Opinion
No. 00 Civ. 3097 (MBM).
December 5, 2000.
Jeremy J. O. Harwood, Healy Baillie, LLP, New York, NY, for petitioner.
Dimitri P. Georgantas, Georgantas Walters, LLP, Houston, TX, for respondent.
OPINION and ORDER
Petitioner Metalex Corporation and Respondent Sunline Shipping Co., Ltd. entered into a "charter party" for the charter of Sunline's vessel, the Jupiter. The parties agreed to submit any disputes to arbitration "according to the rules of the New York Society of Marine Arbitrators" ("SMA"), and for disputes under $25,000, according to the SMA's short form rules. Metalex disputed Sunline's bill, and Sunline commenced arbitration, The arbitrator ruled in Sunline's favor. Pursuant to 9 U.S.C. § 10 (a)(3), Metalex now petitions for an order vacating the arbitrator's award. For the reasons stated below, the petition is denied.
I.
Metalex chartered the Jupiter on November 21, 1998. (Pet. Exh. 13, at 2) Sunline agreed to carry approximately 3500 metric tons of steel scrap from Port-au-Prince to New Orleans for $85,000. (Id.) The charter party specified that Metalex would load the cargo at a rate of 500 metric tons per day, and would discharge at a rate of 900 metric tons per day. (Pet. Exh. 1. at 1) For every additional day, Metalex agreed to pay demurrage of $3,000. (Id.) Metalex also agreed to pay $800 for a crew to assist in discharging the cargo. (Id.)
The Jupiter arrived in Port-au-Prince on November, 22d 1998. (Id.) Metalex began loading its cargo of steel scrap onto the Jupiter on November 26, 1998, and the loading of 2,768 tons of cargo was completed on December 7, 1998. (Id. at 3) The Jupiter then proceeded to New Orleans and discharged the cargo from December 14 to 17, 1998. (Id.)
Sunline asked Metalex to pay $18,721.57 which Sunline attributed to demurrage. (Pet. Exh. 7) Metalex contested the charge, but offered to settle the dispute for less. (Id.) The parties could not reach a settlement, and eventually they agreed to submit their dispute to arbitration. (Pet. Exh. 2).
Sunline submitted its Points of Claim to the arbitrator, in which it requested $18,643 plus "interests and costs." (Pet. Exh. 4) In response, Metalex asked the arbitrator to compel Sunline to produce various documents. (Pet. Exh. 5) In particular, Metalex requested Sunline's "complete voyage and brokers' file . . . including voyage estimates and projections." (Id.) Metalex also requested "log extracts for the voyage in question and the complete ship to shore, shore to ship communication file and all communications between owner and its agent during the voyage." (Id.) The arbitrator rejected Metalex's request, explaining that he found their "discovery requests to be excessive and unwarranted under the agreed procedures as well as the scope of [Sunline's] claim." (Pet. Exh. 6).
Metalex submitted a brief opposing Sunline's claim. (Pet. Exh. 7) The brief also articulated a counterclaim requesting damages for Sunline's failure to provide a crew to assist in the discharge. (Id.) Sunline then replied. (Pet. Exh. 10) Metalex asked the arbitrator to reject Sunline's reply, arguing that it was an "inappropriate procedure for short form arbitration. In particular, Metalex argued that Sunline's reply "raised new factual assertions and arguments" in support of its claim, and that "for the first time, a ream of new exhibits were received . . . ." In the alternative, Metalex asked to submit a response to Sunline's reply. (Pet. Exh. 11) The arbitrator responded that although it was important that "the reply brief, to which there is no response, does not include new arguments and/or documents," he found that "although some of the exhibits are new in themselves, they are nevertheless in direct response to issues raised by Charterers in their rebuttal memorandum." Therefore, the arbitrator concluded, "neither the reply brief nor the exhibits were prejudicial to [Metalex's] position." (Pet. Exh. 12).
The arbitrator then issued a decision awarding Sunline $17,782.97. (Pet. Exh. 13) Metalex wrote the arbitrator "strongly protest[ing]" his decision. (Pet. Exh. 15) Because he had already issued his decision, the arbitrator refused to reconsider without Sunline's consent. (Pet. ¶ 18) Sunline would not consent, (Pet. Exh. 16), and on April 21, 2000, Metalex filed this action to vacate the award.
II.
9 U.S.C. § 10 (a)(3) authorizes a federal court to vacate an arbitrator's award "[w]here the arbitrators were guilty of misconduct . . . in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced." Petitioner argues that the arbitrator was "guilty of misconduct within the meaning of [10(a)(3)] because he failed to allow [Metalex] to take discovery of [Sunline]." (Pet. Mem. at 2) Petitioner is referring to its fax of November 15th, 1999, to the arbitrator, in which it asked him to compel Sunline to produce various documents. (Pet. Exh. 5) The arbitrator rejected Metalex's request on the ground that it was "excessive and unwarranted." (Pet. Exh. 6).
The SMA's Marine Arbitration Rules do not provide for discovery as practiced under the Federal Rules of Civil Procedure. Instead, the rules provide that the parties "shall produce such . . . evidence as the [arbitrator] may deem necessary to an understanding and determination of the dispute." Soc'y of Marine Arbitrators, Inc., Maritime Arbitration Rules, in Marine Arbitration in New York 23 (3d ed. 1998) Those rules do not obligate the arbitrator to compel the production of requested materials. See id. Courts have assumed that in deciding whether to compel the production of evidence requested by a party, the arbitrator has the same discretion he has in deciding whether to hear certain evidence. See e.g. Chiarella v. Viscount Industr. Co., No. 92 Civ. 9310, 1993 W.L. 497967, at *5 (S.D.N.Y. 1993);Fine v. Bear. Sterns Co., 765 F. Supp. 824, 829 (S.D.N Y 1991).
