Iota Shipholding Ltd et al v. Starr Indemnity and Liability Company et al
OPINION AND ORDER re: 18 MOTION for Summary Judgment filed by Iota Shipholding Ltd, Blumenthal JMK GmbH & Co. KG, 25 CROSS MOTION for Summary Judgment filed by Starr Indemnity and Liability Company. For the foreg oing reasons, Petitioners motion for summary judgment is GRANTED and Starrs cross-motion is DENIED. The underlying arbitration is hereby enjoined because there is no valid arbitration agreement between these parties. See In re Am. Exp. Fin. Adviso rs Sec. Litig., 672 F.3d at 141 (affirming right of district court to enjoin arbitration where parties have not entered into valid and binding arbitration agreement). This case is DISMISSED as against Starr and DISMISSED WITHOUT PREJUDICE as agai nst Marinsa. The Clerk of Court is directed to terminate all pending motions, adjourn all remaining dates, and close this case. If Petitioners wish to reinstate this action and move for entry of default judgment against Marinsa, Petitioners must seek leave from the Court to do so on or before June 14, 2017. SO ORDERED. (Signed by Judge Katherine Polk Failla on 5/31/2017) (anc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IOTA SHIPHOLDING LTD and BLUMENTHAL :
JMK GMBH & CO. KG,
STARR INDEMNITY AND LIABILITY
COMPANY, as a subrogor of TERNIUM
MEXICO S.A. DE C.V. and TERNIUM
INTERNACIONAL COSTA RICA, S.A., and
MARINSA INTERCONTINENTAL, S.A.,
DOC #: _________________
DATE FILED: May 31, 2017
16 Civ. 4881 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
Petitioners 1 Iota Shipholding Ltd. (“Iota”) and Blumenthal JMK GmbH &
Co. KG 2 (“Blumenthal,” and together with Iota, “Petitioners”) brought this
action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, and the
Federal Arbitration Act, 9 U.S.C. §§ 1-16 (the “FAA”), (i) to enjoin an arbitration
commenced in New York by Respondent Starr Indemnity and Liability
Company (“Starr”), in its capacity as subrogor of Ternium Mexico S.A. de C.V.
(“Ternium Mexico”) and Ternium Internacional Costa Rica, S.A. (“Ternium
Costa Rica,” and together with Ternium Mexico, the “Ternium Entities”), and
The Court refers to the parties as they are designated in the caption of this case. The
Court notes, however, that in the arbitration underlying this litigation, the parties’ roles
and designations are reversed.
Petitioners’ Local Rule 56.1 Statement indicates that the correct name for this entity is
Johann M. K. Blumenthal GmbH & Co. KG. (Dkt. #19 ¶ 1).
(ii) to declare that there is no valid arbitration agreement between these parties.
The Court has jurisdiction over Petitioners’ claim under 28 U.S.C. §§ 1332 and
1333, and Petitioners have designated their claim an admiralty or maritime
claim under Federal Rule of Civil Procedure 9(h).
Petitioners have moved for summary judgment, seeking a declaration
that there is no valid arbitration agreement between these parties and an
injunction or permanent stay of the underlying arbitration. Starr has crossmoved for summary judgment seeking dismissal of this action and an order
remanding this matter to arbitration. For the reasons that follow, Petitioners’
motion is granted and Starr’s motion is denied.
The facts in this Opinion are drawn from the parties’ submissions in connection with
their cross-motions for summary judgment, including Petitioners’ Local Rule 56.1
Statement (“Pet’r 56.1” (Dkt. #19)), Starr’s combined opposition to this statement and
counter Local Rule 56.1 Statement (Dkt. #22), and Petitioner’s reply to Starr’s counterstatement (“Pet’r 56.1 Reply” (Dkt. #26)). In addition, the Court has drawn on the
declaration of Starr’s counsel, Lawrence C. Glynn. (“Glynn Decl.” (Dkt. #23)). Because
Starr’s combined opposition to Petitioners’ Local Rule 56.1 Statement and counter Local
Rule 56.1 Statement has duplicative paragraph enumeration, the Court will refer to the
portion in opposition to Petitioners’ Local Rule 56.1 Statement as “Resp’t 56.1 Opp.”
and the portion comprised of Starr’s counter Local Rule 56.1 Statement as “Resp’t 56.1”
for ease of reference.
The Court notes that Petitioners’ opening and reply 56.1 statements are styled as
declarations of Blumenthal’s Chief Executive Officer Heinz-Dieter Czech and Petitioners’
counsel of record Garth S. Wolfson, respectively. (See Dkt. #19, 26). Because the
parties have treated these declarations as Petitioners’ Rule 56.1 Statements, the Court
will do the same.
Citations to a party’s Local Rule 56.1 Statement incorporate by reference the
documents cited therein. Where facts stated in a party’s Local Rule 56.1 Statement are
supported by testimonial or documentary evidence, and denied with only a conclusory
statement by the other party, the Court finds such facts to be true. See Local Rule
56.1(c), (d). Where the parties have marked the same documents as exhibits, the Court
will provide only one citation to the document.
