Keytrade Usa, Inc. v. Ain Temouchent M/V

• Decision Date: 23 March 2005
• Docket Number: No. 04-30370.,04-30370.
• Citation: 404 F.3d 891
• Parties: KEYTRADE USA, INC., Plaintiff-Appellee, v. AIN TEMOUCHENT M/V, in rem; et al., Defendants, Societe Nationale de Transports Maritime & Compagnie Nationale Alberienne de Navigation Maritime, in personam, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

404 F.3d 891

KEYTRADE USA, INC., Plaintiff-Appellee, v. AIN TEMOUCHENT M/V, in rem; et al., Defendants, Societe Nationale de Transports Maritime & Compagnie Nationale Alberienne de Navigation Maritime, in personam, Defendant-Appellant.

No. 04-30370.

United States Court of Appeals, Fifth Circuit.

March 23, 2005.

Andrew S. de Klerk (argued), Kris Elliott, Frilot, Partridge, Kohnke & Clements, New Orleans, LA, for Plaintiff-Appellee.

Peter Brooks Sloss, John Herr Musser, V (argued), Murphy, Rogers & Sloss, New Orleans, LA, for Defendant-Appellant.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, DAVIS and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

We must address whether a bill of lading incorporates a voyage charter's arbitration clause. We hold that it does, and reverse and remand with instructions to compel arbitration.

I.

A misguided and fateful shipment of urea set in motion a series of events that culminated in this appeal. Societe Nationale de Transports Maritimes & Compagnie Nationale Algerienne de Navigation Maritime ("CNAN") is the owner of the bulk carrier AIN TEMOUCHENT M/V. On December 4, 2000, CNAN entered into a charter party with Progress Bulk Carriers, Inc. ("Progress Bulk"), providing the AIN TEMOUCHENT to Progress Bulk for a period of six to ten months at a cost of $6,000 per day.¹ The time charter contained a number of clauses and conditions, among them Clause 48, which states that "[a]ll disputes arising out of this contract ... shall be referred to arbitration in London."

Progress Bulk was to use the AIN TEMOUCHENT to transport cargo for other companies. In March, 2001, three months after it entered into the time charter, Progress Bulk agreed to a voyage charter with one such company, Keytrade A.G. ("KAG"). KAG is a Swiss corporation and the parent company of Keytrade USA ("KUSA"), a Chicago-based subsidiary that sells fertilizer to customers in the United States. When KUSA needed to ship cargo, it authorized KAG to negotiate for and obtain on its behalf the necessary transportation. The voyage charter between KAG and Progress Bulk was for the shipment of roughly 22,000 metric tons of prilled urea, to be sent from Shuaiba, Kuwait to New Orleans, Louisiana. Among the many provisions of the voyage charter was Clause 45, pursuant to which "[a]ny dispute arising under this Charter Party [was] to be referred to Arbitration in London." The voyage charter also specified that a "Congen" bill of lading was to be utilized.

Per the Progress Bulk/KAG voyage charter, the urea was loaded onto the AIN TEMOUCHENT, and KUSA was given a Congen bill of lading acknowledging such on March 26, 2001. The bill of lading was signed by the master of the AIN TEMOUCHENT on behalf of CNAN. Among the many features of a Congen bill of lading is an arbitration incorporation clause, which states that "[a]ll terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated." (emphasis added).

Shortly thereafter, the AIN TEMOUCHENT departed for the scheduled 42-day journey — the shipment was to arrive before the beginning of the farming season, by May 10, 2001 — to New Orleans. The trip took longer than planned. Among the delays that befell the AIN TEMOUCHENT were a seizure of the vessel by a creditor-supplier during a stop for repairs, and an unscheduled crew change. In all, the trip was delayed 16 days — the AIN TEMOUCHENT ultimately arrived in New Orleans on May 26, 2001.

Before the AIN TEMOUCHENT had docked in New Orleans, KUSA filed this lawsuit against both Progress Bulk and CNAN in personam, and against the AIN TEMOUCHENT in rem. KUSA alleged breaches of the contract of carriage (the bill of lading) and of defendants' Carriage of Goods at Sea Act obligations, seeking damages it suffered from the drop in market value of prilled urea. Progress Bulk, invoking Clause 45 of its voyage charter with KAG, moved the district court to dismiss the case and to compel arbitration. Because KUSA, and not KAG, filed the suit, the district court denied Progress Bulk's motion unless and until Progress Bulk could produce sufficient evidence to establish an agency relationship between KAG and KUSA.

