Hess Corporation v. Dorado Tankers Pool, Inc.
MEMORANDUM AND ORDER. For the reasons in this Memorandum and Order, petitioner's petition to confirm the arbitration award is granted and respondent's motion to vacate the arbitration award is denied. The Clerk of Court is respectfully dire cted to enter judgment in favor of petitioner in the amount of $1,192,021.25, plus pre-judgment interest from July 23, 2014, at the annual rate of 3.25 percent, and post-judgment interest at the rate set by 28 U.S.C. § 1961. Denying 17 MOTION to Vacate Arbitration Award. (Signed by Judge Naomi Reice Buchwald on 3/4/2015) Copies Mailed By Chambers. (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
In the matter of the Arbitration
MEMORANDUM AND ORDER
14 Civ. 6412 (NRB)
- and DORADO TANKER POOL, INC.,
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Petitioner Hess Corporation (“Hess”) petitions to confirm
an arbitration award of $1,192,021.25 in its favor and against
respondent Dorado Tanker Pool, Inc. (“Dorado”).
the petition and moves to vacate the award on the ground that it
reflects manifest disregard of the law of damages.
reasons stated herein, we conclude that there was no manifest
disregard of the law, and we confirm the award.
findings for present purposes.
Accordingly, we rely on those
factual findings, supplemented only as necessary to illuminate
the parties’ current dispute.
This case arises out of the contamination of a parcel of
jet fuel belonging to Hess at the port of St. Croix, U.S. Virgin
On July 30, 2011, the M/T SWARNA MALA (the “Vessel”)
arrived at St. Croix, pursuant to a charter party between Hess
and Dorado, the Vessel’s time charter owner, to take on two
cargoes of clean petroleum products sold there by Hovensa LLC
(“Hovensa”) to Hess.
Award at 2.
The Vessel’s initial orders
were to carry the cargoes to Bayonne, New Jersey, but revised
orders providing for final discharge at other United States and
Canadian ports were contemplated.
One of the cargoes was
We refer to Hess’s Petition dated August 12, 2014, Doc. 7 (“Pet.”);
the Final Award of the arbitration panel, dated July 23, 2014, Ex. 1 to the
August 12, 2014 declaration of James D. Kleiner, Esq., Doc. 8 (“Award”);
Dorado’s memorandum of law dated September 12, 2014, Doc. 14 (“Dorado Mem.”);
Hess’s reply memorandum of law dated October 3, 2014, Doc. 20 (“Hess Reply
Mem.”); the declaration of James D. Kleiner, Esq., dated October 3, 2014,
Doc. 21 (“Kleiner Reply Decl.”), and exhibits thereto; and Dorado’s
memorandum of law dated October 15, 2014, Doc. 24 (“Dorado Reply Mem.”). We
also refer to the post-hearing briefs submitted in arbitration, which are
exhibits to the September 12, 2014 declaration of Michael E. Unger, Esq.,
Doc. 19 (“Unger Decl.”), specifically Hess’s main brief dated September 6,
2013, Unger Decl. Ex. 3 (“Hess Post-Hearing Br.”); Dorado’s main brief dated
September 6, 2013, Unger Decl. Ex. 2 (“Dorado Post-Hearing Br.”); and
Dorado’s reply brief dated October 21, 2013, Unger Decl. Ex. 4 (“Dorado PostHearing Reply Br.”).
jet fuel, and the other was No. 2 heating oil (or “No. 2 oil”),
a product of lower grade than jet fuel.
The quantity of
jet fuel sold by Hovensa to Hess was 112,289.69 barrels (“bbl”).2
Id. at 9.
The next day, after the cargoes were loaded on board the
suggesting that a portion of the No. 2 oil had been erroneously
transferred into the tank containing the jet fuel.
Award at 2.
revealed a gain of 3,812.62 bbl in the tanks designated for jet
fuel and a corresponding shortage of 3,007.80 bbl in the tanks
designated for No. 2 oil.
been contaminated in loading.
Apparently, the jet fuel had
contaminated product back ashore.
Hess revised its voyage
orders and directed the Vessel to proceed to New York harbor,
where it arrived on Saturday, August 6, 2011.
Id. at 2-4.
arbitration panel summarized the events that transpired after
the Vessel arrived in New York as follows:
Following sampling at the anchorage, the Vessel
discharged the contaminated jet fuel parcel into two
barges which in turn delivered the product ashore into
Hess Newark Tank 309 and its First Reserve Tank 235.
