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U.S. TITAN, INC. v. GUANGZHOU ZHEN HUA SHIPPING CO

August 5, 1998

U.S. TITAN, INC., Petitioner, against GUANGZHOU ZHEN HUA SHIPPING CO., LTD., Respondent.

William C. Conner, Senior United States District Judge.


The opinion of the court was delivered by: CONNER

OPINION AND ORDER

Conner, Senior D.J.:

 This case is currently before the Court on petitioner U.S. Titan, Inc.'s ("Titan") motion for a summary determination of the making of a binding charter party agreement between Titan and respondent Guangzhou Zhen Hua Shipping Co., Ltd. ("Guangzhou"), and to compel arbitration on Titan's claim for breach of contract, pursuant to the Federal Arbitration Act (the "FAA"), 9 U.S.C. § 4. Guangzhou has cross-moved to dismiss the action for lack of jurisdiction and improper venue under Fed. R. Civ. P. 12(b)(1), 12(b)(2) and 12(b)(3), or alternatively, to stay the proceedings pursuant to 9 U.S.C. § 3 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 201 et seq. (the "Convention").

 For the reasons discussed below, the Court finds that the parties have entered into a binding charter party agreement that requires arbitration of their dispute; grants petitioner's motion to compel arbitration; and denies respondent's cross-motion to dismiss or stay the action. *fn1"

 BACKGROUND

 The facts, according to plaintiff, are as follows. Titan is a corporation organized under the laws of Texas, with its principal place of business in Pelham, New York. Guangzhou is a state-owned corporation organized under the law of the People's Republic of China, with its principal place of business in Canton, China. At all pertinent times, Guangzhou owned and operated the M/T BIN HE (the "BIN HE"), an ocean-going Chinese-flag tanker. *fn2"

 On or about August 22, 1995, the parties began negotiating a time charter *fn3" of the BIN HE, through their respective brokers -- Seagos Company, Inc. ("Seagos") of Stamford, Connecticut, on behalf of Guangzhou, and Seabrokers, Inc. ("Seabrokers"), also of Stamford, on behalf of Titan. The charter contained three "subjects," or conditions: (1) Titan's satisfactory inspection of the BIN HE; (2) the release of the vessel from its previous charterer, "Camaro"; and (3) the approval of the charter party by Titan's board of directors within three days of the board's receipt of the final inspection report. *fn4" (See Pet'r Exh. 29.) On September 22, 1995, Guangzhou offered to charter the BIN HE to Titan for 12 months at $ 15,250 per day, with an option for an additional twelve months at $ 15,750 per day. During the next few days, the parties negotiated different periods and rates, as well as several other terms. Ultimately, on September 26, Guangzhou responded with a "firm counter offer" as follows:

 
". . . Accept/Except:
 
Period - 6 mos. plus/minus 30 days at CHOPT
 
CHOPT next 12 mos. . . .
 
Rates - $ 15,250 first period
 
Optional $ 15,750 second period."

 (Pet'r Exh. 18.)

 That same day, Titan informed Seabrokers that "Charterers are in agreement and accept Owner[']s last offer." (Pet'r Exh. 19.) Seabrokers then sent Seagos a fixture telex "recapping Owners and Charterers' agreement." (Pet'r Exh. 1.) The agreement was based on the "Shelltime 4 Time Charter," a standard time charter, and contained the above subjects. (Id.) The Shell Time 4 Charter contained an arbitration clause, providing for arbitration in London, at the election of either party. (See Pet'r Exh. 4.)

