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PUERTO RICO MARITIME SHIPPING AUTH. v. STAR LINES

July 14, 1978

In the Matter of the arbitration between PUERTO RICO MARITIME SHIPPING AUTHORITY, Petitioner,
v.
STAR LINES LTD., Respondent



The opinion of the court was delivered by: CARTER

CARTER, D.J.

 Petitioner moves this court, pursuant to 9 U.S.C. § 9, for an order confirming an arbitration award dated February 1, 1978; respondent cross-moves to have that award vacated under 9 U.S.C. § 10(d). For the reasons set forth below, the award is confirmed in part and vacated in part.

 Facts

 The arbitration proceedings that underlie the present action arise out of a principal-agency relationship between Puerto Rico Maritime Shipping Authority ("PRMSA") and Star Lines Ltd. ("Star Lines"). An outline of the history of that relationship is related in two earlier opinions of this court in another action between PRMSA and Star Lines, *fn1" with which familiarity is assumed, and will not be rehearsed in detail here. It is sufficient for the purposes of this opinion to note only that PRMSA is the owner of the S.S. Puerto Rico, a cargo transport ship, and that in May of 1976 PRMSA and Star Lines entered into a contract under which Star Lines was PRMSA's agent for the purposes of servicing and booking cargo for the S.S. Puerto Rico. That relationship was dissolved, prematurely, in February, 1977, when PRMSA gave notice of termination of the agreement. In its wake the agreement left various disputes between the parties concerning their respective obligations under the contract, and pursuant to Article 16 of the contract, these disputes were submitted to binding arbitration in New York initiated by Star Lines. *fn2" PRMSA made twenty-two separate claims against Star Lines and Star Lines stated ten claims in return. *fn3" Each party denied most of the claims of its opponents, and on the remaining claims, admitted liability while contesting the amount of money due. The present action concerns only one of PRMSA's claims against Star Lines.

 As agent for PRMSA, the owner of the ship, Star Lines collected freight payments from shippers who shipped goods on the S.S. Puerto Rico. The agency agreement provided, however, that any such funds collected by Star Lines "are exclusively the property of" PRMSA and "shall belong solely to [PRMSA] free and clear of any claims of [Star Lines] or its creditors." *fn4" PRMSA claimed before the arbitrators that Star Lines remained in possession of $550,000 in freight monies belonging to PRMSA. See note 3, supra. Star Lines' response to this claim was that it "admits it has collected approximately $180,000 in freight. This sum is due PRMSA and will be applied as a set-off against Star Lines' recovery in this arbitration." PRMSA moved the arbitrators to issue an "interim award" on the sum of freight money admittedly owed by Star Lines, and the motion was granted.

 The arbitrators ruled that Star Lines was liable for the sum admittedly owed on this claim, and, after the submission of briefs on whether arbitrators had the power to issue interim determinations on less than all the claims for money submitted to arbitration, leaving the other claims for later resolution, decided that they did have that power. Thus, the arbitrators directed that Star Lines pay PRMSA $180,000, "along with an accounting therewith," and also, within sixty days of the interim award, "account for and pay over to PRMSA such other freight monies as are or may come into its possession." Following Star Lines' failure to pay over the $180,000 within the period specified in the award, this suit to confirm the award was instituted. It is the understanding of the court that proceedings on the remaining claims between the parties are continuing at present before the arbitrators.

 Discussion

 Section 9 of Title 9 of the United States Code provides that, upon the satisfaction of certain conditions not at issue here, "the court must grant . . . . an order [confirming the arbitration award] unless the award is vacated, modified, or corrected as prescribed in Sections 10 and 11 of this title." The only relevant portion of either of these latter sections provides that the court "may make an order vacating the award . . . . (d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(d). It is thus this court's duty to confirm the award unless § 10(d) precludes confirmation.

 In that regard, it is important to note what is not at issue in this case. No question is presented concerning the correctness of the arbitration decision regarding the freight money. *fn5" Neither is there an issue with regard to the arbitrators' power to regulate and shape the order and form of the proceedings before them. Nor is the wisdom of the arbitrators' determination to consider the freight claim separately and before any of the other claims directly under review here. The sole problem raised by these motions is whether this court has the power to confirm an award that disposes of only part of the matter submitted to arbitration, leaving the rest to later resolution.

 While the arbitrators' award has three elements -- the accountings, the award of $180,000 in freight monies admittedly held by Star Lines, and an order to pay over "such other freight monies" which may be held by Star Lines -- the parties in their papers have focused exclusively on that portion which awarded the sum of $180,000. Perhaps under the influence of that distorting focus, the parties have conceived and argued the case as if the arbitrators had issued an award which only ordered the payment of the $180,000 and, more importantly, as if the arbitrators' award had fully determined PRMSA's freight money claim. If that were the case, the award might well have been confirmable.

