The opinion of the court was delivered by: SONIA SOTOMAYOR
Southern Petroleum questions whether this Court has the authority under § 4 of the Arbitration Act or Fed. R. Civ. P. 42(a) and 81(a)(3) to compel a consolidated arbitration of two separate agreements containing identical arbitration clauses that are silent about and do not incorporate any rules or laws addressing the issue of consolidation. This question has generated considerable disagreement among district and circuit courts. Despite a Second Circuit case suggesting a contrary conclusion, this Court joins in the reasoning of Judge David N. Edelstein in Ore & Chemical Corp. v. Stinnes Interoil, Inc. et al., 606 F. Supp. 1510 (S.D.N.Y. 1985), and concludes that it lacks authority to order consolidation under the circumstances of this case.
The general facts of this case are not disputed. Coastal owns two motor tankers, named the "SIBYL W" and the "ERIN T". Southern Petroleum "bareboat chartered" the SIBYL W and the ERIN T on March 27, 1989 and January 26, 1990, respectively. Except for the named tanker, the time-duration of the agreement, and the geographical area for the tanker's use, the charter agreements are boiler-plate copies containing identical arbitration clauses. The arbitration clauses state that:
Should any dispute arise between the Owners and the Charterer's [sic], the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them, shall be final and for the purpose of enforcing any award this agreement may be made a rule of the Court. The arbitrators shall be commercial men conversant with shipping matters.
Southern Petroleum subsequently sub-chartered the SIBYL W to Lineas Agromar Limitada, S.A., which in turn sub-chartered the tanker to a company owned by the Mexican government. The ERIN T was sub-chartered to Antilles Petroleum. Coastal has requested that any order compelling consolidated arbitration also include a compulsion that the sub-charter parties participate in the consolidated arbitration. Because of the sub-charters, the disputes between Coastal and Southern Petroleum may involve multiple parties potentially asserting defenses and counterclaims that run up and down two distinct and independent "vertical charter agreements."
The sub-charter parties were not named in the Petition and have not been joined in this proceeding, and the Court, therefor, will not address that portion of Coastal's request as it affects those parties.
Coastal contends that the commonality of law and facts between its two claims against Southern Petroleum requires this Court to exercise its discretion to compel the consolidated arbitration of the claims. Southern Petroleum concedes that it chartered the SIBYL W and the ERIN T, that it signed similar boiler-plate agreements containing identical arbitration clauses, and that it is compelled to arbitrate the separate claims raised by Coastal. It argues, however, that an order to consolidate the arbitration of separate claims would constitute an impermissible reformation of the parties' arbitration contracts and that a commonality of law and facts do not exist in this case warranting the Court's exercise of any discretionary power it may have.
In short, both parties agree that arbitration is proper; they clash, however, over the form the arbitration must take.
A summary of general arbitration principles places Coastal's motion to compel arbitration in the proper context.
Pursuant to the Federal Arbitration Act and following the lead of the Supreme Court in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983), federal courts have adopted a policy of actively enforcing private arbitration agreements. Although the Arbitration Act is interpreted liberally, see Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A. 527 F.2d 966, 975 (2d Cir. 1974), and doubts are resolved in favor of arbitration, see, e.g., United States Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 583, 80 S. Ct. 1347, 1353, 4 L. Ed. 2d 1409 (1960); David L. Threlkeld & Co., Inc. v. Metallgesellschaft Limited (London), 923 F.2d 245, 248 (2d Cir.), cert. dismissed U.S. , 112 S. Ct. 17, 115 L. Ed. 2d 1094 (1991), arbitration is strictly a matter of contract; therefore, a party can be compelled to arbitration only when it has agreed to do so. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S. Ct 1415, 1418, 89 L. Ed. 2d 648 (1986). Absent an explicit statement, see Old Dutch Farms, Inc. v. Milk Drivers & Dairy Employees Union, 359 F.2d 598, 603 (2d Cir. 1966), or conduct implying an agreement to arbitrate, see Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991), arbitration will not be compelled. Thus, a Court must first satisfy itself that the agreement to arbitrate is not at issue before compelling arbitration. Tehran-Berkeley Civil and Environmental Engineers v. Tippetts-Abbett-McCarthy-Stratton, 816 F.2d 864, 867 (2d Cir. 1987).
Neither Coastal nor Southern Petroleum dispute that valid agreements to arbitrate exist in this case. Southern Petroleum, however, questions this Court's power to order consolidated arbitration absent a specific agreement to that effect. It argues that consolidation of the disputes at issue would amount to a reformation of the contracts - an action not authorized by the Arbitration Act or the Rules of Civil ...