United States District Court, Southern District of New York
February 29, 2000
LOUIS DREYFUS NEGOCE S.A., PETITIONER,
BLYSTAD SHIPPING & TRADING, INC., RESPONDENT.
The opinion of the court was delivered by: Scheindlin, District Judge.
OPINION AND ORDER
Petitioner Louis Dreyfus Negoce S.A. ("Dreyfus") moves this
Court, pursuant to the United States Arbitration Act,
9 U.S.C. § 1 et seq., and the Declaratory Judgment Act, 28 U.S.C. § 2201,
for an order: (1) declaring that the claim brought by respondent
Blystad Shipping & Trading Inc. ("Blystad") against Dreyfus is
not subject to arbitration in New York; (2) staying any further
proceedings in the pending New York arbitration; and (3)
enforcing a choice of law/choice of forum provision stipulating
that Blystad's claim must be brought in London. For the reasons
set forth below, Dreyfus' motion is denied.
On November 27, 1996, Blystad and Dreyfus entered into a tanker
voyage charter party (the "Charter"), providing for the carriage
of a shipment of crude degummed soyabean oil from the United
States to China. See Affidavit of Clifford A. Dahl, Assistant
Chartering Manager at Dreyfus ("Dahl Aff."), ¶ 2. Blystad was the
time charterer of a vessel known as the M.T. THORSFREDDY (the
"Vessel"), owned by Jahre Dahl Bergesen ("Bergesen"). See id.;
Affidavit of David Nourse, counsel for Dreyfus ("Nourse Aff."),
Ex. C. Dreyfus intended to sell the soyabean oil to Lief
Enterprise Pty Ltd. ("Lief"), which intended to sell it to Kaland
Limited ("Kaland"). See Nourse Aff., ¶¶ 2, 11.
The Charter provided that the Vessel would pick up the soyabean
oil at Brownsville, Texas, and New Orleans, Louisiana, and
discharge it at "One (1) safe berth each/One (1)/Two (2) safe
port(s) CHINA;" the Charter did not specify the discharge port in
China. See Dahl Aff., Ex. B, Cl. C. In December 1996, the
soyabean oil was loaded onto the Vessel at Brownsville and New
Orleans. See Dahl Aff., ¶¶ 8, 9; Nourse Aff., ¶ 4. Pursuant to
instructions received from Lief, tanker bills of lading providing
that the soyabean oil should be discharged at Qingdao, China,
were issued. See Nourse Aff., ¶ 4; Dahl Aff., ¶ 9, Exs. C, D.
On or about January 13, 1997, as the Vessel was approaching
China, Blystad advised that the Vessel was expected to arrive at
Qingdao on January 18, but that the original bills of lading had
not yet arrived. See Nourse Aff., ¶ 5; Dahl Aff., ¶ 12. Blystad
requested that Dreyfus arrange for a letter of indemnity from the
receivers of the soyabean oil, so that the Vessel might discharge
the soyabean oil on its arrival in Qingdao without waiting for
presentation of bills of lading. See id. Blystad provided
Dreyfus with a form letter of indemnity; Dreyfus forwarded this
form letter to Lief. See Nourse Aff., ¶ 5; Dahl Aff., ¶ 13.
On or about January 15, 1997, Lief advised Dreyfus that Kaland,
the ultimate buyer, had requested that the discharging port be
changed to Qin Huang Dao, China.
See Nourse Aff., ¶ 6; Dahl Aff., ¶ 13. The Charter contained a
provision specifically related to a change in the discharge port;
that provision states, in relevant part:
[T]he Charterer warrants that the cargo shall be
discharged at the ports and berths specified in Part
I. Any change in loading or discharging ports or
berths shall be made only as the result of special
agreement in writing between Charterer and Owner, and
in such case, Charterer shall assume all cost
incident to such change, including the value of the
vessel's time if the voyage is prolonged thereby.
Dahl Aff., Ex. B, Cl. 6(c). Dreyfus relayed Kaland's request to
Blystad and indicated that letters of indemnity regarding the
change of destination and the discharge of cargo without the
presentation of the original bills of lading would be issued by
both Lief and Dreyfus. See Nourse Aff., ¶ 6; Dahl Aff., ¶ 13.
