Weeks Marine Inc. v. BAE Systems Southeast Shipyards Alabama, LLC

Filing 32

ORDER & REASONS denying 2 MOTION for Temporary Restraining Order and MOTION for Preliminary Injunction filed by Weeks Marine, Inc. and granting 20 MOTION to Compel arbitration filed by BAE Systems Southeast Shipyards Alabama, LLC. This case is STAYED and ADMINISTRATIVELY CLOSED pending resolutionof the arbitration proceedings. Signed by Judge Martin L.C. Feldman on 6/4/2014.(caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
WEEKS MARINE, INC

CIVIL ACTION

VERSUS

NO. 14-905

BAE SYSTEMS SOUTHEAST
SHIPYARDS ALABAMA, LLC

SECTION “F”
ORDER & REASONS

Before the Court are the plaintiff’s motion for injunctive
relief and the defendant's motion to compel arbitration. For the
following

reasons,

the

plaintiff's

motion

is

DENIED

and

the

defendant's motion is GRANTED.
Background
This is a dispute arising out of a fixed-price shipbuilding
contract.

On August 5, 2011, Weeks Marine Incorporated (WMI) and

BAE Systems Southeast Shipyards Alabama, LLC (BAE) contracted for
the construction of a vessel.

Under the contract, the completed

vessel was to be delivered by BAE to WMI by February 5, 2014;
however, after the parties disagreed over several change orders,
work on the vessel stopped.

On June 28, 2013, WMI sent a notice of

default to BAE demanding that it exercise "due diligence in the
performance of contract work." On July 1, 2013, BAE responded with
its own notice of default asserting that WMI breached the contract
by failing to administer "essential changes."

WMI contends that

the work delay puts BAE in breach, but BAE counters that the delay

1

was caused solely by WMI's failure to fulfill its obligation to
provide complete and adequate design specifications.
Under Article X of the contract, if BAE is in default, then
WMI may have the vessel transferred to another shipyard for
completion.

Under Article XI, if WMI is in default, then BAE may

suspend its work, take title to the vessel and its parts and
materials, and sell them to mitigate damages.

However, Article

XIII contains the following arbitration provision:
Except as set forth below, in the event of any dispute
between the parties hereto as to any matter arising out
of or relating to this Contract or any stipulation herein
or with respect hereto which cannot be settled by the
parties themselves, such dispute shall be resolved by
arbitration in metro New Orleans, LA in accordance with
the Construction Industry Arbitration Rules of the
American Arbitration Association ("AAA") as they exist as
of the date hereof or another set of rules agreed to in
advance by the parties (the "Rules").
In accordance with that provision, on August 2, 2013, BAE sent
a Notice of Demand for Arbitration.

Although the arbitration

proceedings remain pending, on April 7, 2014, WMI notified BAE that
it was invoking its right, upon BAE's default, to terminate the
contract

and

completion.

transfer

the

vessel

to

another

shipyard

for

On April 9, 2014, BAE responded that WMI had no such

right and that BAE would terminate the contract and take over title
to the partially completed vessel and its parts and materials. The
next day, when WMI's engineer tried to enter BAE's shipyard to
inspect the vessel but was turned away, WMI filed a complaint in

2

this Court for injunctive relief in aid of arbitration.1
Specifically,

WMI

requests

preliminary

and

permanent

injunctive relief: (1) prohibiting BAE from selling the vessel or
any

of

its

parts

and

materials;

(2)

prohibiting

BAE

from

unreasonably allowing the vessel and its parts to deteriorate and
requiring BAE to take reasonable commercial steps to maintain the
vessel in good condition; (3) prohibiting BAE from denying WMI, its
vendors, and representatives of other shipyards from inspecting and
evaluating the vessel in preparation for its transfer; and (4)
requiring BAE to allow WMI to promptly and efficiently transfer the
vessel

to

another

shipyard.

