Arbitration between Carina Intern. & Adam Maritime, 96 Civ. 5527(SS).

• Decision Date: 27 March 1997
• Docket Number: No. 96 Civ. 5527(SS).,96 Civ. 5527(SS).
• Citation: 961 F.Supp. 559
• Parties: In the Matter of ARBITRATION BETWEEN CARINA INTERNATIONAL SHIPPING CORP., as Owner of the M/T Sobral, Petitioner, and ADAM MARITIME CORP., as Voyage Charterer, Respondent.
• Court: U.S. District Court — Southern District of New York

961 F.Supp. 559

In the Matter of ARBITRATION BETWEEN CARINA INTERNATIONAL SHIPPING CORP., as Owner of the M/T Sobral, Petitioner and ADAM MARITIME CORP., as Voyage Charterer, Respondent.

No. 96 Civ. 5527(SS).

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

March 27, 1997.

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Haight, Gardner, Poor & Havens, Mark C. Flavin, James H. Hohenstein, New York City, for petitioner Carina International Shipping Corp.

Piper & Marbury, L.L.P., James D. Kleiner, New York City, for Respondent/Cross-Petitioner, Adam Maritime Corp.

OPINION AND ORDER

SOTOMAYOR, District Judge.

Petitioner Carina International Shipping Corporation ("Carina") moves, pursuant to 9 U.S.C. §§ 1 and 9, to confirm an arbitration award ("the Award") rendered in its favor on June 26, 1996. Respondent Adam Maritime Corporation ("Adam") cross-moves, pursuant to 9 U.S.C. § 10, to vacate the Award. For the reasons to be discussed, the motion to vacate the Award is DENIED, and the motion to confirm the Award is GRANTED.

BACKGROUND

Carina owns the MT SOBRAL ("the vessel"), a charter vessel. On May 28, 1993, Carina entered into a charter party contract with Adam, chartering the vessel for one voyage to carry a full cargo of clean unleaded petroleum products, including caustic soda, from a port or ports in the United States to a port or ports in South America. Subsequently, disputes arose concerning demurrage claims¹ and Carina sought arbitration in accordance with the arbitration clause (Clause 23) of the Charter Party Contract.

The demurrage dispute occurred in the following context. On June 9, 1993, Adam ordered the vessel to proceed to the Oiltanking Terminal in Houston to load naptha and methyl butyl ether ("ether") for discharge at La Pampilla, Peru. Later, Adam issued instructions for the vessel to proceed — prior to the vessel's final discharge in Peru — to Corpus Christi upon completion of the loading of the naptha and ether in order to load caustic soda for discharge at Buenaventura, Colombia. The vessel arrived in Houston on June 10, with loading of the ether commencing on June 11. While loading the ether, the vessel was arrested by a third party, forcing the cessation of loading. On June 12, loading resumed and continued until the ether was completely loaded.

Approximately one half-hour after completion of the ether cargo loading, the terminal ordered the vessel off the berth, allegedly to allow Carina to resolve "judicial problems." The vessel proceeded to the Houston anchorage and remained there until Adam instructed her to reberth at the oil tanking facility in preparation for the loading of the naptha cargo on June 15, 1993. The vessel made her way to the berth, but subsequently returned to anchorage. During the period in which it was unclear when the vessel would return to berth, Adam began making plans for another vessel to load the naptha and transship the ether. However, on learning that the M/T SOBRAL would be returning to the terminal, the other vessel was not chartered.

The vessel reberthed on June 16, 1993, and commenced loading the naptha. On June 17, Adam informed Carina that the caustic soda, now to be loaded in Houston, would not be available until at least June 19, and that other arrangements needed to be made for the transport of the caustic soda. Loading of the vessel was completed on June 18, and it set sail for Peru that day.

The vessel arrived in Peru on June 29, 1993, and discharge of the ether commenced that night. On July 1, the Peruvian receivers ordered the vessel out of the berth and to anchorage (allegedly because of slow pumping on the part of the vessel). The vessel remained at anchorage from July 1 to July 8. It commenced discharging the naptha on July 9 and completed the discharge on July 10. Carina's arbitration claim for demurrage followed.

The arbitration panel held hearings, requested briefs from the parties, and a majority of the panel awarded Carina demurrage in the amount of $144,385.83. Carina had appointed the dissenting arbitrator. The dispute in this confirmation proceeding involves that portion of the arbitration award to Carina for damages of approximately $56,309.65 or three days, twenty-one hours, and twelve minutes of demurrage while the vessel was at anchorage in Houston. Adam contends that it is not liable for the $56,309.65 of demurrage, because the delays were incurred as a result of Carina's financial troubles. Carina originally submitted a demurrage claim in the arbitration in the amount of $142,291.40. This computation excluded time that the vessel was arrested at the berth in Houston and the three days, twenty-one hours, and twelve minutes under dispute (hereinafter "the re-berthing delay"). Subsequently, Carina increased its claim to $156,790 because of an arithmetical error in its original computation. In February 1996, after the close of the evidentiary hearings, Carina amended its claim to $213,099.65 to include the re-berthing delay.

