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The Rice Corporation v. Express Sea Transport Corporation

United States District Court, S.D. New York

May 26, 2015

THE RICE CORPORATION, a Delaware corporation d/b/a/THE RICE COMPANY USA, Plaintiff,
v.
EXPRESS SEA TRANSPORT CORPORATION, CAPITAL PRODUCT PARTNERS LP, CAPITAL SHIP MANAGEMENT CORP., and CAPITAL SHIP MANAGEMENT (USA) CORP., Defendants.

MEMORANDUM OPINION AND ORDER

VALERIE CAPRONI, District Judge.

Plaintiff, The Rice Corporation d/b/a The Rice Company USA ("TRC"), filed this action seeking to enforce an arbitration award obtained against Defendant Express Sea Transport Corporation ("ESTC") and its alleged alter-ego entities, Capital Product Partners LP, Capital Ship Management Corp., and Capital Ship Management (USA) Corp. (the "Capital Defendants"), following an alleged breach of contract and settlement dispute between TRC and ESTC. During the initial pretrial conference, the Court directed the parties to brief the question of whether the Court has subject matter jurisdiction over this case in light of the Second Circuit's decision in D'Amico Dry Limited v. Primera Maritime (Hellas) Limited, 756 F.3d. 151 (2d Cir. 2014). After reviewing the parties' submissions, the Court finds that it lacks subject matter jurisdiction over Plaintiff's claims. Accordingly, this case is DISMISSED.

BACKGROUND[1]

On or about April 4, 2007, TRC, as charterer, and ESTC, as disponent owner, entered into a time charter party for the charter of the M/V APOSTOLOS II (the "Charter Agreement"). Pl.'s Mem. at 1. Disputes arose regarding the timeliness of TRC's payments, and ESTC withdrew the vessel. TRC claimed ESTC had breached the Charter Agreement, id., and took the dispute to arbitration. Id. at 2. Prior to the arbitrators reaching a decision on the merits of TRC's breach of contract claim, ESTC offered to settle the claim for $1.275 million. The offer specified that it would remain open only until the "close of business" on April 29, 2009. Id. TRC accepted the offer by email sent at 17:21 on April 29, 2009. Id. Asserting that TRC's acceptance was untimely, ESTC purported to withdraw the offer and refused to pay the settlement. Id.

TRC then asked the arbitration panel to determine whether ESTC was bound by its settlement offer. The arbitration panel found (1) that it had jurisdiction under the Charter Agreement to determine whether an enforceable settlement agreement had been reached and (2) that the parties had entered into an enforceable settlement agreement such that TRC was entitled to payment of the settlement amount. Id. In so deciding, the panel relied on clauses 17 and 73 of the Charter Agreement, which provide, respectively:

(17) That should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred (as per clause 73).
(73) Arbitration. Any dispute arising under the Charter to be referred to arbitration in London, .... the award of the arbitrators or the Umpire to be final and binding upon both parties.... This contract is governed by English Law and there shall apply to all proceedings under this Clause in terms of the London Maritime Arbitrators Association ["LMAA"] current at the time when the arbitration proceedings were commenced.

King Aff. Ex. A at 7. The panel further relied on paragraph 10 of the "LMAA terms 2006, " which provides:

Notwithstanding the terms of any appointment of an arbitrator, unless the parties otherwise agree the jurisdiction of the tribunal shall extend to determining all disputes arising under or in connection with the transaction the subject of the reference....

Id. Based on these provisions, the panel found that the parties' "dispute as to whether claims arising under the [Charter Agreement] have been settled or not" was a "dispute[] arising in connection with the [Charter Agreement]." Id. at 25. The Panel further determined that the settlement agreement was not a separate contract that replaced the Charter Agreement. Id. at 35.

ESTC did not pay the arbitration award, and TRC brought the matter before the High Court of Justice in London, from which it obtained an order to enforce the arbitral award as a judgment. King Aff. ΒΆ 10. After TRC's efforts to enforce its English judgment against ESTC failed, it obtained a judgment against ESTC in this District in proceedings before Judge Pauley. The Rice Corporation v. Express Sea Transport Corporation, 13-CV-43 (WHP) (S.D.N.Y. Jan. 8, 2014) (Dkt. 31). In the present action, TRC seeks to enforce its judgment against the Capital Defendants as alleged alter-egos of ESTC.

DISCUSSION

Section 1333 of Title 28, United States Code, gives federal district courts the power to decide "[a]ny civil case of admiralty or maritime jurisdiction." It is beyond dispute that "a charter party agreement is a maritime contract" subject to federal admiralty jurisdiction. Fednav, Ltd. v. Isoramar, S.A., 925 F.2d 599, 601 (2d Cir. 1991) (citing Armour & Co. v. Fort Morgan S.S. Co., 270 U.S. 253, 259 (1926); Morewood v. Enequist, 64 U.S. (23 How.) 491, 493-94 (1860)). On the other hand, the Second Circuit has consistently suggested that an agreement to settle a claim that arises under a charter agreement is not a maritime contract. Accordingly, lawsuits regarding such agreements are not within the court's admiralty jurisdiction.

In Fednav, for example, the plaintiff chartered a vessel from the defendant and certain cargo was damaged on board. The two parties negotiated a settlement relative to the damage pursuant to which each agreed to pay approximately 50% of the damages. Fednav, 925 F.2d at 600. When defendant refused to pay its portion of the damage claim, plaintiff brought suit for breach of the settlement agreement. Id. at 600-01. The District Court dismissed the case for lack of subject matter jurisdiction, and, on appeal, the Second Circuit affirmed, finding that the ...


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