United States District Court, S.D. New York
February 10, 2004.
RAPTURE SHIPPING, LTD., Plaintiff, -against- ALLAROUND FUEL TRADING B.V., CHEMOIL and CHEMOIL CORPORATION, Defendants
The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
ORDER & MEMORANDUM OPINION
Plaintiff Rapture Shipping Ltd. ("Rapture"), a Liberian corporation,
filed this action seeking to recover $1,048,483 in alleged property
damage and for punitive damages from Defendants Allround Fuel Trading
B.V. ("AFT") and Chemoil Corporation ("Chemoil").*fn1 This suit was
filed on January 31, 2003, after a similar action was dismissed in
December 2002 by the Rotterdam Court of First Instance (the "Rotterdam
Court"). Rapture alleges that defective marine diesel oil*fn2 delivered
by the defendants caused the breakdown of the M/V Monagas II's ("Monagas
II") auxiliary engines. Presently before the Court is a motion by the
defendants to compel arbitration and stay the action.
Through its agent, Oceanmaris Management Inc., Rapture contracted with
Praxis Energy Agents, S.A. ("Praxis") for the provision of marine fuel
oil to its vessel, the Monagas II. In order to fulfill its contract with
Rapture, Praxis entered into a bunker nomination contract with AFT and
AFT's parent company, Chemoil. Both the Oceanmaris/Rapture-Praxis and
Praxis-AFT/Chemoil contracts are dated November 12, 1999. The
Praxis-AFT/Chemoil bunker nomination lists Praxis as the buyer,
Chemoil/AFT as the seller and supplier and the Monagas II as the motor
vessel to receive the fuel. See Brennan Aff., Ex. 5. The
contract also states that Praxis was "[a]cting as contractual buyers and
in accordance with instructions received by purchaser M/V `Monagas II'
and owners." Id. In addition, the agreement set forth that the
bunker was being nominated in accordance with Chemoil/AFT's general terms
and conditions. Id.
On November 15, 1999, AFT/Chemoil sent, by facsimile, a bunker
confirmation to Praxis. The bunker confirmation reaffirmed that the sale
was based on Chemoil's standard terms and conditions for the sale of
marine fuel oil, and offered to provide a copy of those terms and
conditions if so requested. See Brennan Aff. Ex. 6. The bunker
confirmation established that [t]he fuel oil will be supplied with the
express recognition that procurement was authorized by the owner of the
vessel." Id. Finally, the bunker confirmation stated that
AFT/Chemoil would "assume that all parties agree to this confirmation
unless we are notified in writing within 24 hours." Id.
Although the Monagas II is listed as the vessel to receive the fuel,
Rapture is not a signatory or listed as a party to the Praxis-AFT/Chemoil
agreement. In fact, Rapture claims not have been aware of either the
Praxis-AFT/Chemoil agreement or the November 15, 1999 bunker
confirmation. See Lennon Aff. ¶ 5.
Rapture makes this claim despite the fact that the
Praxis-AFT/Chemoil agreement indicates that it was to be sent to Rapture
or its agent, Oceanmaris, as the end users of the fuel oil. See
Brennan Aff. Ex. 5.
On November 19, 1999, Chemoil delivered the bunkers to the Monagas II
while the vessel was docked in the Port of Rotterdam. Upon delivery of
the marine oil fuel, the Chief Engineer of the Monagas II signed a
receipt for the fuel. See Brennan Aff. Ex. 7. The receipt
signed by the Chief Engineer stated in plain terms that the fuel was
delivered "in accordance with Chemoil Corporation's Standard Terms and
Conditions of sale." Id. By signing the receipt, the Chief
Engineer declared that a copy of the Standard Terms and Conditions had
been provided and that he had the authority to bind the "vessel and her
Included among the "Standard Terms and Conditions of Sale of Marine
Fuel By Chemoil" is an arbitration provision. Article 12 of the Standard
Terms and Conditions state in pertinent part:
a) Any controversy or claim between Buyer and
Seller, or between Buyer and the fuel barge
contractor, relating solely to the quality or
quantity of marine fuels delivered or to be
delivered hereunder or to the sum payable for such
fuel shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the
American Arbitration Association.
Brennan Aff. Ex. 8.
On or about November 25, 1999, the Monagas II suffered a blackout.
Rapture alleges that the blackout was the result of a
breakdown of and damage to the Monagas II's engine equipment that
was caused by defective and unreasonably dangerous marine fuel oil
supplied by AFT and Chemoil at the Port of Rotterdam. See
Compl. ¶ 11. According to Rapture, the Monagas II was left powerless
and stranded during gale force weather conditions that necessitated the
procurement of salvage assistance. Id. at ¶ 12.
