Opinion
04 Civ. 3154 (RMB), 04 Civ. 3155 (RMB).
December 14, 2004
DECISION AND ORDER
I. Introduction
IMC Maritime Group, Inc. ("IMC Maritime"), and Gulfcoast Transit Co. ("Gulfcoast Transit") (collectively, "Petitioners"), move pursuant to Section 9 of the Federal Arbitration Act, 9 U.S.C. § 9, for an order confirming two Maritime Arbitration Awards ("Awards") issued by a unanimous panel ("Panel") of three arbitrators from the Society of Maritime Arbitrators, Inc. ("SMA") on April 14, 2004. (See Petition to Confirm IMC Maritime Arbitration Award, dated April 26, 2004; Petition to Confirm Gulfcoast Transit Arbitration Award, dated April 26, 2004 (collectively, "Petitions").) Russian Farm Community Project ("RFCP" or "Respondent") cross-moves to vacate the Awards pursuant to Section 10 of the Federal Arbitration Act, 9 U.S.C. § 10.
A single Panel of SMA arbitrators "was convened to hear evidence with respect to both charters and hearings were held. . . . Although the hearings were convened concurrently, the records, exhibits and proceedings expressly were not consolidated" and the Panel issued the Awards separately on April 14, 2004. (Resp't Mem. at 3.)
The Petitions were filed on April 26, 2004. (See IMC Maritime Petition at 1; Gulfcoast Transit Petition at 1.) The Court consolidated the cases on June 28, 2004 and, on July 6, 2004, Respondent moved to vacate the Awards. (See RFCP's Memorandum of Law in Support of Cross-Petition ("Resp't Mem.").) On July 13, 2004, Petitioners replied ("Pet'rs Reply"), and on July 20, 2004 Respondent filed a sur-reply ("Resp't Sur-Reply"). Oral argument was held on December 13, 2004. (See Transcript of Hearing, dated December 13, 2004 ("12/13/04 Tr.").) For the reasons set forth below, the Petitions to confirm the Awards are granted, and the Cross-Petition to vacate the Awards is denied.
II. Background
In October 2001, RFCP, a non-profit organization based in Minneapolis, Minnesota, chartered the vessel JUDY LITRICO, owned by Gulfcoast Transit, and the ADVENTURE I, owned by IMC Maritime, to carry cargoes of corn in bulk from the United States to St. Petersburg, Russia. (IMC Maritime Award, dated April 14, 2004 ("IMC Maritime Award") at 2-3; Gulfcoast Transit Award, dated April 14, 2004 ("Gulfcoast Transit Award") at 2.) Because discharge of the cargoes at St. Petersburg had been substantially delayed, Petitioners initiated two arbitration proceedings in New York ("Arbitrations") seeking "payment of unpaid demurrage . . . accrued at the discharge port," pursuant to provisions in the charter agreements, dated October 16, 2001 and October 25, 2001, respectively ("Charters"), both of which provided that: "Any/all disputes between Charterer/Receiver and Vessel Owner arising out of this contract relating to the settlement of laytime issues shall be arbitrated in New York subject to the rules of the Society of Maritime Arbitrators, Inc." (See Charters, attached as Exhibit 5 to Petitions, at Art. 5.)
"Demurrage is defined as extended freight and is the amount payable for delays by the receiver in loading or unloading cargo. It is stipulated damages for detention." Hellenic Lines, Ltd. v. Director Gen. of India Supply Mission, 319 F. Supp. 821, 831 (S.D.N.Y. 1970). "Laytime by definition is the time allowed for the charterer to load or unload." Pan Cargo Shipping Corp. v. United States, 234 F. Supp. 623, 636 (S.D.N.Y. 1964).
In the Arbitrations, Petitioners claimed that the primary cause of the delays was a shortage of railway wagons and not bad weather and, in support of their claims, they produced, among other things, "the contemporaneous accounts of the Master and Owner's Port Superintendent, who had attended the [cargo] discharge and frequently complained about the availability and condition of rail cars used at the port," and weather information (obtained through the U.S. Department of Commerce, National Climatic Data Center) which detailed the amount of precipitation during the relevant periods, as well as the vessels' "contemporaneous logbook entries and those from two other unrelated vessels in port at the same time." (Gulfcoast Transit Award at 5; IMC Maritime Award at 5; see also Certification of August L. Shumbera, Records Custodian, U.S. Department of Commerce ("U.S. Department of Commerce Records"), dated May 3, 2003.) Respondent countered that bad weather caused the discharge delays and it relied upon information collected and disseminated by the Russian Federal Agency for Environmental and Hydrometeorological Monitoring. (See Awards at 6.)
