The opinion of the court was delivered by: Buchwald, District Judge.
This maritime action is brought by plaintiff Salim
Oleochemicals, Inc. ("Salim" or "plaintiff") against M/V
Shropshire ("Shropshire" or "the ship") in rem, Bibby
International Services (ION) Ltd. ("Bibby"), Langton Shipping
Ltd. ("Langton"), Botany Bay Parcel Tankers International
("Botany Bay"), and Botany Bay Management Services Pty. Ltd.
("Botany Management") (collectively "defendants"). Plaintiff sues
for $737,136.67 in damages, plus interest and costs, arising from
contamination to a liquid glycerine shipment. Pending before the
Court are three motions: (1) defendants' motion to compel
arbitration in London, (2) cross motions for summary judgment on
the issue of limitation of liability, and (3) plaintiff's motion
for sanctions against defense counsel. For the following reasons,
(1) defendants' motion to compel arbitration in London is
granted, (2) parties' cross motions for summary judgment are
dismissed in light of the arbitration order, and (3) plaintiff's
motion for sanctions is denied.
Salim filed this action on April 29, 1997. Pursuant to a demand
by plaintiffs, Langton had filed a letter of undertaking for the
Shropshire on November 25, 1996 and posted a $600,000 bond.
Defendants moved to stay the action pending arbitration in London
pursuant to the arbitration clause in the Contract as
incorporated in the Bill. Before the motion was fully briefed,
however, the parties consented to arbitration in London.
Defendants' counsel, J. Scott Provan, faxed a draft stipulation
to plaintiff's counsel, Harold Kingsley, on January 7, 1998.
Defendants' counsel included a cover note with the fax which read
in relevant part:
The draft stipulation attached read in relevant part:
"[T]he parties are directed to promptly institute
arbitration pursuant to Clause 16 of the Contract of
Affreigtment between Botany Bay Parcel Tankers and
Salim Oleochemicals Pte., Ltd., Dated November 7,
1995 as incorporated in the terms and conditions of
the Tanker Bill of Lading dated April 23, 1996 for
the carriage of the cargo of glycerine."
However, plaintiff's counsel returned a draft order on consent
for defendants' counsel's approval that differed from defendants'
proposed stipulation. The defendants' counsel made only two
substantive changes to plaintiff's proposed order, removing
language that stated that the parties disputed who was subject to
the arbitration clause but that the arbitrator would resolve this
issue. Both counsel signed the final version of the order on
consent which was "so ordered" by the Court on February 24, 1998.
The final order read:
"WHEREAS, defendants herein have moved for a stay
pending arbitration in London under contracts of
Affreightment dated November 7, 1995, between Botany
Bay Parcel Tankers International and Salim
Oleochemicals Pte Ltd., and the parties agree that
plaintiff and Botany Bay Parcel Tankers International
are subject to arbitrate thereunder, WHEREFORE, upon
the subscribed consents hereunder, this action is
Stayed, pending arbitration in London under the
Contract of Affreightment between Botany Bay Parcel
Tankers International and Salim Oleochemicals Pte
Lts., dated November 7, 1995."
However, when Salim (plaintiff herein, not Salim Pte) brought
the arbitration in London, it brought it only under the Contract,
not under the Bill. Defendants moved to have the matter dismissed
for lack of subject matter jurisdiction because Salim was not a
signatory to the Contract. However, Defendants first gave Salim
the opportunity to amend its claim to sue under the Bill. Salim
refused to do so. The London arbitrator thereafter dismissed the
case, ruling that Salim indeed was not a party to the Contract
and accordingly, that the arbitration tribunal had no subject
matter jurisdiction over its claim on the Contract.
Salim has now returned to this Court and seeks to have its
claims heard on the merits. Defendants move to compel Salim to
bring the action, under the Contract as incorporated in the Bill,
in a London arbitration.
To place the current motion in context it is helpful to
consider why plaintiff has been so eager to proceed exclusively
under the Contract rather than under the Bill which incorporated
the Contract. The likely reason becomes clear upon reading
Salim's motion to strike defendants' affirmative defense of
limitation of liability under 46 U.S.C. § 1304(5) ("§ 1304(5)")
of the Carriage of Goods by Sea Act ("COGSA"). If § 1304(5)
applies to the shipment, it would limit defendants' liability to
$500 per customary freight unit ("cfu"). The Bill provided:
"If this Bill of Lading is a document of title to
which the Carriage of Goods by Sea Act [applies] . .
