Opinion
CIVIL ACTION NO. 01-1617, SECTION "N"
January 10, 2003
ORDER AND REASONS
Before the Court are the following motions: (1) a Motion to Compel Arbitration and Alternatively, Motion for Summary Judgment, filed by Progress Bulk Carriers, Ltd. ("Progress Bulk"); (2) a Motion to Compel Arbitration and Dismiss or, Alternatively, Stay Pending Arbitration, filed by Societe Nationale de Transports Maritimes and Compagnie Nationale Algerienne de Navigation Maritime ("CNAN"); and (3) a Motion for Summary Judgment, filed by CNAN, in the event its Motion to Compel Arbitration is denied.
For the reasons that follow, Progress Bulk's Motion to Compel Arbitration is GRANTED; CNAN's Motion to Compel Arbitration is GRANTED IN PART and DENIED IN PART; and the motions for summary judgment are DENIED AS MOOT.
I. BACKGROUND
Plaintiff, Keytrade USA, Inc. ("KUSA"), brings this action against the M/V Ain Temouchent, CNAN (the owner/operator of the Ain Temouchent), and Progress Bulk (a time charter of the Ain Temouchent), seeking damages for delay in a shipment of prilled urea from Kuwait to Louisiana.
KUSA is located in Chicago and sells fertilizers to buyers in the United States. It is an American subsidiary of Keytrade A.G. ("KAG"), a Swiss corporation. On March 19, 2001, KAG entered into a voyage charter with Progress Bulk to ship a cargo of prilled urea to KUSA aboard the Ain Temouchent, from Shuaiba, Kuwait to Louisiana. The Voyage Charter requires that any dispute "arising under" it be "referred to Arbitration in London." While stopped in Dubai, the Ain Temouchent was arrested and subsequently arrived in the United States on May 26, 2001, some days after its original expected arrival date. When it arrived, KUSA already had filed this suit.
The arbitration clause provides: "Any dispute arising under this Charter Party to be referred to Arbitration in London according to English Law and LMAA Rules shall apply." See Progress Bulk Exh. A at Clause 45.
In December 2001, Progress Bulk moved to dismiss or stay the matter pending arbitration pursuant to the voyage charter. Progress Bulk argued that KUSA should be bound by the terms of the voyage charter because (1) the voyage charter was incorporated by reference in the bill of lading, the document relied upon by KUSA as the contract of carriage; and (2) KAG was acting on behalf of KUSA when it entered into the voyage charter, thereby binding KUSA to the charter party's terms under agency principles. KUSA opposed the motion, arguing (1) that the bill of lading did not incorporate the voyage charter by reference because it did not identify the charter party by date or otherwise; and (2) that KAG had not been acting as agent for KUSA when it chartered the Ain Temouchent; rather, the purchase agreement between KAG and KUSA was an "arms' length transaction." See Rec. Doc. 17 at p. 8. This Court denied Progress Bulk's motion, agreeing with KUSA that under Fifth Circuit case law, the bill of lading for the shipment did not incorporate the terms of the charter party. With regard to the agency argument, the Court found that the record did not yet permit a finding that KAG had entered into the charter under circumstances that would bind KUSA under agency principles to the charter party. Nevertheless, the Court expressly left the door open for Progress Bulk to reurge its motion should discovery reveal facts favorable to Progress Bulk regarding the relationship between KAG and KUSA and/or the circumstances surrounding formation of the voyage charter. Progress Bulk now reurges its argument, armed with facts gleaned in discovery.
II. LAW AND ANALYSIS
A. Progress Bulk's Motion to Compel Arbitration:
Discovery has shown that the arrangement between KUSA and KAG was far from the "arms length transaction" depicted by plaintiff when the arbitration issue was first raised in this Court. KAG owns ninety percent of KUSA's stock. Except for Michael Moosman (KUSA's president and ten-percent shareholder), KUSA's entire board consists of KAG officers and directors. Since KUSA's inception in October 2000, KUSA has bought all of its imports and nearly all of its supply through its parent. KUSA's president works closely with KAG on all its imports, communicating with Switzerland constantly, fifteen to twenty times a day. KUSA's president, Michael Moosman, considers Melhi Kyman (CEO of KAG) his "boss" for practical purposes. KUSA decides which contracts to enter based on what is most profitable for the Keytrade "group."
