Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G.

• Decision Date: 07 June 1978
• Docket Number: No. 865,D,865
• Parties: In the Matter of the arbitration between ANDROS COMPANIA MARITIMA, S.A., as Disponent Owners of the KISSAVOS, Petitioner-Appellee, and MARC RICH & CO., A.G., as Charterers, Respondent-Appellant. ocket 78-7019.
• Court: U.S. Court of Appeals — Second Circuit

Page 691

579 F.2d 691

In the Matter of the arbitration between ANDROS COMPANIA MARITIMA, S.A., as Disponent Owners of the KISSAVOS, Petitioner-Appellee and MARC RICH & CO., A.G., as Charterers, Respondent-Appellant.

No. 865, Docket 78-7019.

United States Court of Appeals Second Circuit.

Argued May 3, 1978.

Decided June 7, 1978.

Robert F. Fink, New York City (Milgrim Thomajan & Jacobs, George L. Graff, New York City, of counsel), for respondent-appellant.

Raymond A. Connell, New York City (Healy & Baillie, Nicholas J. Healy, New York City, of counsel), for petitioner-appellee.

Before FEINBERG and MESKILL, Circuit Judges, and PORT, District Judge. ^*

FEINBERG, Circuit Judge:

This appeal raises interesting questions concerning an arbitrator's duty under Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968), to disclose information that might create an impression of bias. The losing party in an arbitration proceeding, Marc Rich & Co., A.G., appeals from a judgment of the United States District Court for the Southern District of New York, Charles L. Brieant, J., confirming the arbitration award and directing Marc Rich to pay Andros Compania Maritima, S.A. the sum of $109,028.40. Marc Rich argues that the district judge denied it an adequate opportunity to present its claim that the arbitrators had not made the required full disclosure. Appellant also contends that the arbitration award should not be enforced, because it disregards the essence of the agreement between the parties. For reasons indicated below, we reject these contentions and affirm the judgment of the district court.

I

The controversy arises out of a charter party, dated at London, July 30, 1974, between Andros as "disponent owner" of the tanker Kissavos ¹ and Marc Rich, under which the latter chartered the tanker to carry a cargo of crude oil from West Africa to two ports on the Peruvian coast. Marc Rich agreed to pay demurrage (charges for excessive time used by the charterer in loading and discharging cargo) at a rate of $5,606.25 per day for all time expended in excess of allowed laytime of 72 hours. In accordance with instructions, the vessel carried the cargo to Peru, but was kept at the two ports well beyond the allowed laytime. Because of the delay, Andros claimed $116,037.70 in demurrage against Marc Rich, which made partial payment but disputed its liability for the balance, some $90,000.

In early 1975, under the arbitration clause of the charter, ² Andros appointed Mr. Philip Moyles and Marc Rich named Captain George Stam as arbitrators. They, in turn, selected Mr. Manfred Arnold, manager of the Maritime Division, National Bank of North America, as the chairman of the arbitration panel. Captain Stam died before the arbitration commenced, and Marc Rich selected Mr. Jack Berg in his place.

At the first arbitration hearing, which Moyles was unable to attend, both Berg and Arnold made preliminary statements, apparently with a view toward complying with the Maritime Arbitration Rules of the Society of Maritime Arbitrators, Inc. (1974) (the Rules). ³ Their disclosures were as follows:

"Mr. Berg. I am personally familiar with Andros Compania Maritima. As a matter of fact, this afternoon I have been chairman of an arbitration panel in which they were one of the disputants. I don't recognize Marc Rich & Company at all.

"I am a corporate officer of Continental Grain Company and it is possible that in the course of their day-to-day business they have had business connections with either or both of these parties, and, as a matter of fact, it is possible that they have had business dealings with Andros in the past.

"I have never been personally involved in any of these business arrangements nor have had any problems which may have arisen from them. I know both attorneys here today. I have been appointed to arbitration (panels) in which they have represented disputants (before) the Panel. I have been appointed by both on various occasions. As far as I know my firm has had no business connections with either of the law firms involved here today.

"I have sat on a number of panels with Mr. Arnold in the past, and I know him quite well personally. We are both on the Board of Governors of the Society of Maritime Arbitrators."

"I do not know Mr. Moyles. I don't believe we have ever met although I would reserve judgment until after I see him."

"I know no other reason why I could not sit on this Panel and render a fair and impartial decision based on the evidence presented here."

"The Chairman (Mr. Arnold). I have not had any business dealings with the owners in this case. I have been involved in arbitrations and I was appointed by Andros as arbitrator.