Progress Bulk ultimately produced that evidence, and reurged its motion to compel arbitration in November, 2002. On this second motion, the district court determined that KUSA and KAG do indeed have an agency relationship — a ruling that is not contested on appeal — and that, under the voyage charter, arbitration was proper between Progress Bulk and KUSA. Also in November, 2002, CNAN moved, for the first time, to compel arbitration on theories of equitable estoppel. The district court denied CNAN's motion pending the conclusion of the KUSA-Progress Bulk arbitration, but the court did not rule on the merits of the motion.

After KUSA settled its dispute with Progress Bulk, CNAN reurged its motion to compel arbitration. In this second motion, CNAN abandoned its equitable estoppel rationale, instead pressing an argument based on Cargill Ferrous International v. SEA PHOENIX M/V, 325 F.3d 695 (5th Cir.2003), a case that had been decided after CNAN's initial motion to compel arbitration. Under SEA PHOENIX, a bill of lading may be found to incorporate an arbitration clause of the charter party, even if one of the parties to the bill of lading was a nonsignatory to the charter party. The district court denied the motion on the merits, finding SEA PHOENIX factually distinguishable. CNAN timely appeals that ruling.

II.

This Court has jurisdiction pursuant to §§ 4 and 16 of the Federal Arbitration Act, 9 U.S.C. §§ 4, 16(a)(1)(C) (2002), and § 28 U.S.C. § 1291. The district court's refusal to compel arbitration is reviewed de novo. See, e.g., Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 428-29 (5th Cir.2004).

III.

We must first consider whether CNAN had a right to compel arbitration with KUSA. After concluding that it did, we address whether CNAN waived that right.

A.

As a general matter, an agreement to arbitrate must be in writing. See Sedco, Inc. v. Petroleos Mexicanos Nat'l Oil Co., 767 F.2d 1140, 1144-45 (5th Cir.1985); see also THE CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS, reprinted as Note to 9 U.S.C. § 201. CNAN concedes, as it must, that no such agreement exists between CNAN and KUSA: although the time and voyage charters each include an arbitration clause, neither was between CNAN and KUSA; while the bill of lading was an agreement between KUSA and CNAN, it did not contain an arbitration clause.

Thus, CNAN's only available argument is that the bill of lading incorporated the arbitration clause from a charter party. Generally, "[a] bill of lading can incorporate a charter party if the bill of lading specifically refers to the charter party." Cargill v. GOLDEN CHARIOT M/V, 31 F.3d 316, 318 (5th Cir.1994). Here, the bill of lading included an incorporation clause, but it did not specify the charter party that it sought to incorporate, leaving both the name and date blanks empty. Recently, this Court in SEA PHOENIX provided the analytical framework for situations where the charter party is not explicitly identified. 325 F.3d at 698-99. In SEA PHOENIX, we held that, where, as here, an incorporation clause is present in the bill of lading, the correct test is whether "the bills of lading are in the hands of the charterer, and [] there is no confusion concerning who was the charterer or which charter party the bills of lading sought to incorporate." Id. (citing State Trading Corp. of India v. Grunstad Shipping, 582 F.Supp. 1523, 1524 (S.D.N.Y.1984)).

As an initial matter, we address, and reject, KUSA's argument that the bill of lading was not in the hands of the charter party. In SEA PHOENIX, the holder of the bill of lading was also a party to the voyage charter. 325 F.3d at 697-98. Because KAG was a party to the voyage charter, but KUSA was listed on the bill of lading, KUSA argues that the bill of lading did not "remain in the hands of the charterer" as required under SEA PHOENIX. It is true that two different entities were parties to the bill of lading and the voyage charter. Due to the district court's finding concerning the KUSA/KAG agency relationship, however, KUSA's argument presents a distinction without a difference. KAG was empowered, among other things, to seek out and procure transport for KUSA's goods. As the district court found, KUSA does not charter its own vessels, rather, it relies on KAG to negotiate transportation. In short, because the district court found that KAG and KUSA were legally intertwined entities — a decision that KUSA does not now appeal — the fact that KUSA, and not KAG, held onto the bill of lading has no legal import.

Therefore, the precise question we are left with is whether there is "no confusion" from the bill of lading as to which charter party governed the rights of the parties. In order to answer this question, it is helpful to look at the parallel facts of SEA PHOENIX. In SEA PHOENIX, Serene was the owner of the vessel, the M/V SEA PHOENIX, which it time chartered to Western. Western, in turn, entered into a voyage charter with Cargill to use the SEA PHOENIX to transport a shipment of steel coils. Id. at 698. The only contract between Serene and Cargill was the bill of lading, which Serene transferred to Cargill when the shipment of coils was loaded. Id. The voyage charter included an arbitration clause, but the bill of lading did not. The bill of lading did contain the following incorporation clause, identical to the one in this case: "All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clauses, are herewith incorporated." Id.

The Court found that there was no confusion as to the charter party it sought to...