Blystad advised Dreyfus that the Vessel's expected arrival date
in Qin Huang Dao was January 18 and requested that the letters of
indemnity be forwarded. See Nourse Aff., ¶ 6; Dahl Aff., ¶ 13.
On or about January 20, 1997, Dreyfus received two letters of
indemnity from Lief. See Nourse Aff., ¶ 7; Dahl Aff., ¶ 16.
These letters of indemnity were typed on Lief's letterhead,
signed on its behalf, and dated January 17 and 20, 1997; they
were in the form provided by Blystad and were addressed to
Blystad, as "owners," and Dreyfus, as "charterers." See Nourse
Aff., ¶ 7; Dahl Aff., ¶ 16, Ex. K. Dreyfus endorsed both letters
of indemnity by adding its name, address, and signature on the
second page of each letter and then superimposing a copy of the
text of the letters, thus endorsed, upon Dreyfus' letterhead.
See Nourse Aff., ¶ 8; Dahl Aff., ¶ 17, Ex. L. Dreyfus then
forwarded these endorsed letters of indemnity to Blystad, which
confirmed that the letters were in order and that the Vessel had
been instructed to discharge the soyabean oil without delay.
See Nourse Aff., ¶ 8; Dahl Aff., ¶ 18.
The letters of indemnity state, in relevant part:
In consideration of your complying with our above
request we hereby agree as follows:
1. To indemnify you, your servants and agents and to
hold all of you harmless in respect of any liability,
loss or damage of whatsoever nature which you may
sustain by reason of delivering the goods to China
Ocean Shipping Agency, Qin Huang Dao in accordance
with our request.
2. In the event of any proceedings being commenced
against you or any of your servants or agents in
connection with the delivery of the goods as
aforesaid, to provide you or them from time to time
with sufficient funds to defend the same.
3. If the vessel or any other vessel or property
belonging to you should be arrested or detained or if
the arrest or detention thereof should be threatened,
[in connection with the delivery of the goods as
aforesaid,] to provide such bail or other security as
may be required to prevent such arrest or detention
or to secure the release of such vessel or property
and to indemnify you in respect of any loss, damage
or expenses caused by such arrest or detention
whether or not the same may be justified.
4. As soon as all original Bills of Lading for the
above goods shall have arrived and/or come into our
possession, to produce and deliver the same to you
[or to your agents at Port of Discharge] whereupon
our liability hereunder shall cease [immediately].
5. The liability of each and every person under this
indemnity shall be joint and several and shall not be
conditional upon your proceeding first against any
person, whether or not such person is party to, or
liable under, this indemnity.
6. This indemnity shall be construed in accordance
with English Law and each and every person liable
under this indemnity
shall, at your request, submit to the jurisdiction of
the High Court of Justice of England.
Dahl Aff., Exs. K, L.*fn1
After discharging the soyabean oil at Qin Huang Dao, the Vessel
was arrested by order of the Tianjin Maritime Court. See Nourse
Aff., ¶ 9. The Vessel remained under arrest for about three
months. See id. Following its release, the Vessel discharged a
second parcel of soyabean oil at Shantou, China, and then left
China. See id.
B. Procedural History
On March 5, 1997, Blystad commenced an action against Dreyfus
and Lief in the High Court of Justice, Queens Bench Division,
Commercial Court, in London (the "London High Court"). See
Nourse Aff., ¶ 10; Unsworn Declaration Under Penalty of Perjury
of Stephen Kirkpatrick, counsel for Dreyfus in London
("Kirkpatrick Decl."), ¶ 2. In its Writ of Summons, Blystad
described its claim as follows:
The Plaintiffs' claim is for damages for breach of a
contract contained in and/or evidenced by a letter
from the Defendants to the Plaintiff dated 20th
January 1997 in failing to provide such bail or
security required to prevent the arrest of, and/or
secure the release from arrest of, the vessel
"THORSFREDDY" at Qing [sic] Huang Dao, China, in
January 1997, and/or for an indemnity pursuant to the
terms of the contract in respect of liability, loss
and damage suffered by the Plaintiffs as a result of
the arrest of the vessel and/or as a result of the
Plaintiffs complying with the Defendants' request for
the vessel to proceed to Qin Huang Dao (instead of
Qingdao) and/or the Defendants' request for cargo to
be delivered to Chua [sic] Ocean Shipping Agency,
and/or for specific performance of the contract.