. this Bill of Lading shall have effect subject to
the provisions of said Act or other similar
legislation, as the case may be, which shall be
deemed incorporate herein and nothing herein
contained shall be deemed a surrender by the carrier
of any of its rights or immunities . . . if any term
of this Bill of Lading is repugnant to the Said Act
. . . such terms shall be void to that extent but no
Thus, defendants could argue that COGSA and § 1304(5)'s $500/cfu
limitation applies if Salim sues under the Bill. In light of the
likely diminution in recovery if the limit applies, Salim's
efforts to avoid suing under the Bill become more comprehensible.
Our analysis of the present motion has two parts. First, we
must determine whether each defendant has a right to compel Salim
to arbitrate under the Bill. Second, for those parties who do
have a right to compel arbitration, we must decide whether Salim
can defeat that right on other grounds.
I. Basis of Right
Each defendant's right to compel Salim to arbitrate derives
from the Bill's incorporation of the Contract. The Supreme Court
has held that "arbitration is a matter of contract and a party
cannot be required to submit to arbitration any dispute which he
has not agreed to so submit." AT & T Tech., Inc. v.
Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct.
1415, 89 L.Ed.2d 648 (1986). Courts in this circuit have
regularly held that "[i]f a charter party's arbitration clause is
expressly incorporated into a bill of lading, nonsignatories of
the charter party who are linked to that bill through general
principles of contract or agency law may be bound," provided they
are put on actual or constructive notice of their arbitration
obligation. Continental U.K., Ltd. v. Anagel Confidence
Compania, 658 F. Supp. 809, 813 (S.D.N.Y. 1987); see Midland Tar
Distillers v. M/T Lotos, 362 F. Supp. 1311 (S.D.N.Y. 1973);
Lowry & Co. v. S.S. Nadir, 223 F. Supp. 871 (S.D.N.Y. 1963). In
the instant case, we find that the Bill fully incorporated the
entire Contract, including the arbitration clause. Indeed, the
Bill singled-out notice of the arbitration clause, stating that
"all terms whatsoever of the said Contract of
Affeightment/Charter Party including the arbitration clause
specified therein apply to and govern the rights of the parties
concerned in this shipment" (emphasis added). See Thyssen v. M/V
Markos, 1999 AMC 2515, 2520-21, 1999 WL 619634 (S.D.N.Y. 1999);
Amoco Overseas Co. v. S.T. Avenger, 387 F. Supp. 589, 593
(S.D.N.Y. 1975). In emphasizing the "parties [plural] concerned
in this shipment," the Bill shows the clear intent of all its
parties to be bound by arbitration.
However, it is not enough that the parties to the Bill wished
to be bound by the incorporated arbitration provision. Because
the right to arbitrate under the Bill is incorporated, not
independent, we must determine whether the parties' exercise of
it violates the arbitration clause's terms. Courts undertaking
this inquiry have "consistently drawn a distinction between an
arbitration clause specifically identifying the parties to which
it applies, and a broader form of arbitration clause which does
not restrict the parties." In re Southwind Shipping Co.,
709 F. Supp. 79, 82 (S.D.N.Y. 1989). For a charterparty's arbitration
clause to bind a party to a bill of lading who is not a
charterparty signatory, the clause must not only be incorporated
into the bill of lading, but also must contain "language . . .
broad enough to allow nonsignatories' disputes to be brought
within its terms." Lucky Metals Corp. v. M/V Ave, 1996 A.M.C.
265, 1995 WL 575195, at *2 (S.D.N.Y. 1995); see Son Shipping Co.
v. De Fosse & Tanghe, 199 F.2d 687, 688 (2d Cir. 1952).
Typically, "broad" arbitration clauses explicitly govern "all
disputes" arising under the charterparty. See, e.g., Son
Shipping Co., 199 F.2d 687 (2d Cir. 1952); Kaystone Chemical,
Inc. v. Bow-Sun, 1989 AMC 2976, 1989 WL 39498 (S.D.N.Y. Apr. 19,
Continental U.K. Ltd. v. Anagel Confidence Compania Naviera.
S.A., 658 F. Supp. 809, 814 (S.D.N.Y. 1987), (quoting Production
Steel Co. of Illinois v. S.S. Francois L.D., 294 F. Supp. 200,
201 (S.D.N.Y. 1968)); Midland Tar Distillers v. M/T Lotos,
362 F. Supp. 1311 (S.D.N.Y. 1973). In contrast, "a `narrow' clause,
which typically provides that disputes `between owners and
charterers' must be arbitrated; applies only to disputes between
the particular parties identified in the clause." Thysen v. M/V
Markos, 1999 WL 619634, 1999 AMC at 2520-21 (citing, inter
alia, Import Export Steel Corp. v. Mississippi Valley Barge Line
Co., 351 F.2d 503, 505-06 (2d Cir. 1965); Sohtorik Shipping &
Trading, Inc. v. Peter Cremer Befrachtungskontor, GMBH. & Co.,
502 F. Supp. 143, 144-45 (S.D.N.Y. 1980); Production Steel Co. of
Illinois v. S.S. Francois L.D., 294 F. Supp. 200, 201-02
(S.D.N.Y. 1968)). The issue of which defendants may compel
arbitration, therefore, turns on whether the arbitration clause
in the Contract is "narrow" or "broad."
