680 F.2d 627 (9th Cir. 1982), 79-4485, Polar Shipping Ltd. v. Oriental Shipping Corp.

Docket Nº:79-4485.
Citation:680 F.2d 627
Party Name:POLAR SHIPPING LIMITED, Plaintiff-Appellant, v. ORIENTAL SHIPPING CORPORATION; Taiwan Marine Corporation; Sanko Steamship Company, Limited, Defendants-Appellees, and Pacific Resources, Inc.; Pacific Resources Terminals, Inc.; Hawaiian Independent Refinery, Inc.; Shell International Petroleum Co., Ltd.; Shell Oil Company; and Pacific Resources, Ltd.
Case Date:June 30, 1982
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 627

680 F.2d 627 (9th Cir. 1982)

POLAR SHIPPING LIMITED, Plaintiff-Appellant,

v.

ORIENTAL SHIPPING CORPORATION; Taiwan Marine Corporation;

Sanko Steamship Company, Limited, Defendants-Appellees,

and

Pacific Resources, Inc.; Pacific Resources Terminals, Inc.;

Hawaiian Independent Refinery, Inc.; Shell

International Petroleum Co., Ltd.; Shell

Oil Company; and Pacific

Resources, Ltd., Garnishees.

No. 79-4485.

United States Court of Appeals, Ninth Circuit

June 30, 1982

Reassigned April 7, 1982.

Argued and Submitted Jan. 14, 1981.

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[Copyrighted Material Omitted]

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Raymond A. Connell, Healy & Baillie, New York City, argued, for plaintiff-appellant; David W. Proudfoot, Bruce Bigelow, Case, Kay & Lynch, Honolulu, Hawaii, on brief.

Sheldon A. Vogel, Thacher, Proffitt & Wood, New York City, argued, for defendants-appellees; George W. Ashford, Jr., Honolulu, Hawaii, on brief.

Appeal from the United States District Court for the District of Hawaii.

Before DUNIWAY and ALARCON, Circuit Judges, and BYRNE, [*] District Judge.

DUNIWAY, Circuit Judge:

I. The Facts.

On January 15, 1970, Polar Shipping Limited ("Polar"), as owner, and Oriental Shipping Corporation, as charterer, entered into a charter of the vessel M/T Polar Saturn, since renamed Globtik Saturn. The charter was amended to name Oriental and S.S. Sanko Co., Ltd., jointly and severally, as charterers. Oriental is now called Taiwan Marine Corporation. We refer to the charterers as "Sanko."

The charter, a printed form known as a "SHELLDEMISE," was for a term of nine years, with provisions for an extension and for redelivery of the vessel upon expiration. Clause 22 of the charter provided:

Law and Litigation.

22(a) The charter shall be construed and the relations between the parties determined in accordance with the Law of England.

(b) Any dispute arising under this charter shall be decided by the English Courts to whose jurisdiction the parties agree whatever their domicile may be:

Provided that either party may elect to have the dispute referred to a single arbitrator in London in accordance with the provisions of the Arbitration Act, 1950, or any statutory modifications or re-enactment thereof for the time being in force. Such election shall be made by written notice by one party to the other no later than 21 days after receipt of a notice given by one party to the other of a dispute having arisen under this charter.

Claiming expiration of the charter, Polar demanded redelivery of the vessel. Sanko failed to redeliver and, on March 13, 1979, Polar filed this action against Sanko in the United States District Court for the District of Hawaii, invoking admiralty jurisdiction (28 U.S.C. § 1333), alleging breach of the charter, and claiming damages of at least $1,000,000. Polar also obtained a writ of foreign attachment and garnishment, pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims to the Federal Rules of Civil Procedure ("Supplemental Rule B"). The writ eventually resulted in the attachment in Hawaii of

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$907,324.51 that Pacific Resources, Ltd. owed to Sanko as freight charges of the Globtik Saturn. On April 24, 1979, the district court ordered Pacific Resources, Ltd. to pay that sum into the registry of the court.

Under Supplemental Rule B, in personam jurisdiction over the defendant is obtained by compelling its appearance through attachment of its goods and chattels, or credits and effects. See Swift & Co. Packers v. Compania Columbiana del Caribe, 1950, 339 U.S. 684, 70 S.Ct. 861, 94 L.Ed. 1206; see generally 7A Moore's Federal Practice, P B.02 at B-51 (2d ed. 1981).

On May 11, 1979, Sanko moved, under F.R.Civ.P. 12(b), to dismiss Polar's complaint and to vacate the writ of attachment on the ground that clause 22 of the charter precluded the exercise of jurisdiction by the district court. Alternatively, Sanko argued that the attachment procedure provided by Supplemental Rule B violated its rights to due process as guaranteed by the Fifth Amendment of the United States Constitution.

