The opinion of the court was delivered by: William C. Conner, Senior District Judge.
Petitioner Sunoco Overseas, Inc., ("Sun") brings this action to
vacate the arbitration award rendered against Sun in favor of the
respondent, Texaco International Trader, Inc. ("Texaco"). Sun
seeks to vacate the Partial Final Award of the sole arbitrator
dated May 12, 1997 and the Final Award of the sole arbitrator
dated October 30, 1998, alleging that he violated the U.S.
Arbitration Act, 9 U.S.C. § 10, due to his evident partiality and
his manifest disregard of the law. Respondent Texaco submits a
cross-motion to confirm the arbitration award in accordance with
9 U.S.C. § 9. We deny Sun's motion to vacate the arbitrator's
award, and therefore grant Texaco's cross-motion to confirm the
Texaco and Sun entered into a sales contract on January 1, 1992
for a cargo of spray oil, Texaco agreeing to purchase 14,900
barrels of spray oil from Sun, to be delivered in September of
1995. The two companies had participated in a number of similar
agreements in the past, and the same standard contract was
repeatedly used in dealings between the parties.*fn2 Sun
confirmed that the oil would be available in late September 1995,
and Texaco set out to charter a suitable vessel. The contract
provided that Texaco was to elect a vessel for use in delivery of
the spray oil, and permitted Sun forty-eight hours after such
nomination to reject the vessel. Texaco then, through its
affiliated chartering organization, went into the market to seek
a suitable vessel. The vessel found was the M/T Proof Trader
("Proof Trader"). Upon nomination of the Proof Trader, Sun sent
Texaco a questionnaire to ascertain information about the ship.
Texaco filled out the questionnaire and timely returned it to
Sun. Sun received the answers and, apparently finding the
nominated ship acceptable, approved the use of the Proof Trader.
After receiving Sun's approval, Texaco chartered the Proof Trader
and dispatched it to Sun's terminal in Yabucoa, Puerto Rico to
pick up the spray oil.
The Proof Trader arrived in Yabucoa on September 26, 1995. Upon
inspecting the vessel, but after the forty-eight hour period for
rejection had lapsed, Sun concluded that it could not safely load
the spray oil onto the Proof Trader. Sun claimed that the vessel
was not compatible with the facilities at Yabucoa due to location
of the manifold on the ship, the rate at which the spray oil was
to be loaded onto the ship, and the type of hoses used for
lifting the oil. More specifically, Sun claimed that the spray
oil could not be safely loaded onto the vessel because the
manifold was too far aft. Further, Sun claimed that while spray
oil is normally loaded at the Yabucoa port at a minimum rate of
one thousand barrels per hour, the Proof Trader could only handle
a maximum of five hundred barrels per hour. The location of the
manifold, however, was clearly indicated in Texaco's responses to
the questionnaire prepared by Sun. Nonetheless, Sun decided that
the port and the vessel were incompatible, and Sun formally
rejected the Proof Trader on September 29, 1995.
Following the rejection, a dispute arose between the two
parties over who would bear the costs associated with the
rejection of the Proof Trader. Under the terms of the contract,
any dispute that arose under the contract was to be settled by an
arbitrator to be agreed upon by both parties. Sun and Texaco
agreed to use R. Glenn Bauer, an experienced maritime attorney
who had adjudicated approximately fifty similar cases, as the
sole arbitrator. Sun requested a bifurcated proceeding so that
the issues of liability and damages would be argued and decided
separately. The sole arbitrator granted this request.
The Partial Final Award, which decided the issue of liability,
was rendered on May 12, 1997 in favor of Texaco. The Final Award,
which determined the issue of damages, was issued on October 30,
1998. In the final award, Texaco was awarded $126,590.00 by the
sole arbitrator. This amount included $126,385.00 for the payment
to the owners of the Proof Trader to cancel the charter, and
$205.00 for the vessel's inspection fees.
I. Partiality of the Sole Arbitrator
Sun moves, pursuant to 9 U.S.C. § 10, to vacate the arbitration
award based upon the evident partiality of the sole arbitrator.
While evident partiality or corruption by the arbitrator is a
valid ground for vacating an arbitration award, there is a
high standard in order to prevail on such a claim.
9 U.S.C. § 10(a)(2). "Courts are reluctant to set aside an award based on a
claim of evident partiality, and will do so only if bias of the
arbitrator is direct and definite; mere speculation is not
enough." Sofia Shipping Co., Ltd. v. Amoco Transp. Co.,
628 F. Supp. 116, 119 (S.D.N.Y. 1986). In claiming partiality, Sun
asserts that there was an ex parte communication between the sole
arbitrator and Texaco. More specifically, Sun alleges that in a
phone conversation between employees for Sun and Texaco that
occurred prior to the arbitrator's October 30, 1998 decision as
to damages, a Texaco employee, John Kretlow, indicated that he
knew the approximate amount the arbitrator planned to award, and
this demonstrates that an ex parte communication had occurred.
Because this allegation amounts to "mere speculation" without any
showing of prejudice, we reject Sun's claim. Id.
First, we note that Sun has come forward with no direct
evidence that any ex parte communication occurred. Affidavits
from both of Texaco's attorneys as well as the sole arbitrator
strongly deny that any such ex parte communication took place.
Bauer Affidavit ¶ 2; Phillips Affidavit ¶ 2; Silberstein
Affidavit ¶ 2. In fact, the affidavit of John Kretlow, a new
Texaco employee responsible for tracking Texaco's outstanding
bills, makes clear that he simply made a mistake, and, not
realizing that the hearing was bifurcated, thought the amount of
damages had been determined, when in fact only liability had been
decided at that time. Kretlow Affidavit ¶ 2. As a result, he
simply called to find out when the money might be paid. Id.
This phone call, from a confused Texaco employee to a Sun
employee, forms the entire basis of Sun's claim that counsel for
Texaco had engaged in an unethical, ex parte communication with
the arbitrator. It is a speculative argument based upon mere
conjecture, and we will not vacate the arbitrator's decision
based upon such meager evidence.
Moreover, even were we to accept Sun's allegations as true,
Sun's allegation is simply that Texaco was notified before Sun as
to the approximate amount of the award. Thus, even if Sun's vague
assertions were proven, the purported ex parte communication most
likely resulted in no prejudice to Sun whatsoever. Despite Sun's
argument to the contrary, we will not vacate a lengthy and costly
arbitration process simply based on the "appearance of
impropriety," see Sun's Memorandum of Law at 5, as such a low
threshold would subvert the well established tradition of
according arbitration decisions substantial deference. Sun's
request that we adopt such a low standard ignores binding Second
Circuit precedent directly on point. See Morelite Constr. Corp.
v. New York City Dist. Council Carpenters Benefit Funds,
748 F.2d 79, 83-84 (2d Cir. 1984) (". . . . we read Section 10(b) as
requiring a showing of something more than the mere `appearance
of bias' to vacate an arbitration award").
Sun has also alleged that the sole arbitrator's former law firm
may have had some dealings with a company named Stena Bulk, Stena
Bulk and Texaco participated in a joint venture company called
StenTex, and this connection, alleges Sun, is sufficient to
establish evident partiality on the part of the sole arbitrator.
Sun, however, again fails to meet the high burden for proving
such a claim.