Cargill Ferrous Intern. v. Sea Phoenix Mv

• Decision Date: 09 April 2003
• Docket Number: No. 01-31193.,01-31193.
• Citation: 325 F.3d 695
• Parties: CARGILL FERROUS INTERNATIONAL, a Department of Cargill Incorporated, Plaintiff-Appellee-Cross-Appellant, v. SEA PHOENIX MV, etc.; et al., Defendants, SEA PHOENIX MV, her engines, tackle, apparel, etc., in rem; COSCO (Singapore) Private Ltd., in personam; Western Bulk Carriers, in personam, Defendants-Appellees, and Serene Sky Shipping Inc., Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

325 F.3d 695

CARGILL FERROUS INTERNATIONAL, a Department of Cargill Incorporated, Plaintiff-Appellee-Cross-Appellant, v. SEA PHOENIX MV, etc.; et al., Defendants SEA PHOENIX MV, her engines, tackle, apparel, etc., in rem; COSCO (Singapore) Private Ltd., in personam; Western Bulk Carriers, in personam, Defendants-Appellees, and Serene Sky Shipping Inc., Defendant-Appellant-Cross-Appellee.

No. 01-31193.

United States Court of Appeals, Fifth Circuit.

April 9, 2003.

John Francis Fay, Jr. (argued), Joseph Edward Lee, III, Deutsch, Kerrigan & Stiles, New Orleans, LA, for Cargill Ferrous Intern.

Christopher O. Davis (argued), Phelps Dunbar, New Orleans, LA, for Serene Sky Shipping Inc.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before EMILIO M. GARZA and CLEMENT, Circuit Judges, and HUDSPETH,^* District Judge.

CLEMENT, Circuit Judge:

A vessel owner appeals the district court's denial of its motion to compel arbitration and stay litigation between itself and a shipper, where the vessel owner had chartered the vessel to a time charterer and the time charterer had, in turn, chartered the vessel to the shipper.¹ The shipper cross-appeals the district court decisions dismissing its bailment claim against the vessel operator and granting a motion to compel arbitration and stay litigation between the shipper and the time charterer. We reverse the district court's denial of the motion to compel arbitration between the vessel owner and the shipper because the bills of lading between the vessel owner and the shipper incorporated the arbitration clause of the shipper's voyage charter with the time charterer. We dismiss, for lack of appellate jurisdiction, the shipper's cross-appeal relating to the order compelling arbitration and staying litigation because that part of the case has not yet led to a final judgment by the district court. We dismiss, also for a lack of appellate jurisdiction, the voyage charterer's cross-appeal of the dismissal of its bailment claim.

I. FACTS AND PROCEEDINGS

Cargill Ferrous International ("Cargill") and Western Bulk Carriers K/S ("Western") entered into a voyage charter to transport Cargill's steel coils from Ventspils, Latvia to New Orleans, Louisiana. The voyage charter contained a mandatory arbitration clause. Western provided the M/V SEA PHOENIX, which it had time-chartered. After stevedores discharged the steel coils in New Orleans, Cargill discovered that fresh water had rusted the steel coils. Cargill sued Western; Serene Sky Shipping, Inc., the owner of the SEA PHOENIX; COSCO (Singapore) Pte. Ltd., the operator of the SEA PHOENIX (Serene and COSCO collectively as "Serene"); the SEA PHOENIX in rem; and others.

Pursuant to the voyage charter, the district court referred Cargill's claims against Western to arbitration. The district court denied Serene's motion to compel arbitration and stay litigation. The district court reasoned the claims against Serene were not subject to the voyage charter's arbitration clause because Serene was not a party to the voyage charter. Although the district court held that the bills of lading were the contracts of carriage for purposes of Cargill's claims against Serene, the district court concluded that the bills of lading had not incorporated the voyage charter's arbitration clause. After a two-day bench trial, the court entered judgment against Serene for $57,182.15 plus prejudgment interest but denied Cargill's bailment claim against Serene.

II. STANDARD OF REVIEW

We review a district court's refusal to compel arbitration and stay litigation de novo. Texaco Exploration & Prod. Co. v. AmClyde Eng'd Prods. Co., 243 F.3d 906, 908 (5th Cir.2001). In contrast, we do not review interlocutory orders compelling arbitration because our jurisdiction is limited: "Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order (1) granting a stay of any action" to accommodate arbitration. 9 U.S.C. § 16(b) (1999).

III. DISCUSSION

The Court will first address the issues presented by the parties. After, it will address arguments raised by the opinion concurring in part, dissenting in part.

A.

Serene asks this Court to review the district court's denial of Serene's motion to compel arbitration and stay litigation. As cross-appellant, Cargill asks the Court to review the district court's decision to compel arbitration between Cargill and Western and its decision to dismiss Cargill's bailment claim.

