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SUNOCO OVERSEAS v. TEXACO INTERN. TRADER

September 30, 1999

SUNOCO OVERSEAS, INC., PETITIONER,
v.
TEXACO INTERNATIONAL TRADER, INC., RESPONDENT.



The opinion of the court was delivered by: William C. Conner, Senior District Judge.

OPINION AND ORDER

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 award.*fn1

BACKGROUND

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.

DISCUSSION

I. Partiality of the Sole Arbitrator

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.

The sole arbitrator retired from his former law firm in 1994, and StenTex was not even incorporated until 1995. Bauer Affidavit ¶¶ 1, 8. Further, the arbitrator submitted a sworn statement to this Court attesting that he never worked on any Stena Bulk matters. Id. at ¶ 7. The mere fact that the sole arbitrator's former law firm represents a company that participated in a joint venture with Texaco does not establish evident partiality. Maritime law is a specialized field, and if arbitrators could be disqualified simply because their former law firm did work for a company that participated in a joint venture with one of the parties, even if that arbitrator did not work on the matter in any way, there would be no experienced arbitrators from whom to choose. Morelite, 748 F.2d at 83 ("For to disqualify any arbitrator who had professional dealings with one of the parties. . . . would make it impossible, in some circumstances, to find ...


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