From those tanks Hess subsequently moved the product
about to other of its tanks and through a myriad of
barge transfers, product blends and sales in an
A barrel of oil is equivalent to 42 gallons.
attempt to mitigate its damages. The damaged product
was ultimately disposed of some three months later.
Id. at 3.
Hess commenced two proceedings to recover for loss that it
claimed to have incurred as a result of the contamination of the
jet fuel parcel (hereafter called the “Contaminated Fuel”).
first, a civil action in this Court against the Vessel and its
Shipping Corp. of India Ltd., No. 12 Civ. 6037 (NRB) (S.D.N.Y.
Jan. 16, 2013), Doc. 5.
The second was the arbitration between
Hess and Dorado that resulted in the award now under review.
The arbitration was conducted in New York before a panel of
three arbitrators (the “Panel”).
Award at 3.
conceded liability for the contamination of the jet fuel at St.
evidentiary hearings, in which it heard the testimony of three
witnesses and received voluminous documentary evidence.
a reasoned decision of thirteen pages, exclusive of an appendix,
the Panel awarded some but not all of Hess’s claimed damages and
also granted a Dorado counterclaim.
In its post-hearing briefing, Hess asked the Panel to find
that it incurred three categories of damages.
The arguments of
the parties as to each of these categories, and the conclusions
of the Panel, may be summarized as follows.
Downgrade of the Contaminated Fuel
Hess’s principal damages claim was for the diminution in
value, or downgrading, of the Contaminated Fuel caused by the
defined as “the difference between the sound and damaged market
values of the jet product . . . . at the time of delivery.”
Award at 4-5; see, e.g., Hess Post-Hearing Br. at 2-3, 38-40.
Applying that rule, Hess argued that the Contaminated Fuel’s
sound market value (i.e., the value that it would have had if it
had not been contaminated) would have been that of “low sulfur
jet/kerosene”; that the damaged market value of the Contaminated
Fuel was that of No. 2 oil; and that the appropriate values for
each of these grades of fuel were the market prices published by
Platts for August 5, 2011 (the last business day before the
Vessel arrived at New York), viz., $3.1091 per gallon (“gal”)
for low sulfur jet/kerosene and $2.9361 per gallon for No. 2
Award at 3-4.
Based on the $0.173/gal price difference,
Hess argued that the downgrade of 112,289.69 bbl of Contaminated
Fuel cost it $815,896.87.
Id. at 9.
In response, Dorado argued that “Hess sustained no loss
from the contamination” whatsoever.
Dorado Post-Hearing Br. at 1.
Award at 5; see, e.g.,
Specifically, Dorado argued that
the evidence showed that when Hess purchased the Contaminated
Fuel, that fuel “met the specifications for CPL 54 grade jet,”
and that all of the Contaminated Fuel was ultimately either
“sold or otherwise utilized by Hess as CPL 54 grade jet” and
Hearing Br. at 3; see Award at 5.3
Dorado argued that instead of
calculating damages according to the market value rule urged by
Hess, the Panel should instead apply the “remediation rule,”
Dorado Post-Hearing Br. at 15, under which “any damages awarded
Dorado further argued that “Hess has failed to provide such
Contaminated Fuel had the “quality parameters of a low sulfur
jet/kerosene” in its sound condition and the value of No. 2 oil
CPL-54 is a lower grade product than low sulfur jet/kerosene, but is a
higher grade than No. 2 oil. Dorado Mem. at 7.
Emphasizing the availability of “a published market reference
for the goods” (i.e., the Platts prices), and rejecting Dorado’s
contention that special circumstances justified a departure from
the market value rule, the Panel concluded that “the appropriate
measure of damages in this case is the difference between the
condition in which it should have arrived and the fair market
value in the condition in which it actually did arrive.”
downgrade of the jet fuel.
Id. at 9.
Alleged Downgrade of the Tank 235 Cargo
Hess’s second damages claim related to the discharge of a
portion of the Contaminated Fuel into a shore tank in Hess’s
Newark, New Jersey facility (“Tank 235”).
As noted above, after
Contaminated Fuel into two barges.
Award at 3.
One of the
barges, “Barge RTC-60,” delivered about half of the Contaminated
Fuel to Tank 235, where it was loaded on top of a pre-existing
cargo of roughly 68,900 bbl (the “Pre-Existing Cargo”).
