Sea Bowld Marine Group, Ldc v. Oceanfast Pty, Ltd.

• Decision Date: 05 May 2006
• Docket Number: No. 05-61881 CIV.,05-61881 CIV.
• Citation: 432 F.Supp.2d 1305
• Court: U.S. District Court — Southern District of Florida
• Parties: SEA BOWLD MARINE GROUP, LDC, a Cayman Islands Company, Plaintiff, v. OCEANFAST PTY, LTD, an Australian corporation, Oceanfast LLC, a Florida limited liability company, Austal Ltd., an Australian corporation, and Austal Ships Pty, Ltd., an Australian corporation, Defendants.

432 F.Supp.2d 1305

SEA BOWLD MARINE GROUP, LDC, a Cayman Islands Company, Plaintiff, v. OCEANFAST PTY, LTD, an Australian corporation, Oceanfast LLC, a Florida limited liability company, Austal Ltd., an Australian corporation, and Austal Ships Pty, Ltd., an Australian corporation, Defendants.

No. 05-61881 CIV.

United States District Court, S.D. Florida.

May 5, 2006.

John Keller, Esq., Terrence Russell, Esq. and Sundeep Mullick, Esq., Ft. Lauderdale, FL, for Plaintiffs.

Howard Camerik, Esq., Steven Lessne, Esq. and Kevin P. Mason, Esq., Boca Raton, FL, for Defendants.

ORDER ON PLAINTIFF'S MOTION FOR REMAND AND DEFENDANTS' MOTION TO COMPEL ARBITRATION

GOLD, District Judge.

THIS CAUSE is before the Court upon Defendants' Motion to Compel Arbitration Pursuant to 9 U.S.C. § 206, and Memorandum of Law ("Motion to Compel") [DE 2, filed December 9, 2005] and Plaintiffs Motion for Remand [DE 6, filed January 9, 2006]. On January 17, 2006, Plaintiff responded to Defendants' Motion to Compel [DE 9]. On February 7, 2006, Defendants filed a Combined Memorandum of Law—Response in Opposition to Motion for Remand and Reply in Support of Motion to Compel Arbitration [DE 17]. On February 23, 2006, Plaintiff filed a Memorandum in Reply to Defendants' Opposition to Motion for Remand and in Response to Defendants' Combined Memorandum of Law [DE 19]. On April 4, 2006, I held oral argument on the countervailing motions, and it became clear that further briefing of an issue was necessary. Therefore, on April 19, 2006, Defendants filed a Memorandum of Law on Threshold Choice-of-Law Issue [DE 28], and Plaintiff filed a Memorandum of Law on Choice of Law [DE 29].

I. Factual and Procedural Background

This case involves the alleged poor construction of a luxury yacht. Plaintiff, Sea Bowld Marine Group, LDC ("Sea Bowld") entered into negotiations to construct a luxury yacht with Oceanfast LLC ("Oceanfast USA"). (Amend. Compl. at ¶ 3).¹ On November 24, 2000, Sea Bowld entered into a Shipbuilding Contract (the "Agreement") with Defendant Oceanfast PTY, Ltd. ("Oceanfast") for the construction of a 49.95 meter Motor Yacht (the "Vessel") (Amend. Compl. at ¶ 19). Oceanfast is in the business of designing and constructing high-quality, large, custom oceangoing yachts. (Id. at ¶ 6). The Agreement is signed by Richard Scott Williams, who Sea Bowld contends is an officer of Oceanfast USA. (Id. at ¶ 3; Agreement, p. 54). Defendant Austal Ltd. ("Austal") signed a "Deed of Guarantee" by which it guaranteed Sea Bowld's obligations under the Agreement. (Id. at ¶ 4). Austal wholly owns Oceanfast and Austal Ships Pty, Ltd. ("Austal Ships"). (Id.). Austal Ships serves as the service arm for the "Austal Group," a moniker Austal uses to refer to certain of its subsidiaries, including Oceanfast, Austal Ships, and others. (Id. at ¶¶ 4 and 5).

On May 7, 2004, Oceanfast assigned its "rights and obligations in, under and to the warranty of quality and guaranty of this luxury motor yacht" to Austal Ships. (Id. at ¶ 21). Sea Bowld consented to the assignment of Oceanfast's rights to Austal Ships. (Id.).

Sea Bowld alleges that Oceanfast failed to properly construct the Vessel, and that Defendants are financially responsible for the extensive repairs required to make the Vessel seaworthy. (Id. at ¶¶ 44 through 93). The alleged damages to the Vessel are significant. According to Sea Bowld, the Vessel is covered in heavy black soot, resulting from an defectively installed diesel generator (id. at ¶ 47); its computer control system is impossible to operate (id. at ¶ 57); there are numerous leaks in the hydraulic system (id. at 59) and the spa (id. at ¶ 60); the anchor strike plates were defectively installed and ultimately separated from the Vessel during a trip at sea (id. at ¶ 61); the exterior paint was improperly applied leading to a poor aesthetic appearance (id. at ¶ 63); there are numerous structural cracks in the Vessel (id. at ¶ 66); the main exhaust system was defectively designed (id. at ¶ 67); the cabinet hardware was not properly affixed (id. at ¶ 68); undersized hydraulic lines for the bow thruster assemblies were installed (id. at ¶ 69); and a drain was installed on an upper deck that allowed overflow water to enter the Vessel's living quarters (id. at ¶ 73). Sea Bowld points out that these are just some of the defects in the Vessel's construction. (Id. at ¶ 89).

