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Wizard v. Lines

January 3, 2007


The opinion of the court was delivered by: Gerard E. Lynch, District Judge


Petitioner Travel Wizard, a travel agency based in California, moves to vacate an arbitral award granting damages for breach of contract to respondent Clipper Cruise Lines ("Clipper"), the owner of a cruise ship known as the Clipper Odyssey. Clipper, in turn, cross-moves to confirm the award and to vacate the stay of enforcement currently in place. Petitioner's motion will be denied, and respondent's cross-motion will be granted.


On June 12, 2001, Travel Wizard and Clipper entered into a charter party (i.e., a maritime contract) under which Travel Wizard agreed to lease 62 of the 64 cabins on the Clipper Odyssey for its travel customers. (Marion Aff. Ex. 3.) Travel Wizard planned to arrange a ten-day cruise to see a solar eclipse from the waters near Australia in November 2002.

At first, Travel Wizard received an encouraging response to its efforts to market the cruise. The terrorist attacks of September 11, 2001, however, sent a chill through the travel industry. Cancellations of cruises were particularly common. For months after September 11, not a single prospective passenger contracted with Travel Wizard for the eclipse cruise. (Marion Aff. Ex. 1 at 2.)

After the September 11 attacks, the parties three times agreed to delay the next payment due under the charter party. Each time, Travel Wizard failed to make the payment. On March 25, 2002, Clipper sent Travel Wizard a "notice of cancellation and withdrawal" purporting to cancel the charter party. Travel Wizard demanded arbitration. The parties continued negotiating for some time, but Clipper eventually decided to schedule a different itinerary for the Clipper Odyssey for the dates Travel Wizard had reserved. The alternate cruise took place in November and December of 2002 without an eclipse viewing. (Marion Aff. Ex. 1 at 3-4.)

Disagreeing over the amounts owed under the charter party, the parties presented their dispute to an arbitration panel, which on December 5, 2005, issued a unanimous award (Marion Aff. Ex. 1) (the "award") under which Clipper received $245,117.18 in unpaid charter hire and pre-award interest, as well as post-award interest at $6.75% commencing on January 1, 2006. The parties were required to bear their own costs and fees. (Id. at 9.)

On March 1, 2006, petitioner commenced an action by Order to Show Cause in New York State Supreme Court, seeking to vacate the award. The Supreme Court issued a temporary restraining order ("TRO") staying enforcement of the award, the accrual of post-award interest, and the payment of the arbitrators' fees by petitioner. (Marion Aff. Ex. 2.) On March 17, 2006, Clipper removed the action to federal court, where it filed its Answer and Counterclaim. The matters now pending before this Court are Travel Wizard's motion to confirm the arbitration award and Clipper's cross-motion to confirm the award and to vacate the stay of enforcement currently in place pursuant to 28 U.S.C. § 1450.*fn1


Petitioner asks the Court to vacate the award primarily on two bases: first, that at least one of the arbitrators was or appeared to be biased in favor of respondent; and second, that the award was flawed on its merits. Petitioner also argues as a threshold matter that respondent's opposition papers and cross-motion should be disregarded because they were not submitted in a timely manner.

I. Timeliness of Respondent's Opposition Papers and Cross Motion

Petitioner argues that respondent's opposition papers and cross-motion to confirm the arbitration award are untimely, and asks that they therefore be "rejected." (P. Mem. 4.) This action was originally brought in New York County Supreme Court, where an Order to Show Cause was executed by the court requiring opposition papers to be served by March 17, 2006. (Riker Aff. Ex. 3.) Respondent removed the case to federal court on March 16, 2006, and filed its answer on March 29, 2006. Respondent's opposition papers and cross-motion were filed on August 16, 2006. Petitioner argues, without citing authority, that "Respondent should have served its opposition/cross motion at the same time it served its Answer." (P. Mem. 4.)

A little less than a month after respondent's cross-motion was filed, the Second Circuit issued an opinion clarifying the filing obligations that follow the removal of a petition to vacate or confirm an arbitration award. See D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 107-09 (2d Cir. 2006). "Removed proceedings arrive in federal court in the procedural posture they had in state court." Id. at 108. Thus, when a motion or petition is removed before its return date, it arrives in federal court with its posture "unchanged: a motion with a return date." Id. Therefore, as in Blair, Clipper "should have responded in some fashion, e.g., by seeking an extension, arguing the merits, raising jurisdictional or venue objections, etc." Id.

The Second Circuit noted in Blair, however, that "given the prior dearth of caselaw on the treatment of removed petitions to confirm or vacate arbitration awards, the [respondents] are entitled to some slack." Id. The same is true here. Moreover, even where one party altogether fails to respond to a motion to vacate or confirm an award, the Second Circuit held, district courts should assess the merits of the record rather than entering a default judgment. Id. at 109-10. This suggests that it would be inappropriate to penalize respondent in the dramatic manner suggested by petitioner, that is, by disregarding respondent's arguments. Respondent's procedural mistake has not in any way undermined the Court's ability to assess the record. Moreover, "[n]othing in . . . the Civil Rules of the Southern District requires a court to "punish a party for noncompliance." Maggette v. Dalsheim, 709 F.2d 800, 802 (2d Cir. 1983). In light of the dearth of caselaw concerning removal procedure in arbitration cases noted by ...

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