Maersk Line Limited v. National Air Cargo Group, Inc.

Filing 28

OPINION AND ORDER: Petitioner's motion to confirm the arbitration award is GRANTED in part. The Clerk of Court is directed to terminate all pending motions, adjourn all remaining dates, and close this case. (Signed by Judge Katherine Polk Failla on 10/4/2017) (js)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------- X
:
MAERSK LINE LIMITED,
:
:
:
Plaintiff,
:
v.
:
:
:
NATIONAL AIR CARGO GROUP, INC.,
:
:
:
Defendant.
:
---------------------------------------------------------- X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: October 4, 2017
______________

16 Civ. 6272 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:
Pending before the Court is an unopposed motion for summary judgment
to confirm a contract arbitration award. (Dkt. #20). For the reasons that
follow, the motion is granted in part, with modifications made to the arbitral
award’s calculation of post-judgment interest.
FACTUAL BACKGROUND 1
A.

The Contract Between the Parties
Petitioner Maersk Line, Limited (“Maersk”), is a contract maritime carrier

of United States government property with a principal place of business in
Norfolk, Virginia. (Pet. 56.1 ¶ 1). Respondent National Air Cargo Group, Inc.
(“National Air”), is an air carrier and/or air freight forwarder with a principal
place of business in Ypsilanti, Michigan. (Id. at ¶ 2). On January 25, 2013,

1

The facts in this Opinion are drawn from Petitioner’s Local Rule 56.1 Statement (“Pet.
56.1” (Dkt. #21)), along with the exhibits attached to the declaration of George W.
Wright, Petitioner’s counsel of record (“Wright Decl., Ex. [ ]” (Dkt. #22)). Citations to
Petitioner’s Rule 56.1 Statement incorporate by reference the documents cited therein.

the parties consummated a contractual relationship whereby Maersk would
transport goods tendered by National Air between United States and foreign
ports. (Id. at ¶ 3). The contract provides that “the internal laws of the State of
New York” shall govern the rights and obligations of the parties under the
contract, and it further mandates binding arbitration in the event that the
parties cannot settle any dispute related to the contract. (Wright Decl., Ex. 1).
Maersk performed under the contract, providing ocean transportation
and container storage and management services to National Air. (Pet. 56.1
¶ 5). For the period of July 2014 through August 2016, however, National Air
failed to pay Maersk for its services, which resulted in the following charges:
(i) ocean freight of $572,187.64; (ii) management service fees of $161,100.11;
(iii) container demurrage and port storage of $43,342.40; and (iv) container
detention fees of $1,025.00. (Id. at ¶ 6). This amounts to a sum of
$777,655.15, which National Air does not dispute it owes Maersk. (Id. at
¶¶ 6-8). Maersk contends National Air also owes pre-award interest at an
annual 9% rate accruing during the period of August 1, 2015, through May 31,
2017, resulting in a total of $128,281.14, along with post-award interest at the
same rate for any amounts not paid within 30 days of the issuance of the
underlying arbitration award. (See id. at ¶¶ 10, 15).
B.

The Arbitration and the Instant Litigation
Maersk filed a demand for arbitration against National Air on September

21, 2016. (Pl. 56.1 ¶ 11; Wright Decl., Ex. 3). Maersk then filed the complaint
in this action on August 8, 2016. (Dkt. #1). After National Air received service,