For convenience, the Court will refer to Petitioners’ brief in support of their motion for
summary judgment as “Pet’r Br.” (Dkt. #20); Starr’s brief opposing Petitioners’ motion
and supporting Starr’s own cross-motion for summary judgment as “Resp’t Br.” (Dkt.
#24); Petitioners’ combined brief replying in further support of their own motion and
Factual Background 4
The Shipment of and Damage to the Ternium Entities’ Cargo
In 2013, Ternium Mexico sold 2,552 bundles of square, rectangular, and
mechanical tubing produced in Tampico, Mexico (the “Cargo”), to Ternium
Costa Rica. (Petition, Ex. 1, ¶¶ 2, 8). This Cargo was loaded on board the M/V
Lita in Tampico. (Id. at ¶ 7). Starr contends that the Cargo was in good order
and condition at the time of its loading. (Id. at ¶¶ 8-11).
The M/V Lita sailed from Tampico to Puerto Limón, Costa Rica, where
the ship arrived on August 6, 2013. (Petition, Ex. 1, ¶ 12). The M/V Lita
encountered storms during its journey that caused damage to the Cargo;
damage surveys found that 40-45% of the total Cargo was damaged. (Id. at
¶¶ 13-16). Additionally, two packages of the Cargo were lost overboard. (Id. at
¶ 14). Because Ternium “could not affirmatively segregate damaged material
on a per bundle/per package basis,” it “instead proposed a reasonable
depreciation of 42.86% of the total value of the segregated material.” (Id. at
¶ 18). The physically damaged Cargo was valued at $173,875.14, and the two
lost bundles valued at $1,750.17. (Id. at ¶¶ 19-20).
opposing Starr’s motion as “Pet’r Reply” (Dkt. #27); and Starr’s brief sur-replying in
opposition to Petitioners’ motion and replying in support of its own motion as “Resp’t
Reply” (Dkt. #29). Further, the Court will refer to the Petition for a Stay of Arbitration
as the “Petition” (Dkt. #8; see also Pet’r 56.1, Ex. 1).
Unless otherwise indicated, the facts underlying Starr’s arbitration claim are not in
dispute for purposes of the instant action. Before the Court is only the question of the
arbitrability of that claim. The Court provides a brief summary of the alleged facts here
for context, but at this stage takes no position on their truth or accuracy.
The Maritime Contracts
The Cargo was shipped pursuant to a collection of contracts, which the
Court will describe in this section.
The Voyage Charter
The parties agree that non-party Alexander & Blake Ltd. (“A&B”), 5
chartered the M/V Lita to Ternium Mexico pursuant to a Voyage Charterparty
dated July 26, 2013 (the “Voyage Charter”). (Resp’t 56.1 Opp. ¶ 5). 6
In Annex I, the Voyage Charter defines certain terms used therein. (Pet’r
56.1, Ex. 1(C)). The Charterer is “as stated in ... the beginning of this Charter
Party,” where the Voyage Charter identifies the “Shipper” as Ternium Mexico.
In Starr’s arbitration petition, Starr alleged that Respondent Marinsa chartered the M/V
Lita from its owners, Petitioners, and then sub-chartered the vessel to Ternium Mexico
“pursuant to a voyage Charterparty dated July 26, 2013.” (Petition, Ex. 1, ¶¶ 3-4). In
opposing Petitioners’ 56.1 Statement, Starr “admits that the relationship between
Marinsa and Blumenthal was misstated in the factual background section of the
arbitral submission,” and indicates that that section “was meant to state” that A&B
“was the party to the voyage charterparty.” (Resp’t 56.1 ¶ 5). “Starr denies that this
typo had any impact on [its] substantive allegations against the vessel owners
Blumenthal and/or Iota.” (Id.).
“A charter party is a specific contract, by which the owners of a vessel let the entire
vessel, or some principal part thereof, to another person, to be used by the latter in
transportation for his own account, either under their charge or his.” Asoma Corp. v.
SK Shipping Co., Ltd., 467 F.3d 817, 823 (2d Cir. 2006) (internal quotation marks
omitted) (quoting The New York, 93 F. 495, 497 (E.D.N.Y. 1899)). “The term ‘charter
party’ actually refers to the document in which the terms and conditions of the lease of
a vessel by an owner to a charterer are set out.” U.S. Titan, Inc. v. Guangzhou Zhen Hua
Shipping Co., Ltd., 241 F.3d 135, 138 n.1 (2d Cir. 2001) (internal quotation marks
omitted) (quoting Great Circle Lines, Ltd. v. Matheson & Co., 681 F.2d 121, 124 (2d
Cir. 1982)). There are three principal charter arrangements: “[i] Under a time charter,
the charterer engages for a fixed period of time a vessel, which remains manned and
navigated by the vessel owner, to carry cargo wherever the charterer instructs;
[ii] Under a voyage charter, the charterer engages the vessel to carry goods only for a
single voyage; and [iii] [U]nder a demise, or bareboat charter, the charterer takes
complete control of the vessel, mans it with his own crew, and is treated by law as its
legal owner.” 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 11-1 (5th
ed. 2016); see also U.S. Titan, Inc., 241 F.3d at 138 n.2 (citing 1994 edition of § 11-1 for
authoritative definition of a time charter).
