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United States District Court, S.D. New York

November 21, 2005.

M/T "BEFFEN," her engines, tackle, boiler, etc., in rem; and BRYGGEN SHIPPING AND TRADING A/S, in personam, Defendants.

The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge



Ibeto Petrochemical Industries, Ltd. ("Ibeto") filed suit against M/T Beffen ("Beffen") and Bryggen Shipping and Trading (collectively, "defendants") when base oil shipped by defendants from the United States to Nigeria in the Beffen allegedly arrived contaminated.*fn1 On March 4, 2005, plaintiff filed suit in this Court for breach of defendants' "duties to the plaintiff as common carrier by water for hire."*fn2 Plaintiff now moves for voluntary dismissal of this suit under Federal Rule of Civil Procedure 41 (a)(2).*fn3 Defendants oppose this motion and have filed a motion to dismiss or stay the suit in favor of arbitration in London and to enjoin plaintiff from pursuing the identical claim in Nigeria in a suit plaintiff filed on March 19, 2004.*fn4 In the alternative, defendants move for a declaration "limiting any recovery by plaintiff to $500 pursuant to the compulsorily applicable COGSA liability limitation."*fn5


  On February 6, 2004, the Beffen left the Port of Paulsboro, New Jersey carrying base oil on behalf of plaintiff.*fn6 The shipment was executed via a charter party fixture sent by email from defendants to plaintiff on December 31, 2003,*fn7 incorporating the contractual provisions of two other documents: the "Asbatankvoy" and "Chemlube" Terms.*fn8 When the Beffen arrived in Nigeria on March 5, 2004, the base oil was allegedly contaminated.*fn9 Plaintiff obtained a bond to secure the boat in Nigeria and notified defendants on March 4, 2005 that it was commencing arbitration;*fn10 plaintiff filed the instant suit in the Southern District of New York on the same day in order "to protect the time for suit."*fn11 On August 9, 2005, five months after plaintiff began arbitration proceedings in London, plaintiff notified defendants that it had closed the arbitration and intended to pursue litigation in Nigeria.*fn12 Plaintiff moved for a Rule 41 (a)(2) dismissal of the Complaint in this case on September 9, 2005.*fn13


  A. Arbitrability The determination of whether a dispute is arbitrable under the FAA comprises two questions: "(1) whether there exists a valid agreement to arbitrate at all under the contract in question . . . and if so, (2) whether the particular dispute sought to be arbitrated falls within the scope of the arbitration agreement."*fn14 To find a valid agreement to arbitrate, a court must apply the "generally accepted principles of contract law."*fn15 "[A] party is bound by the provisions of a contract that [it] signs, unless [it] can show special circumstances that would relieve [it] of such obligation."*fn16 It is well established that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to so submit."*fn17 A court should consider only "whether there was an objective agreement with respect to the entire contract."*fn18

  Because there is "a strong federal policy favoring arbitration . . . where [] the existence of an arbitration agreement is undisputed, doubts as to whether a claim falls within the scope of that agreement should be resolved in favor of arbitrability."*fn19 Thus, the Second Circuit has emphasized that

any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Accordingly, [f]ederal policy requires us to construe arbitration clauses as broadly as possible. We will compel arbitration unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.*fn20
However, although federal policy favors arbitration, it is a matter of consent under the FAA, and "a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit."*fn21

  The Second Circuit has established a three-part inquiry for determining whether a particular dispute falls within the scope of the arbitration agreement.*fn22 First, "a court should classify the particular clause as either broad or narrow."*fn23 Second, if the clause is narrow, "the court must determine whether the dispute is over an issue that `is on its face within the purview of the clause,' or over a collateral issue that is somehow connected to the main agreement that contains the arbitration clause."*fn24 "Where the arbitration clause is narrow, a collateral matter will generally be ruled beyond its purview."*fn25 Third, if the arbitration clause is broad, "there arises a presumption of arbitrability and arbitration of even a collateral matter will be ordered if the claim alleged implicates issues of contract construction or the parties' rights and obligations under it"*fn26 or "[i]f the allegations underlying the claims `touch matters' covered by the parties' agreements."*fn27 In making this determination, courts must "focus on the factual allegations in the complaint rather than the legal causes of action asserted."*fn28

  B. The Standard of Review for a Motion to Enjoin a Foreign Proceeding "It is beyond question that a federal court may enjoin a party before it from pursuing litigation in a foreign forum."*fn29 However, "principles of comity counsel that injunctions restraining foreign litigation be used sparingly and granted only with care and great restraint. That is because an anti-suit injunction, though directed at the litigants, effectively restricts the jurisdiction of the court of a foreign sovereign."*fn30

