The opinion of the court was delivered by: Berman, District Judge.
Plaintiffs contend that the Service Contract is not a contract
of carriage because, among other things, it relates to volume
commitments, service commitments, and rates. (Bloom Dec. ¶ 7.)
Thus, Plaintiffs argue that the terms and conditions of the
Service Contract do not apply to the lost (shrimp) cargo. (Bloom
Dec. ¶ 7.) Defendants assert that the Service Contract is clearly
applicable and governs the (shrimp) shipment at issue. (Defs.'
Reply Mem. at 5.)
The Court believes that the Service Contract encompasses
Eastern Fish's lost shrimp claim. Paragraph 1 in Appendix 1
states that "the terms of the Service Contract shall apply to
shipments by the Shipper of the commodities . . . hereto carried
by the Carrier," (Halaszynski Aff. Ex. 1 at 2), including, in the
Court's view, the cargo of shrimp that was never delivered.
"Arbitration should be ordered `unless it may be said with
positive assurance that the arbitration clause is not susceptible
of an interpretation that covers the asserted dispute.'" S.A.
Mineracao da Trindade-Samitri v. Utah Int'l, Inc.,
194 (2d Cir. 1984) (quoting Wire Service Guild v. United Press
, 260 (2d Cir. 1980) (quoting International
Ass'n of Machinists and Aerospace Workers, AFL-CIO v. General
, 1048 (2d Cir. 1969))); see also AT &
T Technologies, 475 U.S. at 650, 106 S.Ct. 1415 (1986).
Furthermore, courts consistently have construed the "arising out
of or relating to" language in arbitration clauses as all
encompassing. See Collins & Aikman Products Co. v. Building
, 8-9 (2d Cir. 1989) (clause providing for arbitration
of "any controversy `relating to'" a purchase and sale contract
broad enough to cover claims stemming for an alleged collateral
agreement to provide plaintiff with an exclusive
distributorship). In the present case, the Court concludes that
Service Contract clearly encompasses the non-shipment of frozen
B. Bill of Lading
As noted, Plaintiffs contend that arbitration is not
appropriate here because, under the terms of the (would be) bill
of lading, this Court has exclusive jurisdiction. (Pls.' Mem. at
2-3.) The Ecuadorian Line form bill of lading (Bloom Dec. ¶ 4),
as noted, includes the following clause in Paragraph 16:
Plaintiffs argue that the terms of the bill of lading should
govern — even though no bill of lading was ever issued and/or
executed for the lost shrimp — since, they contend, if the cargo
had arrived at the port of Guayaquil, a bill of lading would have
Defendants argue that the Service Contract, not
the bill of lading, is the controlling contract of carriage, and
even if the bill of lading had been issued, the terms of the
Service Contract — including the obligation to arbitrate — would
have been incorporated into the bill of lading. (Defs.' Reply
Mem. at 5-6.) Furthermore, Defendants contend that a bill of
lading would only be applicable to cargo which was actually
shipped. (Defs.' Reply Mem. at 6.) Thus, Defendants urge, the
bill of lading does not apply to the missing shrimp.
The Court believes the bill of lading forum selection
provision does not apply here for several reasons. First, the
Service Contract is compatible with (and may be said to
supersede) the bill of lading. The Service Contract may be
construed to provide that the jurisdictional clause contained in
the bill of lading would not govern this dispute even if a bill
of lading had been executed. Paragraph 7 of Appendix 1 to the
Service Contract provides:
The "except as otherwise expressly provided herein" language
indicates that where there is express language in the Service
Contract which conflicts with a bill of lading, the language of
the Service Contract controls. Thus, because the arbitration
clause is an express provision of the Service Contract, the
Service Contract would not be subject to contrary forum selection
terms and conditions of a bill of lading. In addition, Paragraph
7 of Appendix 2 to the Service Contract states specifically that
"all Bills of Lading must be claused `CARGO SHIPPED PURSUANT TO
SERVICE CONTRACT 97-35.'"
(Halaszynski Aff. Ex. 1 at 7.)
Second, a bill of lading for the lost container of shrimp was,
as noted, never issued presumably because the shrimp never
reached the port of Guayaquil (i.e., it was hijacked along the
way). Because it was never signed and executed, the bill of
lading is not enforceable. "Where the agreement takes the form of
a written instrument, the acceptance is effective only when the
document has been signed . . ." Antonucci v. Stevens Dodge,
Inc., 73 Misc.2d 173, 175, 340 N.Y.S.2d 979, 982 (1973).
Third, this is not a case where the party sought to be bound
(e.g. the consignee) had executed only the bill of lading and was
a "stranger" to the Service Contract. Here, Eastern Fish is a
party both to the Service Contract as well as to Ecuadorian
Line's (would be) bill of lading. (Bloom Aff. Exs. 1, 3;
Halaszynski Aff. Ex. 1 at 1.) Where, unlike this case, the
consignee is not a party to the service contract or charter
party, but only to the bill of lading, it may be appropriate that
the bill of lading become the contract of carriage and that its
terms control disputes between the consignee and the carrier.
