International Yacht Bureau, Inc. et al v. International Registries, Inc.

Filing 36

OPINION AND ORDER denying 4 Motion to Stay this Action in favor of Compelling Arbitration in New York. Signed by Judge Kenneth A. Marra on 3/3/2014. (ir)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 13-60947-CIV-MARRA
INTERNATIONAL YACHT BUREAU, INC.
a Florida corporation, and JACOB
DESVERGERS, an individual,
Plaintiff,
vs.
INTERNATIONAL REGISTRIES, INC.,
a Virginia corporation,
Defendant.
______________________________/
OPINION AND ORDER
This cause is before the Court upon Defendant International Registries, Inc.’s Motion to Stay
this Action in Favor of Compelling Arbitration in New York (DE 4). Plaintiffs responded (DE 10),
and Defendant replied (DE 16). After conducting discovery on the issue of arbitrability, the parties
submitted supplemental briefs. (DE 29, 30). Subsequently, Plaintiffs filed a Supplemental Affidavit
of Jacob Desvergers (DE 31), to which Defendant objected (DE 33). This matter is now ripe for
review. The Court has considered the briefs and the record, and is otherwise advised in the premises.
I. Background
The following facts are pertinent to this dispute. The Trust Company of Marshall Islands
(“TCMI”) is the Republic of Marshall Islands’ Maritime Administrator. Apr. 22, 2013 Kirby Aff.,
¶ 3 (DE 4-1). TCMI and Plaintiff International Yacht Bureau (“IYB”) entered into an agreement
effective September 1, 2006 (“Agreement”).1 (DE 4-2). The Agreement designated IYB an
1

The exact title of the contract was “AGREEM ENT TO GOVERN THE DELEGATION of STATUTORY
SURVEY AND CERTIFICATION SERVICES, ISM CODE VERIFICATION AND CERTIFICATION SERVICES,
and ISPS CODE VERIFICATION AND CERTIFICATION SERVICES for YACHTS REGISTERED IN THE
MARSHALL ISLANDS between THE REPUBLIC OF MARSHALL ISLANDS represented by THE TRUST
COMPANY OF THE MARSHALL ISLANDS, INC. and THE OFFICE OF THE MARITIME ADMINISTRATOR for

Appointed Representative (“AR”). As such, IYB was given the authority to survey yachts and to
issue “Marshall Islands statutory certificates.” Agreement, sec. 1 and 2 (DE 4-2).
In particular, IYB was authorized to “measure Yachts, conduct initial and subsequent
surveys, periodic inspections, examinations, including dry-docking examinations, audits and
assessments of Companies and Yachts and safety inspections to determine compliance with the
mandatory requirements of the international conventions and codes as they may apply;” and to “issue
and, in consultation with the Administration, withdraw, cancel or invalidate Marshall Islands
statutory certificates in accordance with the results of such surveys, inspections and audits.”
Agreement, sec. 2.4 (DE 4-2). The Agreement went on to state that “[i]n fulfilling the duties and
responsibilities hereunder, the AR shall as applicable make recommendations to yacht owners as to
compliance with the specific requirements of the Yacht’s certificate or the Applicable Instruments.”
Id. With the exception of the safety inspection fees, IYB was to be compensated by the parties
requiring its services and not by TCMI. Agreement, sec. 6.1 (DE 4-2).2

THE REPUBLIC OF MARSHALL ISLANDS and INTERNATIONAL YACHT BUREAU, INC.” (DE 4-2).
2
Annex V incorporated another contract into the Agreement. (DE 4-2, pp. 34-37). That document was dated
March 14, 2005 and titled “Nautical Inspection Agreement.” Id. The Nautical Inspection Agreement was made between
The Republic of the Marshall Islands, Office of the Maritime Administrator and U.S. Maritime Institute, Inc. Id. Jake
Desvergers signed that contract on behalf of the U.S. Maritime Institute, Inc. as its President. Id. The Nautical
Inspection Agreement called for the U.S. Maritime Institute, Inc. to provide closing inspections to vessels seeking to
register under the Marshall Islands flag, to inspect vessels registered under the Marshall Islands flag, and to investigate
incidents involving vessels registered under the Marshall Islands flag. Id. Further, the U.S. M aritime institute was to
be compensated by the Administrator for its services. Id. The Nautical Inspection Agreement also contained its separate
arbitration clause:
9. Arbitration. All disputes, controversies, or difference which may arise between the parties, out of
or in relation to or in connection with this Agreement, or for breach thereof, shall be finally settled in
Virginia, United States of America, unless the parties agree otherwise, in accordance with the
International Arbitration Rules of the American Arbitration Association. The award rendered by the
arbitrator shall be final and binding upon both parties concerned.
Id.
Thus, the terms of the Nautical Inspection Agreement conflict with the terms of the main Agreement. However,
Defendant does not mention the provisions of the Nautical Inspection Agreement, and U. S. M aritime Institute, Inc. is
not a party to this action. Rather, Defendant is attempting to compel arbitration in New York pursuant to the arbitration
clause, section 6.7.2, of the main Agreement. Accordingly, the Court will not consider the terms of the Nautical
Inspection Agreement.

