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In the Matter of the Arbitration Between: Sunskar Ltd., As Owner of the M/V Georgia S v. Cdii Trading

November 3, 2011

IN THE MATTER OF THE ARBITRATION BETWEEN: SUNSKAR LTD., AS OWNER OF THE M/V GEORGIA S, PETITIONER,
v.
CDII TRADING, INC., CHINA DIRECT INDUSTRIES INC. D/B/A CDII TRADING, INC., AS CHARTERER,
RESPONDENTS.



The opinion of the court was delivered by: Denise Cote, District Judge:

OPINION AND ORDER

Petitioner Sunskar Ltd. ("Sunskar") brings this action to compel CDII Trading, Inc. ("CDII") and China Direct Industries Inc. ("China Direct") to arbitrate pursuant to a charter party (the "Charter Party") it purports to have made with the respondents on or around January 23, 2011. Sunskar brought this motion to compel arbitration pursuant to 9 U.S.C. § 4 on July 13, 2011. The motion was fully submitted on August 4.

BACKGROUND

I. The Parties

The following facts are undisputed unless otherwise noted.

Sunskar is an owner of the M/V Georgia S ("Georgia"), a self-discharging vessel. China Direct is a Florida corporation located in Deerfield Beach, Florida. CDII is also a Florida corporation based in Deerfield Beach. As CDII is a subsidiary of China Direct, they are distinct legal entities. The website of CDII says that it "acts as the industrial goods sourcing and distribution arm for the CDII family of industrial companies," and names it a "trading division." China Direct and CDII share the same offices and executive officers. The chief executive officer of both companies is Yuejian J. (James) Wang ("James Wang"); the chief financial officer and executive vice president is Andrew X. Wang ("Andrew Wang"); the general counsel and executive vice president is Lazarus Rothstein ("Rothstein"); and the vice president is Andrew Goldrich ("Goldrich"). Two other vice presidents of CDII are Seth Berkowitz ("Berkowitz") and Manuel Perez ("Perez").

II. Negotiations for an Ore Shipment Begin

Alex Friedberg ("Friedberg") is currently the Vice President for International Logistics of CDII. He graduated from the University of Florida in May 2010 and is relatively inexperienced in transportation procurement. He was hired by CDII as an intern after graduation, given a consulting contract in October 2010, and then given his current title in December 2010. The fact that he is a CDII employee was noted in his email correspondence at issue in this case.

In late 2010, Friedberg was tasked with finding transportation for a quantity of ore CDII intended to purchase from Mexico and deliver to China (the "Ore Shipment"). As part of this process, he came in contact with David Christian Wold ("Wold"), vice president of Skaarup Shipping International Corp. -- a ship owners' agent. For the purposes of the Ore Shipment, Skaarup was an agent of Sunskar. Wold and Friedberg had many conversations between December 2010 and February 2011 discussing transportation arrangements for the Ore Shipment. These communications largely took place over email and using the instant messaging service of Skype.*fn1 Wold claims that during these communications, Friedberg made clear that CDII was the "shipping arm" of China Direct. In at least one email, Friedberg stated that he represented China Direct, although this email also specified that CDII was a wholly owned subsidiary of China Direct and that Friedberg was an employee of CDII. Throughout these communications, Wold instructed Friedberg on terms and customs of the shipping industry and answered questions put to him by Friedberg about how shipping contracts are made. Friedberg admits that during these communications with Wold, they "ironed out most of the terms on the business deal I thought were necessary," but alleges that he "was not authorized to bind CDII" and that CDII would not be bound until his superiors approved and signed any charter party.*fn2 Friedberg also claims that during these conversations, he made Wold aware of CDII's difficulties in securing a sufficient quantity of ore to ship.

In December 2010, Wold identified the Georgia as a ship which could convey the Ore Shipment. On December 20, Friedberg indicated he was very interested in the Georgia. On January 10, 2011, Wold asked Friedberg if he should "develop with georgia s or should find alternative vessel/owners"? Friedberg responded that he "would love to develop with Georgia," but that he needed to confirm that the receiver of the Ore Shipment had facilities to accept a self-discharging vessel like the Georgia.

III. Main Terms Are Agreed to on January 18-21, 2011.

By January 18, Friedberg had learned that the receiver could accept the Georgia. Later that day, Wold asked if Friedberg were ready to book the Georgia, and Friedberg said that he was "very ready" but needed to wait a few hours. Friedberg then asked Wold if he was comfortable moving ahead even though only a certain quantity of ore -- 60% of the amount intended to be shipped -- was already at the "patio," the location where the Ore Shipment was being collected in Manzanillo, Mexico, the port city ("Manzanillo"). Wold said that he was comfortable, given that production over the next 30 days could provide the remaining ore. Friedberg replied, "ok," and that they would start on the paperwork for the Georgia the next day.