2

the parties stipulated to stay the case pending the outcome of the arbitration,
and the Court stayed the case on that basis. (See Dkt. #13).
On October 6, 2016, National Air responded to Maersk’s demand for
arbitration by general denial. (Wright Decl., Ex. 3). In response to an order by
the arbitration panel, on May 10, 2017, Maersk filed a dispositive motion with
the panel, but National Air failed to respond. (Pl. 56.1 ¶¶ 12-13). On June 2,
2017, the panel issued a final award in favor of Maersk, including the principal
debt of $777,655.15, pre-award interest of $128,281.14, arbitrator
compensation and expenses of $2,020.00, and post-award interest at an
annual rate of 9% accruing after 30 days from the date of the award. (See id.
at ¶ 15). The award totals $907,956.29. (Id.). Since its issuance, the award
has not been vacated, modified, or corrected. (Id. at ¶ 16).
On June 13, 2017, Maersk moved the Court to award it summary
judgment and confirm the arbitration award. (Dkt. #20). Since then, National
Air has not responded to the motion and the Court has lifted the stay on the
litigation. (See Dkt. #27). As such, the motion is ripe for the Court’s
consideration.
DISCUSSION
A.

Applicable Law
1.

Unopposed Petitions to Confirm Arbitration Awards

The Federal Arbitration Act provides “a streamlined process” for a party
seeking to confirm, vacate, or modify an arbitration award. Mason Tenders
Dist. Council of Greater N.Y. & Long Island v. Adalex Grp., Inc., No. 13 Civ. 764

3

(PAE), 2013 WL 5322371, at *2 (S.D.N.Y. Sept. 23, 2013) (internal quotation
marks and citation omitted); accord Trs. of N.Y.C. Dist. Council of Carpenters
Pension Fund, Welfare Fund, Annuity Fund, & Apprenticeship, Journeyman
Retraining, Educ. & Indus. Fund v. Baywood Concrete Corp., No. 17 Civ. 1800
(ER), 2017 WL 3207797, at *2 (S.D.N.Y. July 26, 2017) (“[A]n application for a
judicial decree confirming an award receives streamlined treatment as a
motion, obviating the separate contract action that would usually be necessary
to enforce or tinker with an arbitral award in court.” (internal quotation marks
omitted) (quoting Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582
(2008)). In furtherance of this streamlined procedure, judicial review of an
arbitral award is sharply circumscribed. See Willemijn Houdstermaatschappij,
BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997); Adalex Grp.,
Inc., 2013 WL 5322371, at *2.
Indeed, “[n]ormally, confirmation of an arbitration award is ‘a summary
proceeding that merely makes what is already a final arbitration award a
judgment of the court,’” and under the Federal Arbitration Act, “the court ‘must
grant’ the award ‘unless the award is vacated, modified, or corrected.’” Blair &
Co., Inc. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006)) (quoting 9 U.S.C. § 9;
Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984)). The movant’s
burden “is not an onerous one” and requires only “a barely colorable
justification for the arbitrator’s conclusion.” Neshgold LP v. N.Y. Hotel & Motel
Trades Council, AFL-CIO, No. 13 Civ. 2399 (KPF), 2013 WL 5298332, at *7
(S.D.N.Y. Sept. 19, 2013) (internal quotation marks omitted) (quoting N.Y.C.

4

Dist. Council of Carpenters Pension Fund v. Angel Const. Grp., LLC, No. 08 Civ.
9061 (RJS), 2009 WL 256009, at *1 (S.D.N.Y. Feb. 3, 2009)). “The arbitrator’s
rationale for an award need not be explained, and the award should be
confirmed ‘if a ground for the arbitrator’s decision can be inferred from the
facts of the case.’” Gottdiener, 462 F.3d at 110 (quoting Barbier v. Shearson
Lehman Hutton, Inc., 948 F.2d 117, 121 (2d Cir. 1991)).
2.

Summary Judgment

Courts within this Circuit approach an unopposed petition to confirm an
arbitration award “as akin to a motion for summary judgment based on the
movant’s submissions, and the court may not grant the motion without first
examining the moving party’s submission to determine that it satisfactorily
demonstrates the absence of material issues of fact.” Neshgold LP, 2013 WL
5298332, at *7 (internal quotation marks omitted) (quoting Gottdiener, 462
F.3d at 109-10). Under the familiar summary judgment standard, a “court
shall 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); see also Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
A genuine dispute exists where “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Fireman’s Fund Ins. Co. v.
Great Am. Ins. Co. of N.Y., 822 F.3d 620, 631 n.12 (2d Cir. 2016) (internal
quotation marks and citation omitted). A fact is “material” if it “might affect the
outcome of the suit under the governing law.” Anderson, 477 U.S. at 248.

