Greenwich Marine, Incorporated v. SS Alexandra

• Decision Date: 07 January 1965
• Docket Number: No. 22,Docket 28869.,22
• Citation: 339 F.2d 901
• Parties: GREENWICH MARINE, INCORPORATED, Libelant, Appellant, Cross-Appellee, v. S.S. ALEXANDRA, her engines, boilers, etc., Fidelity Shipping Company, Ltd., Respondent, Appellee, Cross-Appellant, and Ministry of Supply of the United Arab Republic, Respondent.
• Court: U.S. Court of Appeals — Second Circuit

339 F.2d 901 (1965)

GREENWICH MARINE, INCORPORATED, Libelant, Appellant, Cross-Appellee, v. S.S. ALEXANDRA, her engines, boilers, etc., Fidelity Shipping Company, Ltd., Respondent, Appellee, Cross-Appellant, and Ministry of Supply of the United Arab Republic, Respondent.

No. 22, Docket 28869.

United States Court of Appeals Second Circuit.

Argued September 29, 1964.

Decided January 7, 1965.

COPYRIGHT MATERIAL OMITTED

Woodson D. Scott, New York City (Lord, Day & Lord, New York City, on the brief) (Henry C. Blackiston, New York City, of counsel), for libelant, appellant, cross-appellee.

James D. Hanlon, New York City (Zock, Petrie, Sheneman & Reid, New York City, on the brief), for respondent, appellee, cross-appellant.

Before FRIENDLY, KAUFMAN and MARSHALL, Circuit Judges.

MARSHALL, Circuit Judge:

Fidelity Shipping Co., Ltd. Fidelity chartered the S. S. Alexandra to Greenwich Marine, Inc. Greenwich, and Greenwich in turn chartered the ship to the Ministry of Supply of the United Arab Republic Ministry. The Alexandra made the scheduled voyage from New York to ports in the United Arab Republic and sometime after the voyage Greenwich filed a libel against the Alexandra, Fidelity and the Ministry. The libel alleged that the Ministry refused to pay Greenwich $92,766.96 due for the carriage of the cargo, that the Ministry had claimed a loss and damage to the cargo amounting to $267,787.35, and that if there was any such loss and damage, and if Greenwich was held liable for that amount, Fidelity would have to indemnify it. Greenwich also claimed that the Ministry failed to appoint an arbitrator and proceed to arbitration as required by the contract; and that Fidelity was similarly delinquent in its obligation to arbitrate. The libel purported to be "filed pursuant to the provisions of the Federal Arbitration Act," 9 U.S.C. §§ 1-14, and it requested the District Court to order "that arbitration proceed in the manner provided for" in the contracts and that the ship be seized "in accordance with" Section 8 of the Act. On the same day the libel was filed, process in the form of a monition was issued, and the Alexandra was seized and attached by the United States Marshal for the Southern District of New York. Fidelity appeared, filed its claim as owner, and substituted corporate security in the amount of $270,000 for the Alexandra and finally, six days after the original seizure, the Alexandra was discharged from custody by an order of the court.

Fidelity moved to have the libel against it and the Alexandra dismissed on the ground that the libel failed to state a cause of action; the Ministry moved for a stay of the proceedings in the suit so far as the Alexandra and Fidelity were concerned and for an order directing that arbitration take place solely between Greenwich and the Ministry; and Greenwich petitioned for an order to compel arbitration under sections 4 and 8 of the Act. The Ministry's motion for a stay was denied; and Greenwich's petition to compel arbitration was, under the authority of Section 4 of the Act, granted — the Ministry was required to arbitrate with Greenwich over the freight of $92,766.96 claimed by Greenwich and over the $267,787.35 claimed by the Ministry against Greenwich for cargo damage and loss, and Fidelity was ordered to arbitrate with Greenwich over the indemnity claim. However, the court found that the libel based on this indemnity claim did not state "any cause of action" justiciable in admiralty, but instead was "entirely speculative and hypothetical." Accordingly the court decreed that the libel against the Alexandra and Fidelity be dismissed and that the security obtained under the color of a proper libel be cancelled and discharged (although such cancellation and discharge was stayed pending final determination of any appeal). Greenwich appealed from this decree dismissing the libel, and we affirm.

