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LUBRIZOL INTL., S.A. v. M/V STOLT ARGOBAY

December 30, 1982

LUBRIZOL INTERNATIONAL, S.A., LUBRIZOL SOUTH AFRICA (PTY) LTD., and LUBRIZOL CORPORATION, Plaintiffs,
v.
M/V STOLT ARGOBAY, her engines, boilers, etc., SOUNION SHIPPING INC., and PARCEL TANKERS, INC., Defendants



The opinion of the court was delivered by: TENNEY

TENNEY, J.

 Plaintiffs Lubrizol International, S.A., Lubrizol South Africa (Pty) Ltd., and Lubrizol Corporation (collectively, "Lubrizol") brought this suit against the M/V Stolt Argobay (the "Argobay"); Sounion Shipping, Inc. ("Sounion"), the Argobay's owner; and Parcel Tankers, Inc. ("PTI"), the Argobay's charterer, for damages due to water contamination of cargo carried aboard the Argobay on a voyage from Houston, Texas to Durban, South Africa. Sounion and PTI settled Lubrizol's claim for a payment of $100,000, each contributing $50,000 and reserving its rights against the other to recover its contribution to the settlement. Sounion now moves for summary judgment against PTI on the ground that an earlier arbitration award in Sounion's favor has res judicata effect. Alternatively, should the Court find that material issues of fact preclude an award of summary judgment, Sounion moves for an order staying this action pending arbitration of this dispute. PTI opposes Sounion's motion for summary judgment, on the grounds that the arbitration award has no res judicata effect, and because material issues of fact exist. PTI also opposes Sounion's motion to stay this action pending arbitration, on the ground that Sounion has waived its right to arbitration. Finally, PTI cross-moves for summary judgment in its own favor.

 For the reasons discussed below, the cross-motions for summary judgment are denied, and Sounion's motion for a stay is granted.

 Background

 Pursuant to a charter party dated February 6, 1973 the Argobay was time chartered to PTI by Sounion. *fn1" The Argobay is a parcel tanker, whose system of 35 tanks and 10 separate pumps for discharging cargo enable it to simultaneously carry up to 28 different liquid cargoes.

 The Lubrizol cargo that is the subject of this action is a liquid chemical compound used in the manufacture of transmission fluid. It was loaded in Houston, Texas in May 1975 into the Argobay's tank 10 starboard. *fn2" Upon arrival in Durban, South Africa in July 1975, the Argobay discharged another party's cargo of paraffin wax from tank 9 center. The vessel then proceeded to a second berth to unload the Lubrizol cargo. It is not disputed that samples of the cargo taken prior to discharge proved to be within specification. In other words, prior to discharge the cargo did not contain more than an allowable percentage of water. As discharge of the cargo in tank 10 starboard commenced, however, first water came through the lines, then cargo, which subsequent tests proved to be water contaminated. Lubrizol filed this action against PTI and Sounion in March 1977, seeking damages for the water contamination of the cargo, and PTI and Sounion asserted cross claims against each other.

 In November 1975, approximately four months after the events at issue here, PTI transferred the Argobay from its general products trade -- in which it had been used to transport fats, oils, tallow, and, occasionally, chemical cargoes -- to its chemical and solvent trade. Subsequently, a series of disputes arose between Sounion and PTI concerning the Argobay's maintenance (particularly with respect to the coating on the tanks' interior surfaces), its pumping capacity, and the cleaning of its tanks and discharge lines. When those disputes culminated in PTI's placing the Argobay off-hire in July 1976, Sounion promptly initiated arbitration. After several days of hearings, the arbitration panel rejected PTI's argument that Sounion was responsible for its crew's failure to properly clean and maintain tanks and lines. The panel concluded that PTI had acted improperly in placing the vessel off-hire and awarded to Sounion the costs and lost revenues incurred as a result of the vessel's off-hire. Skarvelis Aff., Exh. B at 28-29. *fn3" The panel, however, refused to rule that PTI was responsible for any contamination of cargoes due to the condition of the vessel's tanks and lines, stating that the cargo claims pending on the vessel were "undefined as to precise causative factors and should be handled in a normal manner between the parties and their insurers. . . ." Id. at 32.

