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SOFIA SHIPPING CO. v. AMOCO TRANSP. CO.

February 6, 1986

SOFIA SHIPPING COMPANY, LTD., Petitioner, against AMOCO TRANSPORT COMPANY, Respondent


The opinion of the court was delivered by: TENNEY

Tenney, J.

In this action, the petitioner, Sofia Shipping Company, Ltd. ("Sofia"), is seeking to confirm an arbitration award which was rendered in its favor. The respondent, Amoco Transport Company ("Amoco"), cross-moves to vacates the award. The petition to confirm is granted.

BACKGROUND

 The controversy here arises out of a contract between the petitioner and respondent. Sofia, as the owner of an oil tanker--the T/T/ ZAKYNTHO--agreed to charter the ship to Amoco for a period of approximately six months. Under the terms of the charter agreement, the transaction was "subject to [Amoco's] favorable report after inspection of [the] vessel." Amoco rejected these ship to Amoco for a period of approximately six months. Under the terms of the charter agreement, the transaction was "subject to [Amoco's favorable report after inspection of [the] vessel." Amoco rejected the ship after inspecting it and refused to honor the contract. The question of whether Amoco had wrongfully breached the contract was submitted to arbitration. A panel of three arbitrators concluded that Amoco had acted unreasonably in rejecting the ship, and that Sofia was entitled to damages for breach of contract.

 In the petition now before the Court, Amoco argues that: 1) the arbitrators' decision should be vacated because it violates public policy; 2) the amount of the damages should be modified under Section 11 of the Federal Arbitration Act *fn1" ("Arbitration Act"); and 3) the decision should be vacated under Section 10 of the Arbitration Act *fn2" because one of the arbitrators, Alexis Nichols ("Nichols"), failed to disclose certain information. For the reasons set forth below, the Court rejects these arguments.

 DISCUSSION

 1. Public Policy

 The standard of review for scrutinizing an arbitration award is extremely narrow. See United States Steel and Carnegie Pension Fund v. Dickinson, 753 F.2d 250, 252 (1985); Diapulse Corp. v. Carba, Ltd., 626 F.2d 1108, 1110 (2d Cir. 1980); I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424, 429-32 (2d Cir. 1974). Courts will not vacate an arbitration award unless the arbitrators acted with manifest disregard of the law, or the facts of the case do not support the award. See Koch Oil, S.A. v. Transocean Gulf Oil Co., 751 F.2d 551, 554 (2d Cir. 1985); Kurt Orban Co. v. Angeles Metal Systems, 573 F.2d 739, 740 (2d Cir. 1978). An arbitrator's interpretation of a contract is binding so long as that interpretation is barely colorable. See John T. Brady & Co. v. Form-Eze Systems, Inc., 623 F.2d 261, 264 (2d Cir. 1980), cert. denied, 449 U.S. 1062, 66 L. Ed. 2d 605, 101 S. Ct. 786 (1980).

 Applying this standard, the Court concludes that there is no merit to Amoco's argument that the arbitrators' decision should be vacated on public policy grounds. Amoco claims that the arbitrators' decision contravenes the public policy of preserving maritime safety and preventing pollution. Specifically, Amoco argues that the tanker was in such bad condition that chartering it to transport oil would have posed a serious threat to the environment. Although Amoco characterizes this argument as involving a matter of public policy, Amoco is essentially arguing that its rejection of the tanker was reasonable, and therefore the contract was not wrongfully breached. This argument is simply an attempt to have the award set aside on its merits, which the Court declines to do.

 The arbitrators concluded that the tanker was seaworthy. The panel found that Amoco's grounds for rejecting the ship were invalid and any violations that existed at the time of the inspection were "minor and capable of being rectified in short order." In addition, the arbitrators concluded that none of the violations reported by Amoco's inspectors "could be regarded as being serious enough to preclude the Vessel from performing reasonably under the agreed charter party terms." In light of the arbitrators' findings, Amoco's public policy argument cannot stand.

 2. Modifying the Award

 It is well established that the court's power to modify an arbitration a award is severely limited. See Kurt Orban v. Angeles Metal Systems, 573 F.2d at 740; UCO Terminals, Inc. v. Apex Oil Co., 583 F. Supp. 1213, 1217 (S.D.N.Y. 1984), aff'd mem., 751 F.2d 371 (2d Cir. 1984). An award may be modified under Section 11 of the Arbitration Act where the figures have been miscalculated, but that is not the case here. In this instance, the arbitrators clearly articulated the basis for their award and set forth their calculations in detail. There is no evidence that the arbitrators erred.

 The measure of damages for breach of contract is the amount necessary to put the injured party in the same economic position as he would have been, if the contract had been fulfilled. See Adams v. Lindblad Travel, Inc., 730 F.2d 89, 92 (2d Cir. 1984); Perma Research & Dev. v. Singer Co., 542 F.2d 111, 116 (2d Cir.), cert. denied, 429 U.S. 987, 50 L. Ed. 2d 598, 97 S. Ct. 507 (1976). A review of the award indicates that the panel applied this standard.

 Amoco claims that the panel based its opinion on erroneous charter rates, and that the panel failed to consider all relevant factors relating to profits and earnings. The panel, however, specifically noted that it was applying "its commerical experience in reviewing [the relevant market conditions] so as to obtain a fair figure of damages[.]" *fn3" The Court will not substitute its judgment for the panel's. In light of the limited ...


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