Mediterranean Shipping Co. v. Pol-Atlantic

• Decision Date: 01 August 1999
• Docket Number: POL-ATLANTI,BROWN-FORMAN,BIO-CHEM,Docket No. 99-7222,D
• Parties: (2nd Cir. 2000) MEDITERRANEAN SHIPPING COMPANY S.A. GENEVA, Third-Party-Defendant-Appellant, v.efendant-Third-Party-Plaintiff-Cross-Defendant-Appellee, ATLANTIC CONTAINER LINE AB, Defendant-Third-Party-Plaintiff-Appellee, SCHREIBER FOODS INTERNATIONAL INC., THE CHANNEL CORPORATION, LOUIS DREYFUS CORPORATION, DOMUS DESIGN CENTER, Inc., A.S.I. STONE IMPORTS, Inc., EATON CORPORATION, THOMSON CONSUMER ELECTRONICS, Inc., TUPPERWARE CORPORATION, TYFIELD IMPORTERS, Inc., COACH LEATHERWARE COMPANY, INC., MASCOTECH FORMING TECHNOLOGIES, MATTEL, INC., CATHERINE COLE, MME., COMARO USA INC., V & S VIN & SPIRIT, L'OREAL GROUP, DE LONGHI S.P.A., PHILIPS CORP., DE VITRITE FABRIEK B.V., GOODMARK AEROSOL COMPANY LIMITED, ASTON MARTIN LAGONDA LIMITED, IKEA WHOLESALE, INC., J. BAKER, INC., AIR EXPRESS INTERNATIONAL, Inc./Radix, FRANCE VOILES CO., Inc., THE ROCKPORT COMPANY, INC., CATERPILLAR, INC., RAYTHEON MARINE COMPANY, MED USA CORP., MCCORMICK & COMPANY, INC., SYRATECH INC.,CORP., THOMAS ALLRAUM, ANDERSON COURTS AND SPORTS SURFACE, INC., ASSOCIATED MERCHANDISING CORP., WILLIAM BUTTRUM, EXTRA PLASTIC LTD, GADOTINC., MR. GALLAGHER, CRP INDUSTRIES, INC, MRS. JULIETTE HABIB, MR. RAINS, MRS. C. RAINS, MS. ELIZABETH SANDS, SKYWAY INTERNATIONAL FREIGHT FORWARDERS LTD., VICKSBURG CHEMICAL CORPORATION, WOODWAY DARTS & SUPPLIES, INC., MR UDAY YADAV, DART MART, INC., YMT INTERNATIONAL, Inc., Plaintiffs, OCEAN WORLD LINES, INC., Defendant-Cross-Claimant, HYUNDAI MERCHANT MARINE CO., LTD., Cross-Defendant, MARITEAM S.A., Cross-Claimant, INTERCARGO NAPOLI SRL, OTIM SPA MILAN, A.L.S. SRL, DENESI SPENDIZIONI, SRL, CIRCLE INTERNATIONAL LIMITED, ALBATRANS S.R.L., ARIMAR SPEDIZIONI, SRL, EUROSHIP LINES, CARGO SPECIALISTS INTERNATIONAL INC., PANALPINA TRANSPORTS INTERNATIONAL, MARITEAM S.A., LOGFRET LOGISTIQUE FRET SA, EXPEDITIORS INTERNATIONAL OCEAN, DANMAR LINES LTD, TRANS WORLD SHIPPING LIMITED, LOGFRET INC., CARGOLINE (USA) INC., SAVITRANSPORT S.P.A., KAMDEN INTERNATIONAL SHIPPING, LTD., SCHENKER
• Court: U.S. Court of Appeals — Second Circuit