The disparity between Petitioners' and Respondent's proof regarding weather conditions, especially the amount of precipitation, was substantial and this was a pivotal issue in the Arbitrations because under Article 17 of the Charters, "non-weather working days" are not counted against laytime. (Resp't Mem. at 5; Pet'rs Reply at 4-5; Charters at Art. 17.) On the other hand, "delays caused by the shore work force/stevedores are Charter/Receiver-borne risks." (Awards at 10-11; Charters at Art. 17.)
The log book records from the JUDY LITRICO "show a total of 38.9 hours of rain during [the] vessel's stay at St. Petersburg compared to Charterer's number of 328 hours," Gulfcoast Transit Award at 10, and the log book records from the ADVENTURE I "show a total of 40 hours 43 minutes of rain during [the] vessel's stay at St. Petersburg compared to Charterer's number of 549 hours 5 minutes." (IMC Maritime Award at 10.)
The Panel heard from three witnesses over three days of hearings and it reviewed "substantial documentary evidence" as well as post-hearing briefs. (Awards at 4.) It concluded that bad weather was not the principal cause of the delays and stated that, "[c]onsidering the total available information on the prevailing weather conditions," it could find "no justification to apply laytime deductions on the basis of the existing record." (Id. at 10.) The Panel also concluded that "[f]rom all the submissions, witness testimony of personal encounters and observations, the accounts of the Russian civil services and agencies involved with the rail system . . . the rail stock of the port of St. Petersburg is heavily burdened," and the "unavailability" of railway wagons, rather than bad weather, caused the delays. (Id. at 11.)
The record does not indicate the names of the witnesses, however, it appears that the ship master and the port captain were among those who testified. (See Awards at 10-11.)
Pursuant to SMA Rule 30, which provides that the Panel "shall grant any remedy or relief which it deems just and equitable, [including] attorneys' fees and expenses," the Panel awarded Gulfcoast Transit $84,675.00 due to discharge delays, $6,987.43 in interest, and a $12,000 "allowance towards Owner's attorneys' fees and costs" for a total of $103,662.43. (Gulfcoast Transit Award at 12.) The Panel awarded IMC Maritime $93,357.64 due to discharge delays, $7,885.01 in interest, and a $10,000 "allowance towards Owner's attorneys' fees and costs" for a total of $111,242.65. (IMC Maritime Award at 11.) The Panel also awarded each Petitioner "[i]nterest at the rate of 4% per annum . . . on the principal until the award has been reduced to judgment or paid in full, whichever first occurs," and set its own fees at $46,882.00, "assessed 70 percent against the Charterer and 30 percent against Owner," with interest at 4% per annum "to accrue from the award date until final payment has been received." (Awards at 12; id. at App. A.)
III. Standard of Review
"It is well established that courts must grant an arbitration panel's decision great deference." Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003).
"[A]n arbitration award may be vacated if it exhibits `a manifest disregard of the law.'" Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004) (citations omitted). Manifest disregard "is more than a simple error in law or a failure by the arbitrators to understand or apply it; and, it is more than an erroneous interpretation of the law." Duferco, 333 F.3d at 389. "The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator." Merrill Lynch, Pierce, Fenner Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986). "A party seeking vacatur bears the burden of proving that the arbitrators were fully aware of the existence of a clearly defined governing legal principle, but refused to apply it, in effect, ignoring it."Duferco, 333 F.3d at 389. So long as the arbitrators "offer even a barely colorable justification for the outcome reached, confirmation of the award cannot be prevented by litigants who merely argue, however persuasively, for a different result."Andros Compania Maritima, S.A. v. Marc Rich Co., A.G., 579 F.2d 691, 704 (2d Cir. 1978). See also United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 37-38 (1987) ("a court may not reject [an arbitrator's factual findings] simply because the court disagrees with them").