(Id.). The “Owner” is “the disponent owner of the Vessel who signs the present
Charter Party identified at the beginning of this Charter Party,” where the
Voyage Charter identifies the “Owner of the vessel” as A&B Limited. (Id.). 7
In its third section, the Voyage Charter outlines a set of requirements for
the proper shipment of the Cargo. As relevant here, this section provides that
the liability of the Charterer, Ternium Mexico, “for each shipment under this
Charter Party and the Charterer’s responsibility for damages to the Cargo ...
shall cease ... on Cargo being shipped, lashed[,] and secured.” (Pet’r 56.1,
The Voyage Charter also contains an arbitration clause, which provides:
This Charter Party shall be governed by and construed
in accordance with English Law (without regard to
conflict of law rules and principles). Should any dispute
arise between Owner and Charterer, the matter in
dispute shall be [referred] to three arbitrators in New
York/London, 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 court. The arbitrators shall be
commercial men. The proceeding shall be conducted in
accordance with the rules of the Society of Maritime
(Pet’r 56.1, Ex. 1(C), ¶ 15) (emphasis omitted).
“A disponent owner does not hold legal title to a vessel, but for purposes of the charter
party acts as if he does.” Mariac Shipping Co. v. Meta Corp. N.V., No. 05 Civ. 2224 (LAK)
(GWG), 2007 WL 1662067, at *1 (S.D.N.Y. June 11, 2007) (internal quotation marks
omitted) (quoting Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G., 579 F.2d
691, 693 n.1 (2d Cir. 1978)). Rather than holding legal title, “a disponent owner rents
the vessel from the true owner under a time charter and then enters into contracts for
the carriage of goods.” Ocean Prods., Inc. v. Molinos Rio de la Plata, S.A., No. 98
Civ. 3487 (DC), 1999 WL 239692, at *1 (S.D.N.Y. Apr. 22, 1999) (citing Andros
Compania Maritima, 579 F.2d at 693 n.1; Fairmont Shipping (H.K.), Ltd. v. Primary
Indus., No. 86 Civ. 3668 (SWK), 1987 WL 9433, at *2 n.4 (S.D.N.Y. Apr. 7, 1987)).
The Bills of Lading
The parties also agree that upon the shipment of the Cargo from
Tampico, “CONGENBILL” form bills of lading were executed “by [Respondent
Marinsa Intercontinental, S.A. (‘Marinsa’)] [o]nly as ship’s port agents for & on
behalf of the master and to incorporate by reference a CHARTER-PARTY dated
JULY 26, 2013.” (Pet’r 56.1 ¶ 9 (internal quotation marks omitted) (quoting
Petition, Ex. 1(D)). Each bill of lading identifies the “Shipper” as Ternium
Mexico, the “Consignee” as Ternium Costa Rica, and the Carrier as the
“Owners MV ‘Lita.’” (Petition, Ex. 1(D)). The Master of the M/V Lita is
identified on the Bills of Lading as the ship’s Captain, Franczyk Jerzy. (Id.).
The Bills of Lading direct that their “[f]reight [is] payable as per
CHARTER-PARTY dated JULY 26, 2013.” (Petition, Ex. 1(D)). For their
“CONDITIONS OF CARRIAGE,” the Bills of Lading direct a reader to “SEE
OVERLEAF.” (Id.). Thereon, each bill of lading notes that it is “to be used with
charter-parties.” (Id. (emphasis omitted)). And the first-listed condition of
carriage in each case specifies that “[a]ll terms and conditions, liberties and
exceptions of the Charter Party, dated as overleaf, including the Law and
Arbitration Clause, are herewith incorporated.” (Id.).
The Time Charter
It is with regard to this contract that the parties’ positions diverge.
