The opinion of the court was delivered by: Robert L. Carter, District Judge.
This case is before the court on the petition of C.T.
Shipping, Ltd. ("C.T.") to vacate an arbitration award, and the
petition of DMI (U.S.A.) Ltd. ("DMI") to confirm
the same award. The facts of this case, as summarized below,
are set out in greater detail in the arbitration panel's final
award. DMI (U.S.A.) Ltd. v. C.T. Shipping, Ltd., S.M.A. No.
2756 (Apr. 19, 1991) [hereinafter "Final Award"] (Berg,
Nichols, Arbs., Laing, Chmn.) (available on LEXIS, ADMRTY
library, USAWDS file).
The dispute arises under a New York Produce Exchange time
charter party, dated January 27, 1988, between C.T. as owner of
the M/V China Trident and DMI as charterer. See Amended
Verified Petition to Vacate, exhibit 1 (Time Charter)
[hereinafter "C/P"]. The China Trident was also the subject of
a subcharter between DMI as disponent owner and Anglo-Canadian
Shipping Company ("Anglo-Canadian") as charterer. Before the
vessel was to receive its intended cargo of lumber at Prince
Rupert, British Columbia, the Canadian Coast Guard prohibited
the further use of the vessel in Canada until the cargo gear
was repaired and recertified. Anglo-Canadian thereupon refused
to accept the vessel. The gear was not repaired in time to
satisfy the subcharter laycan. Anglo-Canadian then cancelled
the subcharter, and commenced arbitration against DMI at
London, England (the "London arbitration"). In the London
arbitration, DMI was found liable to Anglo-Canadian for roughly
$160,000 in damages.
DMI then commenced the arbitration at issue in this case (the
"New York arbitration") under the head charter, contending that
C.T. failed to provide the vessel with "machinery and equipment
in a thoroughly efficient state" and "in every way fitted for
ordinary cargo service," as required by the charter.
See C/P, lines 6, 22. Pursuant to a provision in the charter,
id. ¶ 17, lines 107-09, the dispute was heard before a panel of
three arbitrators: Jack Berg, appointed by DMI; Alexis Nichols,
appointed by C.T.; and Donald Laing, Jr., the chairman,
appointed by the other two arbitrators. To secure execution of
any eventual judgment on the arbitration award, DMI
successfully commenced attachment proceedings against C.T. in
the United States District Courts for the Eastern and Northern
Districts of California.
After hearing evidence, the panel majority, over Arbitrator
Nichols' dissent, found on April 19, 1991, that C.T. had
breached the charter. The panel awarded DMI a total of
$481,490.83, consisting of lost profits, indemnity for the
liability imposed in the London arbitration, interest on the
foregoing items, costs and legal fees of the London
arbitration, costs and legal fees of the attachment proceeding,
and costs of the New York arbitration. Final Award 21. The
award also stated that interest would continue to run at
specified rates (ranging from zero to 15% per annum for various
parts of the award) if the award was not paid within thirty
days. Id. at 24. The arbitrators' fee, which was "deemed to be
a part of [the] award," id., was fixed at $41,850.00, to be
paid equally by the parties to the arbitrators in the first
instance. Id. app. B.
Subsequently, C.T. filed a petition in this court, No. 91
Civ. 2748 (RLC), to vacate the award on various grounds
pursuant to 9 U.S.C. § 10 and N.Y. CPLR 7511. DMI filed a
petition, No. 91 Civ. 2811 (RLC), to confirm the award pursuant
to 9 U.S.C. § 9. By order of the court, the actions were
consolidated. Because of the maritime subject matter of the
case, the court has jurisdiction over the petitions under
28 U.S.C. § 1333.
C.T. bases its petition to vacate both on a federal statute,
9 U.S.C. § 10, and on a New York statute, CPLR 7511. In
addition, much of C.T.'s argument relies on New York cases.
However, in enacting the Federal Arbitration Act, 9 U.S.C. § 1,
Congress established a national policy favoring
arbitration pertaining to maritime transactions and to
interstate and foreign commerce. Southland Corp. v. Keating,
465 U.S. 1, 10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984). It is
therefore clear that the federal statute, when it is
applicable, preempts state statutes purporting to create
grounds for confirming or vacating arbitration awards. See id.
at 10-16, 104 S.Ct. at 858-861; I/S Stavborg v. National Metal
Converters, Inc., 500 F.2d 424, 429-30 (2d Cir. 1974).
