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Integr8 Fuels Inc. v. Daelim Corp.

United States District Court, S.D. New York

April 25, 2017

INTEGR8 FUELS INC., Plaintiff,
DAELIM CORP., Defendant.


          LAURA TAYLOR SWAIN United States District Judge

         On March 27, 2017, Plaintiff Integr8 Fuels Inc. (“Integr8”) filed a Complaint against Defendant Daelim Corporation (“Daelim”), as well as a Motion, by Order to Show Cause, for a Preliminary Injunction and Temporary Restraining Order enjoining Daelim from pursuing arbitration against Integr8. (Docket entry nos. 1 (Complaint) & 9.) This Court ordered Daelim to show cause why a preliminary injunction should not issue. (Docket entry no. 3.) The parties submitted briefing pursuant to a schedule set forth in the Court's Order, and the Court heard oral argument on April 7, 2017. The parties also submitted supplemental post-argument letters on April 21 and 24, 2017. (Docket entry nos. 20 and 23.) The Court has jurisdiction of this action pursuant to 28 U.S.C. section 1331 and 9 U.S.C. section 203.

         The Court has carefully considered the submissions and arguments of both parties. For the reasons set forth below, Plaintiff's motion is denied. This Memorandum Opinion and Order sets forth the Court's findings of fact and conclusions of law in accordance with Federal Rules of Civil Procedure 52 and 65.

         Findings of Fact

         Plaintiff Integr8 is a seller of marine fuels to vessel owners and operators throughout the world. (Complaint ¶ 12.) Defendant Daelim is a vessel charterer of ships to be used in international trade. (Docket entry no. 7 (Declaration of Kim Jae Ho (“Ho Decl.”)) ¶ 3.) Daelim entered into a charter party agreement with Korea Line Corporation (“KLC”), the disponent owner of the vessel M/T DL NAVIG8 (the “Vessel”), which is owned by DL Maritime S.A. (“Maritime”). (Id. ¶¶ 5-6.) Pursuant to the charter party, Daelim was required to keep the Vessel free and clear of encumbrances, including liens. (Id. ¶ 7 & Ex. 1, Clause 15.)

         In October 2014, Daelim contracted with Grace Young International, Ltd. (“Grace”) to provide a bunker stem to the Vessel in Hong Kong. (Id. ¶ 8 & Ex. 2.) Daelim paid Grace in full for the bunker stem, which was delivered as agreed. (Id. ¶¶ 10-14 & Exs. 3-4.) Grace, in turn, contracted with a corporation called Hitec to provide the bunker stem. (Docket entry no. 8 (Declaration of Karnan Thirupathy (“Thirupathy Decl.”)) ¶ 12.) Hitec then contracted with Dynamic Oil Trading (Singapore) Pte Ltd. (“Dynamic”) to provide the bunker stem. (Id. ¶ 12.) Dynamic then contracted with Plaintiff Integr8 to provide the bunker stem in Hong Kong. (Id. ¶ 13.)

         The contract between Dynamic and Integr8 (id. Ex. DD (the “Integr8 Contract”)) identifies the “Buyer” of the bunker stem as: “Dynamic Oil Trading (Singapore Pte Ltd) AND JOINTLY AND SEVERALLY OWNERS/MANAGING OWNERS/OPERATORS/ MANAGERS/DISPONENT OWNERS/CHARTERERS.” (Integr8 Contract, p. 1.) Additionally, the Integr8 Contract provides that “Integr8 Fuels Inc. General Terms and Conditions (including the arbitration clause within those General Terms and Conditions) will apply to this contract.” (Id.) The Integr8 Fuels Inc. General Terms and Conditions (Complaint Ex. B (the “Integr8 GTC”)) include an arbitration clause that provides, in pertinent part, that “[a]ny dispute arising under, in connection with or incidental to this Contract shall be heard and decided at New York City, New York State, by three persons.” (Id. § 11.1)

