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BS Sun Shipping Monrovia v. Citgo Petroleum Corp.

September 7, 2007


The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge


Petitioner-Counter-Defendant-Defendant-In-Intervention BS Sun Shipping Monrovia ("BS Sun") brought this action seeking a declaratory judgment and stay of arbitration against Respondent-Counter-Claimant-Defendant-In-Intervention Citgo Petroleum Corporation ("Citgo").

Third-party Intervenor-Plaintiff Pilot Enterprises, Inc. ("Pilot") now moves to intervene in the action. Citgo moves to compel Pilot to arbitrate. Citgo renews its motion to compel BS Sun to arbitrate, while BS Sun cross-moves in support of its original petition to stay arbitration by Citgo against BS Sun. BS Sun moves to dismiss Citgo's counterclaim against BS Sun as time-barred, while Citgo cross-moves to strike BS Sun's affirmative defense that Citgo's counterclaim is time-barred.

For the reasons articulated in more detail below, Pilot's motion to intervene in this action is GRANTED. Citgo's motion to compel Pilot to arbitrate is GRANTED. Citgo's motion to compel BS Sun to arbitrate is DENIED (and conversely, BS Sun's petition to stay arbitration is GRANTED). BS Sun's motion to dismiss Citgo's counterclaim against BS Sun is GRANTED (and conversely, Citgo's cross-motion to strike BS Sun's affirmative defense is DENIED).


A. The BS Sun-Pilot "Time Charter" Contract

BS Sun Shipping Monrovia ("BS Sun") was the owner of the "M/V STINICE" (hereinafter, the "STINICE" or the "vessel"),*fn1 a commercial tanker which is the ship and its cargo at issue in this litigation. See Rule 56.1 Declaration of Garth Wolfson, Apr. 11, 2007 ("Wolfson 56.1 Decl."), ¶ 6. On April 4, 2002, BS Sun entered into a "time charter party" (hereinafter, the "time charter") with Pilot Enterprises Inc. ("Pilot").*fn2 See Wolfson 56.1 Decl., ¶ 7, Ex. A(2). Pilot alleges, and it does not appear to be disputed, that Pilot thus became the "time-chartered owner" or "disponent owner" of the STINICE. See Pilot Verified Complaint-in-Intervention, Mar. 9, 2007 ("Pilot Compl.") ¶ 6, attached to Pilot's Motion for Leave to Intervene, Mar. 9, 2007, Ex. A.

Under the time charter, Pilot chartered the STINICE for two years, renewable at Pilot's option for up to two additional twelve-month periods. See Wolfson 56.1 Decl., ¶ 7, Ex. A(2). BS Sun and Pilot subsequently extended the time charter beyond the original two-year period for an additional year. See Deposition of Zlatko Kabic, October 13, 2006 ("Kabic Depo."), at 47-53, attached at Wolfson 56.1 Decl., ¶ 7, Ex. E; Reply Declaration of Garth Wolfson, April 30, 2007 ("Wolfson Reply Decl."), Ex. I (extension of time charter).*fn3 The BS Sun-Pilot time charter provided for English jurisdiction over disputes arising thereunder, and allowed either party to elect arbitration before a single arbitrator in London. See Wolfson 56.1 Decl., Ex. A(2).

B. The Pilot-Citgo "Voyage Charter" Contract

On November 23, 2004, Chris Vasilas ("Vasilas"), a broker with Elka Ship Brokerage & Trading ("Elka"), tendered an offer by email for a "voyage charter party" contract (hereinafter, the "voyage charter") to Kevin Conway ("Conway"), a broker with Islandia Chartering, Inc. ("Islandia").*fn4 See Declaration of Christopher M. Panagos, Apr. 11, 2007 ("Panagos Decl."), Ex. D, at ELKA 000002-6. Vasilas testified that "Pilot was [his] client," and indeed, Pilot freely admits that Vasilas negotiated the "voyage charter" on behalf of Pilot. See Deposition of Chris Vasilas, Nov. 16, 2006 ("Vasilas Depo.") at 11, 13, attached at Panagos Decl. Ex. C; see also Pilot's Motion in Opposition. to Citgo's Motion to Compel Arbitration ("Pilot. Mem. Opp.") at 2. Vasilas' email offer, under the heading "Owner's Mailing Address," listed the address of "European Product Carriers" ("EPC") and also listed Elka, Elka's phone number, and Vasilas as a "contact." Panagos Decl., Ex. D, at ELKA 000003. EPC, according to Citgo and undisputed by Pilot, is a corporate alter ego of Pilot.*fn5 Vasilas' email offer included the notation "GA/ARB NYK US LAW." Panagos Decl., Ex. D, at ELKA 000003.

Conway passed Vasilas' email along to Rita Cipriano, another Islandia broker, who was representing Citgo. Deposition of Rita Cipriano, Oct. 11, 2006 ("Cipriano Depo.") at 9-10, attached at Panagos Decl. Ex. B. Cipriano testified that "GA/ARB NYK US LAW" was understood in the industry to mean "General average arbitration, New York, United States law." Cipriano Depo. at 13, at Panagos Decl. Ex. B.

Later that day, November 23, 2004, Vasilas emailed Conway and told him, in response to Conway's questions, that the "owners" of the vessel were "BS Sun Shipping Monrovia Liberia." Panagos Decl., Ex. D, at ELKA 000012; see also Vasilas Depo. at 30. Shortly afterwards, Cipriano circulated a "preliminary recap" to Conway and a Citgo representative that listed "BS Sun" as the "owners" of the vessel (but listed under "owners' addresses" EPC's and Elka's addresses). Panagos Decl., Ex. E, at I 000251-56. At 6 PM that night, Vasilas emailed Conway a "Q88" form listing the ship's particulars, which listed the "owners" as BS Sun, and the "disponent owners" as "N/A." See Panagos Decl. Ex. B, at ELKA000018. Vasilas later testified that the line "disponent owners" should have read "Pilot Enterprises," and that that omission was a "mistake." Vasilas Depo. at 129.

