Opinion
97 Civ. 6181 (MBM)
August 7, 2001
HAROLD M. KINGSLEY, ESQ., Kingsley Kingsley, Hicksville, New York, Attorney for Plaintiff.
RICHARD V. SINGLETON, ESQ., Healy Baillie, New York, New York, Attorney for Defendants.
OPINION ORDER
Plaintiff Thyssen Inc., a steel importer, sues the vessel M/V MARKOS Nin rem, and its registered owner, Calypso Shipping Corp., S.A. and A.M. Nomikos Son (U.K.), Ltd., in personam, for alleged damage to a shipment of steel coils carried aboard the MARKOS N. In this Court's earlier opinion and order, No. 97 Civ. 6181, 1999 WL 619634 (S.D.N.Y. August 16, 1999), with which this opinion assumes familiarity, the Court stayed this action pending arbitration. Defendants now move to dismiss with prejudice. For the reasons stated below, the London Commercial Court's decision that Thyssen's claims are time-barred is confirmed, and the complaint is dismissed.
I.
After I stayed this action pending arbitration, see Opinion and Order, No. 97 Civ. 6181, 1999 WL 619634 (S.D.N Y August 16, 1999), Thyssen appointed its arbitrator, and defendants raised a statute-of-limitations defense. (Singleton Aff. ¶ 9, Ex. 6) By agreement, the parties submitted this threshold question to the Commercial Court in London. (Singleton Aff. ¶ 10) The issues presented to the Commercial Court were (1) whether Thyssen's filing in this Court suspended the one-year limitation period so that the commencement of the arbitration in London was timely; and (2) whether the Court should exercise its discretion under the English Arbitration Act to extend time to commence the arbitration. (Singleton Aff., Ex. 8 ¶¶ 12, 23) The Commercial Court held that Thyssen's filing in this Court did not suspend the one-year limitations period for initiating arbitration, and that, accordingly, the arbitration claim was time-barred. (Singleton Aff., Ex. 8 ¶ 22) The Commercial Court refused to extend the time to commence the arbitration. (Singleton Aff., Ex. 8 ¶ 34) Defendants now move to dismiss the instant action with prejudice as a result of the Commercial Court's decision.
II.
Although defendants frame their motion as one to dismiss, I will treat it as a motion to confirm the arbitration award. See Maidman v. O'Brien, 473 F. Supp. 25, 27 (S.D.N Y 1979) (treating motion to dismiss as motion to confirm arbitration award). First, defendants state that "[t]his court should enforce the judgment of the Commercial Court as if it were an arbitration award." Second, both Thyssen and defendants rely on law relevant to the enforcement of arbitration awards pursuant to the Federal Arbitration Act ("FAA"). (See, e.g., Def. Mem. at 7; Pl. Mem. at 6-7, 12-13) Finally, the arbitration clause is sufficient to satisfy the FAA's requirement that the parties agree that a judgment of the court shall be entered pursuant to the arbitration award. The clause provides that the decision of the arbitrators "shall be final." See 9 U.S.C. § 9 (1994); Homes Ins. Co. v. RHA/Pennsylvania Nursing Homes, 127 F. Supp.2d 482 (S.D.N.Y. 2001) (discussing cases and concluding that an agreement that the arbitrators' decision would be "final" coupled with federal substantive governing law is sufficient to satisfy § 9 of the FAA).
Thyssen argues that the arbitration was "aborted" and should be voided, and not confirmed, under Section 10(a)(4) of the FAA because "a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10 (a)(4) (1994). Thyssen appears to argue that an arbitration never took place because the appointed arbitrators never heard the merits of Thyssen's claims.
An agreement to arbitrate does not entitle a claimant to a decision on the merits of its claim. Arbitrators have the power to determine that a claim is time-barred. See In the Matter of Arbitration No. AAA 13-161-0511-85 under Grain Arbitration Rules, 867 F.2d 130, 133 (2d Cir. 1989) (finding that the agreement to arbitrate was broad and encompassed the question of the time bar). That the Commercial Court resolved the time-bar issue does not render the arbitration void. Section 12 of the English Arbitration Act permits a party to seek an order from the court extending the time to commence arbitration. Arbitration Act, 1996, ch. 23, § 12 (Eng.). In addition to the request for an extension of time, parties may, by agreement, submit to the Court the substantive issue of the time bar. (Keates Decl. ¶ 5) Here, the parties agreed to submit both issues to the Commercial Court rather than the arbitrators because, according to defendants, "a threshold ruling on these issues by the court rather than by the arbitrators would result in considerable savings of costs and fees." (Singleton Aff. ¶ 10, 11; see also Keates Decl. ¶ 5) Thyssen's claims were resolved pursuant to the established procedure of the English Arbitration Act by a "neutral third party" chosen by the parties "after a hearing at which both parties [had] the opportunity to be heard." Black's Law Dictionary 105 (6th ed. 1990) (defining arbitration).