See Depo. of A. Vaterlaus for KAG, Progress Bulk Exh. B, at pp. 14-15 (Q: Does Keytrade USA import fertilizer from any other sources, other than through Keytrade AG? A: It certainly could, but so far, it has not been done.), p. 18 ((Q: So Keytrade USA would not go directly to a shipper to acquire a product? A: No. No.); see also Depo. of M. Moosman for KUSA, Progress Bulk Exh. B, at pp. 14.
See Moosman Depo at pp. 13-14 (Q: Do you work closely in concert with Keytrade AG on all of your imports? A: Yes. . . . We're there to do their business in the United States.), pp. 14-15 (Q: Do you seek approval from Keytrade AG when you make those transactions? A: We don't necessarily have to, but since we're associates, we talk to each other constantly every day and we tell them what's going on and we tell them what we're doing.), p. 39 (A: . . . I mean, like I said, Mr. Keyman [of KAG] and I, who are the main contacts between USA and AG, probably talk to each other 15, 20 times a day.).
See Moosman Depo at pp. 212.
See Moosman Depo at pp. 19-21 (Q: How does a typical transaction work if there is such a thing as a typical transaction? . . . [W]alk me through what Keytrade USA does on a daily basis and how it interacts with Keytrade AG * * * * A: . . . . We get together with Keytrade AG and say, "We're going to require product in A, B, C, D, E for 2001-2002. * * * * And then we generate a shipping plan, put it to Keytrade AG, and they tell us where they can get product from to meet this plan. When we look at each individual ship, they say "Okay. We can buy this from this source for X. Do we want to buy it?" And we say, "Yes, we think we can do that." * * * * Q: How do you decide which type of contract you are going to enter into? A: Whatever we feel is most profitable for our group at the time.).
KUSA does not charter its own vessels, but instead relies on KAG to handle this aspect of the import process. The Ain Temouchent charter was handled in the same manner as other Keytrade imports to the United States. In response to a request by KUSA, KAG finds a supplier. Once it was determined that the supplier's price met with KUSA's approval, KAG contracted with the supplier and started looking for a vessel to ship the cargo. The shipment was insured under a blanket insurance policy that covers the Keytrade group as a whole. At the time cargo was loaded onto the vessel, title passed from the supplier to KAG and simultaneously from KAG to KUSA. Although KAG prepares purchase contracts and invoices in connection with its shipments to KUSA, it does not demand full payment from KUSA in cases such as this one, where KUSA must sell for less than the contract price.
See Moosman Depo at pp. 60-61 (Q: Okay. Does Keytrade ever charter its own vessels for imports from the Persian Gulf? A: No. Q: Why is that? A: Because Keytrade Bach [AG] has 25 people and they're sitting in the same time zone as the Arabian Gulf suppliers, they negotiate with the Arabian Gulf Suppliers, they're chartering ships all the time and why should we charter our own ships. . . . Q: So you rely on Ketrade AG as having the expertise to handle that aspect of the import? A: Yes. Q: And that's on all shipments? A: Yes . . . .).
See Vaterlaus Depo at pp. 111-14.
See Moosman Depo at pp. 113-14 (Q: Do you have anything to do with insuring the cargo? A: Keytrade AG insures it on our behalf. * * * We have — the best of my knowledge, the Keytrade group has a blanket insurance policy for every cargo. . . . Q: Are you ever asked to sign anything related to insurance? A: No. Q: Is Mr. Vaterlaus authorized to enter into agreements on behalf of Keytrade USA? A: He's not — he's an officer of Keytrade USA. I assume that means he's authorized to enter into agreements on our behalf.).