IV. Analysis
Respondent argues that the Panel applied an improper legal standard in manifest disregard of the law when it determined that "the burden is upon RFCP to disprove `conclusively' weather data from the vessel logs." (Resp't Mem. at 2.) "Without explanation, the panel decided to depart from the preponderance standard to impose a[n] almost insurmountable standard of `conclusiveness.'" (Id. at 12.) Respondent also argues that the Panel's award of attorneys fees, costs and interest should be vacated because, "the panel, having concluded its work . . . has no further authority to act," and that attorneys fees, costs and interest sought in this Court in connection with confirmation of the Petitions should be denied because "[n]othing in the charter[s] permits award of fees or costs in the district court." (Id. at 15 n. 2.) Petitioners counter (persuasively) that "the Panel's Final Awards turned not on any application of law, but purely on the assessment of competing evidence concerning the effect that weather had on delays in discharging the cargoes," and that the Panel properly concluded that the "evidence, in the form of contemporaneous ships' logs and certified weather records from the U.S. National Climatic Data Center, together with three separate days of testimony, clearly showed that the cargo delays were not due to bad weather, but to congestion arising from a railway wagon shortage at the discharge port." (Pet'rs Reply at 2, 3; see also 12/13/04 Tr. (According to Petitioners, the Awards were based on the Panel's assessment of "competing evidence.") Petitioners also argue that review of the plain language of the Awards demonstrates that the Panel, in fact, considered and weighed all of the evidence with respect to the weather in St. Petersburg, and, "even if, arguendo, an improper burden was imposed . . . the evidence so overwhelmingly favored Petitioners that the outcome would have been the same regardless of what burden was applied." (Id. at 4, 6.) Petitioners also argue that the Panel's allowances for attorneys fees, costs and interest should be confirmed, and that the Court should award attorneys fees, costs and interest in connection with the prosecution of the Petitions because the Awards "in no way involved the slightest disregard of the law, no less a manifest disregard of the law." (Id. at 2, 7-8.)
The parties dispute whether the Panel applied the correct "burden of the proof of showing that the rain that fell when the vessel was idle [caused] a stoppage in the discharging of . . . vessel." The M.T. Argo Navis, 1967 A.M.C. 10 (Arb. N.Y. Oct. 28, 1966). (See Resp't Mem. at 11 ("the panel manifestly disregarded the law in the Awards by imposing on RFCP an extraordinarily high burden of proof'); Pet'rs Reply at 4 (it "clearly is not the case [that] an improper burden was imposed upon Respondent").) However one interprets particular words chosen by the Arbitrators, there can be no doubt that the Panel weighed all the evidence submitted by Petitioners and Respondent and properly concluded that Petitioners' evidence was far more persuasive. (See Awards at 10-11 ("Considering the total available information on the prevailing weather conditions, we are not persuaded that the vessel logs were incorrect. . . . ").) See also Cemetery Workers Greens Attendants Union, Local 365 v. Woodlawn Cemetery, No. 95 Civ. 0141, 1995 WL 326541, at *4 (S.D.N.Y. June 1, 1995) (rejecting claim "that because the arbitrator used the word `unrefuted,' he erroneously shifted the burden of proof to Grosso."). A review of the briefs and the record shows clearly that Petitioners easily met the burden of establishing their claims as to the cause of the discharge delays by (at a minimum) a preponderance of the evidence. (See Awards at 11 ("cumulative effect of these submissions" confirms data in vessel logs).) The Panel specifically noted the strength of Petitioners' proof (see Awards at 11 ("From all the submissions, witness testimony of personal encounters and observations, the accounts of the Russian civil services and agencies involved with the rails system, it becomes apparent that the rail stock of the port of St. Petersburg is heavily burdened"); id. at 10 ("the most realistic proof for the weather conditions . . . is the contemporaneous entries in the vessel logs")) and the inadequacy of Respondent's evidence. (See id. at 10 ("To produce a document stating that it rained on a given day without, however, stating the amount of precipitation is not very helpful in assessing the effects upon corn discharge.").) In summarizing its review of the (weather) evidence, the Panel stated:
Respondent appeared to acknowledge at oral argument that it had the burden of proof (by a preponderance of the evidence) with respect to "bad weather." (See 12/13/04 Tr.)
Considering the total available information on the prevailing weather conditions, we are not persuaded that the vessel's logs were incorrect or prejudicial. The panel has considered Charterer's general data obtained from the Russian Federal Agency for Environmental and Hydrometeorological Monitoring and compared it to [the] vessel's logs, the Master's testimony as well as that of the Port Captain, the actual working periods and the information provided by the U.S. Department of Commerce National Climatic Data Center. We do not find the cumulative effect of these submissions to establish that the vessel's observations should be ignored. Therefore the panel accepts the vessel's logs as prima facie evidence of the prevailing weather conditions.