Page 397

229 F.3d 397 (2nd Cir. 2000)

MEDITERRANEAN SHIPPING COMPANY S.A. GENEVA, Third-Party-Defendant-Appellant, v. POL-ATLANTIC, Defendant-Third-Party-Plaintiff-Cross-Defendant-Appellee, ATLANTIC CONTAINER LINE AB, Defendant-Third-Party-Plaintiff-Appellee, SCHREIBER FOODS INTERNATIONAL INC., THE CHANNEL CORPORATION, LOUIS DREYFUS CORPORATION, DOMUS DESIGN CENTER, Inc., A.S.I. STONE IMPORTS, Inc., EATON CORPORATION, THOMSON CONSUMER ELECTRONICS, Inc., TUPPERWARE CORPORATION, TYFIELD IMPORTERS, Inc., COACH LEATHERWARE COMPANY, INC., MASCOTECH FORMING TECHNOLOGIES, MATTEL, INC., CATHERINE COLE, MME., COMARO USA INC., V & S VIN & SPIRIT, L'OREAL GROUP, DE LONGHI S.P.A., PHILIPS CORP., DE VITRITE FABRIEK B.V., GOODMARK AEROSOL COMPANY LIMITED, ASTON MARTIN LAGONDA LIMITED, IKEA WHOLESALE, INC., J. BAKER, INC., AIR EXPRESS INTERNATIONAL, Inc./Radix, FRANCE VOILES CO., Inc., THE ROCKPORT COMPANY, INC., CATERPILLAR, INC., RAYTHEON MARINE COMPANY, MED USA CORP., MCCORMICK & COMPANY, INC., SYRATECH INC., BROWN-FORMAN CORP., THOMAS ALLRAUM, ANDERSON COURTS AND SPORTS SURFACE, INC., ASSOCIATED MERCHANDISING CORP., WILLIAM BUTTRUM, EXTRA PLASTIC LTD, GADOT BIO-CHEM INC., MR. GALLAGHER, CRP INDUSTRIES, INC, MRS. JULIETTE HABIB, MR. RAINS, MRS. C. RAINS, MS. ELIZABETH SANDS, SKYWAY INTERNATIONAL FREIGHT FORWARDERS LTD., VICKSBURG CHEMICAL CORPORATION, WOODWAY DARTS & SUPPLIES, INC., MR UDAY YADAV, DART MART, INC., YMT INTERNATIONAL, Inc., Plaintiffs, OCEAN WORLD LINES, INC., Defendant-Cross-Claimant,

HYUNDAI MERCHANT MARINE CO., LTD., Cross-Defendant,

MARITEAM S.A., Cross-Claimant,

INTERCARGO NAPOLI SRL, OTIM SPA MILAN, A.L.S. SRL, DENESI SPENDIZIONI, SRL, CIRCLE INTERNATIONAL LIMITED, ALBATRANS S.R.L., ARIMAR SPEDIZIONI, SRL, EUROSHIP LINES, CARGO SPECIALISTS INTERNATIONAL INC., PANALPINA TRANSPORTS INTERNATIONAL, MARITEAM S.A., LOGFRET LOGISTIQUE FRET SA, EXPEDITIORS INTERNATIONAL OCEAN, DANMAR LINES LTD, TRANS WORLD SHIPPING LIMITED, LOGFRET INC., CARGOLINE (USA) INC., SAVITRANSPORT S.P.A., KAMDEN INTERNATIONAL SHIPPING, LTD., SCHENKER INTERNATIONAL DEUTCHLAND GMBH, SAVINO DEL BENE SPA TREVISO, ROCO FREIGHT SERVICES, PROCON EXPRESS LINES, CONCORD LOGISTICS (UK) LTD, Defendants.

Docket No. 99-7222

August Term, 1999

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: December 6, 1999

Decided: October 13, 2000

Appeal from the January 26, 1999 memorandum and order of the United States District Court for the Eastern District of New York (Richard Owen, Judge), denying the motion of Third-Party-Defendant-Appellant Mediterranean Shipping Company S.A. Geneva to compel arbitration and stay all third-party proceedings and/or all legal actions by Defendants-Third-Party-Plaintiffs-Appellees POL-Atlantic and Atlantic Container Line AB pending London arbitration pursuant to the terms of a Vessel Sharing Agreement between the parties and pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

VACATED and REMANDED.

[Copyrighted Material Omitted] Vincent M. De Orchis, De Orchis, Walker & Corsa LLP, New York, NY (John A. Orzel, Marc I. Kunkin, Of Counsel), for Third-Party-Defendant-Appellant Mediterranean Shipping Co. S.A. Geneva.

Stephen H. Vengrow, Cichanowicz Callan Keane Vengrow & Textor LLP, New York, NY, for Defendant-Third-Party-Plaintiff-Cross-Defendant-Appellee POL-Atlantic and Defendant-Third-Party-Plaintiff-Appellee Atlantic Container Line AB.

Before: WALKER, Chief Judge, CABRANES and PARKER, Circuit Judges.

PARKER, Circuit Judge:

This case concerns the appeal from the January 26, 1999 memorandum and order of the United States District Court for the Eastern District of New York (Richard Owen, Judge), denying the motion of Third-Party-Defendant-Appellant Mediterranean Shipping Company S.A. Geneva ("MSC") to stay all third-party claims or legal actions by Defendants-Third-Party-Plaintiffs-Appellees POL-Atlantic and Atlantic Container Line AB ("POL" and "ACL," respectively, or the "slot charterers," collectively) pending London arbitration pursuant to the terms of a Vessel Sharing Agreement ("VSA") between the parties and pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq.

On appeal MSC argues that the district court improperly denied its motion to compel arbitration. We hold that the district court erred in concluding that concursus under the Limitation of Shipowners' Liability Act (1851) (the "Limitation Act" or the "Act"), 46 U.S.C. app. § 181 et seq., applies to the third-party claims at issue here and that it provided a justification for denial of MSC's motion. Therefore, we vacate the district court's decision and remand for further proceedings.

