Duferco Intern. Steel v. T. Klaveness Shipping

• Decision Date: 24 June 2003
• Docket Number: Docket No. 02-7238.
• Citation: 333 F.3d 383
• Parties: DUFERCO INTERNATIONAL STEEL TRADING, Petitioner-Appellant, v. T. KLAVENESS SHIPPING A/S, Respondent-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

333 F.3d 383

DUFERCO INTERNATIONAL STEEL TRADING, Petitioner-Appellant, v. T. KLAVENESS SHIPPING A/S, Respondent-Appellee.

Docket No. 02-7238.

United States Court of Appeals, Second Circuit.

Argued November 1, 2002.

Decided June 24, 2003.

COPYRIGHT MATERIAL OMITTED

Robert P. Stein, New York, New York (Greenberg Traurig, LLP, New York, New York; Stanley McDermott III, Piper Rudnick LLP, New York, New York, of counsel), for Petitioner-Appellant.

John D. Kimball, New York, New York (Healy & Baillie, LLP, New York, New York, of counsel), for Respondent-Appellee.

Before: FEINBERG, CARDAMONE, and SACK, Circuit Judges.

CARDAMONE, Circuit Judge.

This appeal stems from arbitration proceedings arising under a shipping contract between Duferco International Steel Trading Co. (Duferco or appellant) and T. Klaveness Shipping A/S (Klaveness). Duferco appeals from an order of the United States District Court for the Southern District of New York (Swain, J.), entered February 20, 2002, denying its petition to vacate, in part, an arbitration award and granting Klaveness' cross-petition for confirmation of the award.

In its petition to vacate the arbitral award, Duferco relies on the doctrine of manifest disregard of the law. For us to vacate an arbitral award on the grounds of manifest disregard of the law — a step we very seldom take — we must be persuaded that the arbitrators understood but chose to disregard a clearly defined law or legal principle applicable to the case before them. The error must be so palpably evident as to be readily perceived as such by the average person qualified to serve as an arbitrator. Any plausible reading of an award that fits within the law will sustain it. Here we believe there is such a plausible reading. Hence, we affirm.

BACKGROUND

A. Facts

On November 30, 1993, Duferco contracted with Klaveness to charter a seagoing vessel to carry a cargo of steel slabs from Taranto, Italy, to New Orleans, Louisiana. Duferco's contract with Klaveness was in the form of a voyage charter that covered only the specific voyage set out in the document. The voyage charter provided that the steel would be loaded onto Klaveness' vessel at "one(1) safe port/safe berth Taranto."

To fulfill its charter with Duferco, Klaveness in turn chartered the M.V. ARISTIDIS from its owner, Lifedream Shipping Company, Ltd. (Lifedream). Klaveness chartered the ARISTIDIS on January 3, 1994 by means of a time charter, a type of shipping agreement that allows a party to use an owner's vessel for a specified period of time. Klaveness' time charter with Lifedream allowed use of the ARISTIDIS for two to four months, plus or minus ten days at Klaveness' option. In addition, the time charter contained a safe-berth warranty, which required that the vessel trade via "safe port(s), safe berth(s), [and] safe anchorage(s)." In January and February 1994, while the ARISTIDIS was moored at the port of Taranto, its crew loaded aboard her the steel slabs for shipment to New Orleans. Due to seasonal swells and back waves at Taranto, the crew of the ARISTIDIS experienced major difficulties in the loading operation resulting in damage to the mooring equipment and extra costs from measures taken to keep the vessel stable.

B. London Arbitration

Lifedream, as a result of the difficulties encountered in Taranto, sought arbitration against Klaveness in London to recover for the damages and extra costs incurred (London arbitration). The London arbitrators found Klaveness liable for these damages because it had breached the safe-berth warranty by mooring the ARISTIDIS where sea conditions made the port unsafe.

Klaveness moved to vouch Duferco into the London arbitration to obtain indemnification. Vouching-in is a common law procedural device that allows a party to arbitration to join a nonparty alleged indemnitor, referred to as the vouchee, by notifying the nonparty of the pendency of an arbitration that might obligate the vouchee to indemnify the defendant. See SCAC Transp. (USA), Inc. v. S.S. Danaos, 845 F.2d 1157, 1161-62 (2d Cir.1988); see also Washington Gaslight Co. v. Dist. of Columbia, 161 U.S. 316, 329-30, 16 S.Ct. 564, 40 L.Ed. 712 (1896); Universal Am. Barge Corp. v. J-Chem, Inc., 946 F.2d 1131, 1138 (5th Cir.1991). Vouching-in is used where the vouchee cannot be impleaded because of defects in personal jurisdiction. The purpose of this legal device is to avoid duplicative litigation and the attendant possibility of inconsistent results. SCAC Transp. (USA), Inc., 845 F.2d at 1162.