Mem. at 4; Hess Reply Mem. at 11, 13.
Hess argued that the Pre-Existing Cargo was grade CPL-54,
and that a portion of the blend that resulted from the Vessel’s
unmarketable as CPL-54 and instead was reduced to the value of
No. 2 oil.
Hess Post-Hearing Br. at 28-29, 43.
that this downgrade caused a loss of $149,710.54.
Id. at 43.
Dorado responded that the Pre-Existing Cargo was already “offspec”
loaded on top, the entire contents of Tank 235 became “on-spec”
Dorado Post-Hearing Reply Br. at 10.
Dorado denied that the Pre-Existing Cargo had been downgraded
and argued that no damages were warranted in respect of the PreExisting
receive a “credit for fixing the pre-existing cargo in tank
Id. at 27 (emphasis omitted).
Existing Cargo, finding that it “was already ‘off spec’ and
became more marketable as a result of the Vessel’s cargo being
loaded on top.”
Award at 9.
However, the Panel did not accept
Dorado’s invitation to credit the value of the supposed upgrade
of the Pre-Existing Cargo against Dorado’s other liability.
Finally, Hess claimed what it described as “other ancillary
Hess Post-Hearing Br. at 3; see Award at 4.
(1) the costs of the two barge trips that moved the
Contaminated Fuel from the Vessel to shore and of two subsequent
barge trips; (2) tankage costs; (3) inspection costs; and (4)
Hess Post-Hearing Br. at 43-44; see Award at 4,
Dorado conceded that the cost of two of the barge movements
were “recoverable in mitigation,” but opposed the other two.
Dorado Post-Hearing Reply Br. at 28.
Dorado also opposed the
costs and for half of the claimed spill tax.
The Panel denied the tankage fees and awarded one-half of
both the inspection costs and the spill taxes.
Award at 10.
The Panel also awarded part of the barging costs, explaining:
Hess claims it is entitled to recover a total of
$168,342.82 in barging costs it would not have
incurred but for the mitigation efforts to remedy the
effects of the contamination.
Some barging occurred
some three months after this incident; another
movement would likely have taken place regardless of
the contamination; and a third movement involved
transport of a panel of cargo made more valuable by
the mitigation efforts. The Panel, accordingly, finds
that a portion of these costs are recoverable but
other portions are not. Total allowed: $48,101.02.
clear that the $48,101.02 awarded for barging costs corresponds
to the cost of the movement of Barge RTC-103, which transported
part of the Contaminated Fuel from the Vessel to Tank 309.
Hess Post-Hearing Br. at 43-44; Dorado Post-Hearing Reply Br. at
In other words, the Panel declined to award the claimed
costs of the other three barge movements, including that of
Barge RTC-60 from the Vessel to Tank 235.
4. The Final Award
In total, the Panel awarded Hess $883,063.24 in “damages
attributable to contamination,” of which $815,896.87 was for the
costs, and a total of $19,065.35 was for inspection costs and
Award at 9-11.
The Panel also awarded Hess interest
and partial allowances for its legal fees and costs and the
arbitrators’ fees, resulting in a total award of $1,192,021.25.
Id. at 11-12.4
On August 12, 2014, Hess petitioned this Court to confirm
the Award pursuant to the Federal Arbitration Act, 9 U.S.C. § 1
Enforcement of Foreign Arbitral Awards of June 10, 1958, 21
“Convention”) and its implementing legislation, 9 U.S.C. § 201
The action was accepted by the undersigned as related
to Hess’s earlier-filed civil action against the Vessel and its
The Panel also awarded Dorado $62,211.12 on a counterclaim, which Hess
has satisfied and which is not relevant here.
Award at 11-12; Hess Reply
Mem. at 1; Kleiner Reply Decl. Ex. 1.
On September 15, 2014, Dorado interposed a motion to
vacate the Award pursuant to the same statutes.
positions of the parties were fully briefed on October 15, 2014.
Oral argument was held on February 2, 2015.
Dorado’s sole challenge to the Award is that it reflects
manifest disregard of the law of damages.
Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., 668 F.3d 60,
71 (2d Cir. 2012).
Thus, “[t]here must be an independent basis
of jurisdiction before a district court may entertain petitions
Commc’ns, Int’l Union, Local 261, 912 F.2d 608, 611 (2d Cir.