Moreover, the Second Circuit has held that an arbitration is "mutual, final, and definite" as required by § 10(a)(4) of the FAA, if it "resolves all issues submitted to arbitration and determines each issue fully so that no further litigation is necessary to finalize the obligations of the parties." Conntech Devel. Co. v. University of Conn., 102 F.3d 677, 686 (2d Cir. 1996) (quoting Dighello v. Busconi, 673 F. Supp. 85, 90 (D.Conn. 1987), aff'd 849 F.2d 1467 (2d Cir. 1988)). Here, the Commercial Court held that Thyssen's claims were time-barred, thereby fully resolving this threshold issue. No further litigation is necessary to finalize the obligations of the parties.
Thyssen argues also that, even if the Commercial Court's decision was "mutual, final, and definite," the arbitrators did not have in rem jurisdiction under English law, and therefore their decision disposed of only Thyssen's in personam claims against Calypso and A.M. Nomikos Son. Thyssen asserts that it would violate United States law and policy, specifically § 3(8) of the Carriage of Goods by Sea Act ("COGSA"), to confirm the London Commercial Court's decision as to Thyssen's in rem claim. See Vimar v. M/V Sky Reefer, 515 U.S. 528 (1995) (pointing out that a court may refuse to enforce an arbitration award if it violates United States law or policy) Section 3(8) of COGSA provides that "[a]ny clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability . . . arising from negligence, fault or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect." 46 U.S.C. § 1303 (8) (1994). Specifically, Thyssen argues that the enforcement of the arbitration clause here would violate § 3(8) because it would deprive Thyssen of its in rem claim against the vessel.
Under United States law, an in rem claim is an action "brought against the vessel itself as defendant." 2 Thomas J. Schoenbaum, Admiralty and Maritime Law 516 (3d ed. 2001). An in rem claim permits a plaintiff to arrest the ship. See Supplemental Rule C for Certain Admiralty and Maritime Claims. Here, Thyssen took advantage of the arrest procedures and initiated an arrest of the M/V MARKOS N in Texas. Defendants tendered and Thyssen accepted as security a letter that set forth an undertaking to pay up to $600,000 if a final decree was entered "against the M/V MARKOS N and/or the owners." (Singleton Aff. ¶¶ 2, 3, Ex. 2) Thyssen also had available the procedure set forth in Section 8 of the FAA, which provides for the seizure of a vessel prior to arbitration. See 9 U.S.C. § 8 (1994); Diana Compania Maritima, S.A. v. Subfreights of the S.S. Admiralty Flyer, 280 F. Supp. 607, 615 (S.D.N.Y. 1968) ("The purpose of Section 8 is to give an `aggrieved' party the benefit of the security provided by jurisdiction in rem while preserving the right to arbitrate.").
The parties do not dispute that arbitrators do not have in rem jurisdiction under English law. (Keates Aff. ¶ 9; Fisher Aff. ¶ 4) However, under English law, Thyssen could have brought an in rem claim for the purpose of arresting the vessel pursuant to § 20(2)(g) of the Supreme Court Act of 1981. (Keates Aff. ¶ 6) Although such an in rem claim must be commenced in the Admiralty Court, (Fisher Aff. ¶ 6; Keates ¶ 8) the Admiralty Court would have enforced the arbitrators' award against the security obtained by the arrest of the vessel in the in rem proceedings. (Keates Aff. ¶ 10)
Thyssen argues that the in rem claim that exists pursuant to United States law is not merely a security device used for the arrest of the vessel, but rather is a substantive claim guaranteed by COGSA against the ship. To support its argument that the loss of its in rem claim violates § 3(8) of COGSA, Thyssen cites International Marine Underwriters v.M/V Kasif Kalkavan, 989 F. Supp. 498 (S.D.N.Y. 1998), which found that the plaintiff's inability to bring an in rem action under Korean law — the law specified in the choice-of-law clause — deprived the plaintiff of one of the substantive rights expressly guaranteed by § 3(8). Id. at 499. The Court in International Marine relied on the text of § 3(8), which forbids lessening the liability of the carrier or the ship. The statute's reference to the liability of the ship was, according to the Court, "a clear reference to an in rem proceeding."Id.; but see Reed Barton Corp . v. M/V Tokio Express, No. 98 Civ. 1079, 1999 WL 92608, * 3 (S.D.N.Y. 1999) (distinguishing International Marine on the grounds that the party had accepted a letter of security and that the Hague-Visby Rules, Art. III § 8, contain the same language).
