The opinion of the court was delivered by: SIDNEY STEIN, District Judge
Hughes, Hooker & Co. and Hughes, Hooker (Correspondents) S.A.
(collectively, "Hughes Hooker") bring this action against the
American Steamship Owners Mutual Protection and Indemnity
Association (the "American Club"); its managing company, the
Shipowners Claims Bureau (the "Claims Bureau"); and its current
and former corporate officers, Joseph E.M. Hughes, Thomas J.
McGowan and Vincent J. Solarino, for damages for breach of
contract, fraud, tortious interference with contractual
relationship, and for an accounting. The gravamen of Hughes
Hooker's complaint is that the American Club failed to compensate
Hughes Hooker pursuant to a contract entered into in 1996 between
Hughes Hooker and the American Club, (the "Agreement"), and that
the American Club wrongfully terminated the Agreement in
The American Club moves for a stay of this action pending
arbitration in London, claiming a right to arbitration pursuant
to the arbitration clause in the Agreement. The remaining
defendants claim not to be parties to the Agreement, and also
move for a stay of the action pending arbitration. While Hughes
Hooker concedes the validity of the arbitration clause and the arbitrability of its claims against the American
Club, it nonetheless opposes the entry of a stay, arguing that
interests of justice and judicial economy require that this
litigation not be stayed. Hughes Hooker's primary objections are
to the American Club's choice of England as the forum for
arbitration, and to the stay of the action against the remaining
defendants. Hughes Hooker cross moves for limited pre-arbitration
discovery in the event that a stay is granted.
Because this Court finds that the arbitration clause is valid
and the claims asserted against the American Club are within the
scope of the arbitration clause, this proceeding must be stayed
as against the American Club. Also, because the arbitration
clause at issue unambiguously gives the American Club the right
to select the forum for the arbitration, the Court will enforce
the American Club's choice of forum. Moreover, the stay will
extend to the remaining defendants in the interests of fairness
and judicial economy. Finally, because Hughes Hooker has not
demonstrated that the requested pre-arbitration discovery is
necessary, Hughes Hooker's cross motion is denied.
Hughes, Hooker & Co was a specialist marine law and claims
handling firm based in London and in Piraeus, Greece; in Greece
it was known as Hughes, Hooker (Correspondents) S.A. (Am. Compl.
¶ 3). The American Club is a non-profit mutual insurance
association, which provides marine indemnity insurance to owners
and operators of merchant vessels.*fn1 (Affidavit of
Lawrence J. Bowles in Support of Defs.' Renewed Mots. for Orders
Staying this Action Pending Arb. in London, at ¶ 5). The American
Club is managed by the Shipowners Claims Bureau. (Id. ¶ 5).
Joseph Hughes is the Secretary of the American Club, and the Chairman and Chief Executive Officer of the Claims Bureau.
(Id.). Vincent Solarino serves as the President and Chief
Operating Officer of the Claims Bureau. (Id.). Thomas McGowan
was formerly the Chief Executive of the Claims Bureau and
Secretary of the American Club. (Id.).
According to Hughes Hooker, in 1995, the American Club sought
to expand internationally by enrolling new members among
shipowners in Greece. (Am. Compl. ¶ 9). To further that goal, the
American Club retained Jacek Bielecki, the original plaintiff in
this action, and his firm, Hughes Hooker, as its exclusive
representative in Greece. (Id. ¶¶ 3,9). In March 1996, Hughes
Hooker and the American Club entered a written agreement pursuant
to which Hughes Hooker would provide marketing services and act
as the American Club's general correspondent in Greece. (Id. ¶
11). The written agreement, dated March 25, 1996, is entitled an
"Agreement" between the Claims Bureau and the American Club on
one side and Hughes, Hooker & Co. and Hughes, Hooker
(Correspondents) S.A. on the other. (Agreement, at 2, attached at
pp. 1-3 of Ex. A to Original Compl., incorporated into Am. Compl.
at ¶ 11). The Agreement is signed only on behalf of the American
Club, Hughes, Hooker & Co., and Hughes, Hooker (Correspondents)
S.A. (Id.). The Agreement also sets forth a formula for
calculating Hughes Hooker's compensation, the duration of the
Agreement, and the procedure for its termination. (Id. ¶¶ 1,
3-4). Finally, the clause at issue here Clause 5 sets forth
the parties' agreement regarding dispute resolution as follows:
This Agreement is subject to American or English law
and jurisdiction either in arbitration, before a
single arbitrator, or before the regular courts, at
the option of the defending party.
