387 F.3d 163 (2nd Cir. 2004), 03-7683, JLM Industries, Inc. v. Stolt-Nielsen SA

Docket Nº:03-7683(L), 03-7913(CON).
Citation:387 F.3d 163
Party Name:JLM INDUSTRIES, INC., JLM International, Inc., JLM Industries (Europe) BV, JLM Europe BV, and Tolson Holland, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. STOLT-NIELSEN SA, Stolt-Nielsen Transportation Group Ltd., Odfjell ASA, Odfjell USA, Inc., Jo Tankers BV, Jo Tankers, Inc., and Tokyo Marine Co. Ltd., Def
Case Date:October 26, 2004
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 163

387 F.3d 163 (2nd Cir. 2004)

JLM INDUSTRIES, INC., JLM International, Inc., JLM Industries (Europe) BV, JLM Europe BV, and Tolson Holland, individually and on behalf of all others similarly situated, Plaintiffs-Appellees,


STOLT-NIELSEN SA, Stolt-Nielsen Transportation Group Ltd., Odfjell ASA, Odfjell USA, Inc., Jo Tankers BV, Jo Tankers, Inc., and Tokyo Marine Co. Ltd., Defendants-Appellants.

Nos. 03-7683(L), 03-7913(CON).

United States Court of Appeals, Second Circuit

October 26, 2004

Argued: Feb. 3, 2004

Page 164

[Copyrighted Material Omitted]

Page 165

[Copyrighted Material Omitted]

Page 166

J. Douglas Richards (Michael M. Buchman, on the brief), Milberg Weiss Bershad Hynes & Lerach LLP, New York, NY, Eric D. Grayson, Grayson & Associates, P.C., Greenwich, CT. for Plaintiffs-Appellees.

Christopher M. Curran (J. Mark Gidley and Peter J. Carney, on the brief), White & Case LLP, Washington, D.C., for Defendants-Appellants Stolt-Nielsen SA and Stolt-Nielsen Transportation Group Ltd.

Steven F. Cherry, Wilmer, Cutler & Pickering, McLean, VA, William J. Kolasky (Edward C. DuMont, on the brief), Wilmer, Cutler & Pickering, Washington, D.C., for Defendants-Appellants Odfjell ASA and Odfjell USA, Inc.

Robert A. White (C. Donald Neville, on the brief), Murtha Cullina LLP, Hartford, CT, for Defendants-Appellants Jo Tankers BV and Jo Tankers, Inc.

Page 167

Sheila A. Huddleston (Paul D. Sanson, on the brief), Shipman & Goodwin LLP, Hartford, CT, for Defendant-Appellant Tokyo Marine Co., Ltd.

POOLER, SOTOMAYOR, and WESLEY, Circuit Judges.

POOLER, Circuit Judge.


The named plaintiffs in this putative class action (collectively referred to hereinafter as "JLM"), are affiliated corporations which, according to the amended complaint, are "in the business of shipping, buying, selling and trading chemicals in bulk. The chemicals in bulk are shipped via parcel tankers to and from ports in the United States and to and from international ports." 1 JLM undertakes these shipments by contracting with the owners of parcel tankers to lease space on board a tanker for a certain voyage. The four defendants in this action (collectively referred to hereinafter as "the Owners") are alleged by JLM to be among "the world's largest ocean carriers of liquid chemicals" via parcel tanker. 2 Indeed, JLM contends in its brief before this Court that "the international parcel tanker service industry, which has annual revenues of more than $2.5 billion ... is dominated by [the Owners], who together comprise more than two thirds of the market."

The individual shipping transactions at issue were each governed by a standard form contract, which is known in the parcel tanker industry as the "ASBATANKVOY," and which is published by the Association of Ship Brokers & Agents (U.S.A.), Inc. This contract consists of two parts. Part I sets forth the terms of a particular shipment, such as the nature of the freight being shipped, expected departure and arrival dates, and freight rates. Part II sets forth a number of standard conditions and warranties. Among these is an arbitration clause, which in relevant part reads as follows:

24. ARBITRATION. Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or in the City of London whichever place is specified in Part I of this charter pursuant to the laws relating to arbitration there in force, before a board of three persons, consisting of one arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen. The decision of any two of the three on any point or points shall be final.

It is undisputed that each charter contract entered into between JLM and the Owners specified either London or New York as the place of arbitration.

