In Compania Espanola de Petroles, S.A. v. Nereus Shipping,
S.A., 527 F.2d 966, 974 (2d Cir. 1975), the Second Circuit held
that a district court has the power to consolidate arbitrations
in the appropriate circumstances. The Court based its decision
on the Federal Arbitration Act and Fed.R.Civ.P., Rules 42(a)
and 81(a)(3). The exercise of that power, however, is
discretionary. Sociedad Anonima de Navegacion Petrolera v. Cia.
de Petroles de Chile S.A., 634 F. Supp. 805 (S.D.N.Y. 1986).
Hilton Oil points out that Nereus and its progeny have been
criticized by several courts. See, Weyerhaeuser Co. v. Western
Seas Shipping Co., 743 F.2d 635 (9th Cir.) cert. denied,
469 U.S. 1061, 105 S.Ct. 544, 83 L.Ed.2d 431 (1984); Ore & Chemical
Corp. v. Stinnes Interoil, Inc., 606 F. Supp. 1510 (S.D.N Y
1985). Those cases held that the court lacked the power to
compel consolidation since the express terms of the parties'
agreements did not provide for consolidation of related
arbitrations. However, Weyerhaeuser is not controlling
precedent and contrary to the reasoning in Ore & Chemical,
Nereus remains good law in this circuit. Moreover, nothing in
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct.
1238, 84 L.Ed.2d 158 (1985), overrules Nereus.
Having concluded that this Court has the power to Compel
consolidation, the question is whether consolidation is
permitted here. Consolidation is proper where there are common
questions of law or fact and a possibility of conflicting
awards or inconsistent results. Sociedad Anonimia v. Cia. de
Petroleos de Chile S.A., 634 F. Supp. 805, 809 (S.D.N.Y. 1986).
To defeat a motion for consolidation of arbitrations, a party
must show prejudice that is sufficiently substantial to
outweigh the advantages of deciding the dispute in a
consolidated proceeding. Sociedad Anonimia, 634 F. Supp. at 809;
See Insco Lines, Ltd. v. Cypromar Navigation Co., A.M.C. 2233,
2235 (S.D.N.Y. 1975).
In this case, there are common questions of law and fact in
the two arbitrations as well as a danger of conflicting
findings, particularly regarding the agreed temperature of the
cargo upon discharge. Additionally, access to information
regarding the factual disputes about the cargo delivery
temperature will be promoted by consolidated arbitration.
Sociedad Anonima v. Cia. de Petroleos de Chile S.A.,
634 F. Supp. 805, 809 (S.D.N.Y. 1986). Moreover, Hilton Oil has
failed to demonstrate that prejudice would result if the
arbitrations were consolidated. The Crux of Hilton Oil's claim
of prejudice, as argued in its papers and at oral argument, is
that unfair delay will result if the arbitrations are
consolidated. Hilton Oil, inter alia, has specifically
complained that such delay has been precipitated by CAP's
general nonresponsiveness and initial appointment of a
Spanish-speaking arbitrator, as well as anticipated resistance
by Rio Energy to nominate acceptable arbitrators in a prompt
manner. At oral argument however, CAP informed the Court that
they would consent to appointing an English-speaking
arbitrator. Counsel for CAP also assured the court that its
client would henceforth cooperate in any arbitration
proceedings. Additionally, Rio Energy agreed to permit the
court to name the arbitration panel if the parties failed to
resolve that matter.
For the reasons stated above, the petition to compel
consolidated arbitration is granted. The parties are directed
to select a panel. Should they fail to agree upon the
constitution of the panel within ten (10) days from the date of
this opinion the Court will entertain an appropriate motion
pursuant to 9 U.S.C. § 5.
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