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Ferrostaal, Inc. v. M/V Tupungato

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


October 1, 2004

FERROSTAAL, INC., PLAINTIFF,
v.
M/V TUPUNGATO, HER ENGINES, BOILERS, TACKLE, ETC., F.H. BERTLING REEDERE GMBH, BERTLING LOGISTICS POOL, ADMINISTRADORA DE NAVES HUMBOLDT LTDA, HANSEATIC SHIPPING CO., LTD, KOURIAN SHIPPING, INC., DEFENDANTS, F.H. BERTLING REEDERE GMBH AND BERTLING LOGISTICS POOL, M/V TUPUNGATO, AND TUPUNGATO SHIPPING, INC. THIRD-PARTY PLAINTIFFS,
v.
COMPANIA SUD AMERICANA DE VAPORES, S.A., THIRD-PARTY DEFENDANT, COMPANIA SUD AMERICANA DE VAPORES, S.A., SECOND THIRD-PARTY PLAINTIFF,
v.
ULTRABULK, S.A., PANAMA, SECOND THIRD-PARTY DEFENDANT.

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

MEMORANDUM OPINION

Second third-party defendant Ultrabulk, S.A. moves pursuant to 9 U.S.C. § 3 for an order staying the claims of second third party plaintiff Compania Sud Americana de Vapores, S.A. ("CSAV"). For the following reasons, the motion is granted.

This motion arises from an admiralty suit filed by Ferrostaal, Inc., which seeks recovery for damage to cargo carried on the M/V Tupungato from Huachipato to New Orleans. Ferrostaal named as defendants the vessel owners and charterers, among others. Two defendants then filed a third-party complaint against CSAV, the time charterer of the vessel. CSAV in turn impleaded Ultrabulk, the disponent owner of the vessel.

Ultrabulk moves to stay CSAV's claims on the ground that the charter party executed by CSAV and Ultrabulk which was in effect during the voyage in question requires the parties to resolve all disputes through arbitration. Specifically, Clause 30 of the charter party provides:

Any dispute arising out of or in connection with this Charter, including any question regarding its existence, validity or termination, which the Parties have failed to resolve amicably, shall be referred to and finally resolved by arbitration in London under the terms of the London Maritime Arbitrator's Association current at the time when the arbitration proceedings are commenced. Ultrabulk notes that the Federal Arbitration Act, 9 U.S.C. §§ 1-14, requires courts to stay claims when there is a valid arbitration agreement between the parties, see id. § 3.

CSAV offers two arguments in opposition to Ultrabulk's motion. First, CSAV contends that the arbitration clause quoted above is permissive, rather than mandatory. CSAV cites Hartford Fire Ins. Co. v. Novocargo USA, Inc., 156 F. Supp. 2d 372 (S.D.N.Y. 2002), for the proposition that the mere use of the word "shall" in an arbitration or forum selection clause, without language specifying venue or excluding jurisdiction elsewhere, is insufficient to demonstrate that the parties intended the provision to be mandatory, see id. at 375 (citing John Boutari and Son, Wines and Spirits, S.A. v. Attiki Importers and Distribs. Inc., 22 F.3d 51, 52 (2d Cir. 1994)).

This argument is unavailing. CSAV is correct that "[w]hen only jurisdiction is specified the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." Boutari, 22 F.3d at 52 (quoting Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 764 (9th Cir. 1989)) (alteration in original). But additional exclusive language is present here. Not only did the parties use the word "shall," which "[i]n common usage and understanding,... signifies a command," ASM Communications, Inc. v. Allen, 656 F. Supp. 838, 839 (S.D.N.Y. 1987), but they also used language which indicates that they intended London arbitration to be the sole means of resolving disputes, by stating that such disputes "shall be referred to and finally resolved by arbitration in London" (emphasis added). The clause does not include language which would permit the exercise of jurisdiction by another forum. See Baosteel Am. Inc. v. M/V Ocean Lord, 257 F. Supp. 2d 687, 689-90 (S.D.N.Y. 2003).