Vasilas testified that this Q88 information is "typically prepared by the owners," but in this case, he could not remember whether the information came from Elka, Pilot, BS Sun, or somebody else. Vasilas Depo. at 33-34. Vasilas testified generally, though, that his contact at Pilot was "Nick Karandinos." Vasilas Depo. at 24-25. Karandinos (hereinafter "Capt. Karandinos") declares that he was the "vessel operator" of the STINICE at this time, and that his responsibilities included "working with brokers for the negotiation of voyage charter parties on behalf of Pilot Enterprises for the carriage of cargo," and that he specifically assisted Vasilas with the negotiation of the Citgo-Pilot voyage charter. Affidavit of Capt. N. Karandinos, Apr. 23, 2007 ("Karandinos Aff.") at ¶ 2-4, at Declaration of George M. Chalos, Apr. 24, 2007 ("Chalos Decl.") Ex. C.*fn6 Captain Karandinos avers that to the best of his knowledge, no "alternative dispute resolution" was discussed in the negotiations prior to the voyage charter agreement, nor did Karandinos provide Vasilas with authority to agree on behalf of Pilot to an "alternative dispute resolution clause." Karandinos Aff. at ¶ 6-8.

The next day, November 24, 2004, Conway emailed Vasilas a "Final Recapitulation" of the terms of the voyage charter (hereinafter, the "fixture recap"). See Panagos Decl., Ex. D, at ELKA 000031-35. This "fixture recap" essentially codifies that Pilot would transport oil for Citgo via the STINICE from St. Croix, U.S. Virgin Islands, to New Jersey.*fn7 Id. The fixture recap included the same "GA/ARB NYK US LAW" notation that provided for arbitration of any disputes arising thereunder in New York.*fn8

Id. The fixture recap stated at the top, "[T]he following terms and conditions have been agreed between BS Sun Shipping. as owners and Citgo. as charterers." Id. Vasilas, however, testified that that statement was wrong. Vasilas Depo. at 88, 111-12, at Wolfson Decl., Ex. H ("Pilot is the owner within the context of the voyage charter.

[T]he agreement isn't between BS Sun. It should be between Pilot Enterprises and Citgo Petroleum.")*fn9

The fixture recap, as did the prior documents, listed BS Sun as the vessel's "owner[]." See Panagos Decl., Ex. D, at ELKA 000031. Again, however, under "Owner's Mailing Address/Phone/Etc." the fixture recap lists contact information for EPC and Elka rather than for BS Sun. Id. at ELKA 000032. The fixture recap also provides for payment by Citgo to a bank account in Pilot's name. Id.

On December 3, 2004, Citgo emailed Islandia, stated that in accordance with "Adminstration Clause 32,"*fn10 Citgo confirmed agreement to the terms of the fixture recap dated November 24, and asked to "pass the following to vessel owners." Panagos Decl., Ex. D, at ELKA000039. Islandia forwarded the message to Vasilas and asked to "confirm safe receipt and send owner's agreement." Id. It does not appear that Vasilas responded. Generally, however, it does not appear that Vasilas or Elka objected to the terms of the fixture recap subsequent to its circulation among the parties.*fn11

Vasilas testified that he had no correspondence with BS Sun at the time of the negotiations, and that nothing in his file indicated that BS Sun was made aware of the terms of the voyage charter generally, or the arbitration provision specifically. Vasilas Depo. at 92, at Wolfson 56.1 Declaration Ex. H. Vasilas additionally testified that there existed no agency agreement between Elka and BS Sun. Id. Zlatko Kabic, BS Sun's former secretary, also attested that "neither Pilot nor Elka have ever acted as broker or agent for" BS Sun, and that BS Sun never entered into any voyage charter with Citgo. Declaration of Zlatko Kabic, Mar. 27, 2006 ("Kabic Decl.") ¶ 7, at Wolfson 56.1 Decl. Ex. A.

C. Damage to Cargo and Subsequent Actions

On December 15, 2004, according to the bill of lading signed by the vessel's master, Captain Roberto Malinka,*fn12 the STINICE was loaded with Citgo's oil at St. Croix, U.S. Virgin Islands, and sailed for Linden, New Jersey pursuant to the terms of the voyage charter. See Wolfson 56.1 Decl., Ex. A(1)(B). Upon discharge at New Jersey on December 20, 2004, Citgo alleged that the cargo was contaminated. See Citgo Answer and Counterclaim, Aug. 30, 2006 ("Citgo Answer"), ¶ 25.

On December 21, 2004, Islandia, at Citgo's behest, emailed Vasilas and put him on notice of the potential contamination. Panagos Decl., Ex. E at I000137. Vasilas shortly thereafter notified Captain Karandinos at Pilot. Panagos Decl., Ex. D at ELKA000068.

Vasilas testified that, although it does not appear he notified BS Sun, a representative of the vessel's Protection & Indemnity ("P&I") underwriters visited the STINICE around this time. Vasilas Depo. at 64, at Panagos Decl. Ex. C. Citgo has also produced an email from "M.V. Stinice Email," signed by "Capt. Robert M," notifying Captain Glen Drummond of "Anglo Eastern Group" of the contamination on December 22, 2004. Panagos Decl. Ex. G. Citgo also proffers a "Lloyd's Register of Ships 2004-2005" that lists BS Sun Shipping as responsible for the STINICE, and "Anglo Eastern (UK) Ltd." as "managers" for BS Sun Shipping. Panagos Decl. Ex. L. Captain Drummond, upon receiving the email from "M.V. ...

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