Kirkpatrick Decl., Ex. A.
Little more than a week later, on March 13, 1997, Blystad sent
Dreyfus a letter demanding "arbitration of Blystad's claims for
breach of charter in connection with the discharge of a cargo of
soyabean oil at Qin Huang Dao, China," pursuant to the
arbitration clause contained in the Charter. See Nourse Aff., ¶
12, Ex. A. The Charter's arbitration clause states:
Any dispute arising from the making, performance or
termination of this Charter Party shall be settled in
New York, Owner and Charterer each appointing an
arbitrator, who shall be a merchant, broker or
individual experienced in the shipping business; the
two thus chosen, if they cannot agree, shall nominate
a third arbitrator who shall be an Admiralty lawyer.
Such arbitration shall be conducted in conformity
with the provisions and procedure of the United
States Arbitration Act, and a judgment of the Court
shall be entered upon any award made by said
arbitrator. Nothing in this clause shall be deemed to
waive Owner's right to lien on the cargo for freight,
dead freight or demurrage.
Dahl Aff., Ex. B, Cl. 31. The dispute between Dreyfus and Blystad
then proceeded along the parallel tracks of litigation in London
and arbitration in New York.
On or about March 18, 1997, Dreyfus appeared in the London High
Court to defend Blystad's claim; Lief appeared on April 18, 1997.
See Kirkpatrick Decl., ¶ 3. On April 18, 1997, Blystad served
its Points of Claim against both Dreyfus and Lief. See id. ¶
4.*fn2 In late May 1997, both Dreyfus and Lief served their
Points of Defence against Blystad; Dreyfus also
filed an indemnity claim against Lief. See id., ¶¶ 5-7; Nourse
Aff., ¶ 11. On or about June 20, 1997, Blystad served Voluntary
Particulars on Dreyfus and Lief. See Kirkpatrick Decl., ¶ 8. On
or about July 15, 1997, Lief filed an indemnity claim against
Kaland, which appeared to defend the claim on August 1, 1997.
See id., ¶ 9; Nourse Aff., ¶ 11. The London High Court action
is still pending. See Kirkpatrick Decl., ¶ 10; Nourse Aff., ¶
Back in New York, Blystad renewed its demand for arbitration on
November 18, 1997. See Nourse Aff., ¶ 13. On December 8, 1997,
Dreyfus responded to Blystad's renewed demand, appointing an
arbitrator but stating that the appointment was "without
prejudice to Dreyfus' position that the issues which Blystad
seeks to arbitrate in New York may be subject to the litigation
which Blystad has commenced" in the London High Court. See id.,
¶ 14. There have not been any proceedings in the New York
arbitration. See id., ¶ 15; Affidavit of Simon Harter, counsel
for Blystad ("Harter Aff."), ¶ 8.
Finally, on November 5, 1999, Dreyfus moved this Court for an
order: (1) declaring that Blystad's claim for indemnity against
Dreyfus is not subject to arbitration in New York; (2) staying
the arbitration between Dreyfus and Blystad in New York; and (3)
enforcing the choice of law/choice of forum clause contained in
the letters of indemnity. Blystad opposes this motion, arguing
that its claim against Dreyfus is subject to arbitration in New
The parties agree that the Charter contains a valid arbitration
clause. Their disagreement involves the scope of that clause and,
more specifically, whether the clause applies to the claims
asserted by Blystad. The Second Circuit Court of Appeals has laid
out some general principles for determining the scope of an
Federal arbitration policy respects arbitration
agreements as contracts that are enforceable in the
same way as any other contract. . . . Federal policy
strongly favors arbitration as an alternative dispute
resolution process. We are instructed that any doubts
concerning the scope of arbitrable issues should be
resolved in favor of arbitration. Accordingly,
federal policy requires us to construe arbitration
clauses as broadly as possible. We will compel
arbitration unless it may be said with positive
assurance that the arbitration clause is not
susceptible of an interpretation that covers the
These are rules of construction, however, and what we
construe is a contract. Accordingly, federal law does
not require parties to arbitrate when they have not
agreed to do so. Federal law simply requires courts
to enforce privately negotiated agreements to
arbitrate, like other contracts, in accordance with
Collins & Aikman Products Co. v. Building Systems, Inc.,
58 F.3d 16, 19-20 (2d Cir. 1995) (quotation marks and citations
In addition to these general principles, the Second Circuit has
provided a roadmap for analyzing whether Blystad's claims are
arbitrable. First, "a court should decide at the outset whether
the arbitration agreement is broad or narrow." Id. at 20
(quotation marks and citation omitted).
