Hall Steel Co. v. Metalloyd Ltd.

• Decision Date: 07 June 2007
• Docket Number: No. 05-70743.,05-70743.
• Citation: 492 F.Supp.2d 715
• Parties: HALL STEEL COMPANY, Plaintiff, v. METALLOYD LTD., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

492 F.Supp.2d 715

HALL STEEL COMPANY, Plaintiff, v. METALLOYD LTD., Defendant.

No. 05-70743.

United States District Court, E.D. Michigan, Southern Division.

June 7, 2007.

Joshua A. Lerner, Steven Z. Cohen, Cohen, Lerner, Royal Oak, MI, for Plaintiff.

Michael J. Liddane, Mary Tatham, Foster, Meadows, Detroit, MI, for Defendant.

OPINION AND ORDER DENYING DEFENDANT'S MOTION TO CONFIRM FOREIGN ARBITRAL AWARDS

ROSEN, District Judge.

I. INTRODUCTION

Plaintiff Hall Steel Company commenced this action in a Michigan circuit court on January 31, 2005, asserting breach-of-contract and conversion claims against Defendant Metalloyd, Ltd. arising from Defendant's shipment of steel coils that allegedly did not meet Plaintiff's specifications. Defendant obtained payment for this shipment through a letter of credit arranged by Plaintiff, but Plaintiff alleged in its complaint that this payment was improper in light of the deficiencies in Defendant's steel shipment.

Defendant subsequently removed the case to this Court on February 25, 2005, citing diversity of citizenship between Plaintiff, a Michigan company, and Defendant, a foreign corporation based in London, England. Shortly after removal, Defendant filed a motion to dismiss or stay this proceeding, contending that the parties' dispute was governed by an arbitration agreement that was enforceable under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. Following an initial evidentiary hearing, and just prior to the continuation of this hearing, Plaintiff and its counsel conceded that the parties' dispute was subject to arbitration under the parties' agreement. Accordingly, by order dated February 14, 2006, the Court remanded this case for arbitration in London, England in accordance with the parties' agreement, and retained jurisdiction only for the limited purpose of enforcing any subsequent arbitration awards.

By motion filed on March 1, 2007, Defendant now seeks confirmation of two such awards made by the London arbitrator. Notably, neither of these awards touches upon the parties' underlying contractual dispute. Rather, in the first of these awards, dated March 16, 2006 and labeled an "Interim Final Arbitration Award," the London arbitrator found that Plaintiff was liable to Defendant for the costs reasonably incurred by Defendant before this Court in litigating the existence of Plaintiff's obligation to submit its dispute to arbitration rather than seek judicial recourse. The London arbitrator then issued a second award, dated November 29, 2006 and entitled an "Interim Final Arbitration Award of Assessed Costs," in which he determined that the costs incurred by Defendant in this endeavor totaled £57,516.61 plus $218,622.89, or roughly $332,000 in all. Through the present motion, Defendant seeks the confirmation of these two awards, as well as the entry of a judgment against Plaintiff encompassing the arbitrator's determination of costs plus interest accruing from the date of the arbitrator's initial March 16, 2006 award.

In its April 17, 2007 response opposing this motion, Plaintiff advances two reasons why, in its view, the arbitrator's awards cannot be confirmed at this juncture. First, Plaintiff contends that the awards are merely interim, and not final, and hence are not yet eligible for confirmation under the governing law. In a second, related argument, Plaintiff asserts that it would violate due process principles to order the payment of a substantial amount pursuant to awards that do not purport to even address, much less resolve, the substantive dispute that the parties have agreed to arbitrate. For the reasons stated below, the Court finds merit in Plaintiff's first contention, and thus need not consider at this time whether there might be other grounds for declining to confirm the arbitrator's awards,

II. ANALYSIS

A. The Standards Governing Defendant's Motion

Both the United Kingdom and the United States are signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is commonly referred to as the "New York Convention" and incorporated into this nation's law at 9 U.S.C. § 201 et seq. The parties are agreed that the two awards made by the London arbitrator in this case are within the ambit of the New York Convention, see 9 U.S.C. § 202, and it is likewise clear that this Court has subject matter jurisdiction over Defendant's request for confirmation of these two awards, see 9 U.S.C. §§ 203, 207.