Here, the Court has at least two independent bases of
§ 1333(1) because the agreement to arbitrate was part of the
charter party -- a quintessentially maritime contract -- between
Hess and Dorado.
See Am. Bureau of Shipping v. Tencara Shipyard
S.P.A., 170 F.3d 349, 352 (2d Cir. 1999) (finding subject matter
arbitration under a maritime contract); C.T. Shipping, Ltd. v.
arbitration award arising out of time charter party under § 1333
“[b]ecause of the maritime subject matter of the case”).
Second, Hess’s petition and Dorado’s motion come within the
scope of the New York Convention, whose implementing legislation
§ 203; Scandinavian Reinsurance, 668 F.3d at 71.
By its own
terms, the New York Convention applies to “the recognition and
. . . .
enforcement are sought.”
New York Convention, art. I(1).5
Second Circuit has construed the scope of “awards not considered
as domestic awards” broadly, explaining that such awards are
those “made within the legal framework of another country, e.g.,
pronounced in accordance with foreign law or involving parties
domiciled or having their principal place of business outside
the enforcing jurisdiction.”
Bergesen v. Joseph Muller Corp.,
5 The Convention also applies to “the recognition and enforcement of
arbitral awards made in the territory of a State other than the State where
the recognition and enforcement of such awards are sought.”
Convention, art. I(1). Here, as the Award was made in New York, there is no
such territorial basis for applying the Convention.
710 F.2d 928, 932 (2d Cir. 1983).
The Second Circuit has also
commercial arbitral agreement, unless it is between two United
States citizens, involves property located in the United States,
and has no reasonable relationship with one or more foreign
states, falls under the Convention.”
Jain v. de Méré, 51 F.3d
686, 689 (7th Cir. 1995), quoted in Yusuf Ahmed Alghanim & Sons,
W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15, 19 (2d Cir. 1997)
United States ports, the arbitration took place in the United
States, the law applied in the arbitration was United States
foreign corporation incorporated in the Marshall Islands.
¶¶ 8-9; see Dorado Mem. at 9.
Under Alghanim and Jain, the fact
corporation suffices to bring the Award within the scope of the
New York Convention, and thus to provide an alternative basis of
The Second Circuit continues to rely on Jain for this proposition.
See, e.g., Agility Pub. Warehousing Co. K.S.C. v. Supreme Foodservice GmbH,
495 F. App’x 149, 151 (2d Cir. 2012) (summary order).
The “Manifest Disregard” Standard
Under both the FAA and the New York Convention, a court
must grant a proper petition to confirm an arbitration award
unless there are grounds to vacate, modify, or correct it.
U.S.C. §§ 9, 207.
One of the few grounds for vacating an award
disregard of the law.”
Schwartz v. Merrill Lynch & Co., 665
F.3d 444, 451 (2d Cir. 2011) (internal quotation marks omitted).
Manifest disregard of the law is similarly a ground to decline
to enforce an arbitration award under the New York Convention
where, as here, the award was rendered in the United States.
Alghanim, 126 F.3d at 23.
The party challenging an arbitration award on the basis of
Manifest disregard requires “more than a simple error in law or
a failure by the arbitrators to understand or apply it” and
likewise “more than an erroneous interpretation of the law.”
Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333
F.3d 383, 389 (2d Cir. 2003).
Indeed, manifest disregard will
be found “only in the most egregious instances of misapplication
of legal principles,” Wallace v. Buttar, 378 F.3d 182, 190 (2d
Cir. 2004), that is, where “a party clearly demonstrates ‘that
the panel intentionally defied the law,’” STMicroelectronics,
N.V. v. Credit Suisse Securities (USA) LLC, 648 F.3d 68, 78 (2d
Cir. 2011) (quoting Duferco, 333 F.3d at 393).
To demonstrate manifest disregard, the party resisting the
arbitration award must establish that “the governing law alleged
explicit, and clearly applicable,” and that “[t]he arbitrator[s]
. . . appreciate[d] the existence of a clearly governing legal
principle but decide[d] to ignore or pay no attention to it.”
Westerbeke Corp. v. Dihatsu Motor Co., 304 F.3d 200, 209 (2d
Thus, “manifest disregard can be established only
governing legal principle . . . [was] ignored . . . after it was
brought to the arbitrator’s attention in a way that assures that
(internal quotation marks omitted).
The party resisting the award must also show “that the law
Duferco, 333 F.3d at 390; see, e.g., T.Co Metals, LLC
v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 339 (2d Cir.