BAE

opposes

WMI's

request

for

injunctive relief and moves to compel arbitration.
Law and Analysis
I.
A. Preliminary and Permanent Injunction
It is well settled that “a preliminary injunction is an
extraordinary remedy that should not be granted unless the party
seeking it has clearly carried the burden of persuasion.” Bluefield
Water Ass’n v. City of Starkville, Miss., 577 F.3d 250, 253 (5th
Cir. 2009) (quoting Lake Charles Diesel, Inc. v. Gen. Motors Corp.,
328 F.3d 192, 196(5th Cir. 2003)); see also PCI Transport., Inc.
v.Ft. Worth & W. R.R. Co., 418 F.3d 535, 545 (5th Cir. 2005). The

1

That same day, WMI moved for a temporary restraining order,
which the Court denied.
3

Court can issue an injunction only if the movant shows:
(1) a substantial likelihood of prevailing on the merits;
(2) a substantial threat of irreparable injury if the
injunction is not granted;
(3) the threatened injury outweighs any harm that will
result to the non-movant if the injunction is granted;
and
(4) the injunction will not disserve the public interest.
Ridgely v. FEMA, 512 F.3d 727, 734 (5th Cir. 2008). The standard
for a permanent injunction is essentially identical, with the
exception that one must prove actual success on the merits. Amoco
Prod. Co. v. Vill. of Gambell, Alaska, 480 U.S. 531, 546 n.12
(1987); see Greyhound Lines, Inc. v. City of New Orleans ex rel.
Dept. of Pub. Utils., 29 F. Supp. 2d 339, 341 (E.D. La. 1998).
Where an arbitration agreement contemplates the use of a
preliminary injunction to maintain the status quo, the district
court has the power to issue a preliminary injunction for that
purpose.2 RGI, Inc. v. Tucker & Assocs., Inc., 858 F.2d 227, 230
(5th

Cir.

1988).

This

Court

has

held

that

even

where

the

arbitration clause does not contemplate the use of a preliminary
injunction,

“where

the

requisites

for

injunctive

relief

are

satisfied, to deny such relief would potentially frustrate the
congressional intent to enforce arbitration agreements.” Speedee
Oil Change Sys., Inc. v. State Street Capital, Inc., 727 F. Supp.

2

There is some dispute between the circuits over whether
injunctive relief pending arbitration is appropriate. See Speedee
Oil Change Sys., Inc. v. State Street Capital, Inc., 727 F. Supp.
289, 291 (E.D. La. 1989) (listing cases).
4

289, 292 (E.D. La. 1989).
B. The Arbitration Clause
The Federal Arbitration Act establishes a national policy in
favor of arbitration. See Moses H. Cone Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 22-24 (1983). Among other things, the FAA
requires

that

where

a

suit

presents

an

issue

referable

to

arbitration based on an arbitration agreement, the Court “shall
upon 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. Thus, where the Court finds a written
agreement to arbitrate and determines that the issues raised before
it are within the scope of the agreement, the Court must grant a
motion to stay the proceedings. See In re Hornbeck Offshore (1984)
Corp., 981 F.2d 752, 754 (5th Cir. 1993). Further, the Court must
order the parties proceed to arbitration upon finding that the
making of the agreement or the failure to comply with the agreement
are not at issue. 9 U.S.C. § 4.
In determining whether to compel arbitration, the Court must
engage in a two step inquiry: “first, whether the parties agreed to
arbitrate and second, whether federal statute or policy renders the
claims nonarbitrable.” Dealer Computer Servs., Inc. v. Old Colony
Motors, Inc., 588 F.3d 884, 886 (5th Cir. 2009). Unless the
agreement unmistakably provides otherwise, the Court decides the
question of arbitrability. Howsam v. Dean Witter Reynolds, Inc.,
5