5

B.

Analysis
1.

The Grounds for the Arbitral Award Are Clear

Mindful of its deferential posture, the Court finds that the grounds for
the arbitral award are readily discernible from the contents of the award. The
award contains the arbitrator’s factual findings, including the contractual
relationship between the parties, Maersk’s performance under the contract, an
accounting of the charges in arrears discussed supra, and National Air’s receipt
of invoices for those charges without objection. (See Wright Decl., Ex. 3).
These findings surpass the degree of reasoning courts require to confirm an
arbitral award. See Gottdiener, 462 F.3d at 110; cf. Tube City IMS, LLC v. Anza
Capital Partners, LLC, 25 F. Supp. 3d 486, 491 (S.D.N.Y. 2014) (confirming
arbitration award for return of overpaid invoices). The Court may therefore
proceed to consider the arbitrator’s basis for awarding Maersk the amounts it
sought along with pre- and post-award interest.
2.

Maersk Is Entitled to a Confirmation of the Total Amount of
the Arbitrator’s Award Except Its Post-Judgment Interest Rate
i. Principal Debt Amount

The arbitrator awarded $777,655.15 as a principal debt amount, and the
award makes clear that this sum consisted of unpaid charges for ocean freight
($572,187.64); management service fees ($161,100.11); container demurrage
and port storage fees ($43,342.40); and container detention fees ($1,025.00).
(Wright Decl., Ex. 3). The arbitrator therefore provided more than a “colorable
justification” for awarding these amounts. Gottdiener, 462 F.3d at 110 (quoting
Landy Michaels Realty Corp. v. Local 32B–32J, Serv. Emps. Int’l Union, 954 F.2d
6

794, 797 (2d Cir. 1992)); see also N.Y.C. Dist. Council of Carpenters v. WJL
Equities Corp., 15 Civ. 4560 (KPF), 2015 WL 7571835, at *4 (S.D.N.Y. Nov. 24,
2015) (confirming arbitration award where “findings [were] in line with the
written agreement, and [party challenging confirmation] provided no evidence
that would draw them into question”).
ii. Interest on the Principal Debt Amount
The Court also confirms the arbitrator’s calculated pre-award interest,
but the Court only confirms the arbitrator’s post-award, pre-judgment interest
up to the date of the entry of this judgment. As discussed below, Maersk is
entitled to post-judgment interest as defined by federal statute rather than, as
the arbitrator applied, state law.
While pre-award interest is a matter left within an arbitrator’s discretion,
“post-award pre[-]judgment interest is a matter left with the district court.”
Moran v. Arcano, No. 89 Civ. 6717 (CSH), 1990 WL 113121, at *3 (S.D.N.Y. July
27, 1990). Conversely, federal law controls post-judgment interest by statute.
See 28 U.S.C. § 1961. “The Second Circuit has held that this statute applies
equally to a federal judgment confirming an arbitration award, even if the
award itself sets a different interest rate.” AXA Versicherung AG v. N.H. Ins.
Co., 962 F. Supp. 2d 509, 512 (S.D.N.Y. 2013) (citing Carte Blanche (Singapore)
Pte., Ltd. v. Carte Blanche Int’l, Ltd., 888 F.2d 260, 269 (2d Cir. 1989)).
a.