Accordingly, CPLR 7511 is inapplicable to this case.
Moreover, a federal court exercising its admiralty
jurisdiction will apply federal maritime law, and not state
law. See, e.g., Offshore Logistics, Inc. v. Tallentire,
477 U.S. 207, 227, 106 S.Ct. 2485, 2496, 91 L.Ed.2d 174 (1986);
Herlofson Management A/S v. Ministry of Supply, Kingdom of
Jordan, 765 F. Supp. 78, 85 n. 7 (S.D.N.Y. 1991) (Carter, J.).
All issues in this case, therefore, are governed not by New
York state law but by federal maritime law.
II. Alleged Grounds for Vacating the Arbitration Award
A. Refusal to Postpone Hearing or to Hear Evidence
C.T. challenges the arbitrators' decision on the grounds that
the arbitrators refused to grant an adjournment of the hearing
to allow C.T. to call as a witness a surveyor for Bureau
Veritas in Singapore (the "B.V. surveyor") who had certified
the China Trident's cargo gear before that vessel proceeded to
Canada. The court is authorized to vacate an arbitration award
"[w]here the arbitrators were guilty of misconduct in refusing
to postpone the hearing, upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior by which the rights of
any party have been prejudiced." 9 U.S.C. § 10(a)(3).
Contrary to C.T.'s interpretation, § 10(a)(3) does not
"expressly provide[ ] that arbitrators who . . . refuse an
adjournment [are] guilty of misconduct." Poles Affirmation ¶
17. Rather, the granting or denying of an adjournment falls
within the broad discretion of the arbitrators. Storey v.
Searle Blatt Ltd., 685 F. Supp. 80, 82 (S.D.N.Y. 1988) (Sweet,
J.); see also Fairchild & Co. v. Richmond F. & P.R.R.,
516 F. Supp. 1305, 1313 (D.D.C. 1981); Dan River, Inc. v. Cal-Togs,
Inc., 451 F. Supp. 497, 503-04 (S.D.N.Y. 1978) (Duffy, J.).
Section 10(a)(3) limits the court's review of the arbitrator's
refusal to adjourn the hearing to a determination of whether
the arbitrators were guilty of misconduct. Storey, supra,
685 F. Supp. at 82. The court will not interfere with an award
on these grounds as long as there exists a reasonable basis for
the arbitrators' refusal to grant a postponement. Id.; see also
Fairchild, supra, 516 F. Supp. at 1313-1314.
By C.T.'s own admission, C.T.'s counsel did not advise the
arbitration panel of its intention to call the B.V. surveyor
until the conclusion of the fourth evidentiary hearing on May
14, 1990, which was over a month after the arbitrators were
sworn in, and nearly nine months after DMI had demanded
arbitration. See Poles Affirmation ¶¶ 10, 12. On May 30, 1990,
C.T.'s counsel informed the panel chairman that the B.V.
surveyor was not immediately available to testify, and
requested an unspecified amount of additional time. Id. ¶ 13.
On June 8, 1990, the panel majority (over Nichols' dissent)
agreed to hold an additional evidentiary hearing on July 10 and
11, 1990 — nearly two months from C.T.'s initial announcement
of its intent to call the witness — with the understanding
that all remaining witnesses would be presented at that
hearing. Id. exhibit 11. C.T. produced one additional witness
at that hearing, but did not produce the B.V. surveyor.
On this basis, it is clear that C.T. has not satisfied its
burden of proving that the arbitrators were guilty of
misconduct in refusing to postpone the hearing further. The
arbitrators could reasonably have concluded that C.T. was
attempting to delay the hearings unnecessarily. They were under
no obligation to grant C.T. an indefinite postponement to allow
it to call a particular witness. The purpose of arbitration is
to provide a speedy and inexpensive determination, without the
extended delays inherent in a court proceeding. The fact that
the panel subsequently took over six months to render its
decision is not sufficient on these facts to establish that the
panel's refusal to grant an adjournment was unreasonable.
Moreover, C.T. has not indicated to this court when, if ever,
it would have been able to produce the B.V. surveyor as a
witness. Consequently, C.T. cannot say that its rights were
prejudiced by the panel's refusal to grant the requested ...