Samsun Corp. v. Khozestan Mashine Kar Co., 95 Civ. 3523 (CSH).

• Citation: 926 F. Supp. 436
• Decision Date: 29 May 1996
• Docket Number: No. 95 Civ. 3523 (CSH).,95 Civ. 3523 (CSH).
• Parties: SAMSUN CORPORATION, as Owner of the Prabhu Daya, Petitioner, v. KHOZESTAN MASHINE KAR CO., as Charterer, Respondent.
• Court: U.S. District Court — Southern District of New York

926 F. Supp. 436

SAMSUN CORPORATION, as Owner of the Prabhu Daya, Petitioner, v. KHOZESTAN MASHINE KAR CO., as Charterer, Respondent.

No. 95 Civ. 3523 (CSH).

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

May 29, 1996.

Healy & Baillie, New York City (Jeremy J.O. Harwood, Richard V. Singleton, II, of counsel), for Petitioner.

Hill Rivkins Loesberg O'Brien Mulroy & Hayden, New York City, (Caspar F. Ewig, Alan S. Loesberg, T.E. Willoughby, of counsel), for Respondent.

MEMORANDUM OPINION AND ORDER

HAIGHT, Senior District Judge:

This is a petition pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq, to compel arbitration of commercial disputes in New York. The respondent opposes the petition on the ground that the parties did not agree to New York arbitration. Subject matter jurisdiction in this Court arises out of the underlying maritime contract of charter party.

Background

Petitioner Samsun Corporation ("Samsun"), a Korean corporation, is the owner of the motor vessel PRABHU DAYA. Samsun alleges that on March 9, 1995, it entered into a voyage charter party with respondent Khozestan Mashine Kar Corporation ("KMK"), an Iranian corporation, for the carriage of a part cargo of steel plates from a port in Iran to Bangkok, Thailand. The voyage was performed. Samsun claims that KMK is indebted to it for demurrage and detention. KMK rejects those claims. Samsun says that KMK agreed in the charter party to arbitrate such disputes in New York before a three-arbitrator panel, one arbitrator to be appointed by each party and the third chosen by the two arbitrators thus appointed. KMK says that it did not so agree. Samsun appointed its arbitrator and, upon refusal of KMK to follow suit, brought this petition to compel arbitration under 9 U.S.C. § 4. Where the making of an arbitration agreement is in issue, the Court resolves the matter. Id.

The parties have submitted a number of affidavits, more than one from certain individuals, and many exhibits. They differ with each other in certain areas. But the following facts are undisputed.

Following the custom of the industry, Samsun and KMK were represented by chartering brokers with authority to negotiate the terms and conditions of the charter party.¹ Samsun's broker was Nimble Shipping Division, a division of Nimble (UK) Ltd. of London, England ("Nimble"). KMK's broker was Seas Ark, S.A. of Tehran, Iran ("Seas Ark").

By fax dated March 4, 1995, KMK asked Seas Ark to attempt to charter a vessel to carry the steel shipment from Iran to Bangkok. Also on March 4, Seas Ark passed on that inquiry to Nimble, which on the same day telexed a proposal that the PRABHU DAYA be chartered for the voyage. Nimble's March 4 telex included a proposed freight rate and demurrage and despatch rates, and concluded: "after fixing main terms other Gencon." "Gencon" is the code name for a printed charter party form issued by the Baltic and White Sea Conference, a maritime trade association.

A series of faxes and telexes were then exchanged between the chartering brokers, containing counter-offers and responses to them. I need not describe them all in detail. It does bear noting, however, that in a telex Nimble sent to Seas Ark on March 5, agreeing on behalf of Samsun to certain main terms but refusing others, Nimble concluded by omitting any reference to the Gencon form, saying instead: "o/wise owns c/p details."

In fax and telex exchanges on March 6 and 7, the chartering brokers continued to negotiate on main charter party terms such as lighterage expenses, demurrage charges, lay-days and cancelling date, and the freight rate. These negotiations resulted in agreement on March 9. In a telex during the morning of that day, Nimble "bid firm" to Seas Ark on certain open terms, and then said: "o/wise as previous." Seas Ark passed that telex on to KMK. In the afternoon of March 9, KMK telexed Seas Ark: "we hereby confirm yr freight rate and other conditions in yr am tlx," and added a request about the order of loading of the part cargo consigned to Bombay. Seas Ark at once passed on the text of KMK's telex to Nimble. Nimble telexed back to Seas Ark on March 9, recapitulating the main charter party terms agreed upon during the brokers' negotiations and adding: "o/wise as per owners c/p."

The PRABHU DAYA loaded the cargo covered by the charter party at the Iranian port of Bandar Iman Khomeini. According to the vessel's documents, laytime commenced on March 9, 1995. Loading was delayed because of intermittent unavailability of cargo. It began on March 11 and was completed on April 1. Samsun says that the vessel went on demurrage on March 12 and on detention on March 19. Thereafter the PRABHU DAYA performed the voyage called for by the charter party.

On March 17, 1995, Nimble faxed to Seas Ark a typed-up Gencon form charter party with additional typed clauses added by Samsun. Rider Clause 23 contains a provision for arbitration of disputes in New York. Seas Ark faxed a copy of the form to KMK on March 19. But on March 22, Nimble faxed Seas Ark an instruction not to pass on the typed-up charter to KMK for execution because Samsun had proposed some additional language relating to demurrage. On April 5, Nimble faxed to Seas Ark another typed-up charter party. The arbitration clause was not changed. Seas Ark faxed that charter to KMK on April 5. KMK has never signed the completed charter party.

On April 25, 1995, John Marshall, the individual at Nimble who had conducted the charter party negotiations on behalf of Samsun, received a request from KMK's London solicitors to come to their office to discuss the charter. That encounter promptly gave rise to an exchange of views between KMK's solicitors and Samsun's New York counsel. I need not recount the full particulars. Speaking through these legal advisers, Samsun took the position that KMK had agreed to arbitrate disputes in New York. Samsun appointed a New York commercial arbitrator and called upon KMK to do the same, consistent with the arbitration clause in the typed charter party Nimble first faxed to Seas Ark on March 17. KMK took the position that it had not agreed to New York arbitration, but that the charter party was subject to London arbitration. KMK appointed a London