NCL (Bahamas) Ltd. v. O.W. Bunker USA Inc. et al

Filing 48

PRELIMINARY INJUNCTION ORDER (see attached), enjoining Defendants, until further order of the Court, from, inter alia, "pursuing arbitration in London with respect to the bunkers invoice from O.W. Bunker USA, Inc. to NCL regarding the delivery of bunkers to the M/V NORWEGIAN SPIRIT by EKO in Piraeus, Greece, on October 18, 2014." Signed by Judge Charles S. Haight, Jr. on November 29, 2017. (Dorais, L.)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT

NCL (BAHAMAS) LTD., d/b/a
NORWEGIAN CRUISE LINE,

Civil Action No.
3:17-CV-1327 (CSH)

Plaintiff,
v.

O.W. BUNKER USA, INC. and KELLY
BEAUDIN STAPLETON, Liquidating
Trustee of the OWB USA Liquidating Trust,

NOVEMBER 29, 2017

Defendants.

PRELIMINARY INJUNCTION ORDER
HAIGHT, Senior District Judge:
This matter came before the Court on motion by Plaintiff NCL (Bahamas) Ltd. d/b/a
Norwegian Cruise Lines ("NCL"), requesting "a stay of arbitration and/or an injunction to prevent
the Defendants [O.W. Bunker USA Inc. ("O.W. USA") and the OWB USA Liquidating Trustee
("Liquidating Trustee")] from pursuing arbitration proceedings that the OWB USA Liquidating
Trustee has attempted to initiate in London, England." Doc. 2, at 1. See also Doc. 15 (NCL's
"Emergency Motion for Temporary Restraining Order and Preliminary Injunction"), at 1-2.1
Defendants demand that NCL participate in an arbitration in London to determine NCL's
liability to pay an invoice O.W. USA sent to NCL for the value of bunkers delivered to one of NCL's

1

"On August 17, 2017, the Defendants filed claim submissions in the [London] arbitration
that is the subject of NCL’s emergency motion," which seeks, inter alia, a preliminary injunction.
Doc. 15, at 1.
1

ships, the M/V NORWEGIAN SPIRIT, by the Greek supplier EKO at the port of Pireaus, Greece,
on October 18, 2014. See Doc. 2-4 ("Invoice" dated "18. October 2014"). O.W. USA makes this
demand pursuant to Article P.1 of the "OW Bunker Group Terms and Conditions for Sale of Marine
Bunkers" [Doc. 2-5] (herein "the OWB T&C"), which contains a provision dictating that the
agreement "shall be governed and construed in accordance with English law" and disputes arising
under the agreement "shall be finally settled by arbitration in London."2 Doc. 2-5, at 11.
In the particular circumstances attending the EKO bunkering in Piraeus in October 2014,
NCL has responded to the arbitration demand by asserting that there is no contract between O.W.
USA and NCL obligating NCL to arbitrate O.W. USA's claim in London. NCL has based that
contention upon its interpretation of certain provisions in the OWB T&C, which were incorporated
by reference in the sales order for the bunkers delivery in question. Specifically, "in circumstances
where the physical supply of the Bunkers is being undertaken by a third party which insists that the
Buyer is also bound by its own terms and conditions," Article L.4(a), in the event that the third
party's terms include "[a] different law and/or forum selection for disputes," those different selections

2

Article P.1 of the OWB T&C states in relevant part:

This Agreement shall be governed and construed in accordance with English law.
...
Except for circumstance referred to in Clause P.5 below [where the party requesting
bunkers is not the "Owner of the Vessel"] all disputes arising in connection with this
Agreement or any agreement relating hereto, save where the Seller decides otherwise
in its sole discretion, shall be finally settled by arbitration in London, England in
accordance with the Arbitration Act 1996 (or any subsequent amendment).
Doc. 2-5, at 11.
2

are, and in this case have been, "incorporated into" the contract, Article L.4(b)(iii).3
As NCL's barrister, Mr. Karia, explained:
The prima facie position [of NCL] is that the contract between the Seller [OW USA]
and the Buyer [NCL] is subject to the OWB T&Cs, including the English law and
London arbitration clause in clause P.1 (cls. A.2 & P.1).
Clause L.4, however, makes an exception to that prima facie rule when the third
party physically supplying the bunkers to the Buyer (i.e. "the physical supplier" –
here, EKO) "insists that the Buyer is also bound by its [i.e. the physical supplier's]
own terms and conditions." (cl. L.4(a)).
In that situation, the Contract is varied so as to incorporate that physical supplier's
standard terms and conditions, which then take precedence over the OWB T&Cs.
Doc. 39-1 ("Expert Declaration of Chirag Karia, Q.C.," dated June 16, 2017), ¶¶14.1-14.3 (emphasis
in original).
In opposition, O.W. USA contends that on a proper construction of the OWB T&C, the
parties' contractual obligation to arbitrate disputes in London is not affected by events at the bunkers
3

Article L.4 of the OWB T&C provides in pertinent part:

(a)

These Terms and Conditions are subject to variation in circumstances where
the physical supply of the Bunkers is being undertaken by a third party which
insists that the Buyer is also bound by its own terms and conditions. In such
circumstances, these Terms and Conditions shall be varied accordingly, and
the Buyer shall be deemed to have read and accepted the terms and conditions
imposed by the said third party.

