Jones v. Sea Tow Services Freeport New York, Inc.

• Citation: 828 F. Supp. 1002
• Decision Date: 21 July 1993
• Docket Number: No. CV-91-4669.,CV-91-4669.
• Parties: Charles C. JONES and Clara E. Jones, Plaintiffs, v. SEA TOW SERVICES FREEPORT NEW YORK, INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

828 F. Supp. 1002

Charles C. JONES and Clara E. Jones, Plaintiffs, v. SEA TOW SERVICES FREEPORT NEW YORK, INC., Defendant.

No. CV-91-4669.

United States District Court, E.D. New York.

July 21, 1993.

Frederick A. Lovejoy, Bigham, Englar, Jones & Houston, New York City, for plaintiffs.

Richard P. O'Leary, McCarter & English, New York City, for defendant (Thomas F. Daly, McCarter & English, Newark, NJ, of counsel).

MEMORANDUM AND ORDER

GLASSER, District Judge:

Plaintiffs Charles and Clara Jones, joint owners of the yacht the MISS JADE II, filed the complaint in this declaratory judgment action on November 26, 1991 in response to defendant Sea Tow Services Freeport NY, Inc. ("Sea Tow") having commenced an arbitration proceeding in London, England.¹ Plaintiffs seek a declaration by this court of their rights and responsibilities under a Lloyd's Standard Form of Salvage Agreement ("Lloyd's Open Form" or "LOF") signed by the parties. Defendant counterclaims for outstanding salvage fees owed under the LOF. The parties agreed to stay the London arbitration pending resolution of this action.

Several motions are currently before this court. First, plaintiffs move for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure arguing that no material issue of fact exists concerning either this court's power to compel foreign arbitration or the validity of the contract. Second, defendant cross-moves for leave to file a second amended answer stating an additional counterclaim against plaintiffs for breach of a settlement agreement between the parties. In response to the motion to amend, plaintiffs move for Rule 11 sanctions against defendant based on the assertion that the parties never actually entered into a finalized settlement agreement and that even if they did, defendant could have included this counterclaim through its first motion to amend. For the reasons provided below, this court finds that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards governs the LOF at issue; accordingly, this action is hereby stayed pending arbitration in London in accordance with the provisions of the contract between the parties.

FACTS

The MISS JADE II is a 33' pleasure craft registered and moored in New York State. At approximately 8:30 p.m. on the evening of August 20, 1991 — during a voyage from Essex, Connecticut to the yacht's home port of Freeport, New York — the MISS JADE II was struck by a wave. The boat rolled over, causing the Joneses to sustain some minor injuries. (Deposition of Charles C. Jones, dated July 14, 1992, at 41, 43, 116-17) hereinafter CCJ Dep. at ___. The vessel eventually came to rest on Atlantic Beach, Long Island, where a passerby assisted the plaintiffs in tying a line to one of the vessel's cleats to prevent her from drifting. Thereafter, the police were contacted, and an Officer Daly arrived to lend assistance.

Mr. Jones radioed for help from the United States Coast Guard who, in turn, requested that defendant Sea Tow, a professional salvage company, render aid to the stranded vessel. Captain Robert Raia, accompanied by Michael Marsh, arrived at Atlantic Beach in the Mobile I, a Sea Tow land vehicle. Marsh set the vessel's anchor as an additional measure to prevent the MISS JADE II from drifting (CCJ Dep. at 35), at which point Officer Daly left the scene and plaintiffs entered Captain Raia's vehicle. (CCJ Dep. at 143).

Once inside the Sea Tow Mobile I, plaintiffs were handed the Lloyd's Open Form agreement by Captain Raia. Appearing on the front page and throughout the LOF are statements that any disputes under the agreement are subject to arbitration in London, England.² The document also expressly states that the law of England, "including the English law of salvage," governs any proceedings. Furthermore, in large block letters on the front of the LOF appear the words "No Cure, No Pay," meaning that the salvor receives nothing for its risk and efforts if the salvage operation is unsuccessful. If the salvage operation is completed successfully, however, the salvor submits a claim for remuneration based on a number of factors including the vessel's value, the skill and effort necessitated by the salvage operation, and the level of success of that operation. See LOF Article 13; Trico Marine Operators, Inc. v. Dow Chemical Co., 809 F.Supp. 440, 441-43 (E.D.La.1992) (discussing criteria for salvage awards). Should the owner or insurer contest this claim, the disagreement is submitted to arbitration before the Lloyd's of London Arbitration Panel and either party to the agreement who wishes to be heard nominates a representative to proceed in the United Kingdom. Defendant contends that Lloyd's is an expert in the field of salvage awards.

