Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

INDIAN HARBOR INSURANCE CO. v. GLOBAL TRANSPORT SYSTEM

April 15, 2002

INDIAN HARBOR INSURANCE COMPANY, PLAINTIFF,
V.
GLOBAL TRANSPORT SYSTEM, INC., DEFENDANT.



The opinion of the court was delivered by: Sweet, D.J.,

O P I N I O N

Defendant Global Transport System, Inc. ("Global") has moved to direct plaintiff Indian Harbor Insurance Company ("Indian Harbor") to proceed to arbitration in San Juan, Puerto Rico. Indian Harbor contends that this Court only has the authority to compel arbitration in this district.

For the reasons stated below, Indian Harbor's cross-motion is granted, and the parties are directed to proceed to arbitration in New York.

Prior Proceedings

The facts underlying this dispute are described in greater detail in Indian Harbor Ins. Co. v. Global Transport System, Inc., 2002 WL 435650 (S.D.N.Y. March 20, 2002), familiarity with which is presumed.

In Indian Harbor, this Court dismissed Indian Harbor's complaint and compelled the parties to arbitrate a dispute regarding whether Global's eleventh hour request to modify its insurance policy was successful. This Court did not specify where the arbitration was to take place, however, leading to the current controversy.

By letter dated March 27, 2002, Global moved to compel arbitration in San Juan, Puerto Rico. The policy that is the subject of this dispute contains a broad arbitration clause specifying that all matters are to be arbitrated in San Juan, Puerto Rico "unless otherwise agreed by the parties." Indian Harbor cross-moved by letter dated March 27, 2002, for the arbitration to take place in New York. The case was argued on April 10, 2002, and was considered fully submitted at that time.

DISCUSSION

The Court of Appeals for the Second Circuit has not yet decided how a district court should proceed when a suit pending before it involves an arbitration agreement which specifies that arbitration should take place outside the court's district.*fn1

Other circuits have responded in at least three ways in this situation. First, a district court may compel arbitration outside of its own district in the district specified in the arbitration agreement. Dupey-Busching General Agency, Inc. v. Ambassador Ins. Co., 524 F.2d 1275 (5th Cir. 1975) (interpreting Section 4 of the Federal Arbitration Act ("FAA") to empower the court to decide the issue of arbitrability and to compel arbitration outside of its district). Second, the district court may compel arbitration in its own district and ignore the contractual provision. Textile Unlimited, Inc. v. A. BMH & Co., 240 F.3d 781, 783 (9th Cir. 2001) (holding that FAA venue provisions are discretionary, not mandatory, and thus the FAA "does not require venue in the contractually-designated locale"); Continental Grain Co. v. Dant Russell, Inc., 118 F.2d 967 (9th Cir. 1941) (holding that district court can compel arbitration in its own district). Finally, the district court may lack the power to compel arbitration in any district and should either transfer the action to the contractually agreed-upon district or stay the proceedings pending resolution of the arbitration decision in the other district. Snyder v. Smith, 736 F.2d 409, 418-20 (7th Cir. 1984) (holding that where arbitration agreement contains a forum selection clause, only the district court in that forum can issue a § 4 order compelling arbitration); see also Roe v. Gray, 165 F. Supp.2d 1164, 1171 (D.Colo. 2001) (collecting cases and so holding).

This decision involves an interpretation of Section 4 of the Federal Arbitration Act ("FAA"). That section provides, in pertinent part, that

a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28 . . . for an order directing that such arbitration proceed in the manner provided for in the agreement. . . . The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed.

In construing the section, it is important to keep in mind that, as the Supreme Court has explained, the FAA's venue provisions are discretionary, not mandatory. Cortez Byrd Chips Inc. v. Bill Harbert Constr. Co., 529 U.S. 193, 194-96 (2000). They do not supplant the general venue provisions of 28 U.S.C. § 1391(a). Id. Further, although the Supreme Court was considering different provisions of the FAA, the logic equally applies to § 4. Textile Unlimited, 240 F.3d at 784-85 ("The language of the venue provision of § 4 is less restrictive than that of the provisions the Court found permissive in Cortez Byrd Chips.").

On its face, § 4 provides that venue is proper for an action to compel arbitration in "any United States district court which, save for such agreement, would have jurisdiction under Title 28." FAA § 4. In addition, the only restriction in § 4 is where the actual arbitration, rather than the action to compel arbitration, takes place: "The hearing and proceedings . . . shall be within the district in which the petition for an order directing such arbitration is filed." FAA § 4; see also Textile Unlimited, 240 F.3d at 785 ("[Section 4] does not require that the petition be filed where the contract specified that arbitration should occur.") (citing Continental Grain Co. v. Dant & Russell, 118 F.2d 967, 969 (9th Cir. 1941)). In addition, as the Honorable Leonard B. Sand pointed out, the language of § 4 still reflects the law in 1925 when "it was possible for a contract to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.