CSAV also argues that it may be deprived of its remedy against Ultrabulk if forced to arbitrate this dispute in London, because English courts have applied the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. App. §§ 1300-15, in ways which may bar CSAV's claims. Although COGSA does not apply to CSAV's claims against Ultrabulk, which are claims for contribution or indemnity, the charter executed by CSAV and Ultrabulk includes a clause which provides that COGSA rules shall apply to all bills of lading for cargo shipped either to or from the United States. CSAV points out that despite American courts' refusal to apply COGSA's one-year limitations period to indemnity claims, one English court interpreted COGSA as identical to the Hague-Visby Rules, and barred an indemnity claim brought more than one year after discharge of the cargo. See D/S A/S Idaho v. Peninsular and Oriental Steam Navigation Co. (The "Strathnewton"), 2 Lloyd's Rep. 296 (Q.B. 1982). CSAV fears that an English arbitration panel will apply Strathnewton on the basis of the incorporation into the charter of COGSA provisions, and bar CSAV's indemnity claims even though those claims will not be ripe until the claims against CSAV have been adjudicated or settled. Accordingly, CSAV contends that the arbitration clause should be nullified pursuant to the rules governing the enforceability of forum selection clauses, which provide that such clauses should not be enforced when doing so would deprive a party of its remedy. See, e.g., Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1363 (2d Cir. 1993).

CSAV is essentially objecting to the choice of location for the airing of disputes, rather than the choice of arbitration as the means of settling them. A party seeking to invalidate a forum selection clause bears the burden of demonstrating that "enforcement would be unreasonable and unjust." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). The charter party in question is based on a standard form, the New York Produce Exchange Time Charter. Ultrabulk and CSAV made numerous changes to the pre-printed form. Specifically, the parties crossed out Clause 17, which provides for arbitration in New York, and added Clause 30, which provides for arbitration in London. CSAV now seeks to be relieved of this specifically negotiated provision, based on a twenty-two-year-old decision by an English court which, CSAV omits to mention, was reversed on appeal. See D/S A/S Idaho v. Peninsular and Oriental Steam Navigation Co., (The "Strathnewton"), 1 Lloyd's Rep. 219 (C.A. 1982). CSAV has accordingly offered no evidence to show that a London arbitration panel might apply COGSA's one-year time bar to its claims.

CSAV also argues that English tribunals have narrowed the scope of COGSA's definition of "carrier," such that they might decline to view Ultrabulk as subject to liability. Ultrabulk points out that because COGSA does not deal with indemnity claims, CSAV has no reason to fear that an English arbitration panel will apply COGSA to its claims. In addition, Ultrabulk notes that Clause 82 of the charter party specifically allocates liability between charterer and owner for damage to cargo from problems such as unseaworthiness, improper stowage, and cargo handling. CSAV cites no authority which justifies its fear that an English arbitration panel would disregard the contribution formulae specifically negotiated by these parties in favor of an interpretation of COGSA which would relieve Ultrabulk of liability entirely. In Central National-Gottesman, Inc. v. M.V. "Gertrude Oldendorff", 204 F. Supp. 2d 675 (S.D.N.Y. 2002), the case CSAV cites in support of it argument, the court was concerned that a specific provision in the bill of lading would have insulated the party seeking arbitration from liability unless the London court adopted the expansive definition of "carrier" which had been widely adopted by courts in this district. See id. at 681. The party opposing arbitration in that case produced evidence that English tribunals would not adopt that expansive definition. See id. CSAV has pointed to no similar provision in this charter which would insulate Ultrabulk, and has provided no evidence that London arbitrators would relieve Ultrabulk of liability for the reason CSAV fears.

For the foregoing reasons, Ultrabulk's motion to stay CSAV's claims is granted.

SO ORDERED.

MIRIAM GOLDMAN CEDARBAUM United States District Judge

20041001

© 1992-2004 VersusLaw Inc.



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