Under the federal law implementing the New York convention, "[w]ithin three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration." 9 U.S.C. § 207. The court, in turn, "shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention." 9 U.S.C. § 207. In opposing Defendant's present motion, Plaintiff relies principally upon the Convention provision that permits refusal of confirmation on the ground that "[t]he award has not yet become binding on the parties." New York Convention, art. V, § 1(e). Alternatively, Plaintiff suggests that Defendant's request for confirmation may be denied on the ground that "recognition or enforcement of the award would be contrary to the public policy of" the United States. New York Convention, art. V, § 2(b). Accordingly, the Court turns to these issues.

B. The Arbitrator's Interim Awards Are Not Yet Eligible for Recognition or Enforcement by This Court.

Through the present motion, Defendant requests that the Court confirm two awards issued by the London arbitrator on March 16 and November 29, 2006. As its first ground for opposing this requested relief, Plaintiff argues that the two awards are not yet final, and thus are presently ineligible for recognition or enforcement by this Court. In support of this contention, Plaintiff points to the arbitrator's own designation of his awards as "interim." Plaintiff further notes that the two awards at issue do not purport to resolve, or even address, the underlying contractual dispute between the parties. Under these circumstances, Plaintiff asserts that Defendant's request for confirmation is premature. The Court agrees.

Whether enforcement of an arbitration award is sought under the FAA or the New York Convention, the courts are agreed that the award in question must be "final" in order to be eligible for judicial confirmation. See, e.g., Hart Surgical, Inc. v. Ultracision, Inc., 244 F.3d 231, 233 (1st Cir.2001); Publicis Communication v True North Communications, Inc., 206 F.3d 725, 728-29 (7th Cir.2000); Michaels v. Mariforum Shipping, S.A., 624 F.2d 411, 414-15 (2d Cir.1980). As the Second Circuit has observed, "[m]ost of the advantages inherent in arbitration are dissipated by interlocutory appeals to a district court," where such "applications for interlocutory relief result only in a waste of time, the interruption of the arbitration proceeding, and delaying tactics in a proceeding that is supposed to produce a speedy decision." Michaels, 624 F.2d at 414 (internal quotation marks, alteration, and citation omitted). And, as noted, the New York Convention evidently recognizes and accounts for this concern by expressly authorizing the courts to refuse confirmation of awards that are "not yet ... binding on the parties." New York Convention, art. V, § 1(e).

Nonetheless, the courts have found that an arbitrator's award need not conclusively resolve all matters in dispute in order to qualify as "final" and eligible for confirmation. The Sixth Circuit has explained, for example, that "an `interim' award that finally and definitively disposes of a separate independent claim may be confirmed notwithstanding the absence of an award that finally disposes of all the claims that were submitted to arbitration." Island Creek Coal Sales Co. v. City of Gainesville, 729 F.2d 1046, 1049 (5th Cir. 1984) (internal quotation marks and citations omitted). Similarly, an arbitrator's characterization of an award as "interim" does not necessarily disqualify it from judicial confirmation, because "[t]he content of a decision — not its nomenclature — determines finality." Publicis Communication, 206 F.3d at 728.

Against this legal backdrop, the Court turns to the two awards at issue here. The arbitrator's initial March 16, 2006 award states at the outset that it is "an Interim Final Arbitration Award concerning liability for costs incurred as a result of legal action taken in the U.S.A." (Defendant's Motion, Ex. 3, 3/16/2006 Award at 2.) After recounting the general nature of the parities' underlying dispute and summarizing the prior proceedings before this Court, the arbitrator rejected Plaintiff's contention that he should address the substantive breach-of-contract dispute "before turning to the alleged breach of the arbitration clause." (Id. at 6.) Instead, the arbitrator reasoned:

In my view, the proceedings in Michigan were discrete, and had no bearing on the proceedings on the substantive issue. The costs incurred as a result of the Michigan proceedings were incurred before the Parties could commence the substantive action in the forum agreed in the Contract of Sale. They were costs which were, by virtue of [Plaintiff's] concession, wasted costs. Since they were a discrete set of costs, with minimal bearing on the substantive issue, I do not accept that I should defer findings on these costs until the substantive issue has been determined.

(Id. at 7.) The arbitrator then concluded (i) that he had jurisdiction over the parties' contractual disputes, (ii) that Plaintiff was liable to Defendant "for the costs reasonably incurred by [Defendant] in the U.S. proceedings, such damages to be assessed by this Tribunal if not agreed," and (iii) that Defendant further was...