(b)

Without prejudice or limitation to the generality of the foregoing, in the event
that the third party terms include:
...
(iii) A different law and/or forum selection for disputes to be determined,
then such law selection and/or forum shall be incorporated into these
terms and conditions.

Doc. 2-5, at 9 (emphasis added). The parties to the contract mis-numbered the paragraphs in Article
L.4(b) by including two "ii"'s (instead of "ii" and "iii"). The Court refers to the second paragraph
labeled as "L.4(b)(ii)" as "L.4(b)(iii)" throughout this Order.
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delivery port of Piraeus. In particular, O.W. USA asserts that EKO's choice of Greek law and its
forum selection of Greece in its sales contracts with O.W., have not superseded the London
arbitration clause in the OWB T&C. See Doc. 34, at 9-11.
Upon review of the parties' briefs and numerous declarations of their respective barristers,
Messrs. Karia and Mander, the Court has determined that there is no written agreement obligating
NCL to arbitrate the claim (relating to the October 2014 EKO bunkering) in London.4 See Doc. 47
("Ruling on Plaintiff's Motion to Stay or Enjoin Arbitration," filed November 29, 2017). Article L.4
of the contract for supply of bunkers to the M/V NORWEGIAN SPIRIT, between O.W. USA as
Seller and NCL as Buyer, has varied and superseded the provisions of the OWB T&C's Article P.1.
The sale was performed "in circumstances where the physical supply of the Bunkers [was] being
undertaken by a third party [EKO] which insist[ed] that the Buyer [was] also bound by its own terms
and conditions," Article L.4(a). See Doc. 2-5, at 9. Third party EKO's terms included "[a] different
law and/or forum selection for disputes," so that those different selections were "incorporated into"
the terms and conditions of the OWB T&C, Article L.4(b)(iii). See Doc. 2-5, at 9; see also Doc. 47
(Ruling, filed November 29, 2017).
In general, in the Second Circuit, "[a] party seeking a preliminary injunction must
demonstrate: (1) 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 in
the plaintiff's favor; (2) a likelihood of irreparable injury in the absence of an injunction; (3) that the

4

Both of Mr. Karia's declarations, and Mr. Mander's declarations of June 16 and September
22, 2017, were filed on the docket of this case. See Docs. 34-2, 39-1, 44-1, 45-1. Mr. Mander's
declaration of June 23, 2017, appears on the docket of NCL's bankruptcy action. See Bankr. Case
No. 17-05008, Doc. 39.
4

balance of hardships tips in the plaintiff's favor; and (4) that the public interest would not be
disserved by the issuance of an injunction." Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F.3d
887, 895 (2d Cir. 2015) (citation and internal quotation marks omitted).
However, as stated in the Court's Ruling, the Second Circuit holdings in In re Am. Exp. Fin.
Advisors Sec. Litig., 672 F.3d 113, 142 (2d Cir. 2011), and Goldman, Sachs & Co. v. Golden Empire
Sch. Fin, Auth., 764 F.3d 210, 213-14 (2d Cir. 2014), arguably suggest "that a preliminary injunction
enjoining an arbitration in these particular circumstances does not depend for its issuance upon the
movant's showing of irreparable harm if the injunction is not granted or likelihood of success on the
merits, prerequisites for a preliminary injunction in other contexts." Doc. 47, at 41-42.
Nonetheless, the Court alternatively includes in this Order the typical prerequisites for
preliminary injunction to ensure completeness of analyses and reasoning. The Second Circuit has
observed that a party "would be irreparably harmed by being forced to expend time and resources
arbitrating an issue that is not arbitrable, and for which any award would not be enforceable." Merrill
Lynch Inv. Managers v. Optibase, Ltd., 337 F.3d 125, 129 (2d Cir. 2003) (quoting Maryland Cas.
Co. v. Realty Advisory Bd. on Labor Relations, 107 F.3d 979, 985 (2d Cir.1997)). See also J.P.
Morgan Sec. LLC v. Quinnipiac Univ., No. 14 Civ. 429 (PAE), 2015 WL 2452406, at *6 (S.D.N.Y.
May 22, 2015) ("As a matter of law, there is irreparable harm when a party is 'compelled to arbitrate
... without having agreed to arbitration' because that party is 'forced to expend time and resources
arbitrating an issue that is not arbitrable.'") (quoting NASDAQ OMX Group, Inc. v. UBS Secs. LLC,
No. 13 Civ. 2244(RWS), 2013 WL 3942948, at *12 (S.D.N.Y. June 18, 2013)); UBS Sec. LLC v.
Voegeli, 684 F. Supp. 2d 351, 354 (S.D.N.Y. 2010) ("[I]t is not merely expense that underlies the
prohibition against forcing a party to arbitrate a dispute that it did not agree to arbitrate;" because that
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party "would also lose its right to have defendants' claims adjudicated in a court of law, rather than
in an arbitral forum to whose jurisdiction it has not consented."), aff'd, 405 F. App'x 550 (2d Cir.
2011).
In the case at bar, there would be "irreparable harm" as a matter of law should NCL be
compelled to arbitrate the claim at issue in London. Not only would it incur expenditures of time and
resources, it would lose the potential right to have the claim regarding bunkers payment adjudicated
in a court of law. Under such circumstances, "a district court may properly enjoin arbitration
proceedings that are not covered by a valid and binding arbitration agreement." In re Am. Exp. Fin.
Advisors Sec. Litig., 672 F.3d at 142. See also Goldman, Sachs & Co., 764 F.3d at 213-14 (holding
district court " had authority to enjoin arbitration . . . . Federal courts generally have remedial power
to stay arbitration.").
Having found irreparable harm as a matter of law (due to no contract to arbitrate in London
in these circumstances), the Court has concluded that NCL (1) would succeed on the merits of
whether it must arbitrate in London, and (2) is the party who would suffer by needless expenditure
of time and resources, as well possible loss of the right to adjudicate in court, should arbitration be
forced to proceed there. See Doc. 47, at 42-43. Moreover, in light of the parties' right to contract
as they desire, the injunction does nothing to disserve the public interest.5
Accordingly, NCL's Motion for Preliminary Injunction [Doc. 2], having been GRANTED,
5