However, the Ninth Circuit, in Fireman's Fund Ins. Co. v. M/V DSR Atlantic, 131 F.3d 1336 (9th Cir. 1998), held that "the mere unavailability of in rem proceedings does not constitute a `lessening of the specific liability imposed by [COGSA),' rather it presents a `question of the means . . . of enforcing that liability.'" Id. at 1339-40 (quoting Sky Peefer, 515 U.S. at 534). Here, Thyssen fails to demonstrate that the loss of its in rem claim deprives it of anything more than an additional means of enforcing liability. Thyssen's in rem suit against the vessel is based on the same facts and is at its core the same claim as the in personam suit against Calypso, the vessel's owner, but merely attaches a different label to that claim. Cf. Queen of the Pacific, 180 U.S. 49, 53 (1901) (rejecting plaintiff's assertion that a contractual limitation period applied to suits against the owner but not the ship, the Court wrote that "[t]he claim is in either case against the company, though the suit may be against its property"); Note,Personification of Vessels, 77 Harv. L. Rev. 1122, 1126 (1964) ("Thus, in all situations where the wrong occurs while the owner or his agent is in control of the ship, the in rem proceeding is today merely a procedural alternative to an action against the owner."). Furthermore, Thyssen used the arrest procedures and accepted a letter of security. (Singleton Aff. ¶¶ 2, 3, Ex. 2)
The cases cited by Thyssen to support the viability of its in rem suit do not alter this conclusion. In Central Hudson v. Empreas Naviera, 56 F.3d 359 (2d Cir. 1995), the Court reasoned that Empresa, under the bareboat charter, was not in privity with the vessel, and that therefore the previous in rem suit did not bar an in personam suit against Empresa. Empresa does not support the conclusion that a plaintiff is entitled to bring a subsequent in rem action against the vessel after an attempt to raise the same claim against the owner of that vessel in personam fails. See Burns Bros. v. Central Railroad, 202 F.2d 910 (2d Cir. 1953). Thyssen also quotes Demsey Assoc. v. S.S. Sea Star, 461 F.2d 1009, 1014 (2d Cir. 1972), which states that "Section 1303(8) prohibits a shipowner from contracting out of" a maritime lien which may be enforced by an action in rem. However, in Demsey, the plaintiff could not maintain an in personam action against the owner because the owner did not authorize the bills of lading at issue. Id. at 1015. Thyssen here has failed to demonstrate any meaningful distinction between its in rem suit against the vessel and its in personam suit against the owner.
United States courts have consistently recognized in rem claims against vessels based on the legal fiction of personification of the vessels. See generally, Alex T. Howard, Jr., Personification of the Vessel: Fact or Fiction? 21 J. Mar. L. Com. 319 (1990) (summarizing courts' treatment of the theory of personification). However, Thyssen's attempt to circumvent the arbitration agreement, the policy favoring arbitration, and the London Commercial Court's decision, distorts and disserves the purpose of the legal fiction of personification, which is to "simplify the task of suit and collection against ship owners." Cargill B.V. v. S.S. Ocean Traveler, 726 F. Supp. 56, 61 (S.D.N.Y. 1989). Thyssen's in rem suit is simply another "means of enforcing liability" against Calypso, the owner of the MARKOS N. Therefore, the arbitration clause, and confirmation of the Commercial Court's decision as to all defendants, do not violate § 3(8) of COGSA. See Sky Reefer, 515 U.S. 528, 534 ("The difference is that between explicit statutory guarantees and the procedure for enforcing them, . . . .").
* * *
Thyssen's in rem claim against the vessel was governed by the broad arbitration agreement. Confirmation of the Commercial Court's decision does not violate § 3(8) of COGSA. The London Commercial Court's decision that Thyssen's claims are time-barred was "mutual, final, and definite," and is confirmed as to all defendants. The complaint is dismissed.
SO ORDERED.