Initially, Rapture sued AFT for damages in the Court of First Instance
in Rotterdam, The Netherlands (the "Rotterdam action"). Rapture's claims
for relief were based both on theories of contract law and tort. Of
particular relevance, Rapture argued that AFT had acted as the selling
party toward Rapture and thereby created a contractual relationship
between the two parties. Among the defenses offered by AFT in opposition
to Rapture's claims was the proposition that the Rotterdam Court was not
the proper forum. AFT argued that the dispute belonged in arbitration.
AFT's argument was made in response to Rapture's contention that a
contractual relationship existed between Rapture and AFT.*fn3
By decision dated December 19, 2002, the Rotterdam Court
dismissed Rapture's claims. See Brennan Aff. Exs. 3, 4.
The Rotterdam Court assumed that, as Rapture suggested, a contractual
relationship was created. The court determined, however, that if a
contract had been formed it necessarily incorporated Chemoil's standard
terms and conditions of sale. As such, the arbitration clause included
therein applied and the Rotterdam Court was not a suitable forum for the
action. See Brennan Aff. Ex. 4. Not long after the Rotterdam
Court dismissed its action, Rapture brought suit in this Court.
Unlike the Rotterdam action in which Rapture sought damages based on
contract and tort law, the instant action is confined to claims of
product liability, negligence and fraud. Nonetheless, Rapture's claims
are based on the same incident and involve the same parties.*fn4
Furthermore, the primary affirmative defense raised that
arbitration should be compelled and the action stayed is
identical to the defense raised and litigated in the Rotterdam action.
The initial issue facing the Court, therefore, is what, if any, weight
should the Rotterdam Court's decision carry in this action. Not
surprisingly, the parties are of differing minds when it comes to
settling this issue. Rapture contends that the Rotterdam action has no
bearing on this Court,
whereas AFT/Chemoil believe the Rotterdam decision is entitled to
Whether a domestic court should recognize a judgment of a foreign court
is governed by the principles of comity. See Victrix S.S. Co. v.
Salen Dry Cargo A.B., 825 F.2d 709, 713 (2d Cir. 1987). The concept
of comity has a long and respected tradition within our legal system.
Commenting in 1895 on the importance of affording foreign judgments a
measure of respect, the Supreme Court explained,
`Comity,' in the legal sense, is neither a matter
of absolute obligation, on the one hand, nor mere
courtesy and good will, upon the other. But it is
the recognition which one nation allows within its
territory to the legislative, executive, or
judicial acts of another nation, having due regard
both to international duty and convenience, and to
the rights of its own citizens, or of other
persons who are under the protection of its laws.
Hilton v. Guyot, 159 U.S. 113
, 163-64 (1895).
"Under the principles of international comity, United States courts
ordinarily refuse to review acts of foreign governments and defer to
proceedings taking place in foreign countries, allowing those acts and
proceedings to have extraterritorial effect in the United States."
Pravin Banker Assocs., Ltd. v. Banco Popular Del Peru,
109 F.3d 850, 854 (2d Cir. 1997). The courts of this circuit have been
particularly consistent in practicing comity toward foreign judgments and
proceedings. See S.C. Chimexim S.A. v. Velco Enters. Ltd.,
36 F. Supp.2d 206, 211
(S.D.N.Y. 1999). Following the Supreme Court's holding in
Hilton v. Guyton, courts generally extend comity provided the
foreign court had proper jurisdiction and recognition of its judgment or
proceeding does not prejudice the rights of United States citizens or
violate domestic public policy. Victrix S.S., 825 F.2d at 713.
The importance of extending comity whenever these prerequisites have been
met has only increased as our economy has become increasingly global and
dependent upon international commerce. Affording foreign courts a measure
of deference brings a degree of predictability to international commerce
that is critical to a smooth functioning of business. See Roby v.
Corp. of Lloyd's, 996 F.2d 1353, 1362-63 (2d Cir. 1993).
This dispute is quintessentially one involving international commerce.
Thus, there exists a strong presumption in favor of honoring the
Rotterdam Court's determination that this is a matter to be decided in
arbitration. Rapture seems to believe that because the Rotterdam Court's
ruling was primarily in response to a contractual claim made by Rapture,
by simply restricting its claims in this Court to non-contract claims the
Rotterdam decision can be ignored.
As reluctant as district courts are to upset the decisions of other
courts of first instance, courts are even more loathe to do so when the
arguments smack of inconsistencies seemingly designed to game the system.
