had been exchanged between the parties as to what disputes should be arbitrated, Lexmar accepted Northern Tankers' demand and appointed an arbitrator, but reserved its right to contest the existence of the charter in the arbitration proceeding. See Keane Affid. at Ex. 3. Plaintiff, asserting that the arbitrators cannot resolve that issue, instituted this action seeking judicial resolution of that issue, and Lexmar moves to stay this action in favor of arbitration.
Whether a valid charter party has been formed is ordinarily for the court to decide, see Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987), unless the parties have expressly or impliedly agreed to submit that issue to the arbitrators. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960). Moreover, an agreement to submit that issue to the arbitrators may be implied from the conduct of the parties. See Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105 (2d Cir.), cert. denied, 116 L. Ed. 2d 248, 112 S. Ct. 305 (1991); Teamsters Local Union No. 764 v. J.H. Merritt & Co., 770 F.2d 40, 42 (3rd Cir. 1985); International Longshoremen's Ass'n v. Hanjin Container Lines, Ltd., 727 F. Supp. 818, 821 (S.D.N.Y. 1989).
Northern Tankers argues that the only issue submitted to the arbitrators and the only issue they have jurisdiction to decide is the amount of damages to which Northern Tankers is entitled as a consequence of Lexmar's non-performance of the charter.
Lexmar, while contesting the existence of the charter, asserts that plaintiff, by demanding arbitration of its damages claim, has also necessarily submitted to the arbitrators the threshold question of whether the parties entered into the charter party upon which the claim for damages rests.
The Court agrees with Lexmar's contention.
As would be the case in any contract action, part of the plaintiff's burden of proof in establishing a claim for damages for breach of the provisions of a charter party, is the existence of a valid and existing charter party which defendant has breached. See Nordic Bank PLC v. Trend Group, Ltd., 619 F. Supp. 542, 561 (S.D.N.Y. 1985); Stratton Group, Ltd. v. Sprayregen, 458 F. Supp. 1216, 1217 (S.D.N.Y. 1978). Therefore, when plaintiff demanded arbitration "for damages caused by [Lexmar's] non-performance of the charter," upon Lexmar's acceptance of that demand, the arbitrators were clearly empowered to decide that issue.
Plaintiff's reliance on Interocean Shipping Co. v. National Shipping & Trading Corp., 523 F.2d 527 (2d Cir. 1975), cert. denied, 423 U.S. 1054, 46 L. Ed. 2d 643, 96 S. Ct. 785 (1976), is misplaced. In Interocean, defendant refused to accept plaintiff's demand for arbitration. As a consequence, the Court was required to determine that a valid charter party was formed before it could compel arbitration. In the instant case, Lexmar accepted the arbitration demand and thus an agreement to arbitrate, separate and distinct from that contained in the charter party, was formed, which agreement, as noted above, necessarily encompassed the issue of whether a valid charter party existed.
Plaintiff further contends that no valid agreement to arbitrate was formed because defendant's purported acceptance was in reality a counter-offer to arbitrate the existence of the charter, which plaintiff never accepted.
This argument lacks merit, however, for the simple reason that plaintiff continued to insist on its right to arbitrate the damages issue, a claim necessarily inconsistent with its position that the arbitrators lacked the power to resolve the issue of whether a charter had been formed.
Pollux Marine Agencies, Inc. v. Louis Dreyfus Corp., 455 F. Supp. 211 (S.D.N.Y. 1978), relied on by plaintiff is also inapposite. In Pollux Marine, the court found that the parties did not intend to arbitrate a dispute as to the existence of the charter. Id. at 219. This Court has already found that the parties did in fact agree to arbitrate that issue in an agreement quite aside from the charter itself. Thus, there can be no issue here, as there was in Pollux Marine, as to whether the parties intended that the arbitration agreement set forth in the charter could be severed so as to permit arbitration of the issue of whether the charter party, in which it was set forth, was valid and existing.
Accordingly, for the reasons given above, defendant's motion to stay this action in favor of arbitration is granted.
It is SO ORDERED.
Dated: New York, New York
January 15, 1992
John E. Sprizzo
United States District Judge