2

TCMI is not a party to this action. Defendant International Registries, Inc. (“IRI”) is a
Virginia corporation, and its purpose is to provide technical and administrative services to TCMI.
Id. ¶ 4 (DE 4-1). For example, IRI performs investigative, seafarer identification, marketing,
communication, legal and regulatory support functions for TCMI. Id. Likewise, when a yacht seeks
to register under the flag of Marshall Islands, IRI registers it. Id. IRI and TCMI have an oral
contract. Kirby Dep., p. 13 (DE 29-1). To facilitate performance of IRI’s services, many of the IRI
officers have been deputized and appointed Deputy Commissioners of Maritime Affairs or Special
Agents of the Republic of Marshall Islands. Apr. 22, 2013 Kirby Aff., ¶ 5 (DE 4-1).
The business relationship between the Marshall Islands through TCMI and IYB flourished
for a while resulting in an increase in vessels registered under the Marshall Islands flag. Compl., ¶¶
14-16 (DE 1-2). Plaintiffs assert that in 2010 IRI personnel became dissatisfied because IYB was
strictly enforcing safety standards. This strict enforcement resulted in vessels not passing the
inspections and not being able to register under the Marshall Islands flag. This was contrary to IRI’s
goals. Id., ¶¶ 17-20. Plaintiffs aver that IRI personnel defamed IYB and Jacob Desvergers, one of
the Plaintiffs in this action and the principal of IYB, and advised ship owners and managers to hire
other inspectors. Id. Therefore, Plaintiffs initiated this action for defamation (Count I) and tortious
interference with the “advantageous business relationships with the yachts” (Count II). Id.
The Agreement between TCMI and IYB contained the following arbitration clause:
6.7.2. Should any dispute arise out of this Agreement which has not been resolved
by private negotiations between the parties, the matter in dispute shall be resolved by
arbitration and shall be referred to three persons at New York, 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 proceedings shall be conducted in
accordance with the Rules of the Society of Maritime Arbitrators, Inc. The arbitrators
shall be members of the Society of Maritime Arbitrators, Inc.
(DE 4-2).

3

The Agreement also specified that it was governed by the laws of the state of New York.
Agreement, sec. 6.7.1 (DE 4-2). IRI moved for a stay of this action in favor of compelling
arbitration in New York. Plaintiffs oppose the motion because neither Jacob Devergers nor IRI are
signatories to the Agreement, and because the claims in this case are beyond the scope of the
arbitration clause.
II. Discussion
The Supreme Court has articulated a strong federal policy favoring arbitration agreements.
See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). One of the
purposes of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., is to “ensure judicial
enforcement of privately made agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 219 (1985). As such, arbitration agreements must be “rigorously enforce[d]” by the courts.
Id. at 221. Further, the FAA directs the court to stay the trial until arbitration has been concluded
if the case involves an issue referable to arbitration. 9 U.S.C.A. § 3 (West).
For the purposes of a motion to compel arbitration, the allegations in the complaint should
be assumed to be true. Int'l Underwriters AG v. Triple I: Int'l Investments, Inc., 533 F.3d 1342, 1345
(11th Cir. 2008). The court may consider affidavits. See Samadi v. MBNA America Bank, N.A., 178
Fed. App’x 863, 866 (11th Cir. 2006). In fact, the party opposing a motion to compel arbitration has
an affirmative duty of coming forward with affidavits or deposition transcripts to show that the court
should not compel arbitration. See Sims v. Clarendon Ins. Co., 336 F. Supp.2d 1311, 1314 (S.D. Fla.
2004). Federal substantive law of arbitrability determines which disputes are within the scope of the
arbitration clause. Lawson v. Life of the South ins. Co., 648 F.3d 1166, 1170 (11th Cir. 2011). In
contrast, the question whether a non-party can enforce an arbitration clause is governed by state law.
Id. at 1170-71.
4