Consistent with this apprehension,
the concepts of estoppel, and in particular judicial estoppel, have
developed. "The doctrine of judicial estoppel prevents a party from
asserting a factual position in a legal proceeding that is contrary to a
position previously taken by [it] in a prior legal proceeding."
Bates v. Long Island R.R. Co., 997 F.2d 1028, 1037 (2d Cir.
1993). The somewhat simple purpose of judicial estoppel is to prevent the
integrity of the judicial system from being compromised. See
Bridgeway Corp. v. Citibank, 45 F. Supp.2d 276, 283 (S.D.N.Y.
1999), aff'd, 201 F.3d 134 (2000). More specifically, judicial
estoppel is invoked "as a means to `preserve the sanctity of the oath' or
to protect judicial integrity by avoiding the risk of inconsistent
results in two proceedings.'" Simon v. Safelite Glass Corp.,
128 F.3d 68, 71 (2d Cir. 1997) (quoting Bates. 997 F.2d at
In order for judicial estoppel to be invoked (1) the party against whom
judicial estoppel is to be asserted must have advanced an inconsistent
factual position in a prior proceeding, and (2) the prior inconsistent
position must have been adopted in some manner by the first court.
See Bridgeway Corp., 201 F.3d at 141; Axa Marine &
Aviation (UK) Ltd. v. Seajet Indus. Inc., 84 F.3d 622, 628 (2d Cir.
1996). AFT/Chemoil contends that important inconsistencies exist between
Rapture's claims in this Court and the arguments it made and factual
positions it adopted before the Rotterdam Court. The essence of
position is that Rapture argued before the Rotterdam Court that an
implied contract had been created between it and AFT that should be
rescinded based on AFT's breach. AFT/Chemoil do not believe Rapture
should now be able to claim that no such contract was ever created.
In reaching its decision, the Rotterdam Court stated, "[T]he
contractual claim of Rapture rests on the proposition that AFT acted as
the selling party [toward Rapture] and thus, in other words, has made a
purchasing agreement [with AFT]." Brennan Aff. Ex. 4, § 3.1. Although
Rapture contends that its contractual claim was merely one of many
arguments it raised in the Rotterdam action, it is plainly one that was
offered and seized upon by the court. In fact, the argument was critical
to Rapture's request to have the purchase agreement dissolved because
without this argument it would have no basis on which to make its demand.
By now arguing that AFT did not act as the selling party toward Rapture
and that there is no contractual relationship between it and AFT, Rapture
has staked out a position that is inconsistent with one it took in the
To simply have offered an argument that is inconsistent with the
position advanced before this Court is not enough, however, to warrant
the invocation of judicial estoppel. Rapture's claim in the Rotterdam
action must have been successful in some manner. See Bates, 997
F.2d at 038. Rapture contends that because the
Rotterdam Court refused to grant its request to have the contract
rescinded, its argument was not successful. This position is not entirely
accurate, however. By basing its ultimate conclusion on the premise that
a contractual relationship between Rapture and AFT existed, the Rotterdam
Court conferred a measure of success on Rapture's argument even if it did
not entirely endorse it. Although the final determination was not what
Rapture was hoping it would be, the reality is that the argument was
successful to the extent it was adopted by the Rotterdam Court as an
underlying premise of its decision.
Admittedly, this action is far from being a classic case for the
invocation of judicial estoppel. When this case is viewed with an eye
toward the principles and objectives underlying the creation and use of
the doctrine of judicial estoppel, however, it becomes apparent that
Rapture should not be permitted to deny the existence of a contractual
relationship between it and AFT/Chemoil. To allow Rapture to do so would
risk the possibility of creating the very situation judicial estoppel is
meant to avoid an inconsistent result that compromises the
integrity of the judicial system.
Although this case might otherwise present a close call as to whether
the doctrine of judicial estoppel should be applied, when considered in
combination with the strong presumption in favor of extending comity to
foreign courts in matters involving
international commerce the Court is convinced that the opinion of
the Rotterdam Court should be respected. Not only would upsetting the
Rotterdam Court's decision risk injecting inconsistency into the judicial
process, it would risk injecting the type of inconsistency into
international commerce that comity is designed to avoid. Add to the
equation the fact that Rapture is the party that brought the Rotterdam
action as the plaintiff, and that Rapture is now bound by that decision
does not engender any sympathy from this Court. For these reasons the
Court believes this action should be sent to arbitration.
Defendants' motion to compel arbitration and stay this action is hereby
granted. The clerk of the court is hereby ordered to transfer this action
to the suspense docket pending resolution of the arbitration proceedings.
The parties are hereby directed to keep the Court updated of any
developments as to the status of the arbitration that might require the
Court to return this matter to its active docket.