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HUGHES, HOOKER & CO. v. AMERICAN STEAMSHIP PROTECTION INC.

June 9, 2005.

HUGHES, HOOKER & CO. AND HUGHES, HOOKER (CORRESPONDENTS) S.A., Plaintiffs,
v.
AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, INC., SHIPOWNERS CLAIMS BUREAU, JOSEPH E.M. HUGHES, THOMAS J. McGOWAN, AND VINCENT J. SOLARINO, Defendants.



The opinion of the court was delivered by: SIDNEY STEIN, District Judge

OPINION & ORDER

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 September 1999.

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.

  I. BACKGROUND

  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.

  II. DISCUSSION

  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, ...


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