Plaintiffs argue that (a) their claims are beyond the scope of the arbitration clause; (b) IRI
cannot enforce the Agreement because it was not a party to it; and (c) the Agreement cannot be
enforced against Plaintiff Jacob Desevergers because he likewise was not a party to the Agreement.
The Court will focus on whether the claims in this case fall within the scope of the arbitration clause.
Courts have struggled with the question of how broadly arbitration clauses should to be construed.
Telecom Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109, 1114 (11th Cir. 2001) (noting that
the case law gives no clear answer to the question whether a dispute is related to a contract).
“Whether a claim falls within the scope of an arbitration agreement turns on the factual allegations
in the complaint rather than the legal causes of action asserted.” Gregory v. Electro-Mech. Corp.,
83 F.3d 382, 384 (11th Cir. 1996). Thus, this is a very fact intensive inquiry. See id. The Eleventh
Circuit has directed the courts to focus on whether the tort in question was an “immediate,
foreseeable result of the performance of contractual duties.” Telecom Italia, SpA, 248 F.3d at 1116.
The Agreement here contains an “arising out of” arbitration clause. Agreement, sec. 6.7.2 (DE 4-2).
For such a clause to apply, there must be a direct relationship between the dispute and the
performance of duties specified by the contract. Doe v. Princess Cruise Lines, Ltd., 657 F.3d 1204,
1218 (11th Cir. 2011) (citing Telecom Italia, SpA, 248 F.3d at 1116).
For example, in the case of Hemispherx Biopharma, Inc. v. Johannesburg Consol.
Investments, 553 F.3d 1351 (11th Cir. 2008), Hemispherx granted Bioclones a license for the
development, manufacture, use, and sale of certain products. 553 F.3d at 1354. Hemispherx was
obligated to furnish the technology, and Bioclones was obligated to create a separate corporation,
which both companies would co-own, to manufacture the products. Id. Hemispherx claimed that
eight years later Bioclones, along with some other defendants, initiated a hostile takeover of

5

Hemispherx, and in the process violated securities laws and committed fraud. Id. at 1357-58.
Bioclones attempted to enforce the arbitration clause contained in the licensing agreement. Id.
However, the Eleventh Circuit held that it was not foreseeable that years later defendants would
make misrepresentations to Hemispherx in the course of discussing an equity investment because
the investment was not contemplated in the licensing agreement. Id.
Here, the purpose of the Agreement was to “delegate authority to the Appointed
Representative” to perform certain surveys and inspections. Further, Plaintiffs allege tortious
interference with Plaintiffs’ business relationship with the yacht owners rather than with TCMI.
Thus, at the time the Agreement was created it was not contemplated or foreseeable that several
years later a non-party assisting TCMI would allegedly defame IYB to IYB’s yacht-owner clients
and would allegedly interfere with IYB’s business relationships with the yachts.
Plaintiff makes factual allegations of IRI’s tortious conduct in paragraphs 21 through 37 of
the Complaint. Compl. (DE 1-2). Paragraphs 21, 22, 23, 26, 27, and 31 involve situations where
IRI allegedly interfered in IYB’s relationship with a yacht owner or manager before IYB was able
to perform the investigation, inspection or survey of the vessel and where IYB lost the business as
a result. None of the allegations of defamation involve IRI’s representative’s statements to TCMI.
Accordingly, the allegations in paragraphs 21, 22, 23, 26, 27, and 31 are not directly related to IYB’s
performance under the Agreement with TCMI.
Further, paragraphs 24 and 34 involved IYB’s supervision of yacht construction. These
services are not subject to the Agreement. Also, in paragraph 24 the allegation is that IRI informed
the yacht builder that IYB’s surveys were not required for the registration with the Marshall Islands.
This does not implicate the Agreement. In paragraph 34, Plaintiffs assert that a representative of IRI

