Summary
denying motion to stay arbitration pending Second Circuit review of a decision by the District of Connecticut denying respondents' motion for arbitration in a related case
Summary of this case from Odfjell ASA v. Celanese AGOpinion
04 Civ. 1758 (JSR).
July 12, 2004
MEMORANDUM ORDER
Plaintiffs Odfjell ASA, Odfjell USA, Inc. and Odfjell Seachem AS (collectively "Odfjell") and Jo Tankers AS, Jo Tankers BV and Jo Tankers, Inc. (collectively "Jo Tankers") are in the business of shipping and transporting bulk liquid chemicals via specialized shipping vessels called parcel tankers. In connection with this business, plaintiffs entered into numerous shipping contracts with defendants Celanese AG and Celanese LTD (collectively "Celanese") and Millennium Petrochemicals, Inc. ("Millennium"), who are in the business of producing, developing and selling chemical products.
Each of the shipping contracts entered into by the parties incorporates by reference a set of standardized provisions published by an industry trade association, the Association of Ship Brokers Agents, Inc. Collectively, these standardized provisions are known as the "ASTABANKVOY form." Paragraph 24 of the ASTABANKVOY form provides:
24. ARBITRATION. Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or the City of London, whichever place is specified in Part I of this Charter pursuant to the laws relating to arbitration there in force, before a board of three persons, consisting of one arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen.See Affidavit of Michael H. Rogers sworn to March 19, 2004 in Opposition to Motion to Stay Arbitration ("Rogers Affidavit") Ex. 1.
Pursuant to this paragraph, the defendants, on November 5, 2003, served arbitration demands on Odfjell and Jo Tankers asserting what are, in effect, various federal antitrust claims.See Affidavit of Samantha C. Gordon sworn to March 2, 2004 ("Gordon Affidavit"), Ex. 1 (Letter from Daniel J. Fetterman, Esq. Dated 5, 2003) at 1 ("We demand this arbitration to resolve all differences arising out of Jo Tankers' participation in a conspiracy to fix prices, rig bids, divide trade lanes, and engage in other anti-competitive and wrongful conduct in contravention of United States law."). Previously, however, ten lawsuits had been filed against the plaintiffs in federal district courts in Connecticut, Pennsylvania, and Texas, accusing the plaintiffs of the same anti-competitive conduct that the defendants here sought to refer to arbitration. Although the parties in each of these lawsuits had contracts that incorporated by reference the ASTABANKVOY form, nevertheless when the instant plaintiffs moved in one of these cases, JLM Industries, to stay or dismiss the action in favor of arbitration the Court there ruled that the claims were not arbitrable because they did not "arise out of or relate to the charters between the parties" but rather were predicated on the "alleged conspiracy to control the world market for ocean shipping transportation of liquid chemicals." See JLM Industries, Memorandum of Decision June 24, 2003 (D. Conn.). An appeal from that decision was filed on June 27, 2003, but is still sub judice before the Second Circuit.
These lawsuits are JLM Industries, Inc. et al. v. Stolt-Nielsen SA, et al., No 3:03 CV 348 (D. Conn.) ("JLM Industries"); Illovo Sugar Ltd. v. Stolt-Nielsen SA, et al., No. 3:03-1200-EBB (D.Conn.); Fleurchem, Inc v. Stolt-Nielsen SA, et al., No. H-03-3385 (S.D.Tex); Allchem Industries Industrial Chemicals Group v. Stolt-Nielsen SA et al., No. 2:03-Cv-03476-CMR (E.D. Pa.); GFI Chemicals, LP et al v. Stolt-Nielsen SA et al., No. 2:03-Cv-04079-CMR (E.D. Pa.);Basic Chemical Solutions, LLC v. Stolt-Nielsen SA, et al., No. 2:03-Cv-04080-CMR (E.D. Pa.); Animal Feeds International Corp., et al v. Stolt-Nielsen SA, et al, No. 2:03-Cv-05002-CMR (E.D. Pa.); The Dow Chemical Co. v. Stolt-Nielsen SA, et al., No. 03-Cv-1920 (D. Conn.); Union Carbide Co. v. Stolt-Nielsen SA, et al., No. 03-Cv-1919 (D. Conn.); Nizhnekamskeneftekhim USA, Inc. v. Stolt-Nielsen SA, et al., No. H-03-1202 (S.D. Tex.). Pursuant to 28 U.S.C. § 1407, the Judicial Panel on Multidistrict Litigation has now transferred, or is in the process of transferring, these lawsuits (and others subsequently filed) to the District of Connecticut.
Notwithstanding the decision of the District of Connecticut Court to deny arbitration in the JLM Industries case, the instant defendants, who are not parties to any of the ten aforementioned lawsuits but who also allege similar antitrust claims against plaintiffs, thereafter, as mentioned, commenced an arbitration proceeding against the plaintiffs relating to these antitrust claims. In response, plaintiffs, on March 3, 2004, filed the instant action seeking to stay that arbitration, and, shortly thereafter, made a formal motion seeking such a stay. Plaintiffs seek to enjoin the arbitration, not because they believe the defendants' claims are nonarbitrable — indeed, in the District of Connecticut litigation, as mentioned, plaintiffs have taken the position that the claims are, in fact, arbitrable — but because they believe they would be harmed if forced to participate in arbitration proceedings before the Second Circuit issues its decision in JLM Industries. Since the relief requested in the motion is identical to the sole relief requested in the Complaint, resolution of the motion is also dispositive of the instant action.