 Arguments

 Sounion and PTI settled Lubrizol's claim against them for $100,000. Sounion now moves for summary judgment against PTI, seeking to recover from PTI the $50,000 that it contributed to the settlement. Sounion argues first that no material issue of fact exists with respect to the cause of the water contamination. Noting that tests indicated that the cargo was uncontaminated prior to discharge, Sounion maintains that the contamination was the result of water in the discharge lines. Skarvelis Aff. paras. 4, 6. According to Sounion, the same lines were used to discharge the cargo of paraffin from tank 9 center as were used to discharge the Lubrizol cargo in tank 10 starboard, which necessitated cleaning the lines and flushing them with water. Id. P 6. Thus, Sounion contends that the Lubrizol cargo was contaminated by water which the crew had failed to drain completely from the discharge lines. Id. Further, Sounion argues that it is entitled to summary judgment as a matter of law. Sounion reasons that the cause of the contamination was related to the crew's cleaning of the lines; that the responsibility for cleaning rests squarely with PTI, according to the arbitration award, made in connection with the later dispute between the parties; and that the arbitration award should be given res judicata effect. Sounion's Memorandum in Support of Motion for Summary Judgment ("Sounion's Memorandum") at 3-5.

 Should the Court find that material issues of fact preclude summary judgment, Sounion, citing the arbitration clause in the charter party, moves to stay this action pending arbitration. Noting that its right to arbitration was asserted in its pleadings, Sounion argues that the right was not waived by its participation in this action, as it had no right to compel arbitration against Lubrizol, who initiated this action. Sounion's Memorandum at 6-7. Finally, Sounion requests that the matter be referred to the same arbitration panel that resolved the earlier dispute between these parties, "as they are most familiar with the issues." Skarvelis Aff. para. 7.

 PTI, however, responds that material issues of fact concerning the cause of the water contamination preclude summary judgment. PTI's Statement of Material Facts as to Which There Exists a Genuine Issue to be Tried, para. 3. Most of its papers, however, are devoted to arguing that the earlier arbitration award is not entitled to res judicata effect. Specifically, PTI argues that the facts involved in the arbitrated dispute were significantly different from those now before this Court, and grew out of problems associated with the more sophisticated chemical and solvent market, to which the Argobay was transferred. Affidavit of Keith L. Flicker, sworn to June 15, 1982 ("Flicker Aff."), paras. 6, 7. PTI maintains that the panel addressed the crew's responsibility for contamination from cargo residues which remained in tanks and lines despite the crew's compliance with PTI's cleaning instructions, an issue distinctly different from the crew's responsibility for its failure to drain fresh water from the lines after cleaning, the alleged cause of the contamination in this case. Flicker Aff. para. 12.

 Moreover, PTI contends that Sounion has waived arbitration, by its failure to initiate arbitration until five years after the inception of the action, and eight months after the settlement with Lubrizol, and by virtue of its agreement, in connection with the settlement with Lubrizol, to pursue its claim against PTI in this action. Flicker Aff. paras. 15, 16. PTI argues further that there is no basis for referring this action to the same panel of arbitrators. Finally, PTI moves for summary judgment in its own favor.

 Discussion

 Summary judgment is appropriate only when there is no genuine issue as to any material fact, and the substantive law is in favor of the movant. 6 J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice para. 56.15[1.-0], at 56-391 to -395 (2d ed. 1982). The burden is on the party moving for summary judgment to establish that there are no material facts in dispute. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 444 (2d Cir. 1980). On a motion for summary judgment, the court must resolve ambiguities and draw all reasonable inferences in favor of the party opposing the motion. Heyman v. Commerce & Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975). To overcome a "convincing presentation" by the moving party, the party opposing the motion may not simply rest on conclusory allegations or denials, but must supply facts and arguments in opposition to the motion. Quinn v. Syracuse Model Neighborhood Corp., supra, 613 F.2d at 445; SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978). But, when the ...


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