6

falsely indicated to a naval architect and the yacht’s management that IYB made incorrect stability
calculations. Stability review is a function which IYB was authorized to perform under the
Agreement. See Agreement, Table 1 (DE 1-3). However, it was not foreseeable when the
Agreement was formed that it would apply to a situation years later when a third-party makes
statements to IYB’s clients about IYB’s services.
Paragraphs 29, 33, 35 and 36 likewise involved situations very far removed from the
Agreement. For example, in paragraph 29 Plaintiffs allege that they intended to give an award
jointly with IRI to a captain who had been involved in a rescue at sea, but that IRI went forward
without IYB. This allegation has no connection to the Agreement. Further, in paragraph 33 IYB
states that the personnel in one of IRI’s offices refused to give IYB a fee quote, but that another
office released the requested information. Because under the Agreement IYB was to be compensated
by the client and not by IRI or TCMI, this refusal to quote was not directly connected to the
performance under the Agreement. Similarly, in paragraph 37 Plaintiffs allege that IYB performed
a service for a yacht owner, but that due to IRI’s interference, the owner refused to pay. Again,
because IYB’s fees were clearly subject to a contract between IYB and the yacht owner, the
Agreement is not directly implicated. Paragraph 35 simply alleges that IRI and IYB entered into a
separate oral fee sharing contract, but the amount of the fee was never finalized. Lastly, in paragraph
36 Plaintiffs allege that one of IRI’s staff members stated to a yacht broker at lunch that “things were
weird” between him and Desvergers because of difference in opinions regarding the Marshall
Islands’ regulations. While Marshall Islands’ regulations were important for the inspections that
IYB had the authority to perform, and were also the topic of conversation with the yacht broker, the
conversation itself had nothing to do with IYB’s performance under the Agreement.

7

Plaintiffs admit that “statutory surveys and certifications” were involved in the situations
described in paragraphs 25, 28, 30, and 32 of the Complaint.

However, these allegations are

similarly removed from the Agreement. In paragraph 25, the allegation is that IRI instructed IYB
to withdraw a yacht’s safety certification for not obtaining an annual survey, but that at the same time
IRI transferred IYB’s proprietary records to IYB’s competitor in order for the competitor to enter
into a contract with the yacht’s owner. In paragraph 28 Plaintiffs aver that IRI advised a yacht
captain to change the vessel’s registration from commercial to private to avoid certain regulations,
and that IYB was “legally required to verify compliance.” IRI also advised the captain to not involve
IYB.
In paragraph 30, Plaintiffs allege that one of the yachts certified by IYB and registered with
Marshall Islands’ was overdue for an annual survey, and that IRI imposed a detention preventing the
yacht from sailing. IRI falsely informed the yacht’s owner’s representative that the detention was
imposed at the request of IYB, and encouraged the representative to contact another survey company.
Lastly, in paragraph 32 Plaintiffs state that IRI secretly transferred the statutory certificates issued
by IYB to another company in violation of Marshall Islands’ requirements. Again, all these alleged
instances of interference took place before IYB was able to perform the survey, and these situations
are not directly related to the Agreement or to IYB’s performance.
Similar to the situation in Hemispherx Biopharma, Inc. v. Johannesburg Consol. Investments,
553 F.3d 1351 (11th Cir. 2008), the alleged defamation and tortious interference by third-party IRI
with Plaintiffs’ business relationships with the yachts were not an immediate and foreseeable result
of IYB’s performance under the Agreement between IYB and TCMI. It is likely that either
registration, potential registration, or another function of IRI on behalf of the Marshall Islands or

8

TCMI was involved in all factual scenarios alleged in the Complaint because otherwise IRI would
not have had a reason to interact with the yacht owners. However, this does not make the allegations
and the torts in question immediate and foreseeable results of IYB’s performance under the
Agreement.
Likewise, the facts that TCMI is Marshall Islands’ Maritime Administrator and that IRI and
TCMI have a business relationship with some of IRI’s staff having been deputized by the
government of Marshall Islands are not dispositive of foreseeability or of direct connection. Further,
Plaintiffs do not allege any wrongdoing on the part of TCMI, the only other party to the Agreement
with IYB. Lastly, Plaintiffs do not allege that IRI interfered in IYB’s relationship with TCMI.
Based on the above evidence, the Court concludes that the allegations in this case are not
within the scope of the arbitration clause, section 6.7.2. Thus, it is not necessary to decide whether
IRI can enforce the Agreement. Lastly, the Court did not consider the Supplemental Affidavit of
Jacob Desvergers (DE 31), which did not address the issue of arbitrability.
Accordingly, it is hereby ORDERED AND ADJUDGED that Defendant International
Registries, Inc.’s Motion to Stay this Action in Favor of Compelling Arbitration in New York (DE 4)
is DENIED.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County, Florida,
this 3rd day of March, 2014.
_____________________________
KENNETH A. MARRA
United States District Judge

9