(1)

Serene argues it has a right to compel arbitration, either because the voyage charter served as the contract between Serene and Cargill or because the bills of lading incorporated the voyage charter. Cargill disputes both arguments and further contends Serene waived any right it may have had to compel arbitration.

In Cargill B.V. v. S/S OCEAN TRAVELLER, 726 F.Supp. 56, 59 (S.D.N.Y. 1989), Cargill argued, as it does here, that a bill of lading failed to incorporate a charter party where the space provided on the bill of lading for identifying a charter party was left blank. OCEAN TRAVELLER rejected this argument: "The argument is without merit on these facts.... Whatever may be the merits of its argument in a case where consignor or consignee under the bill of lading is without adequate notice of the terms of a charter party adopted by cross-reference, this contention [has] no application to the very party that negotiated the charter." Id. (citations omitted). In a similar vein, the bill of lading in State Trading Corp. of India v. Grunstad Shipping, 582 F.Supp. 1523-25 (S.D.N.Y.1984), aff'd without opinion, 751 F.2d 371 (2d Cir.1984), stated: "All terms and conditions, liberties and exceptions of the charter-party, dated as overleaf, are herewith incorporated." State Trading concluded this language was sufficient to incorporate a charter party:

It is true that the bill of lading did not name the parties to the charter party it was attempting to incorporate, or state the date or place of its making.... [W]here there is no confusion whatsoever concerning who in fact was the charterer on this voyage, or which charter party governed the rights of the charterer vis-a-vis the shipowner, an incorporation clause may effect incorporation even though it does not contain the names of the signatories or the date or place of the making of the charter party.

Here, defendant could not have been confused regarding which charter party the bill of lading sought to incorporate. The terms of the charter party between the defendant and the charterer ... contained a provision that "any bill of lading signed by the Master or Agent of the Owner shall be without prejudice to the terms, conditions, and exceptions of this Charter and shall be subject to all such terms, conditions, and exceptions...." Thus, defendant can hardly express ignorance as to which charter party the bill of lading signed by its agent referred.

582 F.Supp. at 1524. The bills of lading in the present case are almost identical to the bills of lading in State Trading, with the exception that these bills of lading specifically mention the arbitration clause: "All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clauses, are herewith incorporated." (emphasis added). State Trading holds such language is enough to effect incorporation where the bills of lading are in the hands of the charterer and where there is no confusion concerning who was the charterer or which charter party the bills of lading sought to incorporate.

There can be no confusion in the present case. First, Cargill received and continued to hold bills of lading issued pursuant to the Cargill-Western Bulk voyage charter. See OCEAN TRAVELLER, 726 F.Supp. at 59.² Second, the agent who signed the bills of lading, New England Shipping Company, received its agency authority solely from a term in the voyage charter.³ Third, the bills of lading indicate freight is to be paid pursuant to the charter party. This provision depends on the incorporation of the Cargill-Western Bulk voyage charter to retain any meaning. Fourth, the Cargill-Western Bulk voyage charter, the only charter party Cargill signed, requires all bills of lading issued under the voyage charter to incorporate, among other things, the voyage charter's arbitration clause. State Trading, 582 F.Supp. at 1524.

Cargill clings to this Court's opinion in Cargill, Inc. v. GOLDEN CHARIOT MV, 31 F.3d 316 (5th Cir.1994), arguing it provides the test in this circuit for whether language in a bill of lading is sufficient to incorporate a charter party. In GOLDEN CHARIOT, a carrier, Marinera, asserted that a dispute between it and Savannah, a third-party purchaser of a shipment of sugar, would have to be arbitrated pursuant to a charter party between itself (Marinera) and the shipper, Cargill. GOLDEN CHARIOT acknowledged the established rule that charter parties are the contracts of carriage in private carriage. 31 F.3d at 318; see Alamo Chem. Transp. Co. v. M/V OVERSEAS VALDES, 469 F.Supp. 203, 208-11 (E.D.La.1979) (stating that where charter party provided that the charterer employed the "entire ship" or "full capacity of the ship," it is a private carriage and the charter party is the contract of carriage). But GOLDEN CHARIOT went on to consider the argument that "when cargo is sold to a third party receiver of goods, who was not a party to the charter agreement, and the bill of lading is delivered to that party, the bill of lading becomes the contract of carriage." 31 F.3d at 318 (emphasis added). GOLDEN CHARIOT adopted this argument and stated, as an exception to the general rule, that bills of lading issued under a charter party serve as the contract of carriage if the bills of lading are negotiated. Id. GOLDEN CHARIOT then considered whether the bills of lading then at issue incorporated the charter party. To do so, the Court...