The parties dispute the events that followed Captain Raia handing the LOF to Charles and Clara Jones. Plaintiffs claim that Captain Raia took advantage of their situation by misleading or failing to inform them about the nature of the contract they were signing and by requiring them to sign that contract under difficult and stressful conditions. More specifically, plaintiffs allege that poor lighting, loss of Mr. Jones's glasses, and a head injury sustained by Mrs. Jones prevented them from reading and understanding the LOF agreement. (Plaintiffs' 3(g) Statement ¶¶ 9-10; CCJ Dep. at 52, 66, 105, 112-13, 116-17, 119-20, 137-38; Deposition of Clara E. Jones, dated July 8, 1992, at 28, 34-36) hereinafter CEJ Dep. at ___.³ Plaintiffs also assert that Captain Raia induced them to sign the agreement by assuring them that Boat/U.S., their insurer, was familiar with LOFs, (CCJ Dep. at 52; CEJ Dep. at 38-39, 136-37), and by intimating that they would receive no help from Sea Tow if they refused to sign. (CCJ Dep. at 107-08; CEJ Dep. at 30-31, 107, 110). Plaintiffs also point out that Captain Raia did not give them a copy of the agreement to take home with them on the evening of the storm.

Plaintiffs do concede that Captain Raia spent between 30 and 45 minutes explaining something about the agreement to them, although they either disagree or cannot recall the specifies of that conversation. The following deposition testimony concerning the discussions inside the Mobile I is representative. First, Mr. Jones testified as follows:

Q: Looking at the document that has been marked D 1 for identification with today's date which is the Lloyd's salvage agreement, did your wife at that time that was signed in your name tell Capt. Raia that she objected to signing it?

* * * * * *

A: She signed under protest. You needed a lawyer to read these forms to see what it was all about, but at this point, he couldn't do anything unless we signed. That's where the signature comes in.

Q: Did your wife say to Capt. Raia "I am signing this under `protest'"?

A: Something to that effect. You couldn't read it, the lighting was poor.

Q: Precisely what do you recall your wife saying?

A: I don't recall exact words. We were trying to get something going. He kept trying to explain something about some law, but we didn't understand what he was talking about. At this point, we were upset, wet, cold and the only thing that I understood is that he couldn't do anything unless we signed something.

Q: How long did he try and explain it to you?

A: How long did it take him? I don't know.

Q: Your best estimate?

A: I don't recall. 45, 40 minutes, a half hour, I don't recall.

Q: Did your wife ever say to Capt. Raia "I don't want to sign this"?

A: Yes. Neither one of us wanted to sign, we don't sign anything without reading it but at that point we were just like over a barrel, we had to sign something otherwise there was a possibility of losing the boat drifting out to sea, something had to be done immediately.

Q: At the time the agreement was signed, Capt. Raia's assistant had already put the anchor out, hadn't he?

Mr. Lovejoy: Objection.

A: I don't recall whether it was done after or before.

(CCJ Dep. at 93-94). And Mrs. Jones testified:

Q: Now, you've testified, I believe, that you were in the four by four for about 40 to 45 minutes before the agreement was signed; is that correct?

A: It seemed to be that much. It seemed to be. I wasn't looking at a watch.

Q: During that period of time, did Captain Raia make an effort to explain the agreement to you?

A: Captain Raia said he deals with Boat/U.S. all the time, they were familiar with the forms and we wouldn't have a problem. It is a reputable company, right down the road—"right down the canal from you"; this was 1, 2, 3, according to him.

He would not read that entire form for us. He did not explain that form to us properly. It was misleading what he said. And I will stand by that.

Q: Did he say anything else other than what you just said?

A: Yes. He says, "Don't worry about it. We're familiar with them, O.K. They deal with us all the time. They are familiar with the form."

I'm not familiar with the form. They are familiar with the form.

Q: Did he saying sic anything else?

A: Basically that's the way it went for a while, till he finally convinced us, you know, and he said he would not — could not help us unless the form was signed, which I'm sure you will see.

(CEJ Dep. 136-37).

In stark contrast to plaintiffs' version of the above event, defendant asserts that Mrs. Jones actually read the LOF, that there was ample light to read the document, and that Mr. Jones had ample time to read it. (Defendant's 3(g) Statement ¶¶ 4, 12; Affidavit of Captain Robert Raia, dated September 16, 1992, at ¶¶ 5-6). In addition, defendant claims that Captain Raia read to plaintiffs portions of something called the Miranda Act for Salvors, (Deposition of Captain Robert Raia, dated July 8, 1992, at 76-77), and informed plaintiffs, prior to their signing, that the LOF was a salvage and not a towage agreement. (Raia Aff. ¶ 11 & Exhs. B-D). The following hand-written statement on the LOF corroborates this assertion:

I understand that this

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