[I]f the arbitration clause is broad, there arises a
presumption of arbitrability; if, however, the
dispute is in respect of a matter that, on its face,
is clearly collateral to the contract, then a court
should test the presumption by reviewing the
allegations underlying the dispute and by asking
whether the claim alleged implicates issues of
or the parties' rights and obligations under it. If
the answer is yes, then the collateral dispute falls
within the scope of the arbitration agreement; claims
that present no question involving construction of
the contract, and no questions in respect of the
parties' rights and obligations under it, are beyond
the scope of the arbitration agreement.
Id. at 23. A court should apply the same test "[i]f an
arbitration clause is narrowly worded and the dispute concerns a
matter collateral to the contract calling for arbitration."
WorldCrisa Corp. v. Armstrong, 129 F.3d 71
, 74-75 (2d Cir.
A. Is the Charter's Arbitration Clause Broad or Narrow?
The Charter's arbitration clause covers "[a]ny dispute arising
from the making, performance or termination" of the Charter.
See Dahl Aff., Ex. B, Cl. 31. Dreyfus argues that the clause is
narrow; Blystad contends that it is broad. The Second Circuit has
explained that, in determining whether an arbitration clause is
broad or narrow, "[s]pecific words or phrases alone may not be
determinative although words of limitation would indicate a
narrower clause. The tone of the clause as a whole must be
considered." Prudential Lines, Inc. v. Exxon Corp.,
704 F.2d 59, 64 (2d Cir. 1983); see also McDonnell Douglas Finance Corp.
v. Pennsylvania Power & Light Co., 858 F.2d 825, 832 (2d Cir.
1988) ("In construing arbitration clauses, courts have at times
distinguished between `broad' clauses that purport to refer all
disputes arising out of a contract to arbitration and `narrow'
clauses that limit arbitration to specific types of disputes.").
The best approach in this case is the one taken by the Second
Circuit in WorldCrisa, where it explained:
The arbitration clause at issue here does not contain
the typically broad language that makes arbitrable
all disputes `arising out of or `related to' the
contract or its breach. On the other hand, the clause
is by no means narrow. It is not necessary to make
the nice determination of exactly where in the range
between broad and narrow this clause fits. The clause
is close enough to the `broad' end of the spectrum to
justify a presumption of arbitrability here.
Moreover, we believe that even without resort to the
presumption the current dispute falls within the
scope of the arbitration clause.
WorldCrisa Corp., 129 F.3d at 75; see also Rochdale Village,
Inc. v. Public Service Employees Union, 605 F.2d 1290
, 1296 (2d
Cir. 1979) ("The arbitration clause in the collective bargaining
agreement between Rochdale and the Union is broad, but it is not
unlimited."); Cleveland Wrecking Co. v. Iron Workers Local
Union, 947 F. Supp. 745, 748 (S.D.N.Y. 1996) (stating that
arbitration clause at issue was "broad, but not unlimited"). As
demonstrated below, it is not necessary to state unequivocally
whether the Charter's arbitration clause is broad or narrow,
because Blystad's claims fall within the scope of that clause,
even without the presumption of arbitrability.
B. Do Blystad's Claims Arise Under a Collateral Agreement?
Next, the Court must determine whether Blystad's claims arise
under the Charter itself or under a collateral agreement. This
determination involves two steps: (1) whether the letters of
indemnity are collateral agreements to the Charter; and (2)
whether Blystad's claims arise under the Charter or under the
letters of indemnity.