On July 22, 2005, Sea Bowld filed a fourteen-count Complaint against Defendants in a Florida state court. On or around October 3, 2005, Sea Bowld amended the Complaint. Sea Bowld now asserts eighteen counts against Defendants: breach of express warranty against Austal Ships and Austal (Counts I and II); breach of contract against Oceanfast and Austal (Counts III and IV); violation of Florida Deceptive and Unfair Trade Practices Act against Oceanfast USA (Count V); breach of implied warranty against Oceanfast and Austal (Counts VI, VII, VIII, IX, X, and XI); violation of Australia's Trade Practices Act against Oceanfast, Austal Ships, and Austal (Counts XII, XIII, XIV, XV, and XVI); specific performance against Austal Ships and Austal (Count XVII); and breach of confidentiality agreement against Oceanfast and Austal (Count XVIII).

On December 9, 2005, Defendants removed the Amended Complaint to this Court pursuant to 9 U.S.C. § 205, the portion of the Federal Arbitration Act ("FAA") governing disputes involving an arbitration agreement arising under the Convention on Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (the "Convention"). Contemporaneously, Defendants filed the Motion to Compel, which seeks transfer of this case to arbitration in Australia pursuant to the following language in the Agreement:

[i]f at any time any dispute whatsoever shall arise between the Purchaser and the Builder before or during construction or after the delivery of the Vessel, under or in relation to or in connection with this Agreement or the interpretation thereof or arising in or out of or in connection with performance of or the carrying out of any of the work under this Agreement it shall, unless otherwise specifically provided for in this Agreement, be referred to arbitration in Western Australia in accordance with the laws relating to arbitration in force in Western Australia and any such arbitration award shall be final and binding upon the parties hereto.

(the "Arbitration Clause") (Agreement, § 26.1). Additionally, the foreign Defendants seek dismissal of the Complaint on grounds of personal jurisdiction, and all Defendants seek dismissal for reasons of forum non conveniens.

Sea Bowld's Motion for Remand posits that the Arbitration Clause is unenforceable, and remand to state court must follow since Defendants state no grounds for subject matter jurisdiction apart from that bestowed on the Court by the FAA. The centerpiece of Sea Bowld's argument on enforceability is that three of the named Defendants did not sign the Agreement, and therefore cannot compel arbitration. Sea Bowld urges this Court in determining the scope of the Arbitration Clause to apply Australian law which, it argues, would disallow arbitration of this dispute. To that end, Sea Bowld directs this Court to another portion of the Agreement, its choice-of-law clause, which reads as follows:

[t]his Agreement shall be governed by and construed in accordance with the applicable laws of the State of Western Australia and the Commonwealth of Australia and all the parties hereto agree to submit to the courts of Western Australia and the Commonwealth of Australia having jurisdiction.

(Agreement, § 25). Australian law, Sea Bowld argues, does not feature as liberal a posture towards arbitration as does American law, and it would not support arbitration in this case.

After reviewing the parties' briefs and considering their presentations at oral argument, I grant Defendants' Motion to Compel and I deny Sea Bowld's Motion for Remand.

II. Jurisdiction

Federal courts have jurisdiction over actions arising under the Convention. 9 U.S.C. § 203.² 9 U.S.C. § 202. Arbitration agreements that arise out of a "legal relationship, whether contractual or not, which are considered as commercial," and which involve at least one foreign citizen (unless circumstances that are not relevant to these proceedings exist) fall under the Convention. Id. This case surrounds a commercial agreement involving a foreign entity that is a signatory to the Convention.³ As such, this Court has federal subject matter jurisdiction and may proceed to the issues raised in the parties' motions.

III. Choice of Law

At my direction, the parties filed supplemental memoranda of law regarding whether I should apply American law or Australian law in evaluating the scope of the Arbitration Clause. Once I resolve this dispute, I will apply the governing law to my analysis of whether this case falls within the Arbitration Clause.

As noted above, this Court's jurisdiction extends from a specific portion of the FAA governing international arbitration agreements. A number of fundamental principles that derive from the larger body of FAA jurisprudence will help me analyze the parties' respective positions. I begin by acknowledging the celebrated liberal policy favoring arbitration agreements. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991). Congress enacted the FAA to reverse years of hostility to arbitration agreements, and to "place arbitration agreements upon the same footing as other contracts." Id. This presumption in favor of arbitration is especially forceful in cases involving international agreements. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 3356, 87 L.Ed.2d 444 (1985); Bautista v. Star Cruises, 396 F.3d 1289, 1295 (11th Cir.2005), cert. dismissed, ___ U.S. ___, 125 S.Ct. 2954, 162 L.Ed.2d 884 (2005). Nevertheless, despite the clear...