         In November 2016, Integr8 filed an action against Maritime and Dynamic in the Dubai Court of First Instance, alleging that Integr8 had not been paid for the bunker stem it supplied to the Vessel in Hong Kong pursuant to its contract with Dynamic.[1] (Thirupathy Decl. ¶ 2 & Ex. AA.) Integr8 moved in the Dubai court for an order arresting the Vessel and seeking a maritime lien for necessities, which motion was granted and an arrest ordered. (Id. ¶¶ 3-5.) The Vessel was arrested, and Maritime deposited the amount of the claim with the Dubai court in order to have the arrest lifted. (Id. ¶ 5.) The case in Dubai was dismissed and is currently on appeal. (Id. ¶ 9.)

         Also in November 2016, solicitors in Dubai for KLC contacted Daelim to notify Daelim of the arrest of the Vessel, and Integr8's allegations that it had not been paid for the bunker stem. (Ho Decl. ¶ 15.) Daelim was notified that the Vessel's owners (KLC and/or Maritime) “would seek damages against Daelim as a result of Integr8's arrest of the Vessel in Dubai.” (Ho Decl. ¶ 16.[2])

         On February 14, 2017, Daelim served a demand for arbitration on Integr8. (Complaint ¶ 2 & Ex. A (the “Demand”).) The Demand identifies the operative arbitration agreement as the one contained in the Integr8 GTC. (Demand, p. 1.) The Demand specifies several issues and claims to be put to the arbitrators: (1) “whether Integr8 has a valid maritime lien for necessaries under U.S. law against M/V DL NAVIG8;” (2) “a declaratory ruling alleviating [Daelim] from any and all liability for the aforementioned stem;” (3) “an anti-suit injunction enjoining any further litigation including that previously pending in Dubai on the above issues;” and (4) “in the alternative, indemnity in full for any liability Daelim incurs as a result of the Dubai or any other proceeding initiated by Integr8 in regards to this stem.” (Id. p. 2.) At oral argument, the parties represented that arbitrators have been selected, and that the arbitration proceedings are on hold pending this Court's decision on Plaintiff's motion for a preliminary injunction. (Tr. 35:16-22.)

         Conclusions of Law

         “A party seeking a preliminary injunction must either show that he is likely to succeed on the merits; that he is likely to suffer irreparable harm in the absence of preliminary relief; that the balance of equities tips in his favor; and that an injunction is in the public interest; or he may show irreparable harm and either a likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.” Am. Civil Liberties Union v. Clapper, 785 F.3d 787, 825 (2d Cir. 2015) (internal citation and quotation marks omitted).

         Integr8's Complaint seeks a declaratory judgment that there is no enforceable arbitration agreement between Daelim and Integr8. In determining whether a dispute is arbitrable, the Court must address two questions: “(1) whether there exists a valid agreement to arbitrate at all under the contract in question . . . and if so, (2) whether the particular dispute sought to be arbitrated falls within the scope of the arbitration agreement.” Nat'l Union Fire Ins. Co. v. Belco Petroleum Corp., 88 F.3d 129, 135 (2d Cir.1996). As an initial matter, Integr8 asserts that the contractual arbitration clause here is insufficient to compel arbitration because there is no direct contractual relationship between Integr8 and Daelim.

         The record currently before the Court shows that Integr8 entered into a written agreement, drafted by Integr8, with Dynamic. That agreement included a defined term, “Buyer, ” that covered Dynamic as well as the Charterers of the vessel. Daelim has proffered uncontested evidence indicating that Daelim was the Charterer of the vessel at the time Integr8 contracted with Dynamic. The Court accordingly concludes that the Integr8 Contract, which Integr8 drafted, embodies Integr8's agreement to arbitrate any dispute even incidental to the bunker stem transaction, with a diverse range of parties in interest that includes Daelim, as the Charterer of the vessel. That contract expressly incorporated the arbitration clause of the Integr8 GTC, which also defines the term “Buyer” to include the charterers of the vessel. Accordingly, the Court ...

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