1. Are the letters of indemnity collateral agreements to the
The Second Circuit has explained the relevant inquiry:
A `collateral' agreement is a separate, side
agreement, connected with the principal contract
which contains the arbitration clause. The burden is
on the party resisting arbitration to demonstrate
that the disputed issue is collateral.
If a dispute arises under a collateral agreement,
arbitration of that dispute
cannot be compelled merely based upon the existence
of an arbitration clause in the main agreement.
It is important to note the difference between a
dispute arising under a collateral agreement and one
which arises under the main agreement but requires
determination of a sub-issue. The latter . . . is one
which is inextricably tied up with the merits of the
underlying dispute, . . . and is arbitrable.
Prudential Lines, 704 F.2d at 64 (quotation marks and citation
omitted). Dreyfus argues that the letters of indemnity are
collateral agreements, while Blystad contends that they are
inextricably tied up with issues raised by the Charter.
In Fairmont Shipping (H.K.), Ltd. v. Primary Industries
Corp., No. 86 Civ. 3668(SWK), 1988 WL 7805 (S.D.N.Y. Jan.25,
1988), aff'd, 940 F.2d 649 (2d Cir. 1991), Judge Kram ruled
that a letter of indemnity was a collateral agreement to a
charter party, because "[t]he charter party nowhere references
the letter of indemnity, nor does it require that a letter of
indemnity be issued." Id. at *4. The court then explained that
"[t]he present dispute [arising under the letter of indemnity] is
not a `sub-issue' of a dispute arising under the charter party,
but is instead a separate agreement, merely connected to the
charter party by reference." Id.; see also United Philippine
Lines, Inc. v. Metalsrussia Corp., No. 96 Civ. 8868(MBM), 1997
WL 214959, at *3 (S.D.N.Y. Apr.24, 1997) (parties conceded that
the letter of indemnity was "an agreement separate from the
charter party"); but see Metal Transport Corp. v. Compania
National Naviera, S.A., 268 F. Supp. 456, 458 (S.D.N.Y. 1965)
("While the Charter Party makes no direct reference to the
addendum or to the letter of indemnity, they were an integral
part of it and were intended to change the printed terms,
conditions and exceptions.").
Although Fairmont Shipping differs in some respects from this
case — most notably because the letter of indemnity and charter
at issue there involved different parties — its reasoning
nevertheless applies here.*fn4 The letters of indemnity at issue
here did not "explicitly incorporate [the Charter] or any of its
terms" and they were written after the Charter "had been
negotiated and signed." 1988 WL 7805, at *4. In addition, the
Charter does not "reference [a] letter of indemnity, nor does
it require that a letter of indemnity be issued." Id. Although
Blystad argues that the Charter does reference a letter of
indemnity, the clause identified by Blystad states that "[a]ny
change in loading or discharging ports or berths shall be made
only as the result of special agreement in writing between
Charterer and Owner." Dahl Aff., Ex. B, Cl. 6(c) (emphasis
added). Blystad also argues that the letters of indemnity are
inextricably interrelated to the Charter, citing two cases in
which courts ruled that, because a subsequent agreement merely
supplemented an original agreement, the arbitration clause
contained in the original agreement applied to the subsequent
agreement. See S.A. Mineracao Da Trindade-Samitri v. Utah
International, Inc., 745 F.2d 190, 195 (2d Cir. 1984); Vittoria
Corp. v. New York Hotel and Motel Trades Council, 30 F. Supp.2d 431,
436-37 (S.D.N.Y. 1998). In this case, however, the letters
of indemnity did not supplement or restate the Charter.
Consequently, the letters of indemnity are "separate, side
agreement[s]," see Prudential Lines, 704 F.2d at 64, that are
collateral agreements to the Charter.
2. Do Blystad's claims arise under the Charter or the letters
Having determined that the letters of indemnity are collateral
agreements to the
Charter, the Court now must determine under which document
Blystad's claims against Dreyfus arise. This question is
complicated by the fact that Blystad has asserted claims under
both the Charter and the letters of indemnity. In its demand for
arbitration, Blystad stated that its claims were "for breach of
charter in connection with a discharge of a cargo of soyabean oil
at Qin Huang Dao, China" and that those claims "include, without
limitation, compensation for the damages it has suffered
directly, and an indemnity for any and all liability it has or
may suffer to third parties, as a result of Dreyfus' breach."