Once notified, the vouchee has the option of joining the arbitration to defend the action. If the vouchee refuses to join, it may nonetheless be bound by the result in any subsequent litigation by principles analogous to collateral estoppel. Washington Gaslight, 161 U.S. at 329-30, 16 S.Ct. 564. For the vouchee to be bound, the party seeking to join the vouchee must be able to represent that party's interests fully and fairly in the arbitration. Universal, 946 F.2d at 1139-40.

Duferco declined to be vouched into the London arbitration, and on June 24, 1997 the arbitration panel found against Klaveness for all expenses and damages incurred at the port of Taranto. The award amounted to $150,000 in damages plus $37,900.50 in interest (London award).

C. New York Arbitration

Klaveness thereafter began arbitration in New York seeking, inter alia, full indemnification from Duferco for the London award to Lifedream that it was obligated to pay, as well as for attorneys' and arbitrators' fees from both arbitrations. At the arbitration hearing, Klaveness maintained that the warranty in its charter with Duferco — stating that it would load at "one(1) safe port/safe berth Taranto" — was similar to the one included in the charter between Klaveness and Lifedream, which provided that the vessel trade "via safe port(s), safe berth(s), [and] safe anchorage(s)," and therefore declared that vouching-in had been appropriate and that Duferco could thus be bound by the London award based on collateral estoppel principles.

Duferco did not challenge the findings of the London arbitrators, but it countered that collateral estoppel could not apply because significant differences between the time and voyage charters made the sweep of Klaveness' liability under its time charter with Lifedream far greater than Duferco's liability under its voyage charter with Klaveness. Essentially, Duferco asserted the Klaveness-Duferco voyage charter specifically waived any safe-berth warranty. Under settled principles of maritime law, a voyage charter that names a specific port relieves the charterer of liability for damage arising from conditions at that port so long as those conditions were reasonably foreseeable. See Tweedie Trading Co. v. N.Y.&B. Dyewood Co., 127 F. 278, 280-81 (2d Cir.1903); see also 2A Benedict on Admiralty § 175, at 17-26 (7th ed. 2002). Since the named port of Taranto had predictable seasonal swell conditions, Duferco insisted the safe-berth warranty had been waived, and it therefore had no liability for damages occurring there.

Duferco further averred that it should not be bound by any findings of the London arbitrators because its interests could not have been fully and fairly represented in the London arbitration. It argued that since Klaveness could not advance the named-port argument, as Duferco could have, to relieve itself of liability, Klaveness could not have fully and fairly represented its interests in the London arbitration.

A divided panel of the New York arbitrators found for Klaveness in an arbitration decision and award entered on April 18, 2001 (New York award). The majority found that Klaveness did not waive the safe-berth warranty by agreeing with Duferco to load the ship at Taranto, and that the safe-berth warranties of both charters were sufficiently identical for vouching-in. The panel therefore found Duferco to be bound by the outcome of the London arbitration with respect to the damage portion of the London award and ordered it to indemnify Klaveness for the amount Klaveness paid Lifedream in satisfaction of the London award.

The panel went on to rule nonetheless that collateral estoppel principles prevented Klaveness from collecting attorneys' and arbitrators' fees from Duferco for the London arbitration. The majority reasoned, somewhat confusingly, that "[i]nasmuch as the London arbitrators did not consider the safe-berth warranties of the voyage charter, as properly not before them, no `previous determination' had been made, and therefore, Klaveness must not be permitted to now use the London award against Duferco offensively for vouching-in or collateral estoppel purposes." On its own motion, the arbitration panel awarded Klaveness $120,000 as an allowance toward attorneys' fees and expenses for the New York arbitration. The panel majority made several other determinations of liability related to events at the port of New Orleans. Neither party contests these additional determinations and, in any event, they are not relevant to this appeal.

D. District Court Proceedings

Following the conclusion of the New York arbitration, Duferco, as noted, petitioned the Southern District to vacate that portion of the arbitration award compelling it to indemnify Klaveness for the London arbitration. The district court denied the petition and confirmed the award. See Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 184 F.Supp.2d 271, 272 (S.D.N.Y.2002). Duferco appeals.

DISCUSSION

I Standard of Review

We review a district court's decision to confirm an arbitration award de novo to the extent it turns on legal questions, and we review any findings of fact for clear error. Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 208 (2d Cir.2002).

It is well established that courts must grant an arbitration panel's decision great deference. A party petitioning a federal court to vacate an arbitral award bears the heavy burden of...