Section 4 of the Federal Arbitration Act, 9 U.S.C. § 4, permits a party to petition a United States district court for an order compelling arbitration in a maritime dispute covered by an arbitration agreement, but it does not empower the district court to require the party on the wrong end of the order to post security and much less does the section itself require the posting of security. The parties have therefore assumed, with good reason, that Greenwich would not have been entitled to security if it merely filed a petition for the order under section 4 compelling arbitration. The parties have also assumed, once again with good reason, that if Greenwich properly libeled either the Alexandra or Fidelity on a cause of action justiciable in admiralty, and not one solely arising from the failure to arbitrate, Greenwich would be entitled, under traditional admiralty procedure, to have the Alexandra seized. See Admiralty Rules 2 and 9. These assumptions are not changed by section 8 of the Federal Arbitration Act, 9 U.S.C. § 8. Section 8 provides that a party may obtain an order compelling arbitration on a claim even though the party chose to initiate a suit in admiralty on that same claim; it also provides that if this suit is commenced, the order can be obtained within the proceeding and that there is no need to follow the procedure prescribed in section 4 of commencing a separate procedure by filing a petition. The purpose of section 8 is to relieve a party from making an election between the libel-cum-seizure remedy, on the one hand, and the order-to-arbitrate remedy, on the other hand — not to append the right to seizure to the order-to-arbitrate remedy of section 4. See Anaconda v. American Sugar Refining Co., 322 U.S. 42, 64 S.Ct. 863, 88 L.Ed. 1117 (1944); Marine Transit Co. v. Dreyfus, 284 U.S. 263, 52 S.Ct. 166, 76 L.Ed. 282 (1932). Hence, the principal question is whether Greenwich's libel stated a good "cause of action" in admiralty against the Alexandra and Fidelity, thereby entitling it to have the U. S. Marshal seize the Alexandra.¹ The District Judge answered this question in the negative, and we are not convinced that he erred.

Greenwich attempted to make out a "cause of action" for indemnification — claiming that Fidelity was required to indemnify Greenwich for whatever amount Greenwich has to pay the Ministry for the cargo damage. But the district court properly held that this claim was premature: no judgment had been entered against Greenwich for the cargo damage, no suit had been instituted against Greenwich for the cargo damage, the Ministry, who already appeared in this action, had not sought to cross-libel Greenwich for the cargo damage, and in fact the Ministry had instituted two separate actions against the Alexandra and Fidelity for the same cargo damage — one in the Egyptian Court in Port Said and the other in the Eastern District of New York. At the time Fidelity moved to dismiss the libel, it was possible, and exceedingly probable that Greenwich would never need to sue Fidelity for indemnification, since the Ministry decided to sue Fidelity directly. Had Judge Wyatt allowed Greenwich's libel against the Alexandra and Fidelity to go forward there would be two parallel law suits being prosecuted against Fidelity by different parties for the same conduct. The waste of judicial energies and the burden on Fidelity would be manifest, especially since Fidelity had already posted security approximating $270,000 in each of the suits commenced against it by the Ministry. Greenwich may have only been interested in obtaining an order compelling Fidelity to arbitrate, not in having the indemnity libel go forward at the time Fidelity moved to dismiss, but in assessing the adequacy of a libel it is fair to assume that the libelant would be prepared to and interested in prosecuting its claim at that time, if the court refused to compel arbitration. Although Judge Wyatt could have avoided this duplication by staying the trial of the action, we cannot require him to choose that alternative as opposed to the equally reasonable alternative of dismissing the libel without prejudice.

First, and most importantly, the admiralty judge, who is asked to disregard the prematurity of plaintiff's claim, must be compared to the Chancellor "balancing the equities," and we would be entitled to reverse him only if he clearly abused his discretion — which Judge Wyatt surely did not do — not simply because we would have resolved the equities differently. In cases such as The Lassell, 193 F. 539 (E.D.Pa.1912), The Horsa, 232 F. 993 (E.D.S.C.1915) and Moran Towing & Transport Co. v. United States, 56 F. Supp. 104 (S.D.N.Y.1944) it was the district judge who, in light of the over-whelming equitable position of the plaintiff, chose to disregard the prematurity of plaintiff's claim. The inherent power to adapt an admiralty rule to the equities of a particular situation is entrusted to the sound discretion of the district judge sitting as an admiralty judge, and not to the circuit judges sitting in review. Only if our review is so limited to determining whether he acted within the bounds of his discretion will the allocation of functions between the trial court and the reviewing court be preserved, and the sense of responsibility of the trial court strengthened.

Secondly, although some district judges sitting in admiralty have been willing under certain circumstances to ignore the prematurity of a claim, this does not mean that all doctrines of accrual have been abrogated in admiralty. For example, doctrines of accrual have a continuing vitality in determining whether a statute of limitations has run. The prematurity objection has been ignored only in isolated situations under peculiar factual circumstances and, to be sure, in some cases it has been sustained. In Mitsui Steamship Co. Ltd. v. Jarka Corp., 218 F.Supp. 424 (E.D.Pa.1963), for example, Judge Kraft dismissed an indemnity libel for failure to state a cause of action because it was found to be premature and "nothing more than an...