(Id. ¶ 5). Pursuant to the Agreement, Hughes Hooker represented
the American Club in Greece from 1996 until late 1999. A number
of disputes arose during that period over the adequacy of the
American Club's disclosures on the premiums paid by new members
enrolled through Hughes Hooker's efforts and its commission
payments. The disputes culminated in the American Club's giving notice in September 1999
of its intention to terminate the Agreement as of December 1999.
That termination notice did not put an end to the parties'
disagreements. Instead, it triggered several rounds of disputes
over how to settle disputes relating to the parties' obligations
under the Agreement, as well as disputes over the American Club's
outstanding obligations to Hughes Hooker. After several
unsuccessful endeavors to settle their disputes, Bielecki
commenced an action against the American Club and the remaining
defendants on March 8, 2004 in this district. Approximately six
weeks thereafter, the American Club made its arbitration demand.
Hughes Hooker subsequently filed an amended complaint,
substituting Hughes, Hooker & Co. and Hughes, Hooker
(Correspondents) S.A. as plaintiffs, and the American Club again
moved for a stay of the action pending arbitration.
The pending cross motions present this Court with four
questions: first, whether the American Club is entitled to a stay
of this action; second, whether the Court should enforce the
American Club's selection of the forum for arbitration; third,
whether such a stay should extend to the other defendants; and
finally, whether this Court should grant Hughes Hooker's request
for pre-arbitration discovery. The Court addresses each in turn.
A. Staying an Action Pending Arbitration Pursuant to the
Federal Arbitration Act
In reviewing defendants' motion for a stay pending arbitration,
the Court is guided by a "federal policy [that] strongly favors
arbitration as an alternative dispute resolution process." David
L. Threlkeld & Co. v. Metallgesellschaft, Ltd., 923 F.2d 245,
248 (2d Cir. 1991) (citing Rodriguez de Quijas v.
Shearson/American Express, Inc., 490 U.S. 477, 109 S. Ct. 1917,
104 L. Ed. 2d 526 (1989) and Genesco, Inc. v. T. Kakiuchi &
Co., 815 F.2d 840, 844 (2d Cir. 1987)). Where there is a
question as to whether claims are arbitrable, federal arbitration policy requires that "any doubts . . . be resolved in
favor of arbitration." Moses H. Cone Memorial Hospital v.
Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927,
74 L. Ed. 2d 765 (1983); see also Louis Dreyfus Negoce, S.A.
v. Blystad Shipping & Trading Inc., 252 F.3d 218, 223 (2d Cir.
2001). This policy favoring arbitration "is even stronger in the
context of international business transactions." Threlkeld &
Co., 923 F.2d at 248 (citing Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 629-31, 105 S. Ct. 3346,
87 L. Ed. 2d 444 (1985)).
The American Club contends that a stay should be imposed
pursuant to section 3 of the Federal Arbitration Act, (the
"FAA"), 9 U.S.C. § 3, and alternatively that a stay is warranted
and its choice of arbitration forum should be enforced pursuant
to section 206 of the FAA, which implements the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards,
9 U.S.C. §§ 201 et seq. (the "Convention").
1. The Agreement Is Subject to the Convention
An agreement is subject to enforcement pursuant to the
Convention and the implementing provisions of the FAA if it meets
the following four requirements: "(1) there must be a written
agreement; (2) it must provide for arbitration in the territory
of a signatory of the convention; (3) the subject matter must be
commercial; and (4) it cannot be entirely domestic in scope."
Smith/Enron Cogeneration Ltd. P'ship v. Smith Cogeneration
Int'l, Inc., 198 F.3d 88, 92 (2d Cir. 1999); Credit Suisse
First Boston, LLC. v. Padilla, 326 F.Supp.2d 508, 511 (S.D.N.Y.
2004); see also 9 U.S.C. § 202. The Agreement at issue here
meets each of these four requirements: it is in writing, it
provides for arbitration in the territory of England or the
United States, both of which are signatories to the Convention,
and it involves an international commercial relationship. Where
an agreement meets each of these requirements, ...