See Cargill Inc. v. Golden Chariot MV, 31 F.3d 316, 318 (5th
Cir. 1994); Associated Metals & Minerals Corp. v. M/V VENTURE,
554 F. Supp. 281, 283 (E.D.La. 1983) (citing Chilean Nitrate
Sales Corp. v. the Nortuna, 128 F. Supp. 938 (S.D.N.Y. 1955)).
If, however, the bill of lading incorporates a provision of the
service contract or charter party, then that (incorporated)
provision may be binding on the third party (i.e., the "stranger"
to the Service Contract). See Progressive Casualty, 991 F.2d at
48; Import Export Steel Corp. v. Mississippi Valley Barge Line
Co., 351 F.2d 503, 505-506 (2d Cir. 1965); Son Shipping Co. v.
De Fosse & Tanghe, 199 F.2d 687, 688 (2d Cir. 1952). Here, among
other reasons, because Eastern Fish is both a party to the
Service Contract and the (would be) bill of lading, the bill of
lading "is a mere receipt as between the parties to the charter
and does not perform the additional function as a contract for
the carriage of goods." Nichimen Co. v. M.V. Farland,
462 F.2d 319, 328 (2d Cir. 1972).*fn7 Thus, the parties' relations here
are governed by the Service Contract.
Fourth, the cases cited by Plaintiffs (to support their
argument that although the bill of lading was never issued, "it
is well settled that, as long as a bill of lading would have been
issued in the ordinary course of business, the bill of lading
serves as a contract governing the relationship of a shipper and
carrier even if it was not actually issued," Ironfarmers Parts &
Equipment v. Compagnie Generale Maritime et Financiere, 1994 AMC
2915, 2917 (S.D.Ga. 1994)) are distinguishable. Plaintiffs' cited
cases do not involve express contractual conflict with bills of
lading. Also, the terms sought to be enforced and contained in
(non-issued) bills of lading (referred to in the cases Plaintiffs
cite) did not relate to the method of dispute resolution.*fn8
Plaintiffs' cited cases involve parties who had contracted for
(only) one shipment; they do not involve ongoing relationships
through service contract(s) as in the case at bar. Finally, the
cited cases involve cargo which had reached the sea
carriers' pier(s).*fn9 The frozen shrimp at bar never reached
the port in Ecuador.
C. Waiver of arbitration
Plaintiffs contend that Defendants have waived their right to
arbitration because Defendants have taken (extensive) steps in
furtherance of the instant litigation and also because Defendants
waited until approximately six months after the instant complaint
was filed to move the matter to arbitration. (Mazaroli Aff. ¶¶
2-7; Mazaroli Aff. Exs. 1-8.) Defendants argue that time delay
alone is not dispositive; and that Plaintiffs will suffer no
prejudice if the instant action is stayed or dismissed and
arbitration is pursued. (Defs.' Reply Mem. at 8-10.) The Court
agrees that Defendants have not waived arbitration.
Because there is a strong federal policy in favor arbitration,
a waiver of arbitration "is not to be lightly inferred." Rush v.
Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985) (quoting
Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 (2d Cir.
1968)). "The amount of litigation (usually exchanges of pleadings
and discovery), the time elapsed from the commencement of
litigation to the request for arbitration, and the proof of
prejudice are all factors to be considered. The proximity of a
trial date when arbitration is sought is also relevant."
Leadertex, Inc. v. Morganton Dyeing & Finishing Corp.,
67 F.3d 20, 25 (2d Cir. 1995); see also PPG Indus., Inc. v. Webster Auto
Parts Inc., 128 F.3d 103, 109 (2d Cir. 1997); Com-Tech Assocs.
v. Computer Assocs. Int'l. Inc., 938 F.2d 1574, 1576-77 (2d Cir.
1991). Resolving the issue of waiver is fact specific, and there
is no bright-line test. See Leadertex, 67 F.3d at 25.
Apart from the public policy against waiver, there are several
additional reasons why Defendants have not waived their right to
arbitration here. First, the amount of litigation has been
relatively minimal. The complaint and answer are essentially the
only pleadings that have been exchanged. Little discovery has
been conducted to date. While notices of deposition have been
served by both sides, no deposition(s) have been conducted.
(Defs.' Reply Mem. at p. 10, n. 1.)
A delay of six months, i.e., from April until October 1999,
before seeking to enforce the contractual arbitration clause,
does not in and of itself constitute waiver. No trial date had
been set by the Court when the motion to dismiss or stay this
action was made by Defendants — nor has one been set as of this
date. See In re S & R Company of Kingston v. Latona Trucking,
Inc., 159 F.3d 80, 83 (2d Cir. 1998) (Petitioners actively
participated in litigation for 15 months before seeking to invoke
their right to arbitrate on the eve of trial); Kramer v.