  When determining whether to enjoin a foreign action, a court should consider the relationship between the suit at bar and the suit in the foreign jurisdiction. "An anti-suit injunction against parallel litigation may be imposed only if: (A) the parties are the same in both matters, and (B) resolution of the case before the enjoining court is dispositive of the action to be enjoined."*fn31 If this threshold has been met, the court should also consider the following factors ("China Trade factors"):

(1) frustration of a policy in the enjoining forum; (2) the foreign action would be vexatious; (3) a threat to the issuing court's in rem or quasi in rem jurisdiction; (4) the proceedings in the other forum prejudice other equitable considerations; or (5) adjudication of the same issues in separate actions would result in delay, inconvenience, expense, inconsistency, or a race to judgment.*fn32
"A salient consideration in this case is that, given the federal policy favoring the liberal enforcement of arbitration clauses, an anti-suit injunction may be proper where a party initiates foreign proceedings in an attempt to sidestep arbitration."*fn33

  C. Rule 41(a)(2) and Voluntary Dismissal

  Generally, a plaintiff may voluntarily dismiss an action without a court order if it does so before defendant serves its answer, or if it enters into a stipulation of dismissal with all parties.*fn34 Here, however, defendants have answered the complaint and oppose plaintiff's motion to dismiss voluntarily. In such circumstances, "an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper."*fn35

  The court should permit a Rule 41 (a)(2) dismissal only when it will not prejudice the defendants.*fn36 "The general rule is settled for the federal tribunals that a plaintiff possesses the unqualified right to dismiss [its] complaint . . . unless some plain legal prejudice will result to the defendant other than the mere prospect of a second litigation upon the subject matter."*fn37 The exception to this rule is when a defendant has already gone through the effort of pleading counterclaims; when this occurs, defendant "may insist that the cause proceed to a decree."*fn38


  A. Plaintiff's Motion to Dismiss and Defendants' Motion to Dismiss or Stay and Compel Arbitration

  1. Plaintiff's Motion to Dismiss

  Plaintiff has moved for a voluntary dismissal pursuant to Rule 41(a)(2), which permits dismissal after service of defendants' answer with permission of the court.*fn39 Defendants contest this motion, arguing that because they have asserted counterclaims, Rule 41 (a)(2) no longer permits a voluntary dismissal without prejudice.*fn40 Defendants instead ask that the Court either dismiss the case with prejudice or issue a stay and compel arbitration.*fn41

  Defendants have pled several counterclaims in their Answer to plaintiff's Complaint: (1) a dismissal or stay of plaintiff's cause of action in favor of arbitration in London; (2) a declaration that plaintiff's recovery be limited to $500 pursuant to the Carriage of Goods by Sea Act ("COGSA");*fn42 and (3) an injunction against plaintiff's litigation in Nigeria.*fn43 The presence of these counterclaims weighs against granting plaintiff's motion to dismiss. Plaintiff disputes that a motion to compel arbitration can be viewed as a counterclaim, citing authority from the Ninth Circuit,*fn44 but motions to compel arbitration have routinely been considered proper counterclaims in this Circuit.*fn45

  Plaintiff's intent to litigate this matter in Nigeria also counsels against granting the voluntary dismissal.*fn46 Under Rule 41(a)(2), if this action is dismissed, defendants' counterclaims must be permitted to stand.*fn47 Permitting two litigations on the same issues, in this Court and in Nigeria, could result in inconsistent verdicts — "the very risk that the rules of interpleader were created to avoid."*fn48 Plaintiff's motion to dismiss under Rule 41(a)(2) is therefore denied.

  2. Defendants' Motion to Compel Arbitration

  Before considering defendants' motion to dismiss or stay this case in favor of arbitration, it is necessary first to determine whether there is an arbitration clause present that is binding on both parties. The Chemlube Terms state that "general average, arbitration [is] to be in London, English law to apply."*fn49 The terms of this charter party are invoked in the Charter Party Fixture sent from defendants to plaintiff via email.*fn50 Courts have generally viewed a charter party fixture sent by fax or telex as fully binding,*fn51 and it is no great leap to extend this consideration to fixtures sent by email. Because the parties are bound by the Charter Party Fixture, they are also bound by the Chemlube Terms it incorporates because "a clause in a charter party which provide[s] for arbitration of any and all differences and disputes of whatsoever nature arising out of this Charter [is] binding on parties to a bill of lading which incorporate[s] the charter party by reference."*fn52