In order to obtain preliminary injunctive relief, such as a stay of arbitration, a party must "establish `(1) that it will be irreparably harmed if an injunction is not granted, and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation, and a balance of the hardships tipping decidedly in its favor." Merrill Lynch Investment Managers v. Optibase, Ltd., 337 F.3d 125, 129 (2d Cir. 2003). In the Court's view, the plaintiffs have not met their burden with respect to any aspect of this standard.
With respect to irreparable harm, although plaintiffs have, as noted, taken the position in the JLM Industries case that the controversies here in issue are arbitrable, they argue that if the opposite position taken by the district court in that case is ultimately affirmed by the Court of Appeals, they will have been forced to arbitrate non-arbitrable claims. This, they say, would constitute irreparable harm "per se." See, e.g., Tellium, Inc. v. Corning Inc., 2004 WL 307238, *2 (S.D.N.Y. 2004); Mount Ararat Cemetery v. Local 365, Cemetery Workers and Greens Attendants Union, 975 F. Supp. 445 (E.D.N.Y. 1997); International Trust Co. of Bermuda, Ltd. v. Fahnstock Co., Inc., 1995 WL 606275 (S.D.N.Y. 1995); see also Maryland Casualty Co. v. Realty Advisory Board on Labor Relations, 107 F.3d 979, 985 (2d Cir. 1997). But the test for "irreparable harm" is whether the defendant "will" be irreparably harmed. Merrill Lynch, 337 F.3d at 129 (emphasis supplied). Here, plaintiffs would meet this test only if it were clear that the Court of Appeals would affirm the decision in JLM Industries. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). Indeed, in all the above-cited cases, the respective court either implicitly or expressly premised its finding of irreparable harm on a determination that the claims were, as a matter of law, non-arbitrable (whether because there had been no agreement to arbitrate in the first place or because one of the parties had waived its right to arbitrate).
In the instant case, by contrast, the issue of arbitrability is deeply in doubt. While it is not for this Court to speculate as to whether or not the Second Circuit will affirm the district court's determination of non-arbitrability, plaintiffs themselves have, in their appeal from that decision in JLM Industries, offered substantial reasons in favor of arbitrability. Here, their mere speculation that, despite their arguments, it is possible that the district court's decision may be affirmed, does not remotely carry their burden to make a "clear showing" of irreparable harm. See Mazurek, supra, 520 U.S. 968, 972 (1997); Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 975 (2d Cir. 1989).
Plaintiffs also argue that, even if the district court's determination in JLM Industries is reversed, they will still suffer harm because the instant arbitration will then likely be terminated in favor of a broader arbitration initiated by the plaintiffs in Nizhnekamskeneftekhim USA, Inc. v. Stolt-Nielsen SA, et al., No. H-03-1202 (S.D. Tex.). But quite aside from the highly speculative nature of this assertion, the only harm plaintiffs would then suffer would be certain added expenditures that do not constitute irreparable harm in such circumstances.See, e.g., Woodlawn Cemetery v. Local 365, Cemetery Workers and Green Attendants Union, 930 F.2d 154, 157 (2d Cir. 1991);Emery Air Freight Corp. v. Local Union 295, 786 F.2d 93, 100 (2d Cir. 1986).
The plaintiffs have also failed to establish the second prong of the preliminary injunction test: either (1) a likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation, and a balance of the hardships tipping decidedly in their favor. As to the first alternative, the likelihood of success on the merits means, in this context, the likelihood that the Second Circuit will affirm the decision of the district court in JLM Industries. Here, however, as the Court has already explained, the plaintiffs do not argue that such an affirmance is likely, but only that it is possible.
As to the second alternative, the lower court decision and pendant appeal in JLM Industries clearly show that there are sufficiently serious questions going to the merits to make them a fair ground for litigation, but the plaintiffs have not established that the balance of the hardships tips decidedly in their favor. The arbtration is barely underway. While plaintiffs, as noted, argue that unless the arbitration is stayed, they may suffer the time and money-costs of potentially duplicative proceedings, what is chiefly involved at this point is discovery, which can be applied to whatever form the future proceedings take. Conversely, however, if arbitration is stayed, defendants may well be deprived of that expeditiousness that is a primary benefit of arbitration. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 633 (1985). Given that "federal policy strongly favors arbitration," David L. Threlkold Co., Inc. v. Metallgesellshaft, Ltd., 923 F.2d 245, 248 (2d Cir. 1991), the Court finds that the balance of hardships tips, if at all, towards the defendants, not the plaintiffs.
Accordingly, for the reasons stated above, the Court hereby denies the plaintiffs' motion for a stay and likewise dismisses the Complaint. Clerk to enter judgment.
SO ORDERED.