Opinion
Civil Action No. 01-1617 Section "N"
March 20, 2002
ORDER AND REASONS
Before the Court is plaintiff's Motion to Strike or Alternatively Stay Rule 14(c) Tender of Keytrade A.G. to Plaintiff Pending Arbitration and Motion to Stay Third Party Complaint of Progress Bulk Against Keytrade A.G. Pending Arbitration. For the reasons that follow, the motion is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
Plaintiff, Keytrade USA, Inc. brings this action against the M/V Ain Temouchent, Societe Nationale de Transports Maritimes and Compagnie Nationale Algerienne de Navigation Maritime ("CNAN") (the vessel's owner/operator), and Progress Bulk Carriers, Ltd. ("Progress Bulk") (a time charter of the vessel), seeking damages for delay in a shipment of prilled urea from Kuwait to Louisiana.
On January 17, 2002, this Court denied Progress Bulk's motion to dismiss or stay pending arbitration, accepting plaintiff's arguments that the bill of lading did not incorporate the terms of the voyage charter between Progress Bulk and Keytrade A.G. (the contract containing the arbitration clause) (the "Voyage Charter") and upon finding that the present record did not yet permit a finding that Keytrade A.G. entered into the charter party under circumstances that would bind plaintiff to the arbitration clause under agency principles. The Court, however, granted Progress Bulk leave to file a third-party complaint against Keytrade A.G., seeking indemnity and contribution on grounds that Keytrade A.G., not Progress Bulk, was the party bound by the bill of lading (which plaintiff asserts is the applicable contract of carriage), obligated to carry the goods to plaintiff, and answerable for plaintiff's losses, if any. The third-party complaint also tendered Keytrade A.G. to plaintiff as a direct defendant. See Fed.R.Civ.P. 14(c).
Plaintiff now moves (1) to strike the Rule 14(c) tender on the basis of an arbitration clause contained in a March 12, 2001 agreement between Keytrade A.G. and Keytrade U.S.A. (the "Sale Contract"), and (2) to stay Progress Bulk's claims against Keytrade A.G. on the basis of the arbitration clauses contained in the Sale Contract and the Voyage Charter.
II. LAW AND ANALYSIS
Determining whether a claim is subject to a written arbitration agreement and therefore subject to the mandatory stay provision of the Federal Arbitration Act ("FAA") "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 (5t Cir. 1996); see 9 U.S.C. § 3. Here, no party contends that either arbitration agreement is invalid. Thus, the question for consideration is whether Progress Bulk's third-party claims fall within the scope of either the Sale Contract's or the Voyage Charter's arbitration clause.
A. The Rule 14(c) Tender:
In the Sale Contract, Keytrade A.G. "agree[d] to deliver and sell" to Keytrade U.S.A. a quantity of prilled urea "to arrive in the US Gulf early May 2001." See Plaintiff's Memo in Support (Rec.Doc. 22), Exh. 2 at p. 1. The parties further agreed to arbitrate any dispute "arising out of or relating to th[e] contract, or the breach, termination or validity thereof" Id. at p. 3: Without explanation, plaintiff asserts that its claim in this suit (which is the relevant claim for purposes of determining whether the 14(c) tender is subject to the arbitration clause) "clearly" relates to the Sales Contract. See Plaintiff's Memo in Support (Rec.Doc. 22) at p. 7. The Court disagrees that such relationship is clear.
The arbitration clause provides in pertinent part: "Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof, shall be referred to the arbitration of three persons in New York, one to be appointed by the seller, one to be appointed by the buyer, and the third by the two so chosen, who shall be the chairman."
See Texaco Exploration Production Co. v. AmClyde Engineered Prods. Co., Inc., 243 F.3d 906, 910 (5th Cir. 2001).
In seeking to stay this action in favor of arbitration, Progress Bulk argued that the applicable contract of carriage in this matter is the Voyage Charter, which Keytrade A.G. entered into to arrange delivery of the urea to plaintiff (presumably in connection with the Sale Contract). Under this characterization of plaintiffs claim in this matter, plaintiffs claims arguably are "related to" the Sales Contract. However, plaintiff has vehemently protested this characterization of its claim. Instead, plaintiff argues that whatever might have been the prior arrangement between plaintiff and Keytrade A.G., plaintiff "became a holder in due course of th[e] bill of lading, and is thereby compelled to sue the carrier pursuant to the bill of lading." See Plaintiff's Opp. Memo (Rec.Doc. 17) at p. 8 (emphasis added). If this is plaintiffs claim, then by definition, the claim does not relate to the Sales Contract or any other prior dealing and, therefore, is not subject to the arbitration clause of the Sales Contract.