See Vaterlaus Depo at pp. 40-41; see also Moosman Depo at pp. 133-34.
See Vaterlaus Depo at p. 50 (Q: So you don't demand the difference from Keytrade USA? A: We did not demand the difference from Keytrade USA, because as you can see, the prices they got from the clients were considerably lower than the contract price.), pp. 54-55 (Q: So Keytrade AG is giving Keytrade USA a break, because the cargo could not be resold? A: Yes, we are giving them a break because we have to give them a break, to honor our agreement with the IRS. Q: So Keytrade USA suffered no loss? A: It cannot, as per our agreement with the American tax authorities. They are not allowed. Q: The loss was absorbed by Keytrade AG? A: By somebody it had to be absorbed, yes. Q: And that somebody was you? A: Yes. It is a very common practice. We have not invented this.); see also Moosman Depo at p. 78.
KUSA, communicating through KAG, was active in the Ain Temouchent voyage from the start. KUSA's president, Michael Moosman, had asked KAG to get a "Suez option" in the charter — the option to have the vessel transit via the Suez Canal rather than the Cape of Good Hope, which for some reason did not happen. Once Primal Marine (KAG's broker) had worked out the terms of the voyage charter, a "recap" of the charter was sent to both KAG and KUSA; the charter party itself was not sent to either KAG or KUSA. The "recap" itself states that disputes are subject to arbitration.
See Moosman Depo at p. 58 (Q: So you booked this cargo with an appreciation of sailing via Cape of Good Hope? A: Yes. As a matter of fact, I had asked Keytrade AG to get me a Suez option, which they didn't, but that came later in the discussion.), p. 212 (Q: You did request Keytrade AG to get you a vessel with a Suez option, correct? A: Yes.).
See Vaterlaus Depo at p. 147 (Q: Before Primal Marine fixes a Charter Party, they have to run it by you. Correct? * * * A: No. They need approval, of course. But they don't have to — they don't send us the Charter Party, and say look at it. Q: They give you the recap, that's all you need? A: Exactly.); see also Moosman Depo at pp. 120-21 (Q: Did you get a copy of the AIN TEMOUCHENT charter? A: No. Q: What about the recap? A: We have a copy of the recap which I assume is in the file. . . . Q: Is it your appreciation that Keytrade AG always uses the same basic terms in its charters? A: Sure. I don't know if they use the same charter form, but they use the same terms.).
See Progress Bulk Exh. E at p. 2.
When the vessel stopped in Dubai, Moosman of KUSA immediately began working through Andrea Vaterlaus of KAG, in an effort to get the vessel moving. They discussed re-routing the shipment. But there was no discussion of which company (KAG or KUSA) would bear the additional costs, if any. Although a loss might be KUSA's in the first instance, it ultimately would fall to KAG.
See Moosman Depo at p. 139; see also Vaterlaus Depo at pp. 65-77 (A: Well, I remember this particular case, I was quickly involved, when we were a bit under pressure to present the vessel on time. Q: Under pressure from whom? A: From Mr. Moosman and from PIC. * * * And then [when the vessel did not send a sailing notice] Mossman was already saying, "What is with my ship? She is late, she is late, she is late." * * * When this has not been done, this arrival notice not been given, I got involved because of Mike Moosman, you know, being — Q: Pressuring you? A: Yes, pressuring, you know. That, oh guys, watch what is happening. He gave order to Primal [KAG's broker] to contact the Owner to give arrival notices. Turnaround. At that time, Mike Moosman was starting to discuss with me, well, hey, I am concerned, yes? We lost already a few days, what do we do? We go via Suez or we go —).
See Vaterlaus Depo at pp. 73-74 (Q: But as between AG and USA, did you have any understanding as to who would bear the cost of renegotiating the passage of the vessel? A: No, we didn't have an understanding. It was not important. . . . If a problem is much more sever, you are not start talking about who should pay which costs, yes? Especially between two affiliated companies. You say, "How do we get out of the problem, how do we solve the problem." We are not losing time in discussing with your colleague who should pay the costs.).