The Contract's arbitration clause simply states: "Law General
average and charterparty arbitration to be conducted in London."
We have found no precedent involving an arbitration clause with
precisely this language and it does not fall neatly into either
of the two categories considered above — it neither declares
itself applicable to "any dispute" arising under the charterparty
nor does it explicitly limit itself to the owner and charterer.
However, by language (i.e., "charterparty arbitration") the
clause is more akin to the "broad" language arbitration
agreements than the "narrow." Furthermore, in light of the
Federal Arbitration Act's ("FAA"), 9 U.S.C. § 1 et. seq., clear
policy favoring arbitration agreements, the Supreme Court has
instructed that any doubts concerning arbitrability "should be
resolved in favor of arbitration, whether the problem at hand is
the construction of statutory language itself or an allegation of
waiver, delay, or a like defense to arbitrability." Moses H.
Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1,
24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Taking into account
this strong preference, where ambiguity exists the question is
whether the language is "broad enough to allow nonsignatories'
disputes to be brought within its terms," Lucky Metals, 1995 WL
575195, at *2, not whether the terms could be construed as narrow
enough to exclude them. See also Midland Tar, 362 F. Supp. at
1314, n. 3 (S.D.N.Y. 1973) (construing ambiguous arbitration
clause to be "broad" because, inter alia, federal law favors
arbitration). In the instant case, the arbitration clause simply
says that "charterparty," i.e. Contract, disputes shall be
arbitrated in London. Clearly, the clause's terms do not restrict
its application to specific parties or problems. In the absence
of any language elsewhere in the Contract indicating that this
clause should not cover all disputes arising from it, we find
that it is "broad" and may be exercised by nonsignatories, as
incorporated into the Bill.
Finally, we must ascertain whether plaintiff and each of the
defendants seeking to compel arbitration was a party to the Bill.
Botany Bay clearly may exercise the arbitration clause as it was
both a signatory to the Contract and the Bill. The Shropshire and
Langton (Shropshire's owner) are parties to the Bill and its
arbitration clause by evidence of the Master's signature on the
Bill. See Thyssen v. M/V Markos, 1999 WL 619634, 1999 AMC at
2523; Instituto Cubano de Estabilizacion del Azucar v. T/V
Golden West, 246 F.2d 802 (2d Cir. 1957) ("[W]hen the master
signed the bills of lading the vessel owner became liable in
personam, and the
vessel liable in rem, in the event there should be any failure in
the performance of the contract of carriage the bills of lading
evidenced"); Maize Bd. of the Republic of South Africa v. M/V
Courageous I, 685 F. Supp. 420, 421 (S.D.N.Y. 1988). Lastly,
Salim is bound as the holder in due course of the Bill, see
Thyssen, 1999 AMC at 2523 (citing Son Shipping, 199 F.2d at
688 (inferring that the holder of a bill of lading consents to
the terms of the charter when the bill incorporates the charter
party by reference); Amoco Oil Co. v. M/T Mary Ellen,
529 F. Supp. 227, 229 (S.D.N.Y. 1981); Midland Tar, 362 F. Supp. 1311,
1314 (S.D.N.Y. 1973)), and consignee of the goods. See
id. (citing Kaystone Chemical, 1989 WL 39498, at *4;
Kanematsu Corp. v. MV GRETCHEN W, Civ. No. 93-1437-SEPT., 1994
WL 774554, at *3 (D.Or. Sept. 27, 1994)). In sum, all of the
proper defendants have the right under the Bill to compel Salim
to arbitrate its claims against them in London.*fn3
II. Plaintiff's Challenges
Salim raises several arguments to defeat certain defendants'
arbitration rights. Many of these arguments mirror ones raised by
Thyssen (plaintiff) in Thyssen v. M/V Markos, 1999 AMC 2515, in
which Thyssen was represented by Salim's current counsel. Where
Judge Mukasey analyzed these arguments in depth and on facts
materially identical to ours, we do not feel the need to
recapitulate his well-reasoned analysis and will simply cite
Salim first argues that the Shropshire cannot exercise its
arbitration right because English arbitrators have no
jurisdiction over in rem claims and English law provides no
similar maritime lien for cargo damage. However, Langton's letter
of undertaking and later $600,000 bond moot this argument by
replacing the vessel as the res. See Mackensworth v. S.S.