Accordingly, “[e]ven where explanation for an award is
deficient or non-existent, we will confirm it if a justifiable
ground for the decision can be inferred from the facts of the
Duferco, 333 F.3d at 390.
And “where an arbitral award
cannot be found if at least one of the readings yields a legally
correct justification for the outcome.”
Damages in Maritime Cargo Damage Cases
damages in maritime cargo damage cases are the same as those
applicable in ordinary contract cases.
See, e.g., M. Golodetz
Export Corp. v. S/S Lake Anja, 751 F.2d 1103, 1112 (2d Cir.
“[I]n keeping with the common law, the primary object in
awarding damages . . . is to indemnify the plaintiff for the
loss sustained by reason of the carrier’s fault.”
Fashions, Inc. v. Hellman Int’l Forwarders, Inc., 897 F. Supp.
138, 140 (S.D.N.Y. 1995).
Thus, damages are limited by the so-
called “duty to mitigate,” which represents “the principle that
‘damages which the plaintiff might have avoided with reasonable
effort . . . are . . . not caused by the defendant’s wrong . . .
Golodetz, 751 F.2d at 1112 (quoting 2 Williston on Contracts
§ 1353, at 274 (1962)).
Under the ordinary rule of damages, known as the market
value rule, “the measure of damages is the difference between
the fair market value of the goods at their destination in the
condition in which they should have arrived and the fair market
Kanematsu-Gosho Ltd. v. M/T Messiniaki Aigli, 814 F.2d 115, 118
(2d Cir. 1987).
However, this market value rule is “at best but
a convenient means of getting at the loss suffered,” id. at 119
(quoting Ill. Cent. R.R. Co. v. Crail, 281 U.S. 57, 64 (1930)),
Amolyntos, 11 F.3d 361, 365 (2d Cir. 1993), overruled on other
grounds as recognized by Farrell Lines Inc. v. Ceres Terminals
Inc., 161 F.3d 115, 117 (2d Cir. 1998).
circumstances suggest a more appropriate alternative, the fair
Texport Oil, 11 F.3d at 365.
One such alternative is the so-called “reconditioning cost”
“reconditioning of the damaged merchandise is feasible . . . .
at a modest cost so that the shipper realizes the market value
of the product, the courts sometimes limit damages to [the]
Santiago v. Sea-Land Serv., Inc., 366 F.
abandoning the market value rule for the cost of reconditioning
depends upon the facts, and available evidence, of each case.
Compare Weirton Steel Co. v. Isbrandtsen-Moller Co., 126 F.2d
(same), with Thyssen, Inc. v. S.S. Fortune Star, 777 F.2d 57,
reconditioning cost rule), and Thyssen, Inc. v. S/S Eurounity,
21 F.3d 533, 540 (2d Cir. 1994) (same).
In addition to the value assigned to the direct damage to
incidental damages (such as the costs of surveys, inspections,
resulting from the cargo damage.
See, e.g., Fortis Corp. Ins.,
S.A. v. M/V Cielo del Canada, 320 F. Supp. 2d 95, 108 & n.8
(S.D.N.Y. 2004); Marine Office of Am. Corp. v. Lilac Marine
Corp., 296 F. Supp. 2d 91, 107 (D.P.R. 2003); Hartford Fire Ins.
Co. v. Novocargo USA Inc., 257 F. Supp. 2d 665, 677 (S.D.N.Y.
2003); Plywood Panels, Inc. v. M/V Sun Valley, 804 F. Supp. 804,
813-14 (E.D. Va. 1992), aff’d sub nom. Plywood Panels, Inc. v.
Hyundai Merch. Marine Co., 4 F.3d 986 (4th Cir. 1993); Amstar
Corp. v. M/V Alexandros T., 472 F. Supp. 1289, 1295 (D. Md.
1979), aff’d, 664 F.2d 904 (4th Cir. 1981).
expenses incidental to the loss sustained” are recoverable “[i]n
addition to the actual loss of market value involved” “if they
Santiago, 366 F. Supp. at 1317.
Dorado’s Challenge to the Award
Dorado challenges the Award on the ground that the Panel
manifestly disregarded the law of damages by “award[ing] Hess
expenses incurred in mitigating the loss” to its cargo while
“compensating Hess far beyond the actual loss” and giving Hess a
Dorado Mem. at 2.
