award underscores the binding nature of arbitration clauses in international commercial agreements, particularly in supply chain disputes involving product performance. It also highlights the importance of drafting clear arbitration provisions delineating the scope of covered claims.

For manufacturers and suppliers in the electronics industry, the case demonstrates how defect-related indemnity claims can trigger high-value arbitration proceedings when downstream distributors face consumer refund demands. The decision reinforces that federal courts will defer to arbitral findings unless statutory grounds for refusal are clearly established.

Case Details

Case Name: FIH Hong Kong Ltd. v. Emblem Solutions LLC
Court Name: U.S. District Court for the Northern District of Texas
Case Number: 3:23-cv-01255
Plaintiff Attorney(s): Ni Wang & Massand PLLC; Mei & Mark LLP
Defense Attorney(s): Jones Walker LLP