As declared in the amended complaint, JLM filed this action in order to vindicate "the benefits of free and unrestrained competition in the international parcel tanker service market." JLM's central allegation is that the Owners have exploited their market power by entering into

a continuing agreement, understanding and conspiracy to: (i) fix, raise, maintain or stabilize the worldwide freight rates

Page 168

or price of ocean shipping services for the transportation of liquid chemicals via parcel tanker ("parcel tanker service"); (ii) coordinate worldwide bidding for the provision of ocean shipping services for parcel tanker service provided by [the Owners]; (iii) not compete with one another in the international parcel tanker service market; and (iv) allocate their parcel tanker service customer by customer, trade lane by trade lane and route by route and otherwise "carve up" the worldwide market between one another ....

Based upon this allegation, JLM states four causes of action: (1) a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, in that the Owners "have engaged in a horizontal contract, combination or conspiracy in unreasonable restraint of trade"; (2) violations of Sections 35-26 and 35-28 of the Connecticut Antitrust Act, Conn. Gen.Stat. §§ 35-24-35-49; (3) a common law claim for unjust enrichment; and (4) a violation of the Connecticut Unfair Trade Practices Act, Conn. Gen.Stat. §§ 42-110a-42-110q. 3

Pursuant to Rule 23 of the Federal Rules of Civil Procedure, JLM seeks to represent the following plaintiff class:

All persons or entities who paid freight and/or purchased ocean shipping services for the transportation of liquid chemicals via parcel tanker to and from the United States and to and from international ports from [the Owners], their co-conspirators, predecessors or controlled subsidiaries or affiliates from January 1, 1998 and continuing to present.

JLM does not specify the potential number of class members except to plead upon information and belief that "there are hundred's [sic] of individuals or entities in the United States and around the world who purchased parcel tanker service" from the Owners during the proposed class period. Further, JLM does not allege how many shipping transactions it has so far conducted with the Owners during the proposed class period, but an affidavit filed in the district court by JLM's head of charter operations puts the number at "nearly 80."

Prior to any determination as to certification of the proposed class, certain of the Owners moved to compel arbitration of all of JLM's claims pursuant to the terms of the ASBATANKVOY's arbitration clause. The district court denied these motions in an unreported opinion, concluding that price-fixing allegations against the Owners fall outside the scope of the arbitration clause. Specifically, the district court held that it would be improper to compel arbitration because "JLM's [Sherman Act] claim in no way depends upon interpretation, construction, or application of any provision of the [ASBATANKVOY]." The district court did not rule on JLM's remaining claims. These interlocutory appeals followed. 4

Page 169


We have jurisdiction over these consolidated appeals under the Federal Arbitration Act ("the FAA"), 9 U.S.C. §§ 1-16, 201-08, 301-07, which allows an interlocutory appeal from a district court's denial of a motion to compel arbitration. 9 U.S.C. § 16(a) (1) (A), (B). "We review a district court's determination of arbitrability de novo." Gold v. Deutsche Aktiengesellschaft, 365 F.3d 144, 147 (2d Cir. 2004). In order to determine whether all or part of the instant action should be sent to arbitration, the Court must conduct the following inquiries:

[F]irst, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration.

Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 75-76 (2d Cir. 1998). We now consider each of these inquiries and conclude that the district court erred in holding that arbitration is not appropriate in the instant case.

I. Did the Parties Agree to Arbitrate?

As already noted, the ASBATANKVOY contains an arbitration clause. JLM argues, however, that the clause should not be summarily enforced because "[f]acts germane to whether the arbitration agreements here were contracts of adhesion are in sharp dispute." In order to resolve these factual disputes, JLM contends that "an evidentiary hearing should be held," presumably by the district court upon remand.

We are unpersuaded by this argument. First, we note that a contract of adhesion

is a contract formed as a product of a gross inequality of bargaining power between parties. A court will find adhesion only when the party seeking to rescind the contract establishes that the other party used high pressure tactics, or deceptive language, or that the contract is unconscionable. Typical contracts of adhesion are standard-form contracts offered by large, economically powerful corporations to unrepresented, uneducated, and needy individuals on a take-it-or-leave-it basis, with no opportunity to change the contract's terms.

Klos v. Polskie Linie Lotnicze, 133 F.3d 164, 168 (2d Cir. 1997) (internal citations and quotation marks omitted).

Although JLM's brief is not wholly clear on this point, we understand its argument to be that the ASBATANKVOY as a whole amounts to a contract of adhesion, rather than that the arbitration clause alone so qualifies. Thus, an affidavit filed by JLM International, Inc.'s Vice President of Trading declares as follows:

Because the owners, such as the subsidiaries of Stolt, Odfjell, Jo Tankers and Tokyo all use a standard form charter, the ASBATANKVOY form, every charterer has to accept arbitration or they will not...

To continue reading