Adam contended before the arbitrators that the re-berthing delay claim by Carina was a new dispute not subject to consideration by the arbitration panel because of Clause 24 of the Charter Party which permits new claims to be raised only until the close of evidentiary hearings. Carina argued that the re-berthing delay claim was not a new dispute, but rather an amendment of its original demurrage claim which the arbitrators were empowered to permit under the Maritime Arbitration Rules of the Society of Maritime Arbitrators (the "SMA Rules"). The awarding panel agreed with Carina and ultimately awarded it demurrage for the re-berthing delay.

DISCUSSION

I. Standard of Review

On a confirmation motion, judicial review of an arbitral award is rather narrow, and is limited to determining whether the arbitrators acted within the scope of their authority in rendering the award. See United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 36-37, 108 S.Ct. 364, 369-70, 98 L.Ed.2d 286 (1987); Local 1199, Drug, Hosp. & Health Care Employees Union v. Brooks Drug Co., 956 F.2d 22, 24 (2d Cir.1992). A court may not second-guess the merits of the award. See Wilko v. Swan, 346 U.S. 427, 436-37, 74 S.Ct. 182, 187-88, 98 L.Ed. 168 (1953); Brooks, 956 F.2d at 25. An arbitral award must be confirmed unless: (1) one of the statutory exemptions listed in 9 U.S.C. § 10 applies; (2) the arbitrators acted in manifest disregard of the law; or (3) the arbitral award is incomplete, ambiguous, or contradictory. See 9 U.S.C. § 10; Transit Casualty Co. v. Trenwick Reinsurance Co., 659 F.Supp. 1346, 1350 (S.D.N.Y.1987), aff'd without opinion, 841 F.2d 1117 (2nd Cir. 1988). As noted in Blue Bell, Inc. v. Western Glove Works Ltd., 816 F.Supp. 236 (S.D.N.Y. 1993):

A party seeking to overturn an arbitration award is under a heavy burden to prove that the standards for such relief have been met, especially since it is the Second Circuit's policy to read very narrowly the courts' authority to vacate arbitration awards pursuant to Section 10[a] of the FAA. Blue Tee Corp. v. Koehring Co., 808 F.Supp. 343 (S.D.N.Y.1992); John T. Brady & Co. v. Form-Eze Systems, Inc., 623 F.2d 261, 264 (2d Cir.), cert. denied, 449 U.S. 1062, 101 S.Ct. 786, 66 L.Ed.2d 605 (1980); Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G., 579 F.2d 691, 703 (2d Cir.1978). Any "colorable justification" will support an arbitral award. Fahnestock & Co., Inc. v. Waltman, 935 F.2d 512, 516 (2d Cir.1991); In re Marine Pollution Serv., Inc., 857 F.2d 91, 94 (2d Cir.1988).

Blue Bell, Inc., 816 F.Supp. at 240 (citation omitted).

The Second Circuit has stated that "[i]f there is `even a barely colorable justification for the outcome reached,' the court must confirm the arbitration award." Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 13 (2d Cir. 1997) (quoting Andros Compania Maritima, S.A., 579 F.2d at 704).

II. Arbitrator's Authority Under the Contract and 9 U.S.C. § 10(a)(4)

An arbitral award may be vacated on the grounds that "the arbitrators exceeded their powers." 9 U.S.C. § 10(a)(4). The appropriate test for ascertaining whether an arbitrator has exceeded his or her authority is to "determine first whether the arbitrator acted within the scope of his authority, and second whether the award draws it essence from the agreement or is merely an example of the arbitrator's own brand of justice." Brooks, 956 F.2d at 25. As stated in Synergy Gas Co. v. Sasso, 853 F.2d 59 (2d Cir.), cert. denied, 488 U.S. 994, 109 S.Ct. 559, 102 L.Ed.2d 585 (1988), "the `scope of authority of arbitrators generally depends on the intention of the parties to an arbitration, and is determined by the agreement or submission.'" Id., 853 F.2d at 63-64 (quoting Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir.1987), cert. denied, 488 U.S. 994, 109 S.Ct. 559, 102 L.Ed.2d 585 (1988)). If it is clearly established that the arbitrator has exceeded his authority, or imposed his or her own brand of justice, then the award cannot stand. See Brooks, 956 F.2d at 25.

Adam argues that by allowing Carina to submit the re-berthing delay claim after the evidentiary hearings had closed, "the panel majority violated the express terms of the contract upon which their jurisdiction is based and thus violated 9 U.S.C. § 10(a)(4), which provides for the vacation of [sic] arbitral award where the arbitrators `exceeded their powers.'" (Resp.'s Mem. at 7.)

Adam maintains the Clause 24 of the Charter Party precluded the arbitrators from permitting Carina to raise a new claim for demurrage after the evidentiary hearings at the arbitration closed. Clause 24 provides that "[u]ntil such time as the arbitrators finally close hearings either party shall have the right by written notice served on the arbitrators and upon any other officer of the other party to specify further disputes or differences under this Charter for hearing and determination." (Charter Party, Clause 24.)

Adam...