United States District Court, Southern District of New York
August 21, 1991
IN THE MATTER OF THE ARBITRATIONS BETWEEN BENSHIP INTERNATIONAL, INC., PETITIONER, AND PHOSPHATE CHEMICALS EXPORT ASSOCIATION, INC., RESPONDENT.
The opinion of the court was delivered by: Leisure, District Judge:
Petitioner Benship International, Inc. ("Benship") petitions
for an order directing the consolidation of two arbitration
proceedings (the "Arbitrations") between it and respondent
Phosphate Chemicals Export Association, Inc. ("Phosphate"). In
response, Phosphate has filed a cross-motion also seeking to
consolidate the Arbitrations, but naming it, Benship, and the
Bangladesh Agricultural Development Corporation ("BADC") as the
This action arises out of two very similar charter contracts
between Benship and Phosphate, pursuant to which Benship claims
a total balance of demurrage of approximately $174,000. The
charter contracts contain identical arbitration clauses, under
which each party to the contract selects an arbitrator, with a
third arbitrator chosen by the two party-appointed arbitrators.
This procedure was followed with respect to the demurrage
claims, however, Phosphate would not consent to Benship's
request for a consolidation of the Arbitrations, unless the
consolidated proceeding included resolution of Phosphate's
disputes with BADC.
Phosphate claims that it entered into several bills of lading
with BADC, naming BADC as the receiver of the cargo aboard the
subject vessels,*fn1 and that those bills of lading
incorporate by reference the arbitration clauses in the charter
parties. Phosphate has notified BADC of its intent to
arbitrate, and has argued that Benship's demurrage claims are
identical to the claims that Phosphate will allege against
BADC. Accordingly, Phosphate argues that all of these disputes
— those between Benship and Phosphate, and those between
Phosphate and BADC — should be resolved in a single
consolidated arbitration proceeding.
A district court has the power to consolidate arbitrations in
appropriate cases. See Compania Espanola de Petroleos, S.A. v.
Nereus Shipping, S.A., 527 F.2d 966 (2d Cir. 1975), cert.
denied, 426 U.S. 936, 96 S.Ct. 2650, 49 L.Ed.2d 387 (1976);
Elmarina, Inc. v. Comexas, N. V., 679 F. Supp. 388 (S.D.N.Y.
1988); Cable Belt Conveyors, Inc. v. Alumina Partners of
Jamaica, 669 F. Supp. 577 (S.D.N.Y.), aff'd, 857 F.2d 1461 (2d
Cir.), cert. denied, 484 U.S. 855, 108 S.Ct. 161, 98 L.Ed.2d
116 (1987); Sociedad Anonima de Navegacion Petrolera v.
Compania de Petroleos de Chile S.A., 634 F. Supp. 805 (S.D.N.Y.
1986); In re Czarnikow-Rionda Company, Inc., 512 F. Supp. 1308
(S.D.N.Y. 1981). As the Second Circuit has noted:
[T]here is more than ample support in the case law
for the propriety of a court's consolidation of
arbitrations under the federal statute. We agree
that Fed.R.Civ.P., Rules 42(a) and 81(a)(3), are
applicable. Moreover, we think the liberal
purposes of the Federal Arbitration Act clearly
require that this act be interpreted so as to
permit and even to encourage the consolidation of
arbitration proceedings in proper cases. . . .
Nereus, supra, 527 F.2d at 975 (citations and footnote
In deciding whether to order the consolidation of
arbitrations, courts in this Circuit have considered several
factors, most important of which are the existence of common
questions of law and fact, the possibility of conflicting
awards or inconsistent results, and the avoidance of
unnecessary prejudice, delay and cost. See Elmarina, supra, 679
F. Supp. at 391 (collecting cases).
In the case at bar, Phosphate does not dispute that the facts
of this case, including the existence of virtually identical
charter contracts between identical parties, counsel in favor
of consolidation. Indeed, Phosphate has itself cross-moved to
consolidate. Rather, Phosphate merely argues that it would be
still more desirable to consolidate the Arbitrations together
with its forthcoming arbitration with BADC. Because the Court
believes that consolidation of the Arbitrations is permitted
under the relevant case law, and would result in a more
efficient disposition of those proceedings, the sole question
thus becomes whether to consolidate the arbitration between
Phosphate and BADC as well.
Although Benship's concerns regarding the potential for delay
that exists if it must await BADC's participation may or may
not be well-founded, there is a more basic principle that
requires denial of Phosphate's cross-motion: BADC is not a
party to the action now before the Court. In affirming Judge
Stewart's order consolidating arbitration, the Second Circuit
in Nereus stated that:
As Judge Stewart had all the interested parties
before him in an equitable proceeding and as there
was ample opportunity afforded to all parties to
express their views and present any testimonial or
documentary evidence they thought would support
these views, we think it was clearly proper for
Judge Stewart to take the matter of consolidation
of the two arbitration proceedings under
consideration and to make the order of
Nereus, supra, 527 F.2d at 974 (emphasis added). Here,
Phosphate is asking the Court to, in effect, compel BADC to
arbitrate in a consolidated proceeding with Phosphate and
Benship, without BADC ever having been provided with an
opportunity to be heard on the question. Moreover, to the
extent the Court's power to consolidate arbitration depends on
Fed. R.Civ.P. 42(a), see Nereus, supra, 527 F.2d at 975, that
rule is limited to actions actually pending before the Court.
See Fed. R.Civ.P. 42(a). Compelling a stranger to this action
— BADC — to participate in a consolidated arbitration
proceeding would, therefore, be procedurally improper.*fn3
For the aforementioned reasons, Benship's petition to compel
consolidation of the Arbitrations is granted, and Phosphate's
cross-motion is denied.*fn4