Rhone Mediterranee Compagnia Francese Di Assicurazioni E Riassicurazoni v. Lauro

• Decision Date: 06 July 1983
• Docket Number: No. 82-3523,82-3523
• Citation: 712 F.2d 50
• Parties: RHONE MEDITERRANEE COMPAGNIA FRANCESE DI ASSICURAZIONI E RIASSICURAZONI, Appellant, v. Achille LAURO, d/b/a Achille Lauro Armatore, a/k/a Achille Lauro, d/b/a Flotta Lauro, a/k/a Achille Lauro, d/b/a Lauro Lines, X Company and Antonio Scotto di Carlo.
• Court: U.S. Court of Appeals — Third Circuit

Page 50

712 F.2d 50

1984 A.M.C. 1575

RHONE MEDITERRANEE COMPAGNIA FRANCESE DI ASSICURAZIONI E RIASSICURAZONI, Appellant, v. Achille LAURO, d/b/a Achille Lauro Armatore, a/k/a Achille Lauro, d/b/a Flotta Lauro, a/k/a Achille Lauro d/b/a Lauro Lines, X Company and Antonio Scotto di Carlo.

No. 82-3523.

United States Court of Appeals Third Circuit.

Argued April 27, 1983.

Decided July 6, 1983.

John G. Short, Charlotte Amalie, V.I., David C. Indiano, San Juan, P.R. (argued), Dudley, Dudley & Topper, Charlotte Amalie, St. Thomas, V.I., for appellant.

Thomas D. Ireland, Charlotte Amalie, St. Thomas, V.I., Richard G. Ashworth (argued), Charles B. Anderson, Haight, Gardner, Poor & Havens, New York City, for appellee.

Before GIBBONS, SLOVITER and BECKER, Circuit Judges.

OPINION OF THE COURT

GIBBONS, Circuit Judge.

Rhone Mediterranee Compagnia Francese di Assicurazioni E Riassicurazioni (Rhone), a casualty insurer, appeals from an order of the District Court of the Virgin Islands staying Rhone's action pending arbitration. The action results from a fire loss which occurred when the vessel Angelina Lauro burned at the dock of the East Indian Co. Ltd. in Charlotte Amalie, St. Thomas. At the time of the fire the vessel was under time charter to Costa Armatori S.P.A. (Costa), an Italian Corporation. Rhode insured Costa and reimbursed it for property and fuel losses totaling over one million dollars. Rhone, as subrogee of Costa, sued the owner of the vessel, Achille Lauro (Lauro), and its master, Antonio Scotto di Carlo, alleging breach of the Lauro-Costa time charter, unseaworthiness, and negligence of the crew. The district court granted defendants' motion for a stay of the action pending arbitration, and Rhone appeals. ¹ The defendants have moved to dismiss the appeal for lack of an appealable order. We hold that we have appellate jurisdiction, and we affirm.

I. Appellate Jurisdiction

The defendants' motion to dismiss Rhone's appeal is predicated on Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S.Ct. 475, 79 L.Ed. 989 (1935), which holds that a district court order staying an admiralty suit pending arbitration is an interlocutory order for purposes of the predecessor to 28 U.S.C. § 1291 (1976), and is not an injunction within the meaning of the predecessor to 28 U.S.C. § 1292(a) (1976). The Court reasoned:

While courts of admiralty have capacity to apply equitable principles in order to better attain justice, they do not have general equitable jurisdiction and, ... they do not issue injunctions.

Id. at 457-58, 55 S.Ct. at 476-77 (footnotes omitted). For this reason stays of admiralty actions have been held not to fall within the well-settled Enelow-Ettelson rule ² that a stay of an action at law is the equivalent of an injunction against proceeding with that action, appealable under 28 U.S.C. § 1292(a). Diacon-Zadeh v. Denizyollari, 196 F.2d 491, 492 (3d Cir.1952) (per curiam); 9 J. Moore, B. Ward, & J. Lucas, Moore's Federal Practice p 110.19 (2d ed. 1983).

