I/S Stavborg (O. H. Meling, Manager) v. National Metal Converters, Inc.

• Decision Date: 24 May 1974
• Docket Number: D,No. 633,633
• Citation: 500 F.2d 424
• Parties: In re I/S STAVBORG (O. H. MELING, MANAGER), Petitioner-Appellee, v. NATIONAL METAL CONVERTERS, INC., Respondent-Appellant. ocket 73-2491.
• Court: U.S. Court of Appeals — Second Circuit

Page 424

500 F.2d 424

In re I/S STAVBORG (O. H. MELING, MANAGER), Petitioner-Appellee, v. NATIONAL METAL CONVERTERS, INC., Respondent-Appellant.

No. 633, Docket 73-2491.

United States Court of Appeals, Second Circuit.

Argued March 6, 1974.

Decided May 24, 1974.

Herbert F. Roth, New York City (Finley, Kumble, Heine, Underberg & Grutman, New York City, of counsel), for respondent-appellant.

John J. Reilly, New York City (Parker S. Wise, Jr., Haight, Gardiner, Poor & Havens, New York City, of counsel), for petitioner-appellee.

Before MOORE, MANSFIELD and OAKES, Circuit Judges.

OAKES, Circuit Judge:

National Metal Converters, Inc., appeals from an order entered August 2, 1973, by the district court granting I/S Stavborg's motion to confirm a 2-1 arbitration award made May 3, 1973, in New York City. Appellant raises two main issues on this appeal: (1) whether the district court had jurisdiction to enter judgment on the award under the Federal Arbitration Act, 9 U.S.C. 1 et seq., when the parties did not explicitly agree to the entry of judgment on an award in the arbitration agreement; and (2) whether the decision of the majority of the arbitrators should be reversed on grounds of its being either 'clearly erroneous' or 'manifestly in disregard' of the applicable law. We find that the district court did have jurisdiction to enter judgment on the award, and, not without some doubt, affirm the award.

I. JURISDICTION OF THE DISTRICT COURT.

On August 8, 1972, appellant, as charterer, agreed to charter a vessel owned by appellee to transport bulk scrap steel from Bath, Maine, to Bilbao, Spain. Clause 37 of the contract of charter party entered into by the parties, governing the arbitration of disputes, reads as follows:

Any and all differences and disputes of whatsoever nature arising out of this Charter, shall be put to arbitration in the City of New York pursuant to the Laws relating to arbitration there in force, before a board of three persons consisting of one arbitrator to be appointed by the Owners (appellee), one by the Charterers (appellant), and one by the two so chosen. The decision of any two of the three on any point or points shall be final.

After the steel had arrived in Spain, a dispute arose concerning the payment of freight due under the charter party agreement; this dispute was submitted to arbitration in New York City. Both parties apparently agreed to submit the dispute to arbitration under clause 37, as no court action was brought to enforce that clause. Both parties appointed one arbitrator. Both parties agreed (presumably because the two appointed arbitrators were unable to agree) to the appointment of a third arbitrator by the district court below and accepted that court's appointee. Both parties participated fully in the arbitration itself, including the submission of briefs, calling of witnesses and presenting of argument to the arbitrators. After an award for appellee had been handed down, appellant petitioned the district court to modify or vacate that award pursuant to 9 U.S.C. 9. Only on this appeal does appellant raise, for the first time, the question whether the district court had jurisdiction to enter judgment on the award. Appellant relies primarily on this court's recent decision in Varley v. Tarrytown Associates, Inc., 477 F.2d 208 (1973). Since we agree with appellee that the language of clause 37, coupled with the conduct of appellant here, ¹ was sufficient to confer jurisdiction on the district court to enter judgment on the award pursuant to 9 U.S.C. 9, we do not consider the alternative arguement advanced by appellee on the basis of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. 201 et seq. ² The fact that the question was raised for the first time on appeal is immaterial since the jurisdiction of the federal district court is at stake. See e.g., United States v. Heyward-Robinson Co., 430 F.2d 1077, 1080 (2d Cir. 1970), cert. denied, 400 U.S. 1021, 91 S.Ct. 582, 27 L.Ed.2d 632 (1971).