See, e.g., Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992) ("In
reviewing a written contract, a trial court's primary objective is to give effect to the intent of the
parties as revealed by the language they chose to use.") (emphasis added); Szydlo v. United States,
No. 3:16-CV-0127 (VLB), 2017 WL 125016, at *6 (D. Conn. Jan. 12, 2017) ("Courts do not rewrite
contracts for the parties, but will instead bind parties to express terms of their contract absent
countervailing policy considerations.") (emphasis added) (citations and internal quotation marks
omitted).
6

pursuant to Federal Rule of Civil Procedure 65(d), it is hereby ORDERED, ADJUDGED, and
DECREED that Defendants O.W. Bunker USA, Inc., and its Liquidating Trustee, Kelly Beaudin
Stapleton, and each of their agents, servants, employees and representatives, and those persons
acting in concert or participation with them or any of them, are hereby PRELIMINARILY
ENJOINED, until further order of this Court, from initiating, attempting to initiate, continuing,
proceeding with, or otherwise pursuing arbitration in London with respect to the bunkers invoice
from O.W. Bunker USA, Inc. to NCL regarding the delivery of bunkers to the M/V NORWEGIAN
SPIRIT by EKO in Piraeus, Greece, on October 18, 2014.6
The Court clarifies that it makes no order at this time regarding NCL's broad request that the
Court enjoin the Defendants from pursuing arbitration "in any other forum." Doc. 2, at 4. Moreover,
this Order does not address NCL's prayer for a "judgment against Defendants O.W. and the
Liquidating Trustee, declaring that NCL is entitled [to] equitable subrogation, setoff, recoupment,
priority through payment under compulsion, or other recognition of the amount that it has already
paid for the [bunkers] Order and thus is not liable to O.W. or the Liquidating Trustee for any
amounts with respect to the Order." Doc. 1, ¶ 46.
As stated in its contemporaneously filed Ruling [Doc. 47], the Court has provided O.W. USA
"an opportunity to challenge the inference upon which this Ruling significantly depends: specifically,
that [on October 18, 2014,] at the time EKO supplied the contracted-for bunkers to the
NORWEGIAN SPIRIT, O.W. Malta (and possibly other O.W. entities) knew about EKO's standard
terms and conditions and agreed to them (which is to say, did not object to them)." Doc. 47, at 40-

6

The invoice at issue, dated October 18, 2014 [Doc. 2-4], was in the amount of $694,548.44.
The due date was November 17, 2014.
7

41. Relevant evidence which might negate that inference is entirely within the knowledge and
control of the O.W. Group. O.W. USA is reminded that such proof, if any, that EKO neither knew
of, nor assented to, EKO's standard terms and conditions must be submitted on or before January
30, 2018. If Defendants fail to submit evidence in this regard by that deadline, the Court will make
the preliminary injunction final and permanent. Pending Defendants' submission of such proof, the
Court ORDERS that the preliminary injunction SHALL REMAIN IN EFFECT TILL FURTHER
ORDER OF THIS COURT.
It is FURTHER ORDERED that no bond need be posted.
Moreover, it is FURTHER ORDERED that electronic service of this ORDER upon
Defendants through docketing upon this Court's CM/ECF filing system will complete Plaintiff's
service of this ORDER upon Defendants, providing Defendants with adequate notice thereof through
immediate electronic mail (email) to their named counsel of record.
It is SO ORDERED.
Dated: New Haven, Connecticut
November 29, 2017
/s/Charles S. Haight, Jr.
CHARLES S. HAIGHT, JR.
Senior United States District Judge

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