See Vaterlaus Depo at p. 78 (A: Yes the damages, we were assuming at that time, was the late arrival of the ship in Burnside. Q: And the damages that Keytrade AG would ultimately incur by reason of that delay? A: Yes. Keytrade AG. Q: And USA? A: And Keytrade USA, of course, in the first instance.).
Thus, KUSA is far from the bona fide holder-in-due-course who is innocent of the voyage charter terms and the shipper's agreement to arbitrate any disputes arising out of the shipment. KAG always handled the charter aspect of KUSA's imports, for the mutual benefit of both companies. KUSA knew about the standard terms of these charter parties, and was sent a copy of the recap, which included the arbitration agreement. KUSA even requested that certain terms be included in the charter party. Under these circumstances, KUSA cannot escape the arbitration agreement.
See Moosman Depo at p. 121.
A "nonsignatory party may be bound to an arbitration agreement if so dictated by the `ordinary principles of contract and agency.'" Thomson-CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir. 1995) (quoting McAllister Bros., Inc. v. A S Transp. Co., 621 F.2d 519, 524 (2d Cir. 1980)). Under Louisiana law, an agency relationship can be either express or implied. Matter of Oxford Management, Inc., 4 F.3d 1329, 1336 (5th Cir. 1993). It "is created by implication "`when, from the nature of the principal's business and the position of the agent within that business, the agent is deemed to have permission from the principal to undertake certain acts . . . .'" Id. (quoting AAA Tire Export, Inc. v. Big Chief Truck Lines, Inc., 385 So.2d 426, 429 (La.App. 1980)). "In other words, implied agency involves permission to act, even though permission is not explicitly established orally or in writing." Id. "An implied agency is frequently established by the conduct and communication of the parties and the circumstances of the particular case." Id.; see also Metal Bldg. Components, Inc. v. Gibson Roofers, Inc., 1999 WL 225453, *10 (E.D. La. Apr. 15, 1999).
Plaintiff suggests that application of Illinois law is "more appropriate." See Opp. Memo at p. 10. However, plaintiff does not state what the test for agency is under Illinois law. Moreover, the result does not appear to differ, whether the question is analyzed under Louisiana law, Illinois law, or the general maritime law. Like Louisiana, both Illinois and the maritime law recognize implied agency relationships. See C.A.M. Affiliates, Inc. v. First American Title Ins. Co., 715 N.E.2d 778, 783 (Ill.App. 1999) ("An agent's authority may be either actual or apparent, and actual authority may be express or implied."); Steel Coils, Inc. v. Captain Nicholas I M/V, 197 F. Supp.2d 560, 567 (E.D. La. 2002) ("Principles of agency apply in the maritime law. . . . Furthermore, an agency relationship may be express or de facto.").
From the words and conduct of KUSA, both before and during the existence of the Ain Temouchent charter, the Court finds that KAG had the power to act and transact on behalf of KUSA in arranging and entering into the charter party and that KAG, in entering the charter, was in fact acting as agent on KUSA's behalf. Accordingly, KUSA is bound as a party to the arbitration agreement, and its claims against Progress are subject to mandatory arbitration, provided they fall within the scope of the arbitration clause.
Determining whether a claim is subject to an written arbitration agreement "involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996).
Plaintiff argues that its claims are not within the scope of the clause because they are tort claims and, thus, do not "arise under" the voyage charter. Arbitration clauses, however, must be construed "in favor of arbitration." Sedco, Inc. v. Petroleos Mexicanos Mexican Nat. Oil Co. (Pemex), 767 F.2d 1140, 1145 (5th Cir. 1985). "Arbitration should not be denied `unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue . . . .'" Commerce Park of DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 338 (5th Cir. 1984) (quoting Wick v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir. 1979)). Thus, parties cannot avoid arbitration agreements simply "by casting their claims in tort, rather than in contract." Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524, 526 (5th Cir.), cert. denied, 531 U.S. 1013 (2000).