Petitioners allege that A&B chartered the M/V Lita to Ternium Mexico under
the Voyage Charter in A&B’s capacity as a disponent owner, having itself
chartered the M/V Lita from its true owners under a time charter that is also
dated July 26, 2013 (the “Time Charter”). (See Petition ¶ 12; Pet’r 56.1 ¶¶ 1014; Pet’r 56.1, Ex. 2; Pet’r 56.1 Reply ¶¶ 3-13). This Time Charter “calls for
arbitration exclusively in Germany, and further expressly prohibits issuance of
bills of lading prejudicial to the Time Charter’s provisions.” (Pet’r 56.1 ¶ 11
(citing id., Ex. 2)). The parties agree that a time charterer was permitted to
sub-charter the time-chartered vessel, though the Time Charter’s terms
provided that if they did so, Time “Charterers [would] remain responsible for
the fulfillment of [the Time Charter]. In the case of any dispute, between
charterers and owners, the charterers have to fulfill their obligations toward
the owner with priority.” (Pet’r 56.1 Reply ¶ 16 (quoting Pet’r 56.1, Ex. 2,
In response, Starr argues that this “purported ‘fixture agreement’ is not
an agreement at all,” but “merely an email sent from [A&B] to an undisclosed
recipient.” (Resp’t 56.1 ¶¶ 3-4; see also id. at ¶¶ 5-13). Starr explains that the
email attaches three documents, one of which is not included in Petitioners’
submission, and the other two of which consist of the text of the email and “an
older time charterparty dated March 5, 2013[,] between Blumenthal and nonparty Pacific Basin Handysize limited Hong Kong.” (Id. at ¶¶ 5-8). Starr alleges
that the body of the email “is merely a list of proposed terms” and not a final
agreement, which is evidenced by the email’s instruction that its recipient
“kindly reconfirm.” (Id. at ¶¶ 9-10). And Starr notes that the “purported
‘fixture’ does not mention arbitration[.]” (Id. at ¶ 14).
The Underlying Arbitration
On August 6, 2015, counsel for the Ternium Entities and “respective
interested cargo underwriters” sent Petitioners a demand for arbitration.
(Glynn Decl., Ex. J). 8 The demand specified that the Ternium Entities and
interested underwriters sought $175,625.30 for the damage caused to and the
loss of the Ternium Entities’ steel products shipped aboard the M/V Lita from
Tampico, Mexico, to Puerto Limón, Costa Rica, between July 13, 2013, and
August 6, 2013 (the “Cargo Claim”). (Id.; accord Resp’t 56.1 Opp. ¶ 4). The
arbitration was commenced “pursuant to relevant bills of lading and [the]
arbitration clause contained in the voyage charterparty dated July 26, 2013.”
(Resp’t Br. 1). “Marinsa has not answered the arbitration.” (Id.).
Petitioners disputed the arbitrability of the Cargo Claim, and brought the
instant action to enjoin this arbitration on June 23, 2016. (See Petition). On
August 2, 2016, Petitioners filed a letter requesting a pre-motion conference
(Dkt. #16), which was held on August 12, 2016 (see Docket Entry dated
August 12, 2016). The Court subsequently issued a briefing schedule for the
parties’ contemplated cross-motions for summary judgment. (Dkt. #17).
Petitioners filed their motion for summary judgment on September 8, 2016
On two previous occasions, Blumenthal’s lawyers had agreed to extensions of time for
the commencement of arbitration. (See Glynn Decl. Ex. H, I). Because the Court
resolves the instant motions without reaching the parties’ dispute regarding the identity
of the M/V Lita’s true owners, the Court will not reach Starr’s argument that these
extensions should estop Petitioners from denying their ownership of that vessel. (See
Resp’t Br. 11-16).
(Dkt. #18-20), and Starr its cross-motion on October 18, 2016 (Dkt. #22-25).
Petitioners filed their reply on November 7, 2016 (Dkt. #26-27), and Starr its
reply on December 2, 2016 (Dkt. #29). Marinsa has not appeared in the
Rule 56(a) instructs a court to “grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “When ruling
on a summary judgment motion, the district court must construe the facts in
the light most favorable to the non-moving party and must resolve all
ambiguities and draw all reasonable inferences against the movant.” Pace v.
Air & Liquid Sys. Corp., 171 F. Supp. 3d 254, 262 (S.D.N.Y. 2016) (internal
quotation marks omitted) (quoting Dallas Aerospace, Inc. v. CIS Air Corp., 352
F.3d 775, 780 (2d Cir. 2003)). And where, as here, “parties file cross-motions
for summary judgment, ... each party’s motion must be examined on its own
merits, and in each case all reasonable inferences must be drawn against the
party whose motion is under consideration.” Fireman’s Fund Ins. Co. v. Great
Am. Ins. Co. of N.Y., 822 F.3d 620, 631 n.12 (2d Cir. 2016) (alterations omitted)
(internal quotation marks omitted) (quoting Morales v. Quintel Entm’t, Inc., 249
F.3d 115, 121 (2d Cir. 2001)).
“A motion for summary judgment may properly be granted … only where
there is no genuine issue of material fact to be tried, and the facts as to which
there is no such issue warrant the entry of judgment for the moving party as a
matter of law.” Rogoz v. City of Hartford, 796 F.3d 236, 245 (2d Cir. 2015)
(internal quotation marks omitted) (quoting Kaytor v. Elec. Boat Corp., 609 F.3d
537, 545 (2d Cir. 2010)). In determining whether summary judgment is
merited, “[t]he role of a court … ‘is not to resolve disputed issues of fact but to
assess whether there are any factual issues to be tried, while resolving
ambiguities and drawing reasonable inferences against the moving party.’”
NEM Re Receivables, LLC v. Fortress Re, Inc., 173 F. Supp. 3d 1, 5 (S.D.N.Y.)