537 U.S. 79, 83 (2002); Pennzoil Exploration & Prod. Co. v. Ramco
Energy Ltd., 139 F.3d 1061, 1067 (5th Cir. 1998). The Court
presumes, however, that the parties intended the arbitrator to
decide procedural questions and “allegation[s] of waiver, delay, or
a like defense to arbitrability.” Howsam, 537 U.S. at 84 (quoting
Moses H. Cone Memorial Hosp., 460 U.S. at 24-25); Dealer Computer,
588 F.3d at 887.
In deciding whether the parties agreed to arbitrate the
dispute in question, the Court should consider: “(1) whether there
is a valid agreement to arbitrate between the parties; and (2)
whether the dispute in question falls within the scope of that
arbitration agreement.” Webb v. Investacorp Inc., 89 F.3d 252, 25758 (5th Cir. 1996). Any doubts about the scope of an arbitration
clause must be resolved in favor of arbitration. In re Hornbeck,
981 F.2d at 754-55. Unlike narrow clauses that require arbitration
of disputes that “arise out of” the contract, broad clauses are
those that govern disputes that “relate to” or “are connected with”
the contract. Pennzoil, 139 F.3d at 1067. Broad arbitration clauses
“are capable of expansive reach.” Id.

The Fifth Circuit has held

that an arbitration clause providing that “any dispute, controversy
or claim arising out of or in relation to or in connection with
this Agreement or the operations carried out under this agreement”
was indeed broad. Pennzoil, 139 F.3d at 1067. And the Fifth Circuit
determined that “[w]ith such a broad arbitration clause, it is only

6

necessary

that

the

dispute

‘touch’

matters

covered

by

[the

agreement] to be arbitrable.” Id. at 1068.
II.
The parties do not dispute that this matter is ultimately
arbitrable.

The arbitration clause at issue is broad (it applies

to "any matter arising out of or relating to" the shipbuilding
contract) and plainly covers the plaintiff's breach of contract and
related equitable claims.

The only issue, then, is whether

injunctive relief pending arbitration is available.
The plaintiff contends that Article XXI of the contract
explicitly

provides

a

right

to

injunctive

relief

pending

arbitration, and that such relief is necessary to maintain the
status quo.

The defendant counters that the requested injunction

is neither sanctioned by nor necessary to preserve the parties'
rights under the contract. The defendant argues that the requested
injunction would essentially decide the merits of the case, hold
the defendant solely in default, and render the arbitration process
meaningless.
The

Court

agrees.

As

an

initial

matter,

there

is

no

indication that the parties ever bargained for the availability of
injunctive relief pending arbitration.3 And although the plaintiff

3

Article
XXI
of
the
shipbuilding
contract
is
plainly
distinguishable from the provision at issue in RGI, which
explicitly provided that the parties' agreement "shall continue in
full force and effect until [the arbitration] decision is
rendered." 858 F.2d at 230. There, the Fifth Circuit held that
7

frames its request as one for relief "in aid of arbitration," the
requested

relief

would

arbitration proceedings.

actually

interrupt

and

undermine

the

Rather than preserving the status quo

ante, the requested injunction would create an entirely new state
of affairs where the plaintiff receives the benefit of a remedy
reserved specifically for the defendant's default--that is, the
right to transfer the vessel to another shipyard for completion.
Only the arbitrators can grant that relief.4
Accordingly, the plaintiff's request for injunctive relief is
DENIED and the defendant's motion to compel arbitration is GRANTED.
This case is STAYED and ADMINISTRATIVELY CLOSED pending resolution
of the arbitration proceedings.
New Orleans, Louisiana, June 4, 2014
_______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

"[t]his bargained-for provision clearly contemplates that the
status quo is to continue pending arbitration."
Id.
Here,
however, Article XXI simply provides this Court with "nonexclusive
jurisdiction" over "[a]ny legal action or proceeding with respect
to this contract or the construction of the VESSEL," and in no way
speaks of any bargained-for right to injunctive relief pending
arbitration.
4

Although the plaintiff also requests an injunction preventing
the defendant from allowing the vessel to deteriorate and from
taking title to the vessel and its parts and materials, such relief
is not necessary from this Court because it can by granted by the
arbitrators under Rule R-36 of the Construction Industry
Arbitration Rules and Mediation Procedures, and regardless, there
is no proof of irreparable harm.
8