(IMC Maritime Award at 10; Gulfcoast Transit Award at 10-11 (emphasis added).) Thus, the Panel concluded that the delays in cargo discharge were the result of the "unavailability" of railway wagons at the port at St. Petersburg. (Id. at 11 ("The procurement of rail wagons and their availability for the uninterrupted discharge of the vessel was Charterer's burden and the delays which their unavailability caused can hardly be held against Owner.").)
It is clear that the Panel gave great credence to the vessel logs offered by Petitioners, calling them the "most realistic proof of the weather conditions and the effect upon the cargo operation." (Id.) This was appropriate because vessel logs are considered to be strong evidence of weather affecting a vessel. See, e.g., The Myrina, S.M.A. Award No. 3846 (Arb. N.Y. May 31, 2004) (vessel "logs are to be considered an accurate and reliable representation of the weather experienced"); The M/V Master Panos, S.M.A. Award No. 3501 (Arb. N.Y. Jan. 15, 1999) (evidence in ship's log outweighs ship master's testimony);The Golden Shimuzu, S.M.A. Award No. 2991 (Arb. N.Y. July 28, 1993) ("the log books, absent any glaring discrepancies, are the best source for the prevailing weather condition at the time");The MT Konkar Dinos, S.M.A. Award No. 2631 (Arb. N.Y. Jan. 18, 1990) (logs are "best evidence" of ship's performance in fair weather); The M.V. Spray Cap, S.M.A. Award No. 1706 (Arb. N.Y. Aug. 9, 1982) ("log data should be given greater weight than information developed from other sources"); The S.S. Mount Athos, S.M.A. Award No. 1570 (Arb. N.Y. June 29, 1981); see also S.M.A. Rule 23 ("The Panel shall be the judge of the relevancy and materiality of the evidence offered."). The Panel's factual determinations here should not be disturbed. See Duferco, 333 F.3d at 389; IBEW, Local 97 v. Niagara Mohawk Power Corp., 143 F.3d 704, 726 (2d Cir. 1998); In re Ibar Ltd., No. 97 Civ. 8592, 2003 WL 2012400, at *2-3 (S.D.N.Y. May, 2, 2003); McDaniel v. Bear Stearns Co., 196 F. Supp. 2d 343, 351 (S.D.N.Y. 2002); Sobol v. Kidder, Peabody Co., 49 F. Supp. 2d 208, 217 (S.D.N.Y. 1999) ("a court may not review the weight the arbitration panel accorded to conflicting evidence").
Respondent's claim that "the panel . . . refused to consider other wholly reliable weather data," is belied by, among other things, the Panel's express statement that it "considered Charterer's general data obtained from the Russian Federal Agency for Environmental and Hydrometeorological Monitoring . . . as well as the Master's testimony as well as that of the Port Captain, the actual working periods and the information provided by the U.S. Department of Commerce." (Awards at 10-11.)
The Panel's statement that: "With the presence of the [vessel] logs, the burden is upon Charterer to disprove Owner's assertions conclusively," does not demonstrate that the Panel failed to weigh the competing evidence under a preponderance of evidence standard. (Awards at 10.) The language of the Awards, taken as a whole, indicates that the Panel did weigh the evidence under a preponderance standard (see id. at 10-11 ("cumulative effect of these submissions" confirms data in vessel logs)) and determined that Respondent was unable to counter and/or rebut Petitioners' evidence that "the primary cause of the delays was attributable to shortages of railway wagons, rather than the `bad weather' alleged by Charterer." (Id. at 4.) See also Landy Michaels Realty Corp. v. Local 32-B-32J, Svc. Employees Int'l Union, AFL-CIO, 954 F.2d 794, 797 (2d Cir. 1992) ("arbitration award should be enforced . . . if there is a barely colorable justification for the outcome reached"); Doctor's Assocs. v. Quinn, No. 03 Civ. 728, unpublished op. at 5, 8 (D. Conn. Sept. 19, 2003) (rejecting defendants' claim that "Arbitrator impermissibly shifted the burden of proof to them").
Attorneys Fees, Costs and Pre-Judgment Interest
Petitioners argue that the Court should enter an order confirming the awards of attorneys fees, costs and pre-judgment interest as provided for by the Panel, and, in addition, should order that Respondent pay Petitioners' "counsel fees and expenses in the prosecution of the instant proceeding." (Pet'rs Reply at 7-8.) Respondent counters that Petitioners' request for fees and costs and, presumably, interest, should be denied because "the panel having concluded its work has no further authority to act." (Resp't Mem. at 15 n. 2.)