See Nourse Aff., Ex. A. In addition, Blystad's Memorandum of
Law identifies a number of Charter provisions under which it
could state claims against Dreyfus. See Opp. Mem. at 19-20. On
the other hand, Blystad's claim in the London proceeding is
limited to a claim under the letters of indemnity. See
Kirkpatrick Decl., Ex. A. (describing claim as "breach of a
contract contained in and/or evidenced by" the letters of
To determine whether Blystad's claims arise under the Charter —
and therefore are arbitrable — the Court must "review the
allegations underlying the dispute and [ask] whether the claim
alleged implicates issues of contract construction or the
parties' rights and obligations under it." Collins & Aikman, 58
F.3d at 23. Put another way:
In determining whether a particular claim falls
within the scope of the parties' arbitration
agreement, we focus on the factual allegations in the
complaint rather than the legal causes of action
asserted. If the allegations underlying the claims
`touch matters' covered by the parties' [agreement
containing an arbitration clause], then those claims
must be arbitrated, whatever the legal labels
attached to them.
Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840
, 846 (2d Cir.
1987) (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614
, 624 n. 13, 105 S.Ct.
3346, 87 L.Ed.2d 444 (1985)); see also WorldCrisa Corp., 129
F.3d at 74-75 (applying both Collins & Aikman and Genesco
standards to determine whether a particular claim fell within the
scope of an arbitration clause). Accordingly, the Court will look
beyond the legal labels attached to Blystad's claims in order to
determine whether they arise under the Charter.
Blystad has identified a number of Charter provisions under
which it alleges that its claims arise. See Opp. Mem. at 19-20.
Many of these clauses have no counterpart in the letters of
indemnity, as illustrated by these three examples:
7. PUMPING IN AND OUT. HOSES. (a) The cargo shall be
pumped into the Vessel at the expense, risk and peril
of the Charterer, and shall be pumped out of the
Vessel at the expense of the Vessel, but at the risk
and peril of the Vessel only so far as the Vessel's
permanent hose connections, where delivery of the
cargo shall be taken by the Charterer or consignee.
The Vessel shall furnish her pumps and the necessary
steam for discharging in all ports where the
regulations permit of fire on board, as well as
necessary hands. Should regulations not permit of
fire on board, the Charterer or consignee shall
supply, at its expense, all steam necessary for
discharging as well as loading, but the Owner shall
pay for steam supplied to the Vessel for all other
purposes. If cargo is loaded from lighters, the
Vessel, if permitted to have fires on board, shall,
if required, furnish steam to lighters at Charterer's
expense for pumping cargo into the Vessel.
(h) Unless notation or exception is made in writing
on the bill of lading, or other shipping document
before departure of the Vessel from the dock or place
at which the said cargo is delivered, receipt of the
cargo shall be deemed prima facie evidence of right
delivery of the entire cargo as described in the bill
of lading; further, that upon failure or refusal by
the Charterer or its representative to execute or
except to the ullage reports
prepared by the Vessel, the figures stated in said
ullage reports shall be deemed prima facie correct
and binding upon the parties hereto.
12. DUES, WHARFAGE, TAXES. The vessel shall be free
of any wharfage, dockage, quay dues or similar
charges at all loading and discharging ports.
Entrance and clearance fees whether measured by the
volume of cargo or not, towing and tag charges,
pilotage, dues, and other usual port charges on the
Vessel shall be paid by the Owner. All other dues,
taxes, assessments, and charges on the cargo shall be
paid by the Charterer including but not without
limitation any habilitation tax, Customs overtime,
taxes on freight at loading or discharging ports as
well as any unusual taxes, assessments or
governmental charges whether in effect at present or
whether imposed on the Vessel or freight in the
future and whether or not measured by the volume of
the cargo, shall be paid by the Charterer.
24. BILLS OF LADING. Bills of Lading in the form
appearing below for cargo shipped shall be signed by
the Master or Agent as requested. Any bill of lading
signed by the Master or Agent of the Owner shall be
without prejudice to the terms, conditions and
exceptions of this Charter and shall be subject to
all such terms, conditions and exceptions. The
Charterer shall indemnify the Owner, the Master, and
the Vessel from all consequences or liabilities that
may arise from the Charterer or its agents or the
Master or Vessel's agents signing bills of lading or
other documents inconsistent with this Charter or
from any irregularity in papers supplied by the
Charterer or its agents, or from complying with any
orders of the Charterer or its agents.