The Court has given Progress Bulk the opportunity to conduct discovery and pierce plaintiffs pleadings to show that the substance behind plaintiffs claims is not the pure holder-in-due-course picture painted by plaintiff. See, e.g., Steel Coils, Inc. v. Captain Nicholas, 2002 WL 230823 at *5 (E.D. La. Feb. 14, 2002) (Fallon, J.) (where parent company had long history of chartering vessels for carriage of subsidiary's cargo, subsidiary was not a naive holder in due course; rather, agency relationship existed between parent and subsidiary such that knowledge of clause in voyage charter could be imputed to subsidiary, even though subsidiary was not a party to voyage charter entered into by parent).
Nevertheless, the arbitration clause in the Sales Contract is sufficiently broad to make the question debatable. Under such circumstances, the appropriate course is to stay the action and allow the arbitrators to decide whether the dispute falls within the clause. See Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 755 (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."). Accordingly, the Court will stay Progress Bulk's Rule 14(c) tender of Keytrade A.G. to the plaintiff.
B. Progress Bulk's Rule 14(a) Claim for Indemnity and/or Contribution:
Although the Rule 14(c) tender is subject to arbitration, Progress Bulk's independent Rule 14(a) claim for contribution and indemnity is not. Unlike the Sales Contract's arbitration clause (which requires arbitration of any claim "related to" the Sales Contract, whether arising under the Sales Contract or not), the arbitration clause in the Voyage Charter reaches only those disputes that "aris[e] under" the Voyage Charter. See Plaintiff's Memo in Support (Rec.Doc. 22), Exh. 3 at Clause 45. Under no interpretation does Progress Bulk's Rule 14(a) claim come within this clause. To the contrary, Progress Bulk explicitly conditioned its third-party claim upon the Court finding that the Voyage Charter does not govern the plaintiffs claims. See Third Party Complaint (Rec. Doc. 21) at ¶ IV. Thus, the third-party claim expressly does not "arise under" the Voyage Charter and is not subject to the arbitration clause contained therein.
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."
Progress Bulk avers that the subject shipment is one of private carriage governed by the terms of a voyage charter dated March 19, 2000, which contains a binding arbitration clause. However, in the event the court finds otherwise, Progress Bulk avers that Keytrade A.G. was the party obligated to carry the goods to plaintiff and was bound by the bill of lading which is alleged by plaintiff to constitute the contract of carriage." Third Party Complaint at ¶ IV (emphasis added).
Finally, even if the arbitrability of the Rule 14(a) claim were debatable, which it is not, the Court nevertheless would decline to stay the claim on plaintiff's motion. Plaintiff claims not to be a party to the Voyage Charter or its arbitration agreement. Accordingly, it is not entitled to invoke the mandatory stay provision of the FAA. See Cosmotek Mumessillk Ve Ticaret Ltd. Sirkketi v. Cosmotek USA, Inc., 942 F. Supp. 757, 760 (D. Conn. 1996) ("Since APSI is not bound by the arbitration agreement, its requested stay does not fall within the purview of the FAA."); American Shipping Line, Inc. v. Massan Shipping Indus., Inc., 885 F. Supp. 499, 501 (S.D.N.Y. 1995) ("Non-parties to an arbitration do not have this right [to obtain a stay], but they may petition a federal court to grant a stay pursuant to its inherent power to control its docket."); cf. Hornbeck supra, 981 F.2d at 755 (citing Matter of Talbott Big Foot, Inc., 887 F.2d 611, 614 (5th Cir. 1989) ("the mandatory stay provision of the Act does not apply to those who are not contractually bound by the arbitration agreement")).
Although the Court has discretion to issue a stay under its inherent power to regulate its docket, "the moving party bears a heavy burden to justify the stay." Cargill Ferrous Int'l v. M/V Anatoli, 935 F. Supp. 833, 837 (E.D. La. 1996). Plaintiff has failed to carry this burden. Unlike in the cases cited by plaintiff, plaintiff here has failed to point to a single common issue between Progress Bulk's narrowly drawn third-party claim and any existing or prospective arbitration proceeding under the Voyage Charter. Nor has plaintiff shown that a stay would not cause undue hardship to Progress Bulk. See id.; see also Metropolitan Entertainment Co, Inc. v. Koplik, 20 F. Supp.2d 354, 364 (D. Conn. 1998). Consequently, the Court does not find that the need for a stay has been demonstrated.
III. CONCLUSION
Accordingly, for the foregoing reasons, IT IS ORDERED that plaintiffs Motion to Strike or Alternatively Stay Rule 14(c) Tender of Keytrade A.G. to Plaintiff Pending Arbitration and Motion to Stay Third Party Complaint of Progress Bulk Against Keytrade A.G. Pending Arbitration is GRANTED IN PART, in that Progress Bulk's Rule 14(c) claim is stayed, and DENIED IN PART, in that it is denied in all other respects.