Here, although plaintiff argues that its claims are based in tort, the obligations it seeks to enforce against Progress Bulk derive, at least in part, from the charter party. Indeed, plaintiff alleges expressly that Progress Bulk breached the contract of carriage, which in this case is the voyage charter. See Steel Coils, Inc. v. M/V Lake Marion, 2001 WL 1518302 (E.D. La. Nov. 29, 2001) (where plaintiff's parent company acted with plaintiff's knowledge on plaintiff's behalf in entering into voyage charter, the charter party, not bills of lading, was the applicable contract of carriage). Thus, construing the clause in favor of arbitration, the Court finds that plaintiff's claims fall within the arbitration clause. See e.g., TMC Shipping Co. v. Gulf Africa Lines, 2002 WL 31741223, *2 (E.D. La. Dec. 5, 2002) (where obligation that plaintiff sought to enforce was obligation created via the charter party, plaintiff's claims did derive from the charter party and thus were arbitrable, despite plaintiff's attempt to couch claims as independent of charter party). Certainly it cannot be "said with positive assurance" that the arbitration clause "is not susceptible of an interpretation which would cover the dispute at issue." Commerce Park, 729 F.2d at 338. Accordingly, the appropriate course is for the Court to stay the claims and allow the arbitrators to determine whether the dispute falls within the arbitration clause. See Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 755 (5th Cir. 1993) ("`[W]henever the scope of an arbitration clause is fairly debatable or reasonably in doubt, the court should decide the question of construction in favor of arbitration'" and "permit the arbitrators to decide . . . whether the . . . dispute falls within it.").
See Complaint at ¶ 30.
B. CNAN's Motion to Compel Arbitration:
Unlike Progress Bulk, CNAN is not a party to the voyage charter. CNAN argues that KUSA's claims against CNAN should be ordered to arbitration based on the theory of equitable estoppel. Alternatively, CNAN asks the Court to stay KUSA's claims against CNAN until the arbitration with Progress Bulk has been completed.
The Fifth Circuit has recognized "that equitable estoppel allows a nonsignatory to compel arbitration in two different circumstances:" (1) where a party to an agreement containing an arbitration clause "must rely on the terms of the written agreement in asserting its claims against the nonsignatory;" and (2) where a party to such an agreement "raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract." Id. (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999)). It is not clear from the pleadings that plaintiff's claims against CNAN fall within either category. Given the abundance of common issues, however, allowing plaintiff to proceed to trial against CNAN before arbitration has been had on plaintiff's claims against Progress Bulk would almost certainly undermine Progress Bulk's right to arbitration. Under these circumstances, the Court finds that a stay of all claims in this matter is essential. See Olsher Metals Corp. v. M/V Agios Andreas, 982 F. Supp. 402, 403-04 (E.D. La. 1997) (Fallon, J.).
The Court cautions that its decision not to compel arbitration of plaintiff's claims against CNAN should not be read as a rejection of CNAN's estoppel argument altogether. Rather, it is simply unclear from the pleadings that plaintiff's claims against CNAN are dependent upon the voyage charter or sufficiently intertwined with Progress Bulk's actions under the voyage charter to warrant estoppel. If the matter is reopened after the arbitration against Progress Bulk is completed, the Court will be receptive to an estoppel argument if at any time it becomes clear that plaintiff's claims against CNAN do rest upon obligations deriving from the charter party.
III. CONCLUSION
Accordingly, for the foregoing reasons, IT IS ORDERED that: (1) Progress Bulk's Motion to Compel Arbitration is GRANTED; (2) CNAN's Motion to Compel Arbitration is GRANTED IN PART, in that all claims in this matter shall be stayed, and DENIED IN PART, in that it is denied in all other respects; and (3) the motions for summary judgment, urged by CNAN and Progress Bulk in the alternative, are DENIED AS MOOT.
IT IS FURTHER ORDERED that the captioned matter is STAYED in all respects pending the completion of arbitration and CLOSED for administrative purposes. Any party may re-open the case upon motion once arbitration has been completed.