 Thereafter, the BIN HE was dry-docked in Hong Kong and inspected by Denholm Ship Management (Overseas) Ltd. ("Denholm"). On October 19, Titan received Denholm's initial report. (Warfield Aff. P 16.) On October 23, Titan informed Seabrokers that it had concerns about the seaworthiness of the BIN HE, but that it was awaiting Denholm's final inspection report. (Id. P 18 & Exh. 30.) Then, on October 25, Titan informed Seabrokers that it had received the full Denholm report and that it had "lifted its inspection subject." (Pet'r Exh. 34.) It also stated that Titan "now looked to [the] Owners to lift their Camaro withdrawal subject . . . . [and that] the Titan board will make its decision within . . . three working days after the lifting of this subject per [the] 9/26 agreement." (Id.) On October 26, 1995, Seabrokers informed Titan that the BIN HE had been withdrawn from Camaro. (See Pet'r Exh. 20.) Titan thereupon replied that it would respond with board approval "by close of New York [business] Monday Oct. 30." On October 27, 1995, Titan notified Seabrokers that its board had approved the charter. (Pet'r Exh. 21.)

 Guangzhou presents a slightly different version of events. According to Guangzhou, Titan rejected the BIN HE by its October 23 telex, which informed Seagos that the vessels' machinery spaces were "in terrible condition," and that the vessel was not "up to an acceptable trading standard." (Chen Aff. P 10 & Exh. 5.) Seagos informed Seabrokers that in view of Titan's rejection of the vessel, the conditions to which the charter had been subject had failed to occur. (Id. P 10 & Exh. 6.)

 Additionally, Guangzhou maintains that on October 24, Seabrokers confirmed that Titan had rejected the vessel, and that the subjects had therefore failed. (Id. P 11 & Exh. 7.) Moreover, according to Guangzhou, on October 25, "Titan reversed its position and attempted to assert that the vessel had not failed the inspection." Guangzhou claims that it then terminated all negotiations with Titan. (Id. P 13 & Exh. 9.)

 On November 1, in a facsimile to Titan, Seagos suggested arbitration to resolve the dispute. (See id. PP 16-17 & Exh. 12.) Later that day, Titan proposed that the parties submit the matter "to three arbitrators in New York who would have 45 days . . . to issue a ruling on the threshold issue of whether the parties entered into a binding agreement on September 26 subject to conditions that were subsequently fulfilled." (Pet'r Exh. 39.) On November 2, Seagos responded that the "Shell Time 4 Camaro proforma is very clear on the simplified arbitration which has been agreed by U.S. Titan and is agreeable to Southern Shipping as well. There is no need for a separate arbitration agreement at all." (Pet'r Exh. 40.) *fn5" Titan then sent "formal written notice of Arbitration" to Seagos, advising it that arbitration was to follow "the Shell Time 4 clause 41(c) of Camaro/Titan Charter Party." (Pet'r Exh. 41.) On November 7, Titan sent a follow-up fax to Seagos, requesting confirmation that arbitration would be held under clause 41(c) of the charter party. (Pet'r Exh. 42.) Seagos replied, "London arbitration in accordance with Clause 41(c)." (Pet'r Exh. 43.) On November 9, Titan once again faxed Seagos, asking for confirmation that "arbitration proceedings in London are to [be] . . . in accordance with Clause 41(c) of the Shell Time 4 Guangzhou/Titan Proforma, which is based on the 'Camaro' Charter." (Pet'r Exh. 44.) Seagos replied that "both sides" had agreed to London arbitration "to ascertain whether there is a charter between Guangzhou . . . and . . . Titan." (Pet'r Exh. 45.) Titan then sent another fax to Seagos, stating that "arbitration in London is acceptable per the agreement." (Pet'r Exh. 46.)

 Following these exchanges, the parties attempted to select a London arbitrator. In one such communication, sent directly from Guangzhou to Seabrokers, Guangzhou reiterated that it had agreed to submit the matter to arbitration "pursuant to the Shell Time 4 Clause 41." (Resp. Exh. 18.) No agreement was reached as to the identity of the arbitrators.

 On February 7, 1996, Titan again wrote to Seagos. Among other things, the fax stated that Titan would "not agree to arbitration outside of the binding Titan/Guangzhou charter." (Pet'r Exh. 47 (emphasis in original).) Seagos did not reply. Instead, Titan received a fax from Guangzhou, which stated that Titan was "not allowed to be in breach of the "ad hoc" arbitration clause which is actually running." The fax also referred to an "alleged C/P." (Resp. Exh. 20.) Titan responded that since the parties could ...


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