CARGILL BV v. S/S OCEAN TRAVELLER

• Decision Date: 26 January 1989
• Docket Number: No. 88 Civ. 0210 (PNL).,88 Civ. 0210 (PNL).
• Citation: 726 F. Supp. 56
• Parties: CARGILL B.V., Plaintiff, v. S/S "OCEAN TRAVELLER," her engines, tackle, boilers, etc., Wursata Shipping Co., Defendants.
• Court: U.S. District Court — Southern District of New York

726 F. Supp. 56

CARGILL B.V., Plaintiff, v. S/S "OCEAN TRAVELLER," her engines, tackle, boilers, etc., Wursata Shipping Co., Defendants.

No. 88 Civ. 0210 (PNL).

United States District Court, S.D. New York.

January 26, 1989.

Yorkston W. Grist, P.C., New York City, for plaintiff (David L. Mazaroli, of counsel.)

Cichanowicz, Callan & Keane, New York City, for defendants (Lawrence V. Cichanowicz, of counsel.)

MEMORANDUM AND ORDER

LEVAL, District Judge.

Defendant moves to stay the action and compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 3.

BACKGROUND

Plaintiff sues to recover for damage to its cargo of soybeans suffered on a voyage from Louisiana to the Netherlands. On October 31, 1986, the plaintiff, Cargill B.V. ("Cargill"), a Dutch corporation, signed a charter party with defendant carrier, Wursata Shipping Co. ("Wursata"), for charter of the S/S Ocean Traveller for carriage of ore from The Netherlands to the United States and of soybeans on the return trip. The charter called for issuance of a bill of lading containing a "`Centrocon' arbitration clause."<sup>1</sup> In the course of the chartered voyage, the ship took on soybeans at Reserve, Louisiana for carriage to Amsterdam. After inspection on December 9, 1986, the master issued a bill of lading which designated plaintiff as the consignee. The bill of lading stated: "All other terms, conditions and exceptions as per charter party." In addition it provided, "All terms, conditions and provisions of the ... Arbitration Clause of the `Centrecon' charter-party ... to apply." When the cargo was discharged in Amsterdam on January 14, 1987, the soybeans had been damaged by salt water.

Cargill brought this action on January 12, 1988, naming the S/S Ocean Traveller and Wursata as defendants. It obtained jurisdiction over the vessel in rem by means of a letter of undertaking furnished by the underwriter. Continental Grain Co. v. Federal Barge Lines Inc., 268 F.2d 240, 243 (5th Cir.1959), aff'd, 364 U.S. 19, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960). Wursata appeared and answered on its own behalf and on behalf of the ship. Wursata's answer reserved the affirmative defense of lack of personal jurisdiction over it. On November 2, 1988, defendants moved to compel arbitration in London and to stay the actions against Wursata and the vessel pending arbitration.

Wursata relies on the arbitration clause required by the charter party and on the Federal Arbitration Act.²

Cargill makes several arguments in opposition to this motion. It contends that defendant's delay effectively waived the right to seek arbitration; that the arbitration clause is void because the terms of the charter party were not adequately incorporated into the Bill of Lading; third, arbitration is barred by that the Carriage of Goods By Sea Act ("COGSA"), 46 U.S.C. App. 1300 et seq.; finally, Cargill argues that its arbitration agreement was with the vessel owner, not with the vessel, and is therefore not applicable to an in rem action against the vessel.

DISCUSSION

Federal law favors the enforcement of arbitration agreements. "The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). See Dean Witter Reynolds Inc. v. Bird, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). "National courts need to `shake off the old judicial hostility to arbitration,' ... and also their unwillingness to cede jurisdiction of a claim arising under domestic law to a foreign or transnational tribunal." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 639, 105 S.Ct. 3346, 3360, 87 L.Ed.2d 444 (1985).

1. Waiver

"The presence or absence of prejudice ... is determinative of" whether a party to an arbitration agreement has waived that right. Demsey & Associates v. S.S. Sea Star, 461 F.2d 1009, 1018 (2nd Cir.1972); Liggett & Myers Inc. v. Bloomfield, 380 F.Supp. 1044, 1047 (S.D.N.Y.1974) (Weinfeld J.) ("Such waiver is not to be lightly inferred. `Mere delay in seeking a stay of the proceedings pending arbitration without some resultant prejudice to a party ... cannot carry the day.'" Quoting Carcich v. Rederi A/B/ Nordie, 389 F.2d 692, 696 (2nd Cir.1968)).

Cargill claims that defendant waived its right to compel arbitration by waiting nearly ten months before moving for a stay. Cargill also argues that it has been prejudiced by losing the time in London because it believed that the action was proceeding in this court. Defendant points out first that no discovery has been taken; second, that it raised the arbitration clause as a defense in its answer, placing Cargill on notice so that it could have protected itself from loss of time by pursuing arbitration in London simultaneously with the prosecution of this action.

