TDC, L.L.C. v. Stolt-Nielsen Transportation Group B.V., et al
Filing
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RULING granting 7 Motion to Dismiss or Stay Pending Arbitration and/or Motion to Dismiss for Improper Venue. Accordingly, all claims are DISMISSED WITHOUT PREJUDICE, in favor of arbitration. Signed by Judge James J. Brady on 3/7/2014. (LLH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
TDC, L.L.C.
CIVIL ACTION
VERSUS
NO. 13-670-JJB-SCR
STOLT-NIELSEN TRANSPORTATION
GROUP B.V., ET AL.
RULING ON MOTION TO STAY PENDING ARBITRATION
This matter is before the Court on the Defendant Stolt Tankers B.V.’s (f/k/a Stolt-Nielsen
Transportation Group B.V.) Motion (doc. 7) to Dismiss or Stay Pending Arbitration and/or
Motion to Dismiss for Improper Venue. Plaintiff TDC, L.L.C. opposed the motion. (Doc. 11).
Jurisdiction is based on 28 U.S.C. § 1332. Oral argument is not necessary.
Per the amended complaint in this matter, the plaintiff and defendant entered into an
agreement on December 22, 2009, whereby the defendant—Stolt Tankers B.V.—agreed to
transport the plaintiff’s Sodium Hydrosulfide product. (Doc. 6, p. 5, ¶ 14). The agreement—
which the plaintiff attached to the complaint and incorporated by reference—included the
following arbitration provision:
24. Arbitration: Any dispute arising from the making, performance or
termination of this Charter Party shall be settled in New York, Owner and
Charterer each appointing an arbitrator, who shall be a merchant, broker or
individual experienced in the shipping business; the two thus chosen, shall
nominate a third arbitrator who shall be an admiralty lawyer. Such arbitration
shall be conducted in conformity with the provisions and procedures of the United
States Arbitration Act, and a judgment of the court shall be entered upon any
award made by said arbitrators. Nothing in this clause shall be deemed to waive
Owner right to a lien on the cargo for freight, deadfreight, or demurrage. United
States Law shall govern this agreement. For disputes involving less than USD
25.000, SMA simplified arbitration procedure shall be used.
(Doc. 6-1, p. 8). The plaintiff contends that on or around May 6, 2011, the defendant
contaminated and destroyed the Sodium Hydrosulfide product it was transporting by mixing
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Arcol Polyol F30340 with the Sodium Hydrosulfide, and in doing so, created a “hazardous waste
by characteristic” under RCRA. (Doc. 6, p. 8, ¶ 26). In the bill of lading, the parties expressly
provided that this shipment was subject to the terms of the December 22, 2009 agreement,
including the arbitration clause. (Doc. 7-6, p. 1). The plaintiff contends that the defendant
refused to clean up or otherwise dispose of this contaminated material. (Doc. 6, p. 8–12).
According to the complaint, the plaintiff and defendant subsequently entered into an oral
agreement on October 10, 2011. (Doc. 6, p. 13). As per this alleged oral agreement, the
defendant’s representative promised that it would reimburse the plaintiff for the “cost of properly
managing and disposing of Stolt’s hazardous waste.” (Doc. 6, p. 13, ¶ 54). The plaintiff claims
that these costs have not been paid, and thus, brought this action asserting claims of relief for
breach of contract, misrepresentation and detrimental reliance, unjust enrichment, and
negotiorum gestio.
In its motion, the defendant argues that this action should either be dismissed or stayed
pending the mandatory New York arbitration, as provided in the arbitration provision of the
December 22, 2009 agreement. (Doc. 7, p. 1). In opposition, the plaintiff contends that the
October 10, 2011 oral agreement was “stand-alone and independent of the December 22, 2009,
agreement,” and as a result, the claims in the pending matter are not subject to the arbitration
clause.
The Federal Arbitration Act (FAA) provides that:
A written provision in any maritime transaction or a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction, or the refusal to perform the whole or
any part thereof, or an agreement in writing to submit to arbitration an existing
controversy arising out of such a contract, transaction, or refusal, shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract.
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9 U.S.C. § 2. Furthermore, the FAA gives courts the authority to stay a proceeding pending
arbitration “upon being satisfied that the issue involved in such suit or proceeding is referable to
arbitration under such an agreement.” 9 U.S.C. § 3. In fact, the Supreme Court provides that “the
Act leaves no place for the exercise of discretion by a district court, but instead mandates that
district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration
agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985).