The Schoenamsgruber rule does not apply in this case, however, because Rhone sues for breach of a time charter agreement. The District Court of the Virgin Islands, a court of general jurisdiction, can entertain actions at law which, despite their connection with maritime commerce, fall within the saving to suitors clause in 28 U.S.C. § 1333(a) (1976). An action for breach of a time charter agreement may be brought in personam in a law court. E.g., Carich v. Rederi A/B Nordi, 389 F.2d 692, 695 (2d Cir.1968) (underlying action for violation of a charter party is at law and stay order is appealable); Mailloux v. Elxnit, 7 Alaska 192 (1924) (action for money due for a charter is a common law action in contract). Such an action may be brought in admiralty, but may also be brought as an ordinary civil action in law in a court of general jurisdiction. G. Gilmore & C. Black, The Law of Admiralty, § 1-13 at 40 (2d ed.1975). This being so, appealability is controlled by cases such as J. & R. Sportswear & Co. v. Bobbie Brooks, Inc., 611 F.2d 29 (3d Cir.1979) (denial of stay of breach of contract action for money damages is appealable); Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 42 n. 7 (3d Cir.1978) (denial of stay of action alleging breach of agreement to renew franchise appealable); Gavlik Construction Co. v. H.F. Campbell Co., 526 F.2d 777, 781-82 (3d Cir.1975) (stay of action for services under contract is appealable); and McCreary Tire & Rubber Co. v. CEAT, 501 F.2d 1032, 1034-35 (3d Cir.1974) (denial of stay of action seeking money damages appealable).

II. The Merits

As subrogee, Rhone stands in place of its insured, the time charterer Costa. In the time charter contract there is a clause:

23. Arbitration

Any dispute arising under the Charter to be referred to arbitration in London (or such other place as may be agreed according to box 24) one arbitrator to be nominated by the Owners and the other by the Charterers, and in case the Arbitrators shall not agree then to the decision of an Umpire to be appointed by them, the award of the Arbitrators or the Umpire to be final and binding upon both parties.

Box 24

Place of arbitration (only to be filled in if place other than London agreed (cl. 23) NAPOLI

All the parties to the time charter agreement and the lawsuit are Italian. Italy and the United States are parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997; reprinted following 9 U.S.C.A. §§ 201-208 (1983 Supp.). The Federal Arbitration Act, Pub.L. No. 91-368, 84 Stat. 692 (1970) (codified at 9 U.S.C. §§ 201-208 (1976)), implements the United States' accession on September 1, 1970 to the Convention by providing that it "shall be enforced in United States courts in accordance with this chapter." 9 U.S.C. § 201. That act further provides:

An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial ... falls under the Convention.

9 U.S.C. § 202. The same section exempts from the Convention agreements or relationships entirely between citizens of the United States. That exemption does not apply. Thus by virtue of the Federal Arbitration Act the arbitration clause in the time charter falls within the Convention's coverage. Rhone does not contend otherwise.

What Rhone does contend is that under the terms of the Convention the arbitration clause in issue is unenforceable. Rhone's argument proceeds from a somewhat ambiguous provision in Article II section 3 of the Convention:

The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Ambiguity occurs from the fact that no reference appears in section 3 to what law determines whether "said agreement ... is null and void, inoperative or incapable of being performed."

Rhone contends that when the arbitration clause refers to a place of arbitration, here Naples, Italy, the law of that place is determinative. It then relies on the affidavit of an expert on Italian law which states that in Italy an arbitration clause calling for an even number of arbitrators is null and void even if, as in this case, there is a provision for their designation of a tie breaker.

The ambiguity in Article II section 3 of the Convention with respect to governing law contrasts with Article V, dealing with enforcement of awards. Section 1(a) of Article V permits refusal of recognition and enforcement of an award if the "agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made." Section 1(e) of Article V permits refusal of recognition and enforcement if "[t]he award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made." Section 1(d) of Article V permits refusal of enforcement if "[t]he composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place." Thus Article V unambiguously refers the forum in which enforcement of an award is sought to the law chosen by the parties, or the law of the place of the award.

Rhone and the defendants suggest different conclusions that should be drawn from the differences between Article II and Article V. Rhone suggests that the choice of law rule of Article V should be read into Article II. The defendants urge that in the absence of a specific reference Article II should be read so as to permit the forum, when asked to refer a dispute to arbitration, to apply its own law respecting validity of the arbitration clause.

There is some treaty history suggesting that a proposal to incorporate in Article II choice of law language similar to that in Article V was rejected because delegates to the United Nations organization which drafted it were concerned that a forum might then have an obligation to enforce arbitration clauses regardless of its "local" law. G. Haight, Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of U.N. Conference, May/June 1958 at 27-28. It thus appears that the ambiguity in Article II section 3 is deliberate. How it should be resolved has been a matter of concern to commentators, who suggest, variously, that the forum state should look to its own law and policy, to the rules of conflicts of laws, or to the law of the place of execution of the agreement....