(quoting Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986)),
reconsideration denied, 187 F. Supp. 3d 390 (S.D.N.Y. 2016).
A party moving for summary judgment “bears the initial burden of
demonstrating ‘the absence of a genuine issue of material fact.’” ICC Chem.
Corp. v. Nordic Tankers Trading A/S, 186 F. Supp. 3d 296, 301 (S.D.N.Y. 2016)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). “[A] fact is material
if it ‘might affect the outcome of the suit under the governing law.’” Royal
Crown Day Care LLC v. Dep’t of Health & Mental Hygiene of City of N.Y., 746
F.3d 538, 544 (2d Cir. 2014) (quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986)). And “[a] dispute is genuine ‘if the evidence is such that
a reasonable jury could return a verdict for the nonmoving party.’” Fireman’s
Fund Ins. Co., 822 F.3d at 631 n.12 (quoting Anderson, 477 U.S. at 248).
If the movant satisfies its initial burden, then “the adverse party ‘must
set forth specific facts showing that there is a genuine issue for trial.’”
Anderson, 477 U.S. at 250 (quoting Fed. R. Civ. P. 56(e)). To make this
showing, a summary-judgment “opponent must do more than simply show that
there is some metaphysical doubt as to the material facts.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, that
opponent must adduce “evidence on which the jury could reasonably find for”
him. Anderson, 477 U.S. at 252.
In cases where the interpretation of a contract is at issue, “a motion for
summary judgment may be granted only where the agreement’s language is
unambiguous and conveys a definite meaning.” Am. Home. Assurance Co. v.
Hapag Lloyd Container Linie, GmbH, 446 F.3d 313, 316 (2d Cir. 2006) (internal
quotation marks omitted) (quoting Sayers v. Rochester Tel. Corp. Supplemental
Mgmt. Pension Plan, 7 F.3d 1091, 1094 (2d Cir. 1993)). “Contract language is
ambiguous if it is ‘capable of more than one meaning when viewed objectively
by a reasonably intelligent person who has examined the context of the entire
integrated agreement and who is cognizant of the customs, practices, usages
and terminology as generally understood in the particular trade or business.’”
Id. (quoting Lightfoot v. Union Carbide Corp., 110 F.3d 898, 906 (2d Cir. 1997));
see also Palmieri v. Allstate Ins. Co., 445 F.3d 179, 187 (2d Cir. 2006) (“In
determining a motion for summary judgment involving the construction of
contractual language, a court should accord that language its plain meaning
giving due consideration to the surrounding circumstances and apparent
purpose which the parties sought to accomplish.” (internal quotation marks
omitted) (quoting Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir. 1990)).
Choice of Law
“When a contract is a maritime one, and the dispute is not inherently
local, federal law controls the contract interpretation.” Norfolk S. Ry. Co. v.
Kirby, 543 U.S. 14, 22-23 (2004). “Such is the case here, as ... the
transaction at issue involved [the] international shipment of goods by sea.”
Mediterranean Shipping Co. (USA) Inc. v. Am. Cargo Shipping Lines, Inc., No. 13
Civ. 6357 (ER), 2014 WL 4449796, at *4 (S.D.N.Y. Sept. 10, 2014); see also,
e.g., Nippon Yusen Kaisha v. FIL Lines USA Inc., 977 F. Supp. 2d 343, 349
(S.D.N.Y. 2013). Thus, the relevant “[c]harter parties and bills of lading [must
be] interpreted using the ordinary principles of maritime contract law.” Asoma
Corp. v. SK Shipping Co., 467 F.3d 817, 823 (2d Cir. 2006); see also, e.g.,
E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864 (1986)
(“Absent a relevant statute, the general maritime law, as developed by the
judiciary, applies.”). “Drawn from state and federal sources, the general
maritime law is an amalgam of traditional common-law rules, modifications of
those rules, and newly created rules.” E. River S.S. Corp., 476 U.S. at 864-65.
“The law generally treats arbitrability as an issue for judicial
determination ‘unless the parties clearly and unmistakably provide otherwise.’”
NASDAQ OMX Grp., Inc. v. UBS Secs., LLC, 770 F.3d 1010, 1031 (2d Cir. 2014)
(quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)); accord
Katsoris v. WME IMG, LLC, No. 16 Civ. 135 (RA), 2017 WL 775849, at *8
(S.D.N.Y. Feb. 27, 2017). But even where parties to a contract commit the
question of arbitrability to arbitration, a reviewing court “must always
ascertain for itself whether [a] resisting party is subject to a valid arbitration
agreement, because even the broadest arbitration clause cannot bind a party
who never agreed to it.” Nat’l Union Fire Ins. Co. of Pittsburg v. Beelman Truck
Co., 203 F. Supp. 3d 312, 317 (S.D.N.Y. 2016) (citing Sarhank Grp. v. Oracle
Corp., 404 F.3d 657, 661 (2d Cir. 2005) (“As arbitrability is not arbitrable in the
absence of the parties’ agreement, the district court was required to determine
whether [Respondent] had agreed to arbitrate.”); Zimring v. Coinmach Corp.,
No. 00 Civ. 8111 (LMM), 2000 WL 1855115, at *2 (S.D.N.Y. Dec. 19, 2000)).
