Opinion
Civil Action No. 00-2354, 00-2910, SECTION: "R"
November 14, 2001
ORDER AND REASONS
Before the Court is Anangel Endeavour Compania Naviera, S.A.'s motion to dismiss, or in the alternative, stay certain underwriters' claim against it pending arbitration. For the following reasons, the Court grants the motion for a stay pending arbitration.
I. Background
This case arises from the August 6, 2000 collision of the M/V ANANGEL ENDEAVOUR and the M/V IVAN SUSANIN south of that entrance to the Southwest Pass of the Mississippi River. At the time, the M/V ANANGEL ENDEAVOUR was carrying 21,399 metric tons of corn owned by M/S Tareem Poultry Co. Ltd., Al Zhaheri Poultry Farms, and their interested underwriters ("cargo claimants"). As a result of the collision, the owners of the M/V ANANGEL ENDEAVOUR abandoned the voyage and instructed cargo claimants to collect their remaining onboard cargo. Cargo claimants discharged the corn from holds 1, 3, 4, and 5 into ten barges for salvage, leaving corn in the number 2 cargo hold.
On August 9, 2000, Murmansk Shipping Co. initiated a limitation of liability proceeding in this Court as owner of the M/V IVAN SUSANIN. In this proceeding, Anangel Endeavour Compania Naviera, S.A. ("AECNSA"), the owner of the M/V ANANGEL ENDEAVOUR, filed a claim for damages and an answer to Murmansk's complaint The cargo claimants also filed a claim and answer.
On September 29, 2000, AECNSA filed its own complaint seeking exoneration or limitation of its liability and an order attaching the discharged cargo pursuant to Supplemental Admiralty Rule B(1) of the Federal Rules of Civil Procedure. Murmansk filed a claim and counterclaim in this proceeding. The cargo claimants' also filed a claim and answer and the cases "were consolidated on October 11, 2000 before this Court.
On July 24, 2001, Keith James Nichols, for himself, and as a representative of Certain Underwriters at Lloyd's of London (collectively "Nichols"), moved this Court to permit him to file a claim nunc pro tunc, along with a claim for loss and/or damage to bunkers aboard the M/V ANANGEL ENDEAVOUR against both the owners of the M/V ANANGEL ENDEAVOUR and the M/V IVAN SUSANIN. Underwriters insured Copenship A/S, who purchased bunkers on board the M/V ANANGEL ENDEAVOUR under a charter party with AECNSA. As a result of the collision and abandonment of the voyage by the M/V ANANGEL ENDEAVOUR's owner, Lloyd's underwriters paid about $74,528.00 to Copenship A/S for the loss of the bunkers and became subrogated to its right. On August 8, 2001, the Court permitted the claim to be filed. AECNSA has filed a motion to dismiss, or in the alternative, stay the litigation pending arbitration of the conflict between AECNSA "and Nichols under the terms of the time charter for the M/V ANANGEL ENDEAVOUR.
II. Discussion
There is a "strong federal policy in favor of enforcing arbitration agreements." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217; 105 S.Ct. 1238, 1240 (1985). The Federal Arbitration Act states that:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration . . . the court . . . shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . .9 U.S.C. § 3.
The FAA specifically applies to maritime transactions. 9 U.S.C. § 2. An application for arbitration by either party under Section 3 "requests the district court to refrain from further action in a suit pending arbitration, and requires the court to first determine whether there is a written agreement to arbitrate between the parties, and then whether any of the issues raised are within the reach of the agreement." Texaco Exploration and Production Company v. AmClyde Engineered Products Company, Inc., 243 F.3d 906, 909 (5th Cir. 2001) (citing Midwest Mechanical Contractors, Inc. v. Commonwealth Construction, 801 F.2d 748, 750 (5th Cir. 1986)). "If the issues in a case are within the reach of that [arbitration] agreement, the district court has no discretion under section 3 to deny the stay. See id. (citation omitted).
Despite the strong federal policy favoring arbitration, the right to arbitration may be waived. See Frye v. Paine, Wetter, Jackson Curtis, Inc., 877 F.2d 396, 398 (5th Cir. 1989) (citing Price v. Drexel Burhnam Lambert, Inc., 791 F.2d 1156, 1158 (5th Cir. 1986)). The party asserting waiver has a heavy burden, but "waiver will be found when the party seeking arbitration" substantially invokes the judicial process to the detriment or prejudice of the other party." Id. (quoting Miller Brewing Company v. Forth Worth Distributing Company, Inc., 781 F.2d 494, 497 (5th Cir. 1986)).