As this court stated in Verley, 477 F.2d at 210, the language of9 U.S.C. 9 is quite specific in requiring an agreement by the parties to entry of judgment by a federal court before a federal court has jurisdiction to do so; section 9 states that a federal district court may confirm an artiration award 'If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration . . ..' One purpose of this provision is to ensure that the aprties have affirmatively agreed to the application of the federal substantive law contemplated by the Act to the interpretation of the arbitration agreement into which they have entered. See Coenen v. R. W. Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949, 92 S.Ct. 2045, 32 L.Ed.2d 337 (1972). See generally Note, The Consequences of a Broad Arbitration Clause under the Federal Arbitration Act, 52 B.U.L.Rev. 571, 589-596 (1972).

It is true that clause 37 does not contain any explicit agreement by the parties to entry of judgment on an arbitral award. The question for us is whether that omission precludes that inplication, from conduct, of consent to such entry. Varley, of course, did not hold that consent must be explicit within the arbitration clause itself or even in some document incorporated therein by reference. In Varley, the arbitration clause provided that disputes under the contract 'shall be settled by arbitration pursuant to the rules of the American Arbitration Association.' 477 F.2d at 209. The appellee in Varley attempted to argue that consent to entry of judgment was made out for purposes of 9 U.S.C. 9 by the reference to the 'rules' of the American Arbitration Association (AAA). This court acknowledged in Varley, as it had previously in Reed & Martin, Inc. v. Westinghouse Electric Co., 439 F.2d 1268 (2d Cir. 1971), that such 'rules' could be incorporated into an arbitration clause, thereby establishing the requisite 'consent' of the parties to entry of judgment, if the 'rules' so provided. The problem for appellee in Varley was that the 'rules' there made no reference whatsoever to entry of judgment; indeed, the AAA had recommended that a separate and distinct clause be written directly into the arbitration agreement to achieve that purpose.

Clause 37 contains two provisions bearing on the question. The first is that arbitration was to be conducted in the City of New York 'pursuant to the Laws relating to arbitration there in force . . ..' The second is that 'The decision of any two of the three (arbitrators) . . . shall be final.' From the first, it may be implied that both parties-- particularly appellee here, a foreign corporation-- had consented both the arbitrate in New York City and to be served with process in New York to enforce any arbitral award that might be forthcoming. Thus, the provision would have protected appellant if, inter alia, appellee had refused to submit to arbitration. ³ The second clause clearly expresses the intent of the parties that the arbitrators' decision as expressed in the award was to be 'final.' Whatever 'final' means, it at least expresses the intent of the parties that the issues joined and resolved in the arbitration may not be tried de novo in any court, state or federal. Thus, the only point left open for conjecture by clause 37 is whether the parties intended for judgment to be entered in a federal, as opposed to a state, court. Where, as here, the substantive law to be applied to interpretation of the contract itself is federal maritime law, it seems doubtful to us that either party was particularly concerned that an award might be enforced in federal court: their main concern was that the award should be 'final.'

Whatever doubt remains as to the intent of the parties from the language of clause 37, that doubt in removed by the conduct of the parties to this case as recounted above. At an early stage, the power of a federal court was invoked to secure the appointment of the 'third' arbitrator. After arbitration, appellant moved in federal district court under 9 U.S.C. 9 to vacate and/or modify that award. Under these circumstances, it seems abundantly clear to us that both parties in fact consented to the entry of judgment on any arbitral award entered, and this was sufficient to permit the exercise of jurisdiction by the district below.

II. REVIEW OF THE ARBITRAL AWARD.

Appellant's other claims may be stated variously that the arbitrators' decision was 'clearly erroneous,' or was 'in manifest disregard of the applicable law,' or amounted to a 'reformation' of the charter party agreement. Although interpretation of the charter party agreement here in issue is clearly a matter of federal maritime law, 'the charter party is merely a contract, subject in general to all the rules and requirements of contract law.' G. Gilmore & C. Black, The Law of Admiralty 172 (1957). The same authors have also observed that 'a single short (and often, to the uninitiate, obscure) expression may refer to a whole set of complicated practices perfectly familiar to those who deal regularly in such matters . . .,' id., and they conclude that 'In such a field, it is not surprising that arbitration . . . has largely taken the place of litigation.' Id. at 173.

As is the usual charter party case, id., the charter party here was negotiated by brokers for both appellant and appellee. The facts surrounding the voyage itself were not in dispute before the arbitrators. The vessel, owned by appellee, left Bath, Maine, on or about August 17, 1972, carrying 4,091.95 long tons of bulk scrap steel. The steel was consigned to one Rosal, 'F.O.B. stowed vessel.' Under the charter party, freight was due to be paid by August 24, 1972, with Rosal having the initial obligation to pay the freight. ⁴ Rosal did not pay the freight by that date, nor had it been paid at the time of arbitration. The parties...