“The issue of whether the parties are obliged to arbitrate their dispute
therefore breaks down into two questions: ‘[i] whether the parties have entered
into a valid agreement to arbitrate, and, if so, [ii] whether the dispute at issue
comes within the scope of the arbitration agreement.’” Nat’l Union Fire Ins. Co.,
203 F. Supp. 3d at 316-17 (quoting In re Am. Exp. Fin. Advisors Sec. Litig., 672
F.3d 113, 128 (2d Cir. 2011)); accord Katsoris, 2017 WL 775849, at *5 (quoting
Begonja v. Vornado Realty Tr., 159 F. Supp. 3d 402, 408-09 (S.D.N.Y. 2016)).
“[B]ecause of the ‘strong federal policy favoring arbitration ... doubts as to
whether a claim falls within the scope of [an] agreement should be resolved in
favor of arbitrability.’” Denney v. BDO Seidman, L.L.P., 412 F.3d 58, 68-69 (2d
Cir. 2005) (omission in original) (quoting ACE Capital Re Overseas Ltd. v. Cent.
United Life Ins. Co., 307 F.3d 24, 29 (2d Cir. 2002)).
However, Section Four of the FAA dictates that where “there is an issue
of fact as to the making of the agreement for arbitration, then a trial is
necessary.” HDI Glob. SE v. Lexington Ins. Co., No. 16 Civ. 7241 (CM), 2017 WL
699818, at *4 (S.D.N.Y. Feb. 7, 2017) (internal quotation mark omitted)
(quoting Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003)). When a
“party seeking arbitration has substantiated the entitlement by a showing of
evidentiary facts, the party opposing may not rest on a denial but must submit
evidentiary facts showing that there is a dispute of fact to be tried.” Id.
(internal quotation mark omitted) (quoting Oppenheimer & Co., Inc. v.
Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995)); see also Bensadoun, 316 F.3d at
175 (“[T]he summary judgment standard is appropriate in cases where the
District Court is required to determine arbitrability, regardless of whether the
relief sought is an order to compel arbitration or to prevent arbitration.”); Cont’l
U.K. Ltd. v. Anagel Confidence Compania Naviera, S.A., 658 F. Supp. 809, 812
(S.D.N.Y. 1987) (“Three requirements must be met before the Court may issue
an order compelling arbitration pursuant to the Federal Arbitration Act. There
must be (i) jurisdiction in admiralty; (ii) a written agreement to arbitrate; and
(iii) an absence of triable issues concerning the making and performance of the
Here, the parties “do not dispute that a written agreement to arbitrate
exists. Their disagreement is over which, if any, of the arbitration clauses ...
governs the resolution of this dispute.” Cont’l U.K. Ltd., 658 F. Supp. at 812
(second emphasis added). Put differently, the parties disagree with regard to
“whether [they] have entered into a valid agreement to arbitrate.” Nat’l Union
Fire Ins. Co., 203 F. Supp. 3d at 317. Petitioners argue that the parties have
not done so for two reasons: (i) the Voyage Charter’s arbitration clause was not
incorporated by reference in the Bills of Lading, and (ii) Petitioners are not
parties to the Voyage Charter nor bound by its terms. (See Pet’r Br.).
Importantly, however, the parties do not dispute the fact that Petitioners were
not signatories to the Voyage Charter. It is undisputed that Starr seeks to
invoke the Voyage Charter’s arbitration clause against a non-signatory to that
“The Supreme Court has counseled that ‘arbitration is a matter of
contract and a party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.’” Matter of Arbitration Between S & R
Co. of Kingston & Latona Trucking, Inc., 984 F. Supp. 95, 100 (N.D.N.Y. 1997)
(quoting United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574,
582 (1960)) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943
(1995)), aff’d sub nom. S & R Co. of Kingston v. Latona Trucking, Inc., 159 F.3d
80 (2d Cir. 1998). Under certain circumstances, however, a party may be
bound by an arbitration agreement to which it is not a signatory. See, e.g.,
Smith/Enron Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int’l, Inc., 198
F.3d 88, 97 (2d Cir. 1999); Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d
773, 776 (2d Cir. 1995). If, for example, “a charter party’s arbitration clause is
expressly incorporated into a bill of lading, non-signatories of the charter party
who are linked to that bill through general principles of contract law or agency
law may be bound.” Lucky Metals Corp. v. M/V Ave, No. 95 Civ. 1726 (JSM),
996 A.M.C. 265, 267 (S.D.N.Y. 1995) (quoting Cont’l U.K. Ltd., 658 F. Supp. at
813); see also Son Shipping Co. v. De Fosse & Tanghe, 199 F.2d 687, 688 (2d
Cir. 1952)). “Additionally, it may be proven that the non-signatory is an alter
ego of the corporation which signed the charter party, or that the signatory was
acting in an agency capacity for the nonsignatory.” Cont’l U.K. Ltd., 658 F.