The Supreme Court previously stated that “[t]he Arbitration Act establishes that, as a
matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24–
25 (1983). The Fifth Circuit echoed this sentiment in Neal v. Hardee’s Food Systems, where it
provided that it “resolve[s] doubts concerning the scope of coverage of an arbitration clause in a
contract in favor of arbitration.” 918 F.2d 34, 37 (5th Cir. 1990) (citing AT&T Technologies, Inc.
v. Communication Workers of Am., 475 U.S. 643, 650 (1986)). Furthermore, “arbitration should
not be denied ‘unless it can be said with positive assurance that an arbitration clause is not
susceptible of an interpretation which would cover the dispute at issue.’” Id. (quoting Commerce
Park at DFW Freeport v. Mardian Const. Co., 729 F.2d 334, 338 (5th Cir. 1984); Wick v.
Atlantic Marine, 605 F.2d 166, 168 (5th Cir. 1979)).
“Determining whether the parties agreed to arbitrate the dispute in question involves two
considerations: (1) whether a valid agreement to arbitrate between the parties exists; and (2)
whether the dispute in question falls within the scope of that arbitration agreement.” Pennzoil
Exploration and Production Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1065 (5th Cir. 1998).
There is no dispute in the present matter that the parties entered into a valid arbitration agreement
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in the December 22, 2009 agreement. The primary issue is “whether the dispute in question falls
within the scope of that arbitration agreement.” Id.
The parties in the present case agreed to a broad arbitration clause, whereby they agreed
to arbitrate “[a]ny dispute arising from the making, performance or termination” of the original
agreement. See id. at 1067 (Fifth Circuit found that a similar arbitration clause was characterized
as a broad arbitration clause “capable of expansive reach”). As the Fifth Circuit previously
stated, “[b]road arbitration clauses . . . are not limited to claims that literally ‘arise under the
contract,’ but rather embrace all disputes between the parties having a significant relationship to
the contract regardless of the label attached to the dispute.” Id. (citing J.J. Ryan & Sons v. Rhone
Poulenc Textile, 863 F.2d 315, 321 (4th Cir. 1988); Miller v. Flume, 139 F.3d 1130, 1136 (7th
Cir. 1998)).
The Fifth Circuit previously found that a broad arbitration clause contained in a
contractual agreement could cover disputes involving a separate, contemporaneously-executed
agreement that was an “integral and interrelated [part] of the one deal.” Neal, 918, F.2d at 37.
Yet, that is not the case in the present matter. This Court has been unable to find Fifth Circuit
precedent that specifically addresses whether a subsequently-executed, collateral agreement falls
within the scope of a broad arbitration clause. Nevertheless, the Second Circuit has provided
guidance regarding when a collateral agreement is subject to a broad arbitration clause. See Louis
Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 228–29. In Louis
Dreyfus, the Second Circuit analyzed whether the plaintiff’s “claim for indemnification under the
letters of indemnity [were] not brought directly under the charter agreement, but [were] made
under a collateral agreement.” Id. at 228. The court explained that “a collateral agreement is ‘a
separate, side agreement, connected with the principal contract which contains the arbitration
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clause.’” Id. (quoting Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64 (2d Cir. 1983)). In
analyzing the letters of indemnification, the Second Circuit focused on the fact that the letters
“were issued subsequent to the charter party [agreement] and [were] not specifically incorporated
or even referenced by [the] agreement.” Id. Additionally, the charter party agreement did not
even provide for indemnification; only the letters of indemnity referenced any indemnification
obligation. See id. Based on its review, the Second Circuit found that “[a]bsent any reference by
the charter party to the letters, or language indicating that the letters themselves incorporated the
charter, [claims under the letters of indemnity] must be deemed collateral to the main
agreement.” Id. (citing Fairmont Shipping (H.K.), Ltd. v. Primary Indus. Corp., 1988 WL 7805,
at *4 (S.D.N.Y. Jan. 25, 1988)). Despite being collateral, the Second Circuit went on to say that
because the charter party agreement contained a broad arbitration clause whereby the parties
agreed “that any dispute between [them] . . ., brought pursuant to the agreement, would be
arbitrated in New York,” the court needed to “test the ‘presumption of arbitrability’ associated
with a broad arbitration clause by asking whether claims under letters of indemnity—as claims
under a collateral agreement—‘implicate [ ] issues of contract construction or the parties’ rights
and obligations under it.’” Id. at 220–21, 228–29 (quoting Collins & Aikman Products Co. v.