The Panel's award of attorneys fees, costs and interest was not in manifest disregard of the law. The Charters' arbitration clause expressly provides that: "Any/all disputes . . . arising out of this contract . . . shall be arbitrated . . . subject to the rules of the Society of Marine Arbitrators, Inc." (Charters at Art. 5.) And, SMA Rule 30 provides that: "The Panel is empowered to award reasonable attorney's fees and expenses or costs incurred by a party or parties in the prosecution or defense of the case." And, it is well settled that an SMA panel "has the discretionary authority to award interest as it deems appropriate." The M.V. Michael, S.M.A. Award No. 1168 (Arb. N.Y. Nov. 4, 1977). See also SMA Rule 30 ("The Panel, in its Award, shall grant any remedy or relief which it deems just and equitable. . . ."); Associated Transp. Line, LLC v. Slebent Shipping Co., No. 04 Civ. 0728, 2004 WL 2093521, at *2 (S.D.N.Y. Sept. 17, 2004) ("The plain language of the SMA Rules Section 30 states that `the Panel is empowered to award reasonable attorneys' fees and expenses or costs incurred by a party or parties in the prosecution or defense of the case.' Therefore, the panel's award of attorney's fees was appropriate."); Companhia de Navegacao Maritima Netumar v. Armada Parcel Syc., Ltd., No. 96 Civ. 6441, 2000 WL 60200, at *4 (S.D.N.Y. Jan. 25, 2000); Trans-Asiatic Oil Ltd. S.A. v. UCO Marine Int'l Ltd., 618 F. Supp. 132, 137 (S.D.N.Y. 1985).
Petitioners' request for attorneys fees, costs and interest in connection with the instant Petitions to confirm the Awards before this Court is denied. The Court finds no reason to depart from "the well-established `American Rule' applicable in the federal courts, under which the prevailing party may not recover attorney's fees from the loser, absent statutory or contractual provisions to the contrary." Result Shipping Co. v. Ferruzzi Trading USA, 56 F.3d 394, 401 (2d Cir. 1995); W.K. Webster Co. v. American President Lines, Ltd., 32 F.3d 665, 670 (2d Cir. 1994); Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 184 F. Supp. 2d 271, 276 (S.D.N.Y. 2002); Maritime Fin. Ltd. v. Stinnes Int'l Co., No. 77 Civ. 1041, unpublished op. at 3 (S.D.N.Y. Sept. 10, 1979).
Post-Judgment Interest
Petitioners argue that the Court should enter an order "decreeing that Respondent pay legal interest in an amount to be determined by the Court." (Pet'rs Reply at 8.) Respondent opposes any "award of fees or costs in the district court," including post-judgment interest. (Resp't Mem. at 15 n. 2.)
Interest following the date of this judgment is governed by 28 U.S.C. § 1961, see Shanghai Foodstuffs Imp. Exp. Corp. v. International Chem., Inc., No. 99 Civ. 3320, 2004 WL 213019, at *4 (S.D.N.Y. Feb. 4, 2004) (citing Carte Blanche (Singapore) Ptc. v. Carte Blanche Int'l, 888 F.2d 260, 269 (2d Cir. 1989)), which provides that post-judgment interest shall be computed at "a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding" the date of judgment. 28 U.S.C. § 1961. See Federal Reserve Statistical Release, available at http://www.federalreserve.gov/releases/H15/Current; Westinghouse Credit Corp. v. D'Urso, 371 F.3d 96, 100 (2d Cir. 2004);Shanghai Foodstuffs, 2004 WL 213019, at *4.
V. Conclusion
For the reasons set forth above, the Petitions to confirm the Awards [1] are granted, and the Cross-Petition to vacate the Awards [12] is denied. The Clerk is respectfully requested to enter judgments: (1) in favor of IMC Maritime Group, Inc. in the amount of $111,242.65, plus interest at the rate of 4% per annum on the principal amount of $93,357.64 from April 14, 2004 to the date of this judgment, and post-judgment interest pursuant to 28 U.S.C. § 1961; and, (2) in favor of Gulfcoast Transit, Inc. in the amount of $103,662.43, plus interest at the rate of 4% per annum on the principal amount of $84,675.00 from April 14, 2004 to the date of this judgment, and post-judgment interest pursuant to 28 U.S.C. § 1961. The parties are directed forthwith to pay their respective shares of the Panel's fees as provided for in the Awards, unless this has already occurred.
The Clerk is, thereafter, respectfully requested to close this case.