  Because there is an arbitration clause binding on both parties, the next consideration is "whether the particular dispute sought to be arbitrated falls within the scope of the arbitration agreement."*fn53 The Chemlube Terms state that "general average" claims should be arbitrated, but it is difficult to determine if this language should be considered a broad or narrow mandate for arbitration.*fn54 In a case involving an arbitration clause with similar "general average" language, this Court determined that the clause should be read broadly, "particularly in light of a clear policy favoring arbitration agreements."*fn55 So given that the language of a "general average" arbitration clause should be read broadly, a claim for negligence falls within the scope of the Chemlube Terms arbitration agreement.

  For these reasons and because of the general federal policy favoring arbitration, arbitration must be compelled in this case. The only issue left to consider is whether to grant defendants' motion for a stay or their motion to dismiss this case. When making this determination, the Second Circuit urges district courts to consider the fact that

  a dismissal renders an order appealable under [9 U.S.C.A.] § 16(a)(3), while the granting of a stay is an unappealable interlocutory order under [9 U.S.C.A.] § 16(b). . . . Unnecessary delay of the arbitral process through appellate review is disfavored. . . . District courts should continue to be mindful of this liberal federal policy favoring arbitration agreements, when deciding whether to dismiss an action or instead to grant a stay.*fn56 In keeping with this instruction, "this court has held that once the opposing party has commenced suit upon any issue referable to arbitration under an agreement in writing for such arbitration a stay is mandatory."*fn57 Therefore, defendants' motion for a stay and to compel arbitration is granted.

  B. Motion to Limit Plaintiff's Recovery

  Defendants ask that, in the alternative to compelling arbitration, plaintiff's recovery be limited to $500,*fn58 as provided under COGSA.*fn59 Because defendants' motion to compel arbitration has been granted, it is not necessary to reach the issue of limiting plaintiff's recovery. While COGSA is contractually incorporated in the Asbatankvoy Terms,*fn60 under the Chemlube Terms the London arbitrator is to apply English law,*fn61 so it will be for the arbitrator to determine whether and to what extent to apply COGSA. Defendants' motion to limit plaintiff's recovery is therefore denied.

  C. Motion to Enjoin Nigerian Litigation

  Defendants also move to enjoin plaintiff's litigation in Nigeria. While this Court has the power to issue an anti-suit injunction, as noted earlier it should only do so if "(A) the parties are the same in both matters, and (B) resolution of the case before the enjoining court is dispositive of the action to be enjoined."*fn62 Both of these requirements are met in this case: the same parties are involved in both this case and in the Nigerian case,*fn63 and resolution of this case (through arbitration) will be dispositive of the Nigerian matter.

  Once these threshold considerations have been met, the Court must address the five China Trade factors quoted earlier. Several of these factors are applicable here. First, plaintiff's intention to pursue litigation in this foreign forum as an alternative to arbitration is a "salient consideration in this case . . . given the federal policy favoring the liberal enforcement of arbitration clauses."*fn64 Permitting the Nigerian litigation to continue may frustrate the general federal policy of promoting arbitration. Second, while pursuit of parallel cases is not prima facie evidence of vexatiousness,*fn65 the fact that the Nigerian court will not apply the principles of COGSA*fn66 may result in widely disparate results in these two actions. This potential disparity, and the race to judgment that it could provoke, weigh in favor of an anti-suit injunction. Third, equitable considerations involved, such as deterring forum shopping, also compel enjoining the foreign action. Fourth, it is likely that adjudication of the same issues in two separate actions would result in inconvenience, inconsistency, and a possible race to judgment. As discussed above, given that COGSA may be applicable in the London arbitration but not in the Nigerian action, the outcomes could be inconsistent. Also, because the witnesses and evidence in both actions would likely be the same, there could be considerable inconvenience in shuttling witnesses between the venues for these two actions. With regard to the last issue — threat to jurisdiction — neither action is strongly favored, as both courts have in personam jurisdiction over the parties. However, given that the four other China Trade factors are met, defendants' motion to enjoin the Nigerian action is granted.


  For the reasons set forth above, defendants' motions to stay this case, to compel arbitration, and to enjoin the Nigerian action are granted. Plaintiff's motion for voluntary dismissal under Rule 41 (a)(2) is denied, and defendants' motion to limit plaintiff's recovery is also denied. The Clerk of the Court is directed to close these motions [Docket #9 & #10].



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