Supp. at 813.
Here, Starr has only attempted the first of these methods: Starr argues
(i) that the Voyage Charter’s arbitration clause is expressly incorporated by
reference in the Bills of Lading and (ii) Petitioners are linked to that Bill
through general principles of contract law and agency law and therefore bound
by the arbitration clause’s terms. 9 To succeed in this argument, Starr must
demonstrate the satisfaction of two prerequisites: Starr must show that (i) the
Voyage Charter’s arbitration clause was expressly incorporated into a bill of
lading and (ii) the clause’s language is broad enough to encompass Starr’s
disputes with the nonsignatory Petitioners. See, e.g., Progressive Cas. Ins. Co.
v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 47-48 (2d Cir.
1993) (“[W]e have held that an arbitration agreement restricted to the
immediate parties does not bind a non-party, notwithstanding words of
Because Starr has not argued that Petitioners are alter egos of A&B, or that A&B was
acting in an agency capacity for Petitioners when it executed the Voyage Charter, the
Court will not consider whether the arbitration clause could bind Petitioners on that
second, alternate basis.
incorporation or reference in a separate contract by which that non-party is
bound.”); Cont’l Ins. Co. v. M/V NIKOS N, No. 00 Civ. 7985 (RLC), 2002 WL
530987, at *3 (S.D.N.Y. Apr. 9, 2002); Upstate Shredding, LLC v. Carloss Well
Supply Co., 84 F. Supp. 2d 357, 365-66 (N.D.N.Y. 2000); Lucky Metals Corp.,
996 A.M.C. at 267; Cont’l U.K. Ltd., 658 F. Supp. at 814.
Here, the Court finds that because the second of these requirements is
not met, the Court need not determine whether Starr has satisfied the first.
The Court cannot find Petitioners bound by the Voyage Charter’s arbitration
The Scope of Arbitration Clauses
To determine whether a party’s invocation of an arbitration clause is
proper, a court must first identify whether the clause in question is narrow or
broad in scope. See, e.g., Louis Dreyfus Negoce S.A. v. Blystad Shipping &
Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001) (directing courts charged with
“determin[ing] whether a particular dispute falls within the scope of an
agreement’s arbitration clause” to “recogniz[e] there is some range in the
breadth of arbitration clauses” and, as the first step in their inquiry “classify
the particular clause as either broad or narrow”); Imp. Exp. Steel Corp. v. Miss.
Valley Barge Line Co., 351 F.2d 503, 505-06 (2d Cir. 1965). “Courts have
consistently drawn a distinction between arbitration clauses specifically
identifying the parties to which it applies, and a broader form of arbitration
clause which does not restrict the parties.” Ogden Power Dev.-Cayman, Inc. v.
PMR Ltd. Co., No. 14 Civ. 8169 (PKC), 2015 WL 2414581, at *4 (S.D.N.Y.
May 21, 2015) (internal quotation marks omitted) (quoting Complaint of
Southwind Shipping Co., S.A., 709 F. Supp. 79, 82 (S.D.N.Y. 1989)), appeal
withdrawn (Oct. 6, 2015); accord e.g., M/V NIKOS N, 2002 WL 530987, at *3-4
(collecting cases); Thyssen, Inc. v. M/V MARKOS N, No. 97 Civ. 6181 (MBM),
1999 WL 619634, at *4-5 (S.D.N.Y. Aug. 16, 1999), aff’d sub nom. Thyssen, Inc.
v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002).
In the maritime context, courts in this District have found that “[t]he
quintessential ‘broad’ arbitration clause applies, by its terms, to ‘all disputes
arising under the charterparty.’” M/V NIKOS N, 2002 WL 530987, at *4
(quoting Salim Oleochemicals, Inc. v. M/V Shropshire, 169 F. Supp. 2d 194, 198
(S.D.N.Y. 2001) (collecting cases), aff’d, 40 F. App’x 626 (2d Cir. 2002). “The
typical ‘narrow’ clause, by contrast, refers specifically to disputes ‘between
owners and charters,’ and thus ‘applies only to disputes between the particular
parties identified in the clause.’” M/V NIKOS N, 2002 WL 530987, at *4
(quoting Thyssen, Inc., 1999 WL 619634, at *4); see also, e.g., Integr8 Fuels Inc.
v. Daelim Corp., No. 17 Civ. 2191 (LTS), 2017 WL 1483326, at *3 (S.D.N.Y.