Dorado argues that in doing so,
the Panel ignored Hess’s duty to mitigate and contravened the
“fundamental principle of compensating a plaintiff only for the
actual loss sustained.”
Id. at 11.
Dorado’s argument is narrowly circumscribed.
not challenge the Panel’s factual findings.
Id. at 2.
although in the arbitration Dorado vigorously argued that the
Panel should apply the remediation cost rule, Dorado now “does
not contest the Panel’s decision to apply the market value rule
Dorado Reply Mem. at 5.
Accordingly, Dorado must
accept that the starting point for calculation of damages is the
diminution in market value of the Contaminated Fuel, which the
Panel found to be $815,896.87.
Dorado argues that the Panel misapplied the market value
rule because “even when the [market value rule of damages] is
efforts beyond the point of delivery.”
Dorado Reply Mem. at 5.
mitigation efforts undertaken by a plaintiff (or that should
have been taken) in response to a loss and the net proceeds
resulting from same (i.e., the revenue generated from same less
the expenses incurred in mitigating) or the net proceeds that
Dorado Mem. at 11.
Applied here, this would mean that the Panel
should have subtracted from Hess’s damages the net proceeds of
what the Panel described as Hess’s “attempt to mitigate its
damages” by “mov[ing] the product about to other of its tanks
and through a myriad of barge transfers, product blends and
sales,” Award at 3.
In this context of a challenge to an arbitration award,
this argument has at least two fatal flaws.
First, Dorado does
not argue that it presented this view of the operation of the
market value rule to the Panel, and our review of the posthearing briefs reveals that it did not.
Dorado instead argued
that “the fair market value test is an inappropriate method of
calculating damages,” Dorado Post-Hearing Br. at 15, and that
‘remediation rule’ test,” id. at 17.
Dorado never argued in the
alternative that, if the market value rule were applied, its
result should be adjusted based on the costs and benefits of
Hess’s mitigation efforts.
Indeed, Dorado’s explanation of the
market value rule was nearly identical to Hess’s explanation.
Compare Dorado Post-Hearing Br. at 11, 15 (quoting KanematsuGosho Ltd., 814 F.2d at 118), with Hess Post-Hearing Br. at 40
supposed rule on which Dorado now relies was never “brought to
the arbitrator[s’] attention,” it cannot be a basis to refuse to
confirm the Award.
Goldman, 306 F.3d at 1216.7
mischaracterizes the relationship between the market value rule
and the duty to mitigate.
An implicit premise of the market
value rule is that the injured party’s duty to mitigate would
have been satisfied by selling the distressed goods upon receipt
for fair market value.
Thus, where the market value rule is
applicable, the shipper’s efforts, if any, to recondition the
irrelevant to the computation of direct damages.
As the Panel
correctly explained, “[b]ecause the market value rule considers
the diminished value of the cargo on the date of discharge,
later price fluctuations or changes in value beyond the date of
Dorado did argue that “even if the cargo is unable to be fully
restored and is sold or valued at a discount, that discount must be offset
from the market value when calculating damages.”
Dorado Post-Hearing Reply
Br. at 16. But this is simply a restatement of the market value rule, with
the (correct but irrelevant) nuance that under some circumstances, such as
when there is no published market price but there is a bona fide salvage
sale, the actual sale price of the distressed cargo may best demonstrate its
damaged market value.
It is not an argument that the result of the market
value rule should be further adjusted based upon the plaintiff’s later
discharge are irrelevant to [the] damages calculation.”
at 8 (quoting BP N. Am. Petroleum v. SOLAR ST, 250 F.3d 307, 314
(5th Cir. 2001)) (emphasis in Award).8
inconsistent in that it awarded to Hess part of the cost of
awarded at least part of the benefits that Hess derived from
this mitigation effort.
Dorado Reply Mem. at 5.
The flaw in
Dorado stresses that the Panel, in describing Hess’s claim
for $168,342.82 in barging costs (only a portion of which were
awarded), stated that “Hess claims it is entitled to recover
. . .
mitigation efforts to remedy the effects of the contamination”
and that the Panel awarded part of those barging costs.
at 10 (emphasis added).
The Panel also awarded a portion of
Hess’s claims for inspection costs and spill taxes.
incidental damages related to cargo damage are commonly awarded
in addition to direct damages.
See, e.g., Amstar, 472 F. Supp.
