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Iota Shipholding Ltd. v. Starr Indemnity

United States District Court, S.D. New York

May 31, 2017

IOTA SHIPHOLDING LTD and BLUMENTHAL JMK GMBH & CO. KG, Petitioners,
v.
STARR INDEMNITY AND LIABILITY COMPANY, as a subrogor of TERNIUM MEXICO S.A. DE C.V. and TERNIUM INTERNACIONAL COSTA RICA, S.A., and MARINSA INTERCONTINENTAL, S.A., Respondents.

          OPINION AND ORDER

          KATHERINE POLK FAILLA, District Judge

         Petitioners[1] Iota Shipholding Ltd. (“Iota”) and Blumenthal JMK GmbH & Co. KG[2] (“Blumenthal, ” and together with Iota, “Petitioners”) brought this action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, and the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (the “FAA”), (i) to enjoin an arbitration commenced in New York by Respondent Starr Indemnity and Liability Company (“Starr”), in its capacity as subrogor of Ternium Mexico S.A. de C.V. (“Ternium Mexico”) and Ternium Internacional Costa Rica, S.A. (“Ternium Costa Rica, ” and together with Ternium Mexico, the “Ternium Entities”), and (ii) to declare that there is no valid arbitration agreement between these parties. The Court has jurisdiction over Petitioners' claim under 28 U.S.C. §§ 1332 and 1333, and Petitioners have designated their claim an admiralty or maritime claim under Federal Rule of Civil Procedure 9(h).

         Petitioners have moved for summary judgment, seeking a declaration that there is no valid arbitration agreement between these parties and an injunction or permanent stay of the underlying arbitration. Starr has cross-moved for summary judgment seeking dismissal of this action and an order remanding this matter to arbitration. For the reasons that follow, Petitioners' motion is granted and Starr's motion is denied.

         BACKGROUND[3]

         A. Factual Background[4]

         1. The Shipment of and Damage to the Ternium Entities' Cargo

         In 2013, Ternium Mexico sold 2, 552 bundles of square, rectangular, and mechanical tubing produced in Tampico, Mexico (the “Cargo”), to Ternium Costa Rica. (Petition, Ex. 1, ¶¶ 2, 8). This Cargo was loaded on board the M/V Lita in Tampico. (Id. at ¶ 7). Starr contends that the Cargo was in good order and condition at the time of its loading. (Id. at ¶¶ 8-11).

         The M/V Lita sailed from Tampico to Puerto Limón, Costa Rica, where the ship arrived on August 6, 2013. (Petition, Ex. 1, ¶ 12). The M/V Lita encountered storms during its journey that caused damage to the Cargo; damage surveys found that 40-45% of the total Cargo was damaged. (Id. at ¶¶ 13-16). Additionally, two packages of the Cargo were lost overboard. (Id. at ¶ 14). Because Ternium “could not affirmatively segregate damaged material on a per bundle/per package basis, ” it “instead proposed a reasonable depreciation of 42.86% of the total value of the segregated material.” (Id. at ¶ 18). The physically damaged Cargo was valued at $173, 875.14, and the two lost bundles valued at $1, 750.17. (Id. at ¶¶ 19-20).

         2. The Maritime Contracts

         The Cargo was shipped pursuant to a collection of contracts, which the Court will describe in this section.

         a. The Voyage Charter

         The parties agree that non-party Alexander & Blake Ltd. (“A&B”), [5] chartered the M/V Lita to Ternium Mexico pursuant to a Voyage Charterparty dated July 26, 2013 (the “Voyage Charter”). (Resp't 56.1 Opp. ¶ 5).[6]

         In Annex I, the Voyage Charter defines certain terms used therein. (Pet'r 56.1, Ex. 1(C)). The Charterer is “as stated in ... the beginning of this Charter Party, ” where the Voyage Charter identifies the “Shipper” as Ternium Mexico. (Id.). The “Owner” is “the disponent owner of the Vessel who signs the present Charter Party identified at the beginning of this Charter Party, ” where the Voyage Charter identifies the “Owner of the vessel” as A&B Limited. (Id.).[7]

         In its third section, the Voyage Charter outlines a set of requirements for the proper shipment of the Cargo. As relevant here, this section provides that the liability of the Charterer, Ternium Mexico, “for each shipment under this Charter Party and the Charterer's responsibility for damages to the Cargo ... shall cease ... on Cargo being shipped, lashed[, ] and secured.” (Pet'r 56.1, Ex. 1(C)).

         The Voyage Charter also contains an arbitration clause, which provides:

This Charter Party shall be governed by and construed in accordance with English Law (without regard to conflict of law rules and principles). Should any dispute arise between Owner and Charterer, the matter in dispute shall be [referred] to three arbitrators in New York/London, one to be appointed by each of the parties hereto, and the third by the two so chosen. Their decision or that of any two of them shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of court. The arbitrators shall be commercial men. The proceeding shall be conducted in accordance with the rules of the Society of Maritime Arbitrators, Inc.

(Pet'r 56.1, Ex. 1(C), ¶ 15) (emphasis omitted).

         b. The Bills of Lading

         The parties also agree that upon the shipment of the Cargo from Tampico, “CONGENBILL” form bills of lading were executed “by [Respondent Marinsa Intercontinental, S.A. (‘Marinsa')] [o]nly as ship's port agents for & on behalf of the master and to incorporate by reference a CHARTER-PARTY dated JULY 26, 2013.” (Pet'r 56.1 ¶ 9 (internal quotation marks omitted) (quoting Petition, Ex. 1(D)). Each bill of lading identifies the “Shipper” as Ternium Mexico, the “Consignee” as Ternium Costa Rica, and the Carrier as the “Owners MV ‘Lita.'” (Petition, Ex. 1(D)). The Master of the M/V Lita is identified on the Bills of Lading as the ship's Captain, Franczyk Jerzy. (Id.).

         The Bills of Lading direct that their “[f]reight [is] payable as per CHARTER-PARTY dated JULY 26, 2013.” (Petition, Ex. 1(D)). For their “CONDITIONS OF CARRIAGE, ” the Bills of Lading direct a reader to “SEE OVERLEAF.” (Id.). Thereon, each bill of lading notes that it is “to be used with charter-parties.” (Id. (emphasis omitted)). And the first-listed condition of carriage in each case specifies that “[a]ll terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.” (Id.).

         c. The Time Charter

         It is with regard to this contract that the parties' positions diverge. Petitioners allege that A&B chartered the M/V Lita to Ternium Mexico under the Voyage Charter in A&B's capacity as a disponent owner, having itself chartered the M/V Lita from its true owners under a time charter that is also dated July 26, 2013 (the “Time Charter”). (See Petition ¶ 12; Pet'r 56.1 ¶¶ 10-14; Pet'r 56.1, Ex. 2; Pet'r 56.1 Reply ¶¶ 3-13). This Time Charter “calls for arbitration exclusively in Germany, and further expressly prohibits issuance of bills of lading prejudicial to the Time Charter's provisions.” (Pet'r 56.1 ¶ 11 (citing id., Ex. 2)). The parties agree that a time charterer was permitted to sub-charter the time-chartered vessel, though the Time Charter's terms provided that if they did so, Time ‚ÄúCharterers [would] remain responsible for the fulfillment of ...


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