Apr. 25, 2017) (“[L]ower courts in this circuit, following the guidance of the
Second Circuit, have distinguished between narrow arbitration clauses in the
maritime context — for example, arbitration clauses that ‘provide that disputes
between owners and charterers must be arbitrated generally apply only to
disputes between the particular parties identified in the clause’ — and broader
clauses[.]” (quoting Trade Arbed, Inc. v. M/V Kandalaksha, 2003 WL 22097460,
at *3 (S.D.N.Y. June 23, 2003)); D/S Norden A/S v. CHS de Paraguay, SRL,
No. 16 Civ. 2274 (LTS), 2017 WL 473913, at *2 (S.D.N.Y. Feb. 3, 2017) (“The
Second Circuit has noted, in discussing a nearly identical arbitration clause
(which required arbitration between ‘the Disponent Owners and the
Charterers’) that this language ‘is restrictive in scope.’” (quoting Imp. Exp. Steel
Corp., 351 F.2d at 505)).
The Voyage Charter’s Arbitration Clause Is Narrow in Scope
and Does Not Bind Petitioners
Here, the arbitration clause in the Voyage Charter applies by its terms
“[s]hould any dispute arise between Owner and Charterer.” (Pet’r 56.1,
Ex. 1(C), ¶ 15). This language is restrictive in scope and clearly establishes
that the Voyage Charter’s arbitration clause is narrow and applies only to
disputes between the particular parties identified therein, the “Owner and
Charterer.” See, e.g., Cont’l U.K. Ltd., 658 F. Supp. at 814 (holding that under
Import Export Steel, “if the scope of the clause is limited to disputes between
owners and charterers, [a] [c]ourt may compel two parties to arbitrate only if
each can be construed as either an owner or charterer”).
As aforementioned, the Voyage Charter identifies the “Owner” referenced
therein as “the disponent owner of the Vessel who signs the present Charter
Party identified at the beginning of this Charter Party.” (Pet’r 56.1, Ex. 1(C)).
And at its beginning, the Voyage Charter Party identifies the “Owner of the
vessel” as A&B Limited. (Id.). 10 Here then, the disponent owner is A&B
In this preliminary section, the relevant vessel is identified as the MV NADJA-MARIA.
Because the M/V Lita is described as the relevant vessel in the body of the Voyage
Charter (see Pet’r 56.1, Ex. 1(C), ¶ 6), and because the parties have neither claimed that
the Voyage Charter applies to the MV NADJA-MARIA rather than the M/V Lita nor
Limited, and it is against this party and this party alone that the Voyage
Charter’s narrow arbitration clause, limited to disputes arising “between Owner
and Charterer,” may be invoked by the Ternium Entities or Starr, their
Starr “asks the Court to expand the arbitration clause beyond its plain
meaning, contrary to the settled rule in this jurisdiction.” Cont’l U.K. Ltd., 658
F. Supp. at 814. Starr argues that Petitioners are the true owners of the M/V
Lita, and thus bound by the Voyage Charter’s arbitration clause governing
disputes involving “Owners.” (See Resp’t Br. 13-16). But whether Petitioners
are the vessel’s true owners or not, the plain text of the Voyage Charter limits
the scope of its obligations to bind a specific party, “the disponent owner of the
Vessel who signs the present Charter Party identified at the beginning of this
Charter Party,” which is A&B Limited. (See Pet’r 56.1, Ex. 1(C)). Abundant
case law in this Circuit makes clear that “scope language ‘should be carefully if
not restrictively construed’ and may not be ‘unduly stretch[ed]’ to include
nonsignatories.” Cont’l U.K. Ltd., 658 F. Supp. at 814 (alteration in original)
(quoting Imp. Exp. Steel Corp., 351 F. 2d at 506) (collecting cases). Therefore,
the Court will not unduly stretch the Voyage Charter beyond its plain, textual
limits, from “the disponent owner” A&B to the alleged true owners, Petitioners.
Starr cannot force Petitioners to arbitrate because Petitioners are not bound by
ascribed any import whatsoever to the apparent misidentification, the Court presumes
that it was a typographical error.
the narrow arbitration clause of the Voyage Charter, to which agreement
Petitioners are not a signatory.
To be clear: The Court does not here opine on Petitioners’ liability in
general with regard to the Cargo Claim, Starr’s capacity to compel A&B to
arbitrate that claim, or the viability of any litigation or arbitration beyond the
instant case. The Court’s holding is limited to the specific facts of this
litigation and its underlying arbitration.
For the foregoing reasons, Petitioners’ motion for summary judgment is
GRANTED and Starr’s cross-motion is DENIED. The underlying arbitration is
hereby enjoined because there is no valid arbitration agreement between these
parties. See In re Am. Exp. Fin. Advisors Sec. Litig., 672 F.3d at 141 (affirming
right of district court to enjoin arbitration where parties have not entered into
valid and binding arbitration agreement).
This case is DISMISSED as against Starr and DISMISSED WITHOUT
PREJUDICE as against Marinsa. The Clerk of Court is directed to terminate all
pending motions, adjourn all remaining dates, and close this case. If
Petitioners wish to reinstate this action and move for entry of default judgment
against Marinsa, Petitioners must seek leave from the Court to do so on or
before June 14, 2017.
May 31, 2017
New York, New York
KATHERINE POLK FAILLA
United States District Judge
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