I. BACKGROUND

The facts of this case are described in detail in the district court opinion, Schreiber Foods Int'l, Inc. v. Intercargo Napoli S.R.L., No. 98 CV 5954, 1999 WL 33469 (S.D.N.Y. Jan. 26, 1999); they are briefly as follows. In November 1997, the 289-meter M/V MSC Carla (the "Carla") departed from Le Havre, France on a westbound voyage to the United States. The vessel encountered heavy weather on November 24, 1997 and broke in half. The bow section sank with all its cargo; the stern continued to float and ultimately was towed to safety with its crew and cargo.

MSC is the bareboat charterer¹ and vessel operator of the Carla. POL and ACL are slot charterers² of the vessel. MSC, POL, and ACL are all ocean carriers which operate services between Europe and the United States. Pursuant to the VSA, which is a charter party³ entered into by MSC, POL and ACL, the slot charterers (POL and ACL) placed containerized⁴ cargo on board the Carla for shipment by MSC. The cargo was moved for cargo owners under separate bills of lading issued by POL and ACL to the cargo owners. Because the cargo was destroyed, the cargo owners had the right to bring claims against the bill of lading issuer or the vessel operator, or both, under the United States Carriage of Goods by Sea Act, 46 U.S.C. § 1300 et seq. ("COGSA"). However, the VSA is not subject to COGSA. According to the VSA's terms, POL and ACL, as the bill of lading issuers, must appear and defend all cargo claims. MSC, the vessel operator, is required to cooperate with POL and ACL in this defense.

Following the casualty, on December 9, 1997, the vessel's owner, Rationis Enterprises, Inc., and MSC filed a Petition or Complaint for Exoneration from or Limitation of Liability (the "limitation proceeding") in the United States Court for the Southern District of New York, pursuant to the Limitation Act and Rule F of the Supplemental Rules for Certain Admiralty and Maritime Claims. The limitation proceeding, In re Complaint of Rationis Enterprises, Inc., No. 97 CV 9052 (RO) (S.D.N.Y. filed Dec. 9, 1997), brings together nearly 1,600 claims filed by cargo owners and their underwriters (collectively, the "cargo interests") against MSC. Under the Limitation Act a shipowner (or its equivalent, including a bareboat charterer) is entitled to limit its liability to the value of the vessel after the incident, plus "freight then pending,"⁵ should exoneration (discussed infra) be denied.⁶ See 46 U.S.C. app. § 183; 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 15 7, at 314 (2d ed. 1994). The Act provides for a "concursus"⁷ whereby all claims against a shipowner are brought "into concourse in an admiralty tribunal." Maryland Cas. Co. v. Cushing, 347 U.S. 409, 414 (1954); see2 Schoenbaum, supra, § 15-5, at 310. The Limitation Act is described in greater detail below.

The cargo interests also filed lawsuits (collectively, the "cargo actions"), from which this appeal arises, outside the limitation proceeding against POL and ACL (and other carriers), who as slot charterers are not entitled to limit their liability under the Limitation Act. On September 10, 1998, POL and ACL filed in the cargo actions third-party complaints pursuant to Rule 14(c) of the Federal Rules of Civil Procedure seeking indemnity from MSC (the "third-party indemnity claims") for the claims filed against them, on the ground that the losses occurred while the vessel was solely under MSC's control. POL and ACL moved on September 28, 1998 to consolidate the cargo actions with the limitation proceeding. On October 7, 1998, MSC moved to stay the third-party indemnity claims brought against it by POL and ACL pending London arbitration⁸ pursuant to the VSA. The district court denied MSC's motion, and granted POL and ACL's motion to consolidate the cargo actions with the limitation proceeding for discovery purposes. SeeSchreiber, 1999 WL 33469, at *3. MSC appealed the denial of its motion.

In the limitation proceeding MSC may be exonerated from all liability if the court finds that cargo loss was due to certain factors, including Act of God, Peril of the Sea, or latent defect of the vessel not discoverable through due diligence. See 46 U.S.C. § 1304. If MSC is not entitled to exoneration, the court will determine whether MSC is entitled to limit its liability under the Limitation Act. The slot charterers are not protected under the Limitation Act, which protects only vessel owners and bareboat charterers. See 46 U.S.C app. §§ 185, 186. As slot charterers, POL and ACL are thus liable for losses due to fault or negligence.

MSC contends that any claims by POL and ACL to recover from MSC must be asserted in London arbitration, pursuant to the VSA's arbitration clause, which reads as follows:

23. Law and Arbitration:

This Charter Party shall be governed by and construed in accordance with laws of England.

Any dispute or claim arising out of or in connection with this Charter Party shall be referred to arbitration under the International Arbitration Rules of the London Court of International Arbitration (LCIA), providing not less than 60 day's notice of intention to refer the matter to arbitration, specifying the nature of the dispute or claim, shall have been delivered in writing to the other party(ies). The parties agree to exclude any...