"I do not recognize the name of Charterers, Marc Rich. It could possibly be that my employer, National Bank of North America, might have had (some) dealings with either party of which, however, I would be unfamiliar and actually had no participation in.

"As far as the attorneys are concerned, this is the first time I meet Mr. Thomajan. I have not had any dealings with (his) firm.

"I have been involved in various arbitrations and I am still involved with arbitrations in which the firm of Healy & Baillie is representing disputants.

"Mr. Berg has commented on our acquaintance. As to Mr. Moyles, I have known Mr. Moyles for possibly five or six years, stemming from the time when he was with Haight, Gardner and I was involved in an arbitration in which Mr. Moyles represented a disputant. Neither I nor my employer had had any business dealings with (his) law firm as such.

"I do not feel that any connection or relation which might exist would impede me from hearing this case and rendering a just and fair award."

After each arbitrator finished, the attorney for Marc Rich stated that he had no questions or objections. The attorney for Andros made a similar statement.

At the beginning of the second hearing, ⁴ Moyles stated:

"I am a member of the firm of Freehill, Hogan & Mahar. Prior to joining that firm in January of this year I was a member of Fuller, Lawton & Moyles.

"At the time that I was appointed arbitrator, I was with the Fuller, Lawton & Moyles firm; although I think all the documents at the first hearing were held subsequent to my joining the Freehill firm as partner.

"I know Mr. Connell on a professional basis, having had cases against his firm over the years. I know Mr. Arnold, having had cases where I presented matters to arbitrations of which he was a member. And I have a case presently pending on behalf of a client before a panel of arbitrators of which Mr. Berg is a member.

"I do not know either of the parties to this dispute and I have never represented either party to this suit.

"Prior to our convening here today, I had not met with Mr. Thomajan or Mr Langlios (attorney assisting Mr. Thomajan) or the young lady with them, Miss Haskins."

"I know of no reason why I cannot sit as a member of this panel, and I know of no reason why I cannot make a true and honest determination based upon the testimony and documents presented by each side with respect to the dispute."

Again, Marc Rich's counsel (as well as Andro's) had no questions or objections.

At the arbitration hearings, we are told, Andros produced two witnesses and submitted 67 exhibits; Marc Rich produced no witnesses and 15 exhibits. The principal focus of the controversy was whether the conceded delay in unloading the tanker had been caused by a deficiency in the ship's discharge pumps or by other causes for which the ship could not be held responsible. In an award dated September 30, 1977, Arbitrators Arnold and Moyles found in favor of Andros for the entire balance due ($88,178.97 plus $20,849.43 interest) for a total of $109,028.40. Arbitrator Berg dissented in part. ⁵

In October 1977, Andros petitioned the district court for an order confirming the arbitration award. Shortly thereafter, without making a motion to vacate or challenge the award, Marc Rich noticed depositions of all three arbitrators, to be held eight days later in the office of counsel for Marc Rich. The notices did not indicate why the arbitrators were being summoned for examination, except that the notice to Arnold warned that Marc Rich intended to subpoena the following:

All documents in (Mr. Arnold's) possession, custody or control, evidencing or reflecting business dealings and social relationships between (Mr. Arnold) or his employer, National Bank of North America, and Orion & Global Chartering Co., Inc., and any of its affiliated companies or Lloyd C. Nelson.

At the time, Lloyd C. Nelson was president of Orion & Global Chartering Co., Inc., the New York brokers and agents for Andros, which in turn was the managing agent for the registered owners of the Kissavos. ⁶

The matter was assigned to Judge Brieant, and with commendable dispatch the judge called the attorneys before him to cut through a potentially complicated procedural tangle. The subpoenas were quashed, and Marc Rich was directed to move to vacate the arbitration award. The judge advised the parties that if the papers revealed "a legitimate disputed factual issue" concerning the adequacy of disclosure, Mr. Arnold would be called to testify in court under the judge's "direct supervision and control and briefly and quickly . . . ."

In short order, Marc Rich did move to vacate. On the issue of disclosure, it submitted affidavits of its lawyers, one from George L. Graff, who did not participate in the arbitration proceeding, and the other from Robert Thomajan, who represented Marc Rich at the arbitration. The Graff affidavit alleged that

we have recently learned that Mr. Arnold has had a close personal and professional relationship with Lloyd C. Nelson, one of the principals of Orion & Global, the firm which actually operates the vessel.

The Thomajan affidavit alleged:

I discussed the (arbitration) decision, after it came down, with our...