On January 19, Friedberg asked Wold what the consequences would be if he committed to the Georgia but a problem with the shipping schedule arose. Wold replied that if there were a cancellation, Sunskar would claim a loss if they could not find alternative cargo. Friedberg then asked for the main terms of the charter, and Wold listed the charterer, cargo quantity (25,000 mt), load and discharge ports, the dates that the Georgia would be ready for loading at Manzanillio (February 15-25, the "Laycan Dates"), the loading rate, freight rate, commission, and demurrage rate. Wold noted that further details would be included in a charter party. Friedberg and Wold also discussed payment options. Throughout the conversation, Friedberg indicated his assent, saying "I accept" to the demurrage rate, that he could "confirm [the freight transfer] for you right now," that "yes we can do" the price and quantity terms Wold listed, and that "it is a GO" if the payment can be made due five days after signing and releasing the bill of lading.

During the afternoon of January 20, Friedberg confirmed with Wold that a form contract would be the basis for the details in the charter party, and told him that "I just spoke with the General Counsel about the whole shipping thing and we are ready to move forward, granted that you can move forward with the limited info that I have." Wold replied, "sure, we can base it on that standard form and add any terms for [the loading port]." Friedberg then made clear to Wold that he still needed to get a draft passed to the trading team and general counsel for final review. Wold explained where he saw their negotiations at that point: "so we have fixed what we call 'main terms' and 2nd part is 'rider clauses' -- main terms are agreed so that its [sic] 'booked' and then best efforts from both sides are made to take their time to clean/add on rider clauses." Friedberg did not respond directly to this message. Later, Wold asked Friedberg, "so its [sic] time to be straight and clear . . . terms we agreed on y[ester]day, are they acceptable by cdii trading ic today?" Friedberg said "yes, except for fact that cargo might go to another potential port." They then exchanged copies of the riders and discussed how edits could be made to them. Friedberg told Wold, "trust that I've informed everyone in the office that reverting the [form contract] back to you, along with everything you request, is a PRIORITY."

Wold then reminded Friedberg "just have in the back of your head . . . in shipping there is a contract even if its [sic] not signed. Charter party details are based on the rule that both parties would try their outmost [sic] to reach an agreement on these commercial ruls [sic] after main terms have been agreed." Friedberg said that he "understood" and knew that they "are not playing a little game here." Wold replied, "price and main terms you have already carved in stone so not much we can do." Friedberg said, "great."

On January 21, Friedberg informed Wold that he would get him a full set of comments on the charter party and riders later that day, but that he would not be able to have the charter party signed until the next week. Wold replied that a signature was not necessary, as an oral contract was sufficient. In response to Friedberg's questions about possible failures in the supply of the ore, Wold told him that clauses in the charter party would cover the resolution of any such issues. Friedberg then asked what the latest time CDII could "back out without being penalized." Wold's response was "back out? Are you kidding? . . . I am speachless [sic]." He asked if anyone at CDII had experience with force majeure clauses.

Discussion of charter party details resumed after that, and Friedberg sent Wold a draft of the form contract that afternoon. Wold noted that the proposed revisions in the draft called for arbitration in Guadalajara, and suggested arbitration in New York instead.

IV. Agreement to Further Terms on January 24, 2011

The next business day was Monday, January 24. Wold expressed a desire to get final agreement to all remaining terms that morning, and Friedberg mentioned that because some of the senior executives were in meetings, this could be difficult. Wold listed three items -- demurrage, arbitration location and letter of indemnity -- that he believed were still outstanding. Friedberg agreed those were outstanding. Friedberg later confirmed agreement on demurrage and the letter of indemnity. Just before 1:00 p.m., Wold asked if all other terms had been agreed other than the location for arbitration. Friedberg said that they had. About an hour later, Friedberg confirmed that they agreed to arbitration in New York. Wold emailed Friedberg a revised the charter party reflecting their discussions.

Sometime on January 24, Wold conveyed the status of the negotiations to Sunskar, and the Georgia was taken off of its active charter so that it could reach Manzanillo by the Laycan Dates.

V. Friedberg Tells Wold He Received Final Approval from the Senior Executives.

That evening, Friedberg told Wold that he sent the Charter Party to "the team," whose collective input he would need and hoped to have by the next morning. Wold asked "are we missing somebody onboard"? Friedberg explained that the executives whose input he would need --- Goldrich, Jason Wang and Rothstein -- had not yet read the Charter Party. Wold explained "you would have to explain to them how it works . . . the vessel is already 'on your account' . . . we have instructed her after this voyage from Halifax to proceed to Manzanillo for loading 15-25 feb." Friedberg responded, "all I can say is 'ok,'" and agreed when Wold said that he "knew where it stands."

On January 25, Friedberg told Wold that he had spoken to Goldrich, James Wang and Rothstein and that one had reviewed the deal, and liked it, but that the others had not reviewed it. He stated that he did not think a signature would be coming that day. Wold reiterated that a signature was not necessary, just a confirmation on the final draft from Friedberg would be sufficient. Friedberg responded that he could not provide confirmation until Goldrich, whose title was vice president, had reviewed the charter party. Wold told him that "there is nothing like 'little more time' when things have been agreed." Friedberg replied, "no comment."

Wold sent the final version of the Charter Party to Friedberg again at 5:46 pm that afternoon. The Charter Party, dated January 25, names CDII as Charterer. ...


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