The arbitrator is the judge of the admissibility and relevance of evidence submitted in an arbitration hearing, see Soc'y of Marine Arbitrators, Inc., Marine Arbitration Rules, supra, and courts will not reverse his evidentiary decisions unless they deprive a party of a fundamentally fair hearing. See Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 20 (2nd Cir. 1997). In particular, the party moving to vacate the arbitrator's award on the basis of an erroneous evidentiary ruling must demonstrate that the ruling influenced the arbitration's outcome. See Employers Ins. of Wausau v. Nat'l Union Fire Ins. Co. of Pittsburgh, 933 F, 2d 1481, 1490 (9th Cir, 1991) (citing Burchell v. Marsh, 58 U.S. (17 How.) 344, 350 (1854)).
Metalex has failed to demonstrate that the arbitrator's rejection of its broad discovery request affected the arbitration's outcome. According to the arbitrator, the underlying dispute resulted primarily from the parties' disagreement about how much demurrage Metalex incurred during loading and discharge. (Pet. Exh. 13) Metalex argued that the "allowed laytime" — the amount of time Metalex was afforded under the charter party either to load or to discharge its cargo before Sunline could begin charging demurrage — should be calculated on the basis of the charter party's estimated cargo of 3,500 metric tons. (Id.) Under Metalex's proposed calculation, therefore, the allowed laytime for load-in would be 3,500 tons divided by the load-in rate of 500 tons per day, or 7 days. Similarly, the allowed laytime for discharge would be 3,500 tons divided by the discharge rate of 900 tons per day, or slightly less than four days. In contrast, Sunline argued that the allowed laytime should be calculated on the basis of the cargo actually loaded, 2,768 metric tons, (id.) which results in an allowed laytime for load-in of 5 1/2 days and for discharge of roughly 3 days, 2 hours. Metalex's briefs do not allege that any of the documents it requested would have affected the arbitrator's decision regarding either the method of calculating the allowed laytime, or the weight of the cargo actually loaded.
Metalex also argues that the arbitrator "was guilty of misconduct within the meaning of [10(a)(3)] because he failed to hear evidence pertinent and material to the controversy before rendering his decision" (Pet.'s Mem. at 2) Metalex is referring to its communication to the arbitrator objecting to Sunline's reply brief and asking permission to submit a response. (Pet. Exh. 11) The arbitrator refused to reject Sunline's reply brief and did not address Metalex's request to submit a response. (Pet. Exh. 12) Metalex indicates that it intended to use its response to dispute a "factual issue regarding the [Jupiter's] loading capacity." (Pet.'s Mem. at 4) Moreover, Metalex attaches a notarized letter from a person who participated in loading the Jupiter, in which he says that "[t]here was definitely space on the ship to load more cargo." (Pet. Exh. 14).
As explained above, the arbitrator is the judge of the admissibility and relevance of evidence submitted in an arbitration hearing, see Soc'y of Marine Arbitrators, Inc., Marine Arbitration Rules, supra, and the party moving to vacate the arbitrator's award on the basis of an erroneous evidentiary ruling must demonstrate that the ruling influenced the outcome,see Employers Ins. of Wausau, 933 F.2d at 1490. Here, Metalex asserts that the "issue regarding the loading capacity" had a "significant impact on the underlying issue in the arbitration." (Pet.'s Mem. at 4) However, Metalex fails to explain why evidence regarding the Jupiter's loading capacity could have had a "significant impact" on the arbitration's outcome. The arbitrator calculated the allowed lay-time on the basis of the cargo actually loaded. Therefore, even if the arbitrator had received and credited Metalex's evidence that the Jupiter had space remaining, that evidence would have had no effect on the arbitrator's calculations and his award.
The source of Metalex's concern appears to be a statement by the arbitrator characterized by Metalex as the arbitrator's "specific finding regarding the [Jupiter's] loading capacity . . . ." (Pet. Exh. 13) The arbitrator says that since "there is no evidence that either shippers or Charterers protested the loaded cargo quantity . . . it must be assumed that the holds . . . were fully utilized." (Id.) However, this so-called finding did not affect the arbitrator's calculation. Rather, the arbitrator cited this fact to explain that if 2,768 tons was as much cargo as the Jupiter could load, "it becomes unrealistic to propose approximately 3,500 metric tons as the basis of the allowed lay-time calculations." (Id.) The arbitrator's point is difficult to discern with certainty, but he seems to have been arguing that 3,500 tons is not a reasonable basis for calculating allowed lay-time because it is nearly 33% greater than the amount of cargo that Metalex actually loaded, In any case, the arbitrator's decision to calculate lay-time on the basis of the amount of cargo actually loaded did not rely on this reasoning.
Metalex has failed to demonstrate that it was deprived of a fundamentally fair hearing. Neither the arbitrator's decision to reject Metalex's discovery request, nor his refusal to allow a response to Sunline's reply, influenced the outcome. Accordingly, I decline to vacate the arbitrator's award.
For the reasons stated above, Metalex's petition is denied.
SO ORDERED.