Copragri S.A. v. Agribusiness United DMCC

• Decision Date: 15 March 2021
• Docket Number: 20 Civ. 5486 (LGS)
• Parties: COPRAGRI S.A., Petitioner, v. AGRIBUSINESS UNITED DMCC, Respondent.
• Court: U.S. District Court — Southern District of New York

COPRAGRI S.A., Petitioner, v. AGRIBUSINESS UNITED DMCC, Respondent.

20 Civ. 5486 (LGS)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 15, 2021

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:

Petitioner Copragri S.A. ("Copragri"), pursuant to §10 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10, seeks to vacate an arbitration award that the Society of Maritime Arbitrators, Inc. ("SMA") issued on June 15, 2020, (the "Award"). Respondent Agribusiness United DMCC ("Agribusiness") did not appear in this action and did not oppose Copragri's Petition to Vacate Arbitration Award (the "Petition"). For the following reasons, the Petition is granted.

I. BACKGROUND

The following undisputed facts are derived from the Petition, the memorandum of law in support of the Petition and the Declaration of Patrick F. Lennon and supporting exhibits.

Copragri is a citizen of Morocco that buys feed and grain. Agribusiness is a citizen of the United Arab Emirates that sells feed and grain. On August 5, 2013, the parties entered into two contracts: AUD 715 and AUD 716 for grain cargoes (collectively, the "Sales Agreements"). With respect to these transactions, the Sales Agreements are the only contracts between the parties. The Sales Agreements require Agribusiness to arrange for transportation of the goods by sea. They also contain a Grain and Free Trade Association ("GAFTA") arbitration provision which incorporates by reference GAFTA Form 100 "Contract for Shipment of Feedingstuffs" and GAFTA Form 125 "Arbitration Rules" and states,

GOVERNING CONTRACT: ALL TERMS AND CONDITIONS NOT IN CONTRADICTION WITH THE ABOVE AS PER GAFTA 100. ARBITRATION AS PER GAFTA 125, AS FAR AS APPLICABLE. THIS CONTRACT IS GOVERNED BY ENGLISH LAW. . . WE THANK YOU FOR THIS BUSINESS AND KINDLY ASK YOU TO PROMPTLY SIGN AND RETURN A COPY OF THIS CONFIRMATION. HOWEVER, THE VALIDITY OF THIS CONTRACT SHALL NOT BE AFFECTED BY THE NON-RETURN OF A SIGNED COPY.

Under GAFTA Arbitration Rules, the parties are required to commence arbitration of certain disputes "not later than one year after . . . the date of completion of final discharge of the ship at port of destination."

Pursuant to its obligations under the Sales Agreements, Agribusiness chartered a vessel (the "Vessel") from Vitosha Maritime, Ltd. ("Vitosha Maritime") to transport the grain cargoes from Darrow, Louisiana, to Jorf Lasfar, Morocco. The Vessel's master issued bills of lading for the cargoes to Agribusiness. Copragri was not a party to the bills of lading, the back of which included a provision calling for SMA arbitration in New York.

Vitosha Maritime presented a demurrage claim against Agribusiness for delays of the Vessel and other expenses at the discharge port in Morocco. Around November 7, 2013, Agribusiness presented an indemnity claim to Copragri. On September 7, 2019, approximately six years later, Agribusiness commenced SMA arbitration of this claim and appointed an SMA arbitrator. Because Copragri did not appoint its own arbitrator within twenty days, Agribusiness appointed a second SMA arbitrator and the two arbitrators together, then appointed a third SMA arbitrator (collectively, the "Arbitrators").

Copragri objected to SMA arbitration by sending five e-mails to Agribusiness and/or one or more of the Arbitrators. On October 25, 2019, Copragri sent an e-mail to Agribusiness stating,

Contrary to the Arbitration Demand, the governing contract between Agribusiness United DMCC and Copragri is the corn purchase and sale contract number AUD 716, not the bill of lading upon which Agribusiness United DMCC has relied to demand arbitration. Moreover, Agribusiness United DMCC is not even a party to the bill of lading and thus has no right to demand arbitration against Copragri thereunder.

Furthermore, the purchase contract between Agribusiness United DMCC and Copragri, Contract Number: AUD 716, provides for disputes to be submitted to GAFTA arbitration governed by English law. Thus, Agribusiness United DMCC is/was required to pursue any claims against Copragri before a GAFTA arbitration panel, including any claims for demurrage -- as specifically referenced in Contract Number: AUD 716.

Copragri reiterated its objections on December 10, 2019, and January 21, 2020, in e-mails to Agribusiness and the Arbitrators. The December 10, 2019, e-mail states,

Agribusiness United DMCC's arbitration demand is invalid and of no force and effect because, as we have previously advised you, the governing contract between Agribusiness United DMCC and Copragri is the corn purchase and sale contract number AUD 716, not any bill(s) of lading. As we also advised you, Agribusiness United DMCC is not even a party to any bill(s) of lading covering the shipment of the cargo and, thus, has no right to demand arbitration against Copragri thereunder. Furthermore, the purchase contract between Agribusiness United DMCC and Copragri, Contract Number: AUD 716, provides for disputes to be submitted to GAFTA arbitration governed by English law. Agribusiness has not disputed these facts.