Pre-Award Interest

As mentioned above, New York law controls the rights and obligations of
the parties arising from the contract. (See Wright Decl., Ex. 1). In New York,

7

interest accrues at 9% per year, absent alternative statutory directives. N.Y.
C.P.L.R. § 5004. The arbitrator granted Maersk pre-award interest of
$128,281.14. The annual interest at a rate of 9% on Maersk’s total award of
$777,655.15 would be $69,989 after rounding up to the nearest dollar. This
amounts to a daily interest of approximately $191.75, and multiplying this by
669 days (the time from the middle point of Maersk’s unpaid performance,
August 1, 2015, to May 31, 2017, the approximate date of the arbitral award),
amounts to $128,281.00 after rounding to the nearest whole dollar. Cf.
Coastal Power Int’l, Ltd. v. Transcon. Capital Corp., 10 F. Supp. 2d 345, 371-72
(S.D.N.Y. 1998) (setting “reasonable intermediate start date” at May 15, 1996,
to calculate pre-award interest, where damages accrued from June 26, 1995,
through November 1, 1995, and December 6, 1995, through July 5, 1996),
aff’d, 182 F.3d 163 (2d Cir. 1999). 2 The Court may thus infer the grounds for
the arbitrator’s decision from the facts in the record and confirms the total
pre-award interest of $128,281.14. See Gottdiener, 462 F.3d at 110.

2

Instead of an August 1, 2015 start date for calculating pre-award interest, the arbitral
award states that the “intermediate start date during the relevant service period” is
“August 1, 2016.” (Wright Decl., Ex. 3 (emphasis added)). This was likely a
typographical error: August 1, 2016, would neither be the middle point of the relevant
period nor provide an arithmetical basis for the amount of the arbitrator’s pre-award
interest. This discrepancy, however, is of no moment. See Trs. of Empire State
Carpenters Annuity, Apprenticeship, Labor-Mgmt. Cooperation, Pension & Welfare Funds
v. Lazzaro Assocs., Inc., No. 12 Civ. 5651 (ADS) (WDW), 2014 WL 4175859, at *6
(E.D.N.Y. July 15, 2014) (“Even where it is unclear what formula or percentage the
arbitrator used in reaching an amount, if the court can infer that the arbitrator had
some basis — documentary, testimonial, or otherwise — on which to determine the
amount of interest, that amount should be awarded.” (internal quotation marks and
citation omitted)), report and recommendation adopted, No. 12 Civ. 5651 (ADS) (SIL),
2014 WL 4175868 (E.D.N.Y. Aug. 20, 2014).

8

b. Post-Award, Pre-Judgment Interest
Likewise, the Court confirms the arbitrator’s calculation of post-award
interest for any amounts unpaid within 30 days of the date of the arbitral
award — but only to the date of the entry of judgment in this case — at an
annual rate of 9%. “Post-award, pre[-]judgment interest is generally awarded
at the discretion of the district court, and there is a presumption in favor of
awarding such interest.” In re Arbitration Between Westchester Fire Ins. Co. v.
Massamont Ins. Agency, Inc., 420 F. Supp. 2d 223, 226-27 (S.D.N.Y. 2005)
(citing In re Waterside Ocean Navigation Co. v. Int’l Navigation, Ltd., 737 F.2d
150, 153-54 (2d Cir. 1984); Irving R. Boody & Co. v. Win Holdings Int’l, Inc., 213
F. Supp. 2d 378, 383 (S.D.N.Y. 2002)). A district court bestowed with
federal-question jurisdiction assesses the rate of post-award, pre-judgment
interest as a matter federal law despite the lack of a federal statute controlling
pre-judgment interest. See Sarhank Grp. v. Oracle Corp., No. 01 Civ. 1285
(DAB), 2004 WL 324881, at *4 (S.D.N.Y. Feb. 19, 2004) (quoting Jones v. UNUM
Life Ins. Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000)) (citing In re Waterside
Ocean Navigation Co., 737 F.2d at 153-54; In Matter of Arbitration Between
P.M.I. Trading Ltd. v. Farstad Oil, Inc., No. 00 Civ. 7120 (RLC), 2001 WL 38282,
at *1 (S.D.N.Y. Jan. 16, 2001)).
A district court considering an award of pre-judgment interest must
settle on a rate that compensates for the award’s diminution in value over time
while not overcompensating the petitioner. Sarhank Grp., 2004 WL 324881, at
*4. Overall, courts should award prejudgment interest if doing so would be