American Merchant, 28 F.3d 246, 252 (2d Cir. 1994); Alyeska
Pipeline Serv. Co. v. The Vessel Bay Ridge, 703 F.2d 381, 384
(9th Cir. 1983), cert. dismissed, 467 U.S. 1247, 104 S.Ct.
3526, 82 L.Ed.2d 852 (1984) ("A plaintiff's lien for the claims
alleged against the vessel is transferred to the security
posted."); J.K. Welding Co. v. Gotham Marine Corp.,
47 F.2d 332, 334 (S.D.N.Y. 1931). The London arbitrator has jurisdiction
over the bond and, accordingly, may arbitrate Salim's claims
against the Shropshire.
Next, Salim contends that its claims against Bibby and Botany
Management lie in tort, not in contract under the Bill, and thus
are not subject to the Bill's arbitration clause. Specifically,
plaintiff seeks to bring its claims against Bibby and Botany
Management under negligence theories. In Thyssen, Judge Mukasey
rejected plaintiff's attempt to avoid an arbitration clause in a
bill of lading by casting the claim in tort. Consistent with
Second Circuit precedent, he found that the arbitrability of a
claim does not turn on the legal theory under which it its pled,
but on the claim's relationship to the subject matter of the
arbitration clause. See Thyssen, 1999 AMC at 2524 (citing
Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16,
20 (2d Cir.)) ("If allegations of the complaint `touch matters'
covered by the arbitration agreement, those claims must
be arbitrated, regardless of the legal labels attached to
them."); In re Spill by the Amoco Cadiz, 659 F.2d 789, 794 (7th
Cir. 1981) ("Whether a particular claim is arbitrable depends not
upon the characterization of the claim, but upon the relationship
of the claim to the subject matter of the arbitration clause.").
In the instant case, Salim's claims against Bibby and Botany
Management plainly are for damage to the cargo during it shipment
— precisely the subject matter and purpose of the Bill and its
arbitration clause. Salim cannot escape the Bill's arbitration
clause simply by couching the claim in tort instead of contract,
for "[w]ere the rule otherwise, a party could frustrate any
agreement to arbitrate simply by the manner in which it framed
its claims." In re Spill by the Amoco Cadiz, 659 F.2d at 794.
Finally, Salim argues that the Court's order on consent of
February 24, 1998 constitutes "the law of the case" and,
therefore, that defendant is precluded from re-litigating the
issue at this time. Salim misapprehends the basic meaning of the
"law of the case" doctrine. The law of the case is a
discretionary doctrine and "posits that where a court decides
upon a rule of law, that decision should continue to govern the
same issues in subsequent stages in the same case." Arizona v.
California, 460 U.S. 605, 618-19, 103 S.Ct. 1382, 75 L.Ed.2d 318
(1983). This Court made no decision upon a rule of law.
Defendant's motion to stay the complaint pending arbitration was
never fully briefed and this Court never issued any decision on
the merits. The February 24, 1998 order on consent embodied
nothing more than this Court's approval and ordering of the
parties' agreement. Moreover, were that order considered the law
of the case, it would make no difference. It was this Court's
understanding that the order anticipated Salim bringing its
claims under the Contract's arbitration clause as incorporated
into the Bill. Had we understood that the consent order was
designed to allow Salim to proceed in London against Botany Bay
under the Contract alone, we would never have signed it. Thus,
even if this Court's order on consent were a decision of law, it
would still be subject to the court's discretion and Salim would
find no relief from arbitrating in London.
For the foregoing reasons, defendants' motion to compel
arbitration in London is granted. The parties are hereby ordered
to proceed to arbitration in London pursuant to the arbitration
clause in the Contract, as incorporated into the Bill. The
parties' cross-motions for summary judgment on the issue of
limitation of liability are dismissed as the issue will be
resolved by the London arbitrator.
Plaintiff counsel's request for sanctions against defendant's
counsel is at a minimum surprising. Plaintiff's attempt to
arbitrate in London only under the Contract, when Salim was not a
party to the Contract, and subsequent refusal to amend its
petition to proceed under the Bill alone (and thus to undermine
the earlier consent to arbitrate), borders on abuse of the
judicial process. Furthermore, in opposing defendants' motion to
compel arbitration, plaintiffs' counsel has failed to cite key
adverse, if not controlling, precedent in Thyssen v. M/V
Markos, 1999 AMC 2515, a case of which plaintiff's counsel is
keenly aware having represented Thyssen in that action. In
contrast, defendant's position is, in our view, correct and
reasonable. Accordingly, plaintiff's motion for sanctions is
IT IS SO ORDERED.