Here, AECNSA and Copenship, A/S entered a time charter that contains an arbitration clause. Clause 17 of the charter party contains the following arbitration provision:
Should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to three persons in London (LMAA procedure where applicable), 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 the Court. The arbitrators shall be commercial men conversant with shipping matters. Exhibit A.
Based on the inclusion of Clause 17 in the charter party, the Court finds that there is a written agreement to arbitrate between the two parties. Further, the arbitration clause in this case is a "broad" agreement because it covers "any dispute" between the parties. See Texaco, 243 F.3d at 909. As a result, any litigation arguably arising under such a clause must be stayed pending the arbitrator's decision as to whether the dispute is covered. Id. (citing Hornbeck Offshore Corp. v. Coastal Carriers Corp., 981 F.2d 752, 754-55 (5th Cir. 1993)), see also Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil, 767 F.2d 1140, 1145 n. 10 (5th Cir. 1985).
The Court finds that AECNSA did not waive its right to arbitrate. While AECNSA has substantially invoked the judicial process, Nichols did not enter the case until nearly a year after AECNSA filed its limitation action and long after most of the discovery had been completed. In fact, Nichols did not enter the case until just over three weeks before the original trial date. This case is distinguishable from Fifth Circuit cases which found waivers when there were delays of over two years and a trial had begun before a party made a motion to compel arbitration. See Frye, 877 F.2d at 397; see also Price, 791 F.2d at 1160-61 (finding waiver when defendant delayed seventeen months before seeking arbitration). Nichols has also failed to demonstrate how he has been prejudiced. The Court recognizes the time and expense involved in litigating this claim, but this case is distinguishable from Fifth Circuit cases finding prejudice because of the limited involvement of Nichols in the discovery and pre-trial process. The fruits of Nichols' discovery efforts can be used in the arbitration.
Nichols further contends that the FAA and the Limitation of Liability Act are in conflict so that arbitration should not be compelled. The Court does not agree. The Fifth circuit has held that the equitable resolution policy of the Limitation Act is not a "strong" public policy sufficient to override a forum selection clause. See Afram Carriers, Inc. v. Moeykens, 145 F.3d 298 (5th Cir. 1998). The Afram court found that a strong public policy, not just any public policy, is needed to justify overcoming the presumption in favor of arbitration and forum selection clauses. See id. n. 9. The Fifth Circuit specifically noted that the case cited by Nichols for the proposition that the policy behind the Limitation Act overrides the policy behind arbitration, The Quarrington Court, 102 F.2d 916 (2d Cir. 1939), was out of line with more recent cases that demonstrated the strong public policy in favor of arbitration:
The Quarrington Court was decided in an era in which forum selection and arbitration clauses were disfavored by the courts because they were thought to "oust their jurisdiction." In those days, nearly any public policy could undo such a clause. See id. (citation omitted).
Today, arbitration clauses are given highly favorable treatment. See Byrd, 470 U.S. at 217, 105 S.Ct. at 1240; see also Texaco, 243 F.3d at 909. In light of the Fifth Circuit's determination that the equitable resolution policy of the Limitation Act is not a "strong public policy," and the heavy presumption in favor of arbitration clauses, the Court finds that the equitable resolution policy of the Limitation Act does not require it to deny arbitration.
Finally, Nichols argues that the arbitrable and non-arbitrable claims are so intertwined that arbitration should be denied. Nichols contends that the claims are so intertwined and related that severance is impractical and impossible. The Court disagrees. All Nichols demonstrates is that the Court and the arbitrators would be duplicating their efforts. The Supreme Court has held that "the Arbitration Act requires district courts to compel arbitration . . . when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums." Byrd, 470 U.S. at 217, 105 S.Ct. at 1241; see also Louis Dreyfus Corporation v. 27,946 Long Tons of Corn, 830 F.2d 1321, 1329, (5th Cir. 1987) ("arbitration agreements should be enforced `even where those agreements necessarily result in inefficient or duplicative bifurcated proceedings'") (citation omitted). Therefore, the Court finds that the arbitrable and non-arbitrable claims can be severed and considered in different proceedings.
III. Conclusion
For the foregoing reasons, the Court GRANTS AECNSA's motion to stay Nichols' claim against it pending arbitration.