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Transportes Coal Sea De Venezuela C.A. v. SMT Shipmanagement & Transport Ltd.

January 9, 2007


The opinion of the court was delivered by: Kenneth M. Karas, District Judge


Transportes Coal Sea de Venezuela ("TCSV") brings this action seeking vacatur of a July 28, 2005 arbitration award favoring SMT Shipmanagement & Transport Ltd. ("SMT"). SMT cross-petitions the Court to confirm the arbitration award and correct SMT's name which appears incorrectly as "Ship Management & Transport of Limassol" on both arbitration and court documents. For the reasons stated below, the petition to vacate the arbitration award is DENIED, and the cross-petition to confirm the award and to correct SMT's name as it appears on court and arbitration documents is GRANTED.

I. Background

In February 2001, SMT, a Cypriot commercial and technical ship management company, attempted to load coal destined for Somerset, Massachusetts onto the Somerset, a vessel under its control. (Petr.'s Mem. of Law ("Petr.'s Mem.") 2; Respt.'s Mem. of Law in Opp'n to Pet./Mot. to Vacate Award of Arbitrators ("Respt.'s Mem.") 2-3.) SMT employed TCSV, a Venezuelan coal barging company, to tow coal via barges to the Somerset, which lay in the waters of Lake Marcaibo, Venezuela. (Aff. of Rahul Wanchoo ¶ 4.) Equipment on the Somerset was then employed to transfer the coal from TCSV's barges onto the Somerset. (Verified Pet. to Vacate Arbitral Award ("Verified Pet.") ¶ 2.) During the coal transfer operation one of TCSV's barges, the TCSV-2, sank. (Petr.'s Mem. 2.) TCSV sought to hold the Somerset responsible for the TCSV-2's sinking and subsequently arrested the Somerset when it returned to Venezuela in April 2001. (Aff. of Paul E. O'Brien in Supp. of Pet. to Vacate Arbitration Award ("O'Brien Aff.") ¶ 11.)

SMT's underwriter, the Swedish Club, was responsible for insuring the Somerset. This included directing and paying for SMT's legal actions worldwide. (O'Brien Aff. ¶ 5; Petr.'s Mem. 2; Respt.'s Mem. 3.) Following the Somerset's arrest, the Swedish Club agreed to provide a guarantee of $1,100,000 on behalf of SMT and the Somerset in return for the Somerset's release. (Aff. of Rahul Wanchoo ¶ 4.) Additionally, SMT permitted the Swedish Club to execute an arbitration agreement on its behalf with respect to the sinking of the TCSV-2, providing that the arbitration would take place in New York and "be tried by three arbitrators or a single arbitrator if agreed amongst the parties." (O'Brien Aff. Ex. B; Aff. of Rahul Wanchoo Ex. A.) A letter to this effect appears to be the only memorialization of any arbitration agreement between TCSV and SMT or the Swedish Club. (Id.)

Each side appointed an arbitrator, with TCSV nominating Manfred Arnold ("Arbitrator Arnold") and SMT nominating Louis Sheinbaum ("Arbitrator Sheinbaum"). (Aff. of Mark C. Flavin ("Flavin Aff.") ¶ 4.) Arbitrator Arnold and Arbitrator Sheinbaum selected Raymond Burke, Jr. ("Arbitrator Burke") to serve as the third arbitrator. Following selection, each arbitrator affirmed in writing that he knew of nothing that could impair his "ability to render an unbiased award solely on the basis of the evidence presented." (O'Brien Aff. ¶ 14.)

Arbitrator Sheinbaum has practiced admiralty law for over forty years and was a founding member of the admiralty law firm Waesche, Sheinbaum & O'Regan. (Id. ¶ 6.) William Bennett, another admiralty lawyer, and Stephen Sheinbaum, Arbitrator Sheinbaum's son, practiced with Arbitrator Sheinbaum for a number of years at this firm. (Id. ¶ 8.) Subsequently, both Stephen Sheinbaum and William Bennett founded and practiced at the firm Sheinbaum, Bennett, Giuliano, McDonnell & Levy, LLP ("Sheinbaum, Bennett, Giuliano"). (O'Brien Aff. ¶¶ 7, 8.)

After eleven evidentiary hearings extending from July 2002 to March 2004, followed by oral argument on July 15, 2004, the arbitration panel denied and dismissed TCSV's claims against SMT and the Somerset. (Flavin Aff. ¶¶ 6, 8; O'Brien Aff. Ex. J 1.) The decision, dated July 28, 2005, awarded SMT all attorneys' and arbitrators' fees and disbursements plus interest from the date of the award. (O'Brien Aff. Ex. J.) The panel was split, however, with Arbitrator Arnold dissenting in an opinion that questioned the credibility of SMT's witnesses. (O'Brien Aff. Ex. J Final Award App. A 7-11.)

Following the arbitration award, counsel for TCSV learned that SMT, through the Swedish Club, had hired Sheinbaum, Bennett, Giuliano to represent them in a separate, concurrent arbitration (the "Brussel Arbitration") between SMT and a third, unrelated party. (O'Brien Aff. ¶ 24.) That arbitration proceeding began in May 2003 and continued throughout the duration of the TCSV-SMT arbitration (the "Somerset Arbitration") and subsequent Final Award. (Petr.'s Mem. 3.)

The Swedish Club assigned the Brussel Arbitration to a Swedish Club "handler," Helena Dahlsten ("Dahlsten"). As a handler, Dahlsten's responsibilities included assessing the strength of liability claims, which sometimes required her to employ specialized attorneys. (Affirmation of Helena Wallerius Dahlsten ("Dahlsten Aff.") ¶¶ 3-4.) Dahlsten, not familiar with New York arbitration practice, contacted the Swedish Club's United States general correspondent in New York, Atlantic Marine Associates, Inc. ("AMA"), to obtain a referral for a law firm experienced in the practice. (Id. at ¶ 7.)

Dahlsten affirmed that the AMA member she contacted, Michael Mitchell, a personal friend and trusted business associate, was familiar with New York arbitration. He, in turn, recommended Bill Bennett and Nick Giuliano of Sheinbaum, Bennett, Giuliano to represent the Swedish Club, and thus SMT, in the Brussel Arbitration. (Affirmation of Michael J. Mitchell ¶ 8.) In formulating his recommendation, Michael Mitchell considered the backgrounds, caseload, and experience of a number of attorneys. (Id.) Before receiving the recommendation, Dahlsten had never heard of Bill Bennet or Nick Giuliano or the firm Sheinbaum, Bennett, Giuliano. (Dahlsten Aff. ¶ 9.) Also, Dahlsten was not aware that these attorneys worked with the son of an arbitrator in the Somerset Arbitration. (Id. at ¶ 9.).

On October 24, 2005, following the Somerset Arbitration panel's Final Award, TCSV filed a verified petition to vacate the arbitration award. In its answer dated December 30, 2005, SMT opposed TCSV's request and cross-petitioned this Court to confirm the panel's Final Award and correct SMT's name as it appears on that award. (Petition to Correct and Confirm Arbitration Award.) On December 22, 2005 the Parties agreed to correct the Final Arbitration Award so that "Ship Management & Transport of Limassol" is in each and every place corrected and changed to read "SMT Shipmanagement & Transport Ltd." (Stipulation Correcting Name of Party in Arbitrators' Award 2.) The Court held oral argument on November 21, 2006.

II. Discussion

A. Standard of ...

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