9

“fair, equitable and necessary to compensate the wronged party fully.”
Wickham Contracting Co. v. Local Union No. 3, Int’l Bhd. of Elec. Workers,
AFL-CIO, 955 F.2d 831, 835 (2d Cir. 1992) (collecting cases). The Court finds
that the arbitrator’s calculation of post-award, pre-judgment interest at a rate
of 9% satisfies these considerations given the parties’ selection of New York law
as controlling the rights and liabilities arising from their contract. The Court
thus confirms the arbitrator’s selection of a 9% interest rate for the post-award,
pre-judgment period from July 2, 2017, 30 days after the issuance of the
arbitral award, up to the date of entry of this judgment.
c. Post-Judgment Interest
The parties’ selection of New York law does not, however, supplant the
statutorily defined post-judgment interest rate applicable to federal judgments.
“Section 1961 of Title 28 establishes the rate of interest that is to be paid ‘on
any money judgment in a civil case recovered in a district court,’ linking that
rate to the rate of interest the government pays on money it borrows by means
of Treasury bills.” Jones, 223 F.3d at 139 (quoting 28 U.S.C. § 1961(a)). The
Second Circuit has established that although parties may depart from § 1961’s
applicable interest rate by contract, “they [must] do so through ‘clear,
unambiguous and unequivocal language.’” AXA Versicherung AG, 962 F.
Supp. 2d at 512 (quoting Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96,
102 (2d Cir. 2004)). Indeed, “[m]ost fundamentally, such contracts must
actually indicate the parties’ intent to deviate from § 1961.” Westinghouse
Credit Corp., 371 F.3d at 102.

10

Here, the parties selected state law by merely providing,
This Subcontract and the rights and obligations of the
Parties hereunder shall in all respects be governed by
and enforced in accordance with the internal laws of the
State of New York U.S.A. (without regard to conflicts of
laws principles of such state) including all matters of
construction, validity[,] and performance.
(Wright Decl., Ex. 1). Such a blanket statement is not sufficiently specific to
disclaim the applicability of § 1961. Cf. Soc’y of Lloyd’s v. Reinhart, 402 F.3d
982, 1004 (10th Cir. 2005) (“[A]greeing to be bound by [foreign] law does not
amount to agreeing to a particular post-judgment interest rate.”); accord
Budejovicky Budvar, N.P. v. Czech Beer Imps., Inc., No. 3:05CV1246 (JBA),
2006 WL 1980308, at *6-7 (D. Conn. July 12, 2006). “The general rule under
New York and federal law is that a debt created by contract merges with a
judgment entered on that contract,” thus extinguishing the contract debt and
leaving only the judgment debt. Westinghouse Credit Corp., 371 F.3d at 102.
For parties to override this general merger rule and select a particular
post-judgment interest rate, “they must express such intent through ‘clear,
unambiguous and unequivocal’ language.” Id. (citation omitted). No such
intent appears here. Therefore, § 1961 controls the interest rate applicable to
any unpaid amounts after the entry of judgment in this case.
iii. Arbitral Compensation and Expenses
Finally, the compensation and expenses for the arbitral panel amounted
to $4,040.00 (Wright Decl., Ex. 3), and the contract between the parties
provided that “[t]he costs and expenses of arbitration shall be borne equally by

11

the Parties” (Wright Decl., Ex. 1). The Court therefore confirms the arbitrator’s
award of $2,020.00, half of the total amount, for compensation and expenses.
CONCLUSION
Petitioner’s motion to confirm the arbitration award is GRANTED in part.
The Clerk of Court is directed to terminate all pending motions, adjourn all
remaining dates, and close this case.
SO ORDERED.
Dated:

October 4, 2017
New York, New York

__________________________________
KATHERINE POLK FAILLA
United States District Judge

12