 It is the general rule with regard to the confirmability of arbitration awards that, in order to be "final" and "definite," the award must both resolve all the issues submitted to arbitration, and determine each issue fully so that no further litigation is necessary to finalize the obligations of the parties under the award. See, e.g., Cofinco, Inc. v. Bakrie & Bros., N.V., 395 F. Supp. 613, 616 (S.D.N.Y. 1975) (Frankel, J.); Mobil Oil Indonesia v. Asamera Oil (Indonesia), 43 N.Y. 2d 276, 401 N.Y.S. 2d 186, 372 N.E.2d 21 (1977); Herbst v. Hagenaers, 137 N.Y. 290, 33 N.E. 315 (1893); Jones v. Welwood, 71 N.Y. 208 (1877); Wolff & Munier, Inc. v. Diesel Construction Co., 41 A.D. 2d 618, 340 N.Y.S. 2d 455 (1st Dep't. 1973), appeal after remand, 44 A.D. 2d. 530, 353 N.Y.S. 2d 22 (1st Dep't. 1974), aff'd, 36 N.Y. 2d 750, 368 N.Y.S. 2d 828, 329 N.E.2d 662 (1975); Hoffman v. Harry Greenberg Co., 109 Misc. 170, 178 N.Y.S. 398 (1st Dep't. 1919); 5 Am. Jur. 2d Arbitration & Award §§ 136, 141, 142. *fn6" There is, however, an exception to this rule: if an award is valid in part and invalid in part, and the valid portion concerns claims that are "separable" from and "non-dependent" on claims covered by the invalid portion, the valid portion of the award is confirmable, notwithstanding the absence of an award that finally disposes of all the claims that were submitted to arbitration. Moyer v. Van-Dye-Way Corp., 126 F.2d 339 (3d Cir. 1942). *fn7" See also, Herbst v. Hagenaers, supra, 137 N.Y. at 296; Jones v. Welwood, supra, 71 N.Y. at 216. While there is little case law which illuminates the precise contours of the separability doctrine outlined in these cases, it would appear that PRMSA's claim regarding the freight monies is "separable" from the other claims at issue between the parties within the meaning of that doctrine. Consequently, if the award before the court had resolved the entirety of PRMSA's freight monies claim, it would probably have been confirmed. See Moyer v. Van-Dye-Way Corp., supra.8

 But, as is apparent from the award itself, the arbitrators did not do that. Rather, the arbitrators granted PRMSA a quantified award only to the extent that Star Lines admitted liability on PRMSA's claim, and with regard to the rest of PRMSA's claim, merely ordered Star Lines to "pay over . . . . such other freight monies as are or may come into its possession." This latter part of the freight monies award is, quite simply, an insufficient and unconfirmable resolution of the freight monies dispute. See Herbst v. Hagenaers, supra. "The goal of the proceeding was, and remains, a money award," Cofinco, Inc. v. Bakrie & Bros., N.V., supra, 395 F. Supp. at 616, and a declaration of liability which leaves the question of the amount of money owing unanswered and the possibility of further disputes between the parties open does not achieve this objective. *fn9" For these reasons, an award with a defect similar to that in the award in this case was held unconfirmable in Herbst v. Hagenaers, supra.10

 Because of the insufficiency of the portion of the award concerning the disputed part of the freight monies claim, the interim award fails to dispose of the claim it deals with. Although the award decides in PRMSA's favor on part of PRMSA's claim, it rules for neither party on the rest of the claim, aside from the mere determination of liability. An award that fails to lay any one issue to rest is contrary to the general principles of arbitration law, as discussed above, and is not "final" within the meaning of the federal Arbitration Act. See, e.g., Herbst v. Hagenaers, supra. See also, Jones v. Welwood, supra, 71 N.Y. at 216 (partial award vacated on grounds "that it does not dispose of any one controversy"); cf. Cofinco, Inc. v. Bakrie & Bros., N.V., supra, 395 F. Supp. at 616 (award disapproved because it directed the payment of an unspecified amount of "accrued expenses" and "interest"). Nor can it be persuasively argued that the two portions of the freight monies award or claim are "separable;" if a confirmable partial award could issue from arbitration solely because liability for a portion of a claim or for a part of the award was admitted or easy to determine, the separability exception would swallow the rule.

 None of the cases relied on by PRMSA support the confirmation of the freight monies award, whatever they may have to say about the confirmability of other kinds of "interim" or "partial" awards. In Moyer v. Van-Dye-way Corp., supra, note 8, the court confirmed an award that disposed of only one of two claims submitted to arbitration, but what was at issue there were two entirely distinct claims -- one for wage payments and one concerning disbursements from an employee welfare fund. As the court noted, the award being confirmed was on a claim which stood "as a separate ...


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