Dahl Aff., Ex. B; see Opp. Mem. at 19-20. At this stage in the
proceedings, I have no basis to conclude that the claims asserted
by Blystad in the arbitration do not arise under the Charter
provisions. Because these claims arise under the Charter, they
are arbitrable. See Dahl Aff., Ex. B, Cl. 31 (requiring
arbitration of "[a]ny dispute arising from the making,
performance or termination of this Charter Party").
Dreyfus does not contest the specific relevance of each of the
Charter provisions cited by Blystad. Rather, Dreyfus argues that
Blystad's claims cannot arise under the Charter because the bills
of lading fixed the place for delivery of the soyabean oil — and
therefore for performance of the Charter — as Qingdao. According
to Dreyfus, any claims stemming from the delivery of the soyabean
oil at Qin Huang Dao, rather than Qingdao, must arise under the
letters of indemnity.*fn5
Dreyfus' argument fails because the Charter explicitly
contemplates a change in the port of delivery, without any
mention that such a change will result in the termination of the
Charter. See Dahl Aff., Ex. B, Cl. 6(c) ("Any change in loading
or discharging ports or berths shall be made only as the result
of special agreement in writing between Charterer and Owner" and
that "Charterer shall assume all cost incident to such change,
including the value of the vessel's time if the voyage is
prolonged thereby."). The letters of indemnity indemnified
Blystad against any claims resulting from the delivery of the
goods to Qin Huang Dao; they did not erase Dreyfus' obligation to
properly perform its responsibilities under the Charter
itself, including the responsibilities asserted by Blystad in the
arbitration. In addition, Dreyfus admits that the letters of
indemnity are not novations that completely replaced the Charter.
See Reply Memorandum of Petitioner, Louis Dreyfus Negoce S.A.
("Reply Mem."), at 6 ("There is no issue of novation presented
because Dreyfus does not argue that the Charter was completely
displaced or `extinguished' by the letters of indemnity.").*fn6
Because Blystad has asserted claims under the Charter, Dreyfus'
request for a stay of the New York arbitration must be denied.
But Blystad also has asserted claims under the letters of
indemnity. The next question, then, is whether those claims also
are subject to arbitration, even though Blystad has asserted them
in the London High Court, because they implicate the parties'
rights and obligations under, or touch matters covered by, the
Charter. See Collins & Aikman, 58 F.3d at 23; Genesco, 815
F.2d at 846; see also Fluor Daniel Intercontinental, Inc. v.
General Electric Co., No. 98 Civ. 7181(WHP), 1999 WL 637236, at
*8 (S.D.N.Y. Aug.20, 1999) ("The phrase `touch matters' has been
interpreted to mean `arising in connection with.'") (citation
In the London High Court, Blystad seeks "an indemnity . . . in
respect of liability, loss and damage" suffered as a result of
the arrest of the Vessel and Blystad's compliance with Dreyfus'
request that the soyabean oil be delivered at Qin Huang Dao.
See Kirkpatrick Decl., Ex. A. At a minimum, that claim
implicates Clause 6(c) of the Charter, which provides that, in
case of any change in discharging port, "Charterer shall assume
all cost incident to such change, including the value of the
vessel's time if the voyage is prolonged thereby." Dahl Aff., Ex.
B, Cl. 6(c). In addition, several of Blystad's claims under the
Charter overlap significantly with its claims under the letters
of indemnity. See pp. 175-76 supra. For example, Blystad
claims that it will assert, in the arbitration proceeding,
"claims for an indemnity arising by operation of law as a result
of its following Dreyfus' orders to change the discharge port and
to deliver the cargo without presentation of original bills of
lading." Opp. Mem. at 20.
