Opinion
Civil Action No. 02-395, Section "A" (2)
December 5, 2002
ORDER AND REASONS
Before the Court is a Motion to Stay Pending Arbitration (Rec. Doc. 7) filed by defendant Gulf Africa Line AG. Plaintiff TMC Shipping Co. opposes the motion. The motion, set for hearing on November 6, 2002, is before the Court on the briefs without oral argument. For the reasons that follow the motion is GRANTED.
Background
This case involves a maritime contractual dispute between Gulf Africa Line A.G. ("GAL") and TMC Shipping Company ("TMC"). TMC asserts that it provided services as consigned vessel agent to vessels owned and/or operated by GAL. TMC is suing for payment on various outstanding invoices for its services. TMC was assigned vessel agent as per the charter party on the vessels at issue.
Two charter party agreements are involved in this dispute — one with Richards Bay Minerals ("RBM") and one with Frank-Symons, Ltd. ("FSL"). Both charter party agreements contain arbitration clauses. The RBM charter party provides that
[A]ny dispute arising out of this Charter Party shall be referred to Arbitration in Durban in accordance with the South African Arbitration Act. . . .
GAL Exhibit A.
The FSL charter party provides that
Any dispute under this Charter Party, or any Bill of Lading issued for cargo shipped hereunder shall be settled by Arbitration in London. . . .
GAL Exhibit B.
GAL moves to stay this matter so that the parties can proceed to arbitration.
Parties' Contentions
GAL argues that TMC's claims are based upon the provisions of the charter party agreements and therefore TMC's claims are subject to arbitration.
In opposition TMC argues that it was not a signatory to the charter party agreements and therefore, as a matter of contract, is not bound by the arbitration provisions. TMC also argues that it is not suing pursuant to the charter party but rather pursuant to its own published tariffs. Further, the dispute at issue does not fall within the scope of the arbitration provisions. Finally, GAL has waived any right it had to arbitration by failing to timely seek arbitration.
Discussion
The first step in evaluating a motion to compel arbitration is to determine whether the parties agreed to arbitrate. Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002). This determination depends on two considerations: (1) whether there is a valid agreement to arbitrate between the parties, and (2) whether the dispute in question falls within the scope of the arbitration agreement. Id. (citing Webb v. Investacorp, 89 F.3d 252, 258 (5th Cir. 1996)). Ambiguities or uncertainties as to whether a particular dispute falls within the scope of an arbitration agreement are resolved in favor of arbitration. Id. (citing Volt Info Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)).
Ordinary contract principles apply to the determination of whether a valid agreement to arbitrate exists between the parties. Id. (citingDaisy Mfg. Co. v. NCR Corp., 29 F.3d 389 (8th Cir. 1984)). Thus, the strong federal policy favoring arbitration is triggered only after the Court determines that a binding arbitration agreement exists. See id.
The first issue for the Court's consideration is whether a valid arbitration agreement binds TMC. TMC's two defenses are that it is suing based upon its owns tariffs and not the charter party, and further that it was a non-signatory to the charter party agreement, and therefore cannot be bound by its arbitration provisions.
TMC's first contention is without merit. TMC's published tariffs provide only the fee structure for its services. (TMC Exhibit 2). TMC's right to recover those fees from GAL, however, clearly derives from the terms of the charter party agreements themselves. As TMC notes in its own complaint, "TMC was assigned vessel agent as per the charter party on the vessels at issue." Rec. Doc. 1, at ¶ V. It is the obligation that GAL as vessel owner created, via the charter party, that TMC seeks to enforce. Therefore, TMC's claims do derive from the charter party agreements.
The next issue the Court must resolve is whether TMC's status as a non-signatory to the charter party agreements allows it to escape the arbitration provisions contained in those agreements. GAL has cited numerous authorities to the Court which recognize that a non-signatory to a charter party can be compelled to arbitrate in accordance with the terms of the agreement. See, e.g., Son Shipping Co. v. DeFossie Tanghe, 199 F.2d 687 (2d Cir. 1952). All of those cases were decided, however, where a bill of lading specifically incorporated the terms of the charter party, or are otherwise factually distinguishable from this case. See, e.g., Cargill Ferrous Int'l v. M/V HUNTA ZYGMUNT, 1996 WL 229445 (E.D. La. 1996) (incorporation through bill of lading); Lucky Metals Corp. v. M/V AVE, 1995 WL 575195 (S.D.N.Y. 1995) (incorporation through bill of lading). In this case, no bill of lading incorporated the charter party agreements and suit is not based upon a bill of lading.
On the other hand, TMC's cited authorities, in which non-signatories were not bound to arbitrate, are likewise distinguishable from the instant case. Fleetwood involved non-signatories suing in tort for personal injuries as opposed to suing in contract and the Fifth's Circuit's analysis was based solely on Texas law. 280 F.3d at 1071-77. Key to the Fifth Circuit's decision to decline arbitration inTalbott Big Foot, Inc. v. Boudreaux, 887 F.2d 611 (5th Cir. 1989), was the fact that the lawsuit was premised on the Louisiana Direct Action statute. Thus, TMC's cited authorities are likewise not very convincing.
Neither party addressed which jurisdiction's law should govern in this case although one of the charter party agreements does refer to South African law.
Considering the foregoing discussion, the Court concludes that TMC is bound by the arbitration provisions in the charter party agreements. But for those agreements, TMC would have no right of action against GAL. Because TMC is suing GAL in reliance upon the terms of the agreements, and because they call for arbitration of any dispute arising under the agreements, TMC is bound by the arbitration provisions contained in the agreements. Further, those arbitration provisions are clearly broad enough to encompass this dispute.
Finally, TMC's argument that GAL waived its right to arbitrate is unpersuasive in light of clear Fifth Circuit jurisprudence. Although the Fifth Circuit recognizes that the right to compel arbitration is waivable, waiver of arbitration is not a favored finding, and there is a presumption against it. Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656, 661 (5th Cir. 1995) (citing Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494 (5th Cir. 1986)). The party claiming waiver has a heavy burden but waiver will be found where the party seeking arbitration substantially invokes the judicial process to the detriment of the other party. Frye v. Paine, Webber, Jackson Curtis, Inc., 877 F.2d 396, 398 (5th Cir. 1989) (citing Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156 (5th Cir. 1986).
In the instant case, minimal activity had taken place when GAL filed its motion to compel arbitration. The "considerable expense" of $1,600 that TMC cites falls far short of the level of activity present in other cases in which the Fifth Circuit refused to find waiver. See, e.g., Tenneco Resins, Inc. v. Davy International, 770 F.2d 416 (5th Cir. 1985) (finding no waiver where defendant delayed eight months and participated in discovery). In contrast, in cases where waiver is found the facts are far more egregious. See, e.g., Frye, 877 F.2d at 397 (finding waiver where defendant waited two and a half years to seek arbitration, participated in extensive discovery, and participated in a trial).
The Court notes that regardless of which way its decision comes down today, the aggrieved party can seek relief from the Fifth Circuit.See American Heritage Life Insurance Company v. Orr, 294 F.3d 702 (5th Cir. 2002).
Accordingly;
IT IS ORDERED that the Motion to Stay Pending Arbitration (Rec. Doc. 7) filed by defendant Gulf Africa Line AG should be and is hereby GRANTED. This matter is STAYED pending arbitration. The Clerk shall CLOSE this matter ADMINISTRATIVELY pending further orders of the Court.