Thus, the fact that Agribusiness United DMCC is/was required to pursue any claims against Copragri before a GAFTA arbitration panel, including any claims for demurrage -- as specifically referenced in Contract Number: AUD 716, remains indisputable and unchallenged by Agribusiness United DMCC. As well, it remains indisputable and unchallenged that under the GAFTA arbitration rules, Agribusiness United DMCC was required to commence arbitration "not later than one year after . . . the date of completion of final discharge of the ship at port of destination." Accordingly, any claim by Agribusiness United DMCC was time barred almost 5 years ago -- as we have previously advised you and which Agribusiness United DMCC has failed to dispute.

On February 7, 2020, Copragri sent two e-mails to the Arbitrators, objecting to (1) the panel's jurisdiction, (2) possible conflicts of interest among the Arbitrators and (3) the Arbitrators' use of a statement of fact that Agribusiness allegedly prepared. The second e-mail states,

In addition to our four prior letters objecting to the unlawful and invalid nature of the purported arbitration proceeding commenced by Agribusiness, we understand that Agribusiness has now served a supposed submission consisting of "Plaintiffs' Statement of Facts and Claim and 10 Exhibits, a signed "verification letter" and "proposed award." Setting aside the fact that the arbitration proceeding is invalid and unlawful ab initio, Agribusiness's submission utterly fails to comply with the governing arbitration rules. Most disturbingly, Agribusiness has written a proposed arbitration award, which itself is unethical and unlawful and in violation of the governing arbitration rules. Thus, on these grounds, in addition to those set forth in its prior objections, Copragri further objects to the arbitration proceeding as violating the substantive and procedural due process rights of Copragri.

As set forth in Copragri's fourth objection to the purported arbitration, we will be [sic] commencing a court action in New York to enjoin the purported arbitration proceeding and will seek to recover all costs and legal fees incurred by Copragri in relation to the invalid and unlawful arbitration. Accordingly, you are respectfully notified to immediately suspend the arbitration and refrain from any further actions in violation of Copragri's rights.

On June 15, 2020, the Arbitrators issued the Award in the amount of USD 208,300.00. The Award neither addresses Copragri's five objections nor mentions the Sales Agreements. The Award does not address the issues of arbitrability and jurisdiction and does not include any legal citations.

Copragri filed the Petition on July 16, 2020. On July 23, 2020, Copragri attempted to serve Agribusiness in New York, through CT Corporation Services, which Copragri believed to be the agent for service that Agribusiness last disclosed to the New York Department of State. Copragri received a letter dated July 24, 2020, from CT Corporation Services, stating that CT Corporation Services was no longer authorized to act for Agribusiness. Copragri then attempted foreign service on Agribusiness through the Clerk of Court, pursuant to Federal Rule of CivilProcedure 4(f)(2)(c)(ii); on August 20, 2020, the Clerk of Court mailed the Petition, via Federal Express, to (1) Agribusiness United DMCC Unit No. 2601, Saba 1, Plot No. E3, Jumeirah Lakes Towers, Dubai, United Emirates and (2) Agribusiness United DMCC, 6/F Unit 607 HDS Tower, United Arab Emirates. Agribusiness did not appear, and on October 1, 2020, the Court issued an Order permitting alternative service of the Petition per Federal Rule of Civil Procedure Rule 4(f)(3) by e-mail to three e-mail accounts that Agribusiness previously used to communicate with Copragri (the "Service Order"). On October 2, 2020, Copragri served the Petition on Agribusiness pursuant to the Service Order. Copragri did not receive any e-mail error messages or automatic responses. Agribusiness did not respond.

II. DISCUSSION

A. Subject Matter Jurisdiction

As a threshold matter, this Court has subject matter jurisdiction under Chapter II of the FAA -- specifically, 9 U.S.C. § 203. Federal courts have a duty "to inquire into their subject matter jurisdiction sua sponte."¹ Hermès of Paris, Inc. v. Swain, 867 F.3d 321, 324 n.3 (2d Cir. 2017); accord Klein v. Aicher, No. 19 Civ. 9172, 2020 WL 4194823, at *2 (S.D.N.Y. July 21, 2020), appeal withdrawn, No. 20-2775, 2020 WL 8575591 (2d Cir. Oct. 29, 2020). Chapter I ofthe FAA, 9 U.S.C. §§ 1-16, does not "independently confer subject matter jurisdiction on the federal courts." Durant, Nichols, Houston, Hodgson & Cortese-Costa, P.C. v. Dupont, 565 F.3d 56, 63 (2d Cir. 2009); accord SSI (Beijing) Co. Ltd. v. Prosper Bus. Dev. Corp., No. 18 Civ. 8408, 2020 WL 6323938, at *6 (S.D.N.Y. July 30, 2020), report and recommendation adopted, No. 18 Civ. 8408, 2020 WL...