Blystad's asserted claims under the letters of indemnity
clearly touch matters covered by, and implicate the parties'
rights and obligations under, the Charter. See WorldCrisa
Corp., 129 F.3d at 75 ("The complaint in the Connecticut Action
relies on Armstrong's alleged failure to satisfy his obligations
. . . under the Agreement. Armstrong has a right to have issues
related to that claim decided in the pending arbitration."); see
also Doctor's Associates, Inc. v. Quinn, 42 F. Supp.2d 184, 187
(D.Conn. 1999) ("[I]t is hard to see how a court could . . .
forego any consideration of defendant's role as development agent
and his duties outlined in the DA Agreement [which contained an
arbitration clause] in resolving the dispute over the oral
agreement [which did not]."), aff'd, No. 99-7344,
205 F.3d 1322, 1999 WL 1254513 (2d Cir. Dec.9, 1999). Mindful of the
Second Circuit's guidance that a court should "compel arbitration
unless it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation that
covers the asserted dispute," Collins & Aikman, 58 F.3d at 19
(quotation marks and citations omitted), I conclude that all of
Blystad's claims against Dreyfus must be heard in the New York
arbitration. See Kerr-McGee Refining Corp. v. M/T Triumph,
924 F.2d 467, 470 (2d Cir. 1991) (RICO claim fell within scope of
charter party's arbitration clause because "[o]nce the parties
have agreed to arbitrate disputes arising under an agreement —
here the Charter — the arbitrators
should be able to consider any conduct of the parties that bears
on the damages appropriate for a covered dispute.").*fn7
C. Has Blystad waived the right to demand arbitration?
Finally, although Dreyfus does not argue explicitly that
Blystad has waived its right to demand arbitration by filing a
claim in London, Dreyfus does refer repeatedly to the London
proceeding. Accordingly, I will briefly address the question of
waiver. "Federal policy strongly favors arbitration as an
alternative means of dispute resolution. . . . This preference
for arbitration has led to its corollary that any doubts
concerning whether there has been a waiver are resolved in favor
of arbitration." PPG Industries, Inc. v. Webster Auto Parts
Inc., 128 F.3d 103, 107 (2d Cir. 1997) (quotation marks and
The Second Circuit has developed a clear standard for
determining when a party has waived its right to arbitration.
"[A] party waives its right to arbitration when it engages in
protracted litigation that prejudices the opposing party." Id.
at 107. A court should consider three factors in determining
whether a party has waived its right to demand arbitration: "(1)
the time elapsed from the commencement of litigation to the
request for arbitration, (2) the amount of litigation (including
any substantive motions and discovery), and (3) proof of
Blystad has not waived its right to demand arbitration. First,
Blystad made its first demand for arbitration one week after
filing its London claim. Second, there has not been extensive
discovery or motion practice in the London proceeding, although
Dreyfus notes that all relevant parties have appeared in the
London action. Third, Blystad has not demonstrated any prejudice
as a result of the London proceeding. See id. at 109 ("We have
held that sufficient prejudice to sustain a finding of waiver
exists when a party takes advantage of pre-trial discovery not
available in arbitration."); Cotton v. Slone, 4 F.3d 176, 179
(2d Cir. 1993) ("Sufficient prejudice to infer waiver has been
found when a party seeking to compel arbitration engages in
discovery procedures not available in arbitration, makes motions
going to the merits of an adversary's claims, or delays invoking
arbitration rights while the adversary incurs unnecessary delay
or expense.") (citations omitted). Although Dreyfus makes much of
the fact that Blystad initiated the London proceeding, even a
party that initiates litigation does not waive its right to
demand arbitration, absent a finding of prejudice. See Zwitserse
Maatschappij Van Levensverzekering En Lijfrente v. ABN
International Capital Markets Corp., 996 F.2d 1478, 1479 (2d
Cir. 1993) ("[A] party initiating judicial proceedings may waive
its right to arbitration . . . when [that] party has unfairly
used litigation prior to commencing arbitration in a way that
might prejudice the opposing party.") (citations omitted).
For the foregoing reasons, Dreyfus' motion for an order: (1)
declaring that the claim brought by Blystad against Dreyfus is
not subject to arbitration in New York; (2) staying any further
proceedings in the pending New York arbitration; and (3)
enforcing a choice of law/choice of forum provision stipulating
that Blystad's claim must be brought in London is DENIED. The
Clerk is directed to close this case.