Oil Spill by Amoco Cadiz Off Coast of France March 16, 1978, In re

Citation659 F.2d 789
PartiesIn re OIL SPILL BY the "AMOCO CADIZ" OFF the COAST OF FRANCE
Decision Date16 March 1978
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Nicholas J. Healy, Healy & Baillie, New York City, for plaintiffs-appellees.

Frank Cicero, Jr., Kirkland & Ellis, Chicago, Ill., for defendant-appellant.

Before SWYGERT *, Senior Circuit Judge, BAUER, Circuit Judge, and CRABB **, District Judge.

CRABB, District Judge.

This is an interlocutory appeal taken from one of the many cases spawned by the March 16, 1978 oil spill off the coast of France. 1 The issue on appeal is whether the district court erred in denying the motion of defendant-appellant for a stay of proceedings pending arbitration of certain disputes between the parties. We conclude that the arbitration should proceed and, accordingly, we reverse.

Factual Background

A brief review of the events leading up to the disaster is necessary to an understanding of the claims at issue.

At about 0945 hours Greenwich Mean Time (GMT), on March 16, 1978, approximately eight miles north of Ushant Island While Hutton was conducting trans-Atlantic negotiations with Amoco Transport in Chicago, the Pacific arrived alongside the Cadiz, again offering her services pursuant to the LSA. Although the master of the Cadiz declined to accept the LSA, the Pacific proceeded to prepare a tow line and attached its tow line to the tanker. It was not until about 1600 GMT that the Cadiz advised the Pacific that it would enter into the LSA. By this time, towing attempts had been under way for almost four hours, but the tanker's drift could not be stopped. At 1618 GMT the Pacific's tow line broke. At about 2055 GMT the Pacific was able to secure another line. At 2104 GMT the tanker ran aground while under tow. Finally, at 2212 GMT, the tow connection broke, the Cadiz floated free briefly, grounded again and broke apart. 2

off the French coast, the Amoco Cadiz, a crude carrier owned by plaintiff-appellee Amoco Transport, suffered a complete failure of her steering gear and began to drift, out of control, in heavy seas and strong winds. Her radio messages warning all ships to stand clear were intercepted by the Pacific, one of a number of ocean-going salvage tugs owned by defendant-appellant. The Pacific changed course immediately to come to the aid of the Cadiz and her 230,000 tons of Iranian oil. At 1128 GMT the Pacific advised the Cadiz of her change of course and offer of assistance, proposing that any assistance rendered be in accordance with Lloyd's Standard Form of Salvage Agreement (LSA). At about the same time the master of the Pacific called Bugsier's Hamburg office which in turn called its London agent, Hutton, with instructions to negotiate an LSA with the owners of the Cadiz. Hutton sent a telex to Amoco Transport's agent in Chicago, Amoco International, offering Bugsier's assistance and proposing performance under the LSA.

On January 16, 1979, Amoco Transport Company and Amoco International Oil Company began this action against Bugsier in the Eastern District of Virginia, obtaining personal jurisdiction by maritime attachment of Bugsier's tug Atlantic. Plaintiffs charged Bugsier with negligence, breach of an alleged warranty of seaworthiness, and false and fraudulent misrepresentations, acts, or omissions in connection with the attempted salvage of the Cadiz. Bugsier moved for dismissal on the ground of forum non conveniens or for a stay pending arbitration and, at about the same time, began arbitration proceedings in London in accordance with the LSA. 3 Those proceedings remain pending, but have been held in abeyance until final disposition of Bugsier's motion for a stay.

The Lloyd's Standard Form of Salvage Agreement

The LSA entered into by the parties is a standard form of salvage agreement commonly referred to as a "no cure, no pay" contract. Paragraph 1 of the agreement provides:

The Contractor agrees to use his best endeavours to salve the __________ and/or her cargo and take them into __________ or other place to be hereafter agreed. The services shall be rendered and accepted as salvage services upon the principle of "no cure no pay." In case of arbitration being claimed the Contractor's remuneration in the event of success shall be fixed by arbitration in London in the manner hereafter prescribed: and any difference arising out of this Agreement or the operations thereunder shall be referred to arbitration in the same way. In the event of the services referred to in this Agreement or any part of such services having been already rendered The agreement also contains provisions for security (in lieu of a maritime lien) for services rendered, for arbitration and for appeal from arbitration. Of the eighteen separate provisions of the agreement, eleven relate to arbitration or to appeal from arbitration. Paragraph 8 of the LSA lists the parties who may file claims for arbitration: (1) the owners of the ship; (2) the owners of the cargo or any part thereof; (3) the owners of any freight separately at risk or any part thereof; (4) the contractor; (5) any other person who is a party to the agreement. Corresponding to the provisions for arbitration is a stipulation of the applicability of English salvage law.

at the date of this Agreement by the Contractor to the said vessel and/or her cargo it is agreed that the provisions of this Agreement shall apply to such services.

Proceedings in the Lower Court

In their complaint against Bugsier, plaintiffs-appellees alleged that in undertaking to assist the Cadiz, Bugsier owed a duty to plaintiffs-appellees to act with due diligence and to exercise reasonable skill, care and prudent seamanship, and that Bugsier failed to so act, but instead acted negligently and improperly; 4 that Bugsier's actions constituted willful and wanton misconduct and gross negligence; that Bugsier warranted the seaworthiness and towing capabilities of its tug and breached those warranties; that Bugsier made material misrepresentations concerning the ability of its tug to assist the Cadiz ; and that Bugsier failed to exercise reasonable care to determine the truth or falsity of its representations.

The lower court held that most of these alleged breaches of duty occurred prior to any attempts to salve the Cadiz ; that, although the damage occurred in the grounding and loss of cargo, the duty was breached in the undertaking itself and at the moment of the alleged misrepresentation; and that, even if other claims arose while the LSA was in effect, the earlier claims are the crux of plaintiffs-appellees claims and predominate over the others. The court concluded that the inseparability of the later claims "from those which matured previously" precluded reference of the later claims to arbitration.

In their motion seeking certification of this matter for interlocutory appeal, Bugsier asked for certification of three questions of law: (1) whether, in deciding a motion for stay pending arbitration, the court must accept as true the allegations in the complaint; (2) whether a salvor has any legal duty to the owner of a disabled tanker before the salvor acts to salvage the tanker and before a salvage agreement is made, and (3) whether a tort can mature before the alleged victim sustains any damage.

It is not clear from the certification order that the trial court viewed the particular questions posed by Bugsier as appropriate for interlocutory appeal, pursuant to 28 U.S.C. § 1292(b). It is clear that the court saw, as we do, that the overriding issue is For their part, plaintiffs-appellees urge affirmance of the district court's denial of a stay on the grounds stated by the court or on two alternative grounds: first, that the LSA applies only to claims involving the salvor's remuneration for successful salvage operations and not to tort claims, and that because this agreement does not cover tort claims, they never agreed to arbitration of such claims; second, their complaint includes claims, not yet resolved, of fraudulent inducement to enter into an arbitration agreement. Additionally, they contend that plaintiff-appellee Amoco International was not a party to the salvage agreement and therefore, cannot be bound by its terms.

                that of the arbitrability of the claims raised against Bugsier.  5 It is that issue to which this opinion is addressed
                
OPINION

In resolving a question of arbitrability, the starting point must be the United States Arbitration Act, 9 U.S.C. § 1 et seq. This act provides that an arbitration provision in any maritime transaction or in a contract evidencing a transaction involving commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract ..." (9 U.S.C. § 2); it requires the federal court to stay the trial of any action arising out of issues "referable to arbitration under an agreement in writing for such arbitration...." once the court has determined the basic question of whether the claims raised are subject to arbitration (9 U.S.C. § 3); and it provides that

If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same shall be in issue, the court shall proceed summarily to the trial thereof. (9 U.S.C. § 4)

The question of arbitrability has two parts: (1) whether the allegedly wrongful conduct is of a nature covered by the agreement and (2) whether the conduct occurred during the time period covered by the agreement.

Substantive Scope of the LSA

The district court seems to have reached the implicit conclusion that the LSA arbitration provisions extend to tort claims against the salvor, questioning only the temporal limits of the agreement. 6 Its conclusion as to the substantive scope of the...

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