8 Dorado “does not contest the Panel’s decision to apply the market
value rule of damages.” Dorado Reply Mem. at 5. Accordingly, the question
is whether the Panel correctly understood the market value rule, not whether
the Panel should instead have followed the reconditioning cost rule.
undoubtedly entitled to recover additional expenses caused by
inspection fees, spill taxes, and “extra barge costs” that the
losses,” Award at 4, may be characterized fairly as incidental
awarded as mitigation costs might be more persuasive if the
Panel had awarded all of the barging costs that Hess sought.
But, as discussed above, the Panel only awarded the cost of a
single barge movement from ship to shore.
That single movement
Contaminated Fuel in New York, is less easily characterized as a
“movement [that] involved transport of a parcel of cargo made
more valuable by the mitigation efforts,” i.e., the Barge RTC-60
movement from the Vessel to Tank 235.
Award at 10.
appears to have denied, rather than granted, mitigation costs.
“We are obliged to give [an] arbitral judgment the most
liberal reading possible.”
Westerbeke, 304 F.3d at 212 n.8.
plausible -- indeed, a persuasive -- reading of the Award is
that the Panel declined to award mitigation costs, and instead
awarded market value damages plus incidental expenses.
that interpretation of the Panel’s decision is both plausible
and legally sound, any ambiguity in the wording of the Panel’s
decision does not constitute a sufficient basis to refuse to
honor the Award.
See Duferco, 333 F.3d at 390.
In sum, Dorado has failed to show that the Award resulted
from the Panel’s manifest disregard of the law.
the Award is confirmed.
Pre-Judgment and Post-Judgment Interest
The Panel awarded interest to Hess from September 30, 2011,
to July 23, 2014 (the date of the Award), at “the prevailing
Award at 11.
In this Court, Hess seeks pre-
judgment interest at the annual rate of 3.25 percent, running
from July 23, 2012, until the date of entry of judgment.
does not address the issue of interest.
. . . should
Mitsui & Co. v. Am. Export Lines, Inc., 636
F.2d 807, 823 (2d Cir. 1981).
“[T]he rate of interest used in
discretion of the trial court.”
Ingersoll Milling Mach. Co. v.
M/V Bodena, 829 F.2d 293, 311 (2d Cir. 1987).
running from July 23, 2012, rather than July 23, 2014, must
reflect typographical error, for to grant Hess interest for the
Therefore, pre-judgment interest is awarded only from
July 23, 2014, to the date of judgment.
Because Dorado does not
object to the interest rate of 3.25 percent, and because that
rate is consistent with the interest rate awarded by the Panel,9
the rate of pre-judgment interest shall be 3.25 percent.
28 U.S.C. § 1961; Westinghouse Credit Corp. v. D’Urso,
371 F.3d 96, 100 (2d Cir. 2004).
Accordingly, Hess is entitled
to post-judgment interest from the date of the entry of judgment
to the date of payment at the statutory rate.
prevailing party may recover attorney’s fees for this action.
If the parties are unable to resolve this issue, Hess may move
The prevailing prime rate is 3.25 percent.
See Market Data Center,
The Wall Street Journal, http://online.wsj.com/mdc/public/page/mdc_bonds.html
(last visited Mar. 2, 2015).
Dorado’s opposition shall be served within fourteen days after
service of the motion, and any reply shall be served within
seven days after service of the opposition.
organized in a manner that facilitates evaluation.
all hours spent on a specific task shall be aggregated.
challenge advanced by Dorado shall be focused on a particular
task and shall include a position on the extent to which the
amount of fees sought for the task is excessive.
For the preceding reasons,
petitioner's petition to confirm
vacate the arbitration award is denied.
The Clerk of Court is
respectfully directed to enter judgment
ln favor of petitioner
in the amount of $1,192,021.25,
plus pre-judgment interest from
judgment interest at the rate set by 28 U.S.C.
New York, New York
March 4, 2015
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Copies of the foregoing Memorandum and Order have been mailed on
this date to the following:
Attorney for Petitioner
James D. Kleiner, Esq.
Hill, Betts & Nash LLP
One World Financial Center
200 Liberty Street, 26th Floor
New York, NY 10281
Attorneys for Respondent
Michael Fernandez, Esq.
Michael E. Unger, Esq.
Gina M. Venezia, Esq.
Freehill, Hogan & Mahar LLP
80 Pine Street
New York, NY 10005
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