Building Systems, Inc., 58 F.3d 16, 23 (2d Cir. 1995)). Ultimately, the court found that “[b]y
implicating the rights of [the defendant] and the duties of [the plaintiff] under the charter party,
the letters of indemnity [were] within the scope of the broad arbitration clause.” Id. at 229.
To determine whether a collateral agreement falls within the scope of a broad arbitration
clause, the Court “focuses on the factual allegations underlying the causes of action rather than
the legal labels asserted.” CBG Marine Services Co. v. M/S STOLT ENTENTE, 1990 WL
134664, at *7 (E.D. La. Sept. 12, 1990) (citing Mitsubishi Motors Corp. v. Soler Chrysler–
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Plymouth Corp., 473 U.S. 614, 620–28 (1985)). In this case, while the plaintiff asserts
contractual claims related to the defendant’s alleged breach of the October 10, 2011 oral
agreement, it is clear that the plaintiff is ultimately seeking to recover the disposal costs it
incurred in relation to the contaminated Sodium Hydrosulfide. As per the complaint, the
defendant insisted that the plaintiff take delivery of the Sodium Hydrosulfide product, regardless
of the contamination. (See doc. 6, p. 8–11). Because the defendant required TDC to take
delivery, TDC was forced to arrange for the transportation, storage, and disposal of the
contaminated material. (Doc. 6, p. 11). Thereafter, on October 11, 2011, the plaintiff alleges that
a Stolt representative orally promised to reimburse TDC for these disposal costs. (Doc. 6, p. 13–
14). Nevertheless, Stolt never paid the costs, and the plaintiff alleged that it incurred
approximately $2,008,188.99 in transporting, storing, and disposing of the contaminated Sodium
Hydrosulfide. (Doc. 6, p. 14). In making each claim for relief in the present suit, the plaintiff
seeks the sum of $2,008,188.99—the exact cost incurred in disposing of the contaminated
product. (Doc. 6, p. 16–20). Therefore, through the contractual claims for relief, it is readily
apparent that the plaintiff is ultimately seeking to recover the transportation, storage, and
disposal costs it incurred in disposing of the contaminated material.
Based on the long line of precedent favoring arbitration, and due to the fact that the
arbitration clause in the present matter is “broad,” this Court finds that the present dispute does
fall within the parties’ arbitration provision. Regardless of how the plaintiff couches its claims, it
is clearly seeking to recover the costs to dispose of the contaminated material, costs which the
plaintiff contends the defendant promised to pay. “If the allegations underlying the claims ‘touch
matters’ covered by the parties’ . . . agreements, then those claims must be arbitrated, whatever
the legal labels attached to them.” Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846
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(2d Cir. 1987). The plaintiff incurred these costs through having to dispose of Hydrogen Sulfide
that the defendant allegedly contaminated while transporting it pursuant to the December 22,
2009 agreement. The costs arose directly out of the performance that is the subject of the charter
party agreement, an agreement that contained the broad arbitration clause subjecting “[a]ny
dispute arising from the making, performance or termination” of the agreement to arbitration in
New York. While the claims here specifically relate to the defendant’s alleged breach of an oral
agreement to pay the disposal costs, those costs were incurred during and as a result of the
execution of the December 22, 2009 agreement. This Court cannot say “with positive assurance
that [this] arbitration clause is not susceptible of an interpretation which would cover the dispute
at issue,” and based on Fifth Circuit precedent, the action must be stayed pending arbitration.
Neal, 918 F.2d at 37. Accordingly, based on the broad arbitration clause and the long-line of
precedent establishing a strong policy in favor of arbitration, this Court finds that the plaintiff’s
pending claims fall within the ambit of the arbitration provision.
Therefore, the Court GRANTS the Motion (doc. 7) to Dismiss or Stay Pending
Arbitration and/or Motion to Dismiss for Improper Venue. Accordingly, all claims are
DISMISSED WITHOUT PREJUDICE, in favor of arbitration.
Signed in Baton Rouge, Louisiana, on March 7, 2014.
JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
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