Hammond, 943 F.2d 176, 179 (2d Cir. 1991) (Four years passed
between the time plaintiff first brought suit and defendant
raised the arbitration issue, during which defendant engaged in
extensive pretrial litigation); Com-Tech, 938 F.2d at 1577-78
(Defendants participated in 18 months of litigation including
extensive discovery and only raised arbitration in motion for
judgment on pleadings four months before trial); Thyssen, Inc.
v. M/V Markos N, Et. Al., 1999 AMC 2515, 2525 (S.D.N.Y. 1999)
(Defendants waited 20 months after filing of the original
complaint before mentioning the arbitration clause in a motion).
Moreover, a delay in seeking arbitration does not usually
result in waiver unless it prejudices the opposing party. See
Com-Tech, 938 F.2d at 1576; Rush, 779 F.2d at 887; Sweater
Bee by Banff, Ltd. v. Manhattan Indus., Inc., 754 F.2d 457, 463
(2d Cir.), cert. denied, 474 U.S. 819, 106 S.Ct. 68, 88 L.Ed.2d
55 (1985). "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." Cotton v. Slone,
4 F.3d 176, 179 (2d Cir. 1993) (internal citations omitted); see also
PPG Indus., 128 F.3d at 109. There is no such prejudice here.
Plaintiffs were on notice that Defendants might seek arbitration
as soon as Defendants raised the arbitration issue in their
"AS AND FOR A TWENTIETH SEPARATE AND COMPLETE
AFFIRMATIVE DEFENSE TWENTY-THIRD: This Answer is made
without waiver of any jurisdictional defenses or
rights to arbitrate that may exist between the
parties." (Smith Aff. Ex. B at 6.)
The Court recognizes that Eastern Fish has incurred pre-trial
costs due to the instant litigation. "Pretrial expense and
delayunfortunately inherent in litigationwithout more, do not
constitute prejudice sufficient to support a finding of waiver."
Leadertex, 67 F.3d at 26; see also Rush, 779 F.2d at 887-88;
Hatzlachh Supply Inc. v. Moishe's Electronics, Inc.,
828 F. Supp. 178, 184 (S.D.N.Y. 1993). The burden of proving prejudice
rests on Plaintiffs, as the parties seeking to defeat
arbitration, see Marubeni v. M/V OHFU, 1996 AMC 1051, 1054,
1996 WL 84485 (S.D.N.Y. 1996), and they have not sufficiently met
Plaintiffs contend that Defendants' delay is prejudicial
because if arbitration is commenced, Defendants may argue that
Plaintiffs' claim is time-barred under COGSA,
46 U.S.C. § 1303(6), which provides that suit must be "brought within one
year after delivery of the goods or the date when the goods
should have been delivered," in this case May of 1998. This
argument is not persuasive. COGSA applies to claims governed by
bills of lading which, as noted, is not this case. (Bloom Decl.
Exs. 1, 3.) Even if COGSA were applicable and the demand for
arbitration were not made within the one-year limitation, it may
be argued that "there is, nevertheless, no time bar because
arbitration is not within the term `suit' as used in the
statute." Son Shipping, 199 F.2d at 689. "In short, where
parties have agreed to settle differences by arbitration, they
should not be denied access to that forum, regardless of COGSA's
one-year time-bar, provided they invoke arbitration within a
reasonable time after their differences have arisen. Thereafter,
it is for the arbitrators, not the court, to decide whether a
claim is time-barred by their agreement," Office of Supply,
Government of Republic of Korea v. New York Navigation Co.,
469 F.2d 377, 380 (2d Cir. 1972).
Also, it is well established that "once a court determines that
the parties agreed to arbitrate a dispute, then that dispute must
be submitted to the arbitrator." Thomas James Assoc. v.
Jameson, 102 F.3d 60, 68 (2d Cir. 1996) (quoting Local Union
No. 370 of the International Union of Operating Engineers v.
Morrison-Knudsen Co., 786 F.2d 1356, 1358 (9th Cir. 1986)). "It
is up to the arbitrators, not the court, to decide the validity
of time-bar defenses." See Shearson Lehman Hutton, Inc. v.
Wagoner, 944 F.2d 114, 121 (2d Cir. 1991); British Insurance
Company of Cayman v. Water Street Insurance Co., Ltd.,
93 F. Supp.2d 506, 521 (S.D.N.Y. 2000). "Once a court has answered
questions of arbitrability . . . the court must refrain from
deciding the validity of any asserted `defenses rather than
[referring] their resolution to any arbitrator.'" Thyssen Inc.,
1999 AMC at 2527.
For the reasons stated above, Defendants' motion [14-1] to
dismiss the proceedings pending arbitration is granted.*fn10
The parties are directed forthwith to proceed to arbitration.
The Clerk is respectfully directed to dismiss the case.