I find that Cargill has not suffered such prejudice as to justify a finding of waiver of the contractual right to arbitration. The delay has not changed the position of the parties to Cargill's prejudice. Demsey & Associates, supra, 461 F.2d at 1018, ("Merely answering on the merits, asserting a counterclaim (or cross-claim) or participating in discovery, without more, will not necessarily constitute a waiver.")

The cases cited by the plaintiff are not persuasive. In Cereal Mangimi v. M/T All Star, 1978 A.M.C. 852 (E.D.Va.1978), it was unclear from the beginning whether there was an arbitration clause in the agreement, and by the time the defendant first raised the issue discovery had already closed. In Liggett & Myers Inc., supra, discovery had closed and the defendant had asserted a counter-claim before moving to arbitrate.

2. Incorporation

Cargill brings the action as assignee of the bill of lading. It contends that the bill of lading does not effectively dictate an arbitration requirement. It points out that the printed clause of the bill of lading adopting the "terms, conditions and exceptions" of the charter party left blank the space provided for identifying the charter party.³ Cargill contends that by failing to identify the charter party with specificity, the carrier effectively failed to incorporate its terms and to give notice of them to assignees of the bill of lading.

The argument is without merit on these facts. In the first place, clause nine of the bill of lading expressly stated: "Arbitration Clause of the `Centrecon' charter-party to apply." Second, although Cargill is the holder of the bill of lading, Cargill itself negotiated the charter with Wursata. It agreed to the arbitration clause. 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, see Federal Insurance Co. v. M/V Andecea, 1787 A.M.C. 566 (S.D.N. Y.1986) (third party assignee cannot be compelled to arbitrate pursuant to a defective incorporation clause), this contention no application to the very party that negotiated the charter.

Thus in State Trading Corp. of India v. Grunstad Shipping, 582 F.Supp. 1523 (S.D.N.Y.1984) (Weinfeld, J.), the consignee of cargo sought to enforce the arbitration requirement contained in a charter party which, like this one, had been imperfectly incorporated in the bill of lading. Because the carrier itself was a party to the charter and had full notice of its terms, Judge Weinfeld refused to permit it to claim benefits resulting from the failure of the bill of lading to identify the charter party by date and identity of its signatories.

3. Application of COGSA

Cargill contends the arbitration clause is void by reason of incompatibility with two requirements of COGSA.⁴ First, Cargill claims that § 1303(6) of COGSA bars enforcement of an arbitration clause because it requires an aggrieved party to "bring suit within one year after the delivery of the goods." Cargill claims this provision requires "suit" and therefore inferentially forbids arbitration.

This contention is without merit. The clear purpose of this COGSA section is to limit the time in which suit may be brought, not to require a court action in preference to arbitration. The courts that have considered the interaction between this section and a contractual arbitration clause have rejected Cargill's position. See Son Shipping Co., Inc. v. De Fosse & Tanghe et. al., 199 F.2d 687, 689 (2d Cir. 1952); Government of Republic of Korea v. New York Nav. Co., 469 F.2d 377, 380 (2d Cir.1972).

Second, Cargill argues that foreign arbitration in London would lessen the carrier's liability in contravention of § 1303(8) of COGSA. It claims that the arbitration will take several years to complete, that none of the parties have any connection with England, and that the British arbitrators might not apply American law conforming to COGSA's requirements.

One of the principal purposes of COGSA is to void overreaching clauses inserted by carriers in their bills of lading which unreasonably limit the rights of cargo claimants. See Encyclopaedia Britannica, Inc. v. S.S. Hong Kong Producer, 422 F.2d 7, 11-12 (2d Cir.1969), cert. denied, 397 U.S. 964, 90 S.Ct. 998, 25 L.Ed.2d 255 (1970). That purpose is expressed in § 1303(8) which protects claimants under a bill of lading from provisions that violate COGSA's guarantees or lessen the liability of the carrier.⁵

In Indussa Corp. v. S.S. Ranborg, 377 F.2d 200, 203 (2d Cir.1967) en banc, the Court of Appeals nullified a clause mandating a foreign law and a foreign forum as it applied to an American consignee. In State Establishment for Agricultural Produce Trading v. M/V Wesermunde, 838 F.2d 1576, 1581-1582 (11th Cir.1988), cert. denied, ___ U.S. ___, 109 S.Ct. 273, 102 L.Ed.2d 262 (1988), the Eleventh Circuit refused to enforce a charter party arbitration clause against the holder of a bill of lading who had no...