On June 18, 1979, Polar demanded arbitration of the dispute. In its opposition to Sanko's motion to dismiss, Polar asked the court to retain jurisdiction and maintain the security obtained by the writ of attachment pending an arbitral decision, pursuant to Section 8 of the Federal Arbitration Act, 9 U.S.C. § 8 (1976). Sanko responded that Polar's demand for arbitration was untimely under clause 22 and that the claim should be referred to the High Court of Justice in London for a determination on the merits.

On June 27, 1979, the court ruled that clause 22 of the charter is a valid forum selection clause. The court stated:

(Clause 22) manifest(s) an intention that all official proceedings resulting from or touching on a dispute under the charter will be conducted in English Courts by arbitration and resolved in conformity with the law of England. Since this was the parties' apparent intention, this action must be dismissed.

The court, without addressing the due process issues raised by Sanko, dismissed Polar's complaint without prejudice and vacated the writ of attachment. Polar appeals from that order. On appeal, Sanko reasserts its constitutional challenge to Supplemental Rule B.

On July 10, 1979, Polar filed its Notice of Appeal and a stipulation whereby the parties agreed that Polar would deposit $125,000 into the registry of the district court and Sanko's freight would remain under attachment pending the outcome of this appeal.

On July 20, 1979, the English High Court of Justice denied Polar's motion to compel arbitration on the ground that Polar had not timely demanded arbitration. The action is now pending before the High Court of Justice for a determination on the merits.

The judgment, on its face, dismisses the complaint, rather than the action. Nevertheless, the judgment, and the order vacating the attachment, are appealable. Swift & Co. Packers, supra, 339 U.S. at 688-689, 70 S.Ct. at 864-865.

II. The Nonconstitutional Issues.

Both constitutional and nonconstitutional issues have been raised on this appeal. We should not pass upon a constitutional question, although it be properly presented by the record, if there is a nonconstitutional ground upon which the case may be decided. See Wood v. Strickland, 1975, 420 U.S. 308, 314, 95 S.Ct. 992, 996, 43 L.Ed.2d 214. If this court affirms the order of the district court on other than constitutional grounds, it need not reach Sanko's constitutional challenge to the maritime attachment procedures of Supplemental Rule B. Therefore, we first address the nonconstitutional issues raised by Polar.

A. Section 8 of the Arbitration Act.

Polar does not challenge the district court's ruling that clause 22 of the charter is enforceable, and it therefore concedes that the merits of this dispute are to be determined by the English High Court of Justice. Polar argues, however, that because

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clause 22 of the charter includes a foreign arbitration provision, Polar has a statutory right, under section 8 of the Arbitration Act, to have the security provided by the writ of attachment maintained, pending a determination of the merits in London. We do not agree.

The right to compel arbitration under the Arbitration Act depends on the existence of a contract to arbitrate, 9 U.S.C. § 2. Here, one term of the contract is that a party may "elect" arbitration, and that "such election shall be made by written notice ... no later than 21 days after receipt of a notice given by one party to the other of a dispute having arisen under this charter." The High Court has held that the election was not made within the prescribed time, and thus the right to arbitration never came into being. Section 8 provides that "the court shall then (i.e., after libel and seizure of the vessel or other property) have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon the award." Here, the court cannot direct arbitration, and there will be no award upon which to enter a decree. This case, therefore, is now in the same posture as if the charter did not contain a provision for arbitration but merely a foreign court selection clause.

In view of our holding, we need not decide the issue raised by Sanko, whether the maintenance of an attachment pending arbitration, as provided by section 8, is barred by the Convention on the Recognition and Enforcement of Foreign Arbitration Awards, acceded to by the United States in 1970, 21 U.S.T. 2517, T.I.A.S. No. 6997, and implemented by Chapter 2 of the Arbitration Act, 9 U.S.C. §§ 201-08 (1970). See Parsons & Whittemore Overseas Co., Inc. v. Societe Generale De L'Industrie, 2 Cir., 1974, 508 F.2d 969.

B. The Foreign Court Selection Clause and Supplemental Rule B.

The next issue is whether Polar has a right under Supplemental Rule B to the maintenance of security by the district court notwithstanding that section 8 is inapplicable, and notwithstanding the presence of a foreign court selection clause.

In admiralty actions, a foreign court selection clause will be enforced unless the resisting party can "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." The Bremen v. Zapata Off-Shore Co., 1972, 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32 L.Ed.2d 513. See also Tai Kien Indus. Co., Ltd. v. M/V Hamburg, 9 Cir., 1976, 528 F.2d 835, 836. In this case, no such showing has been made, and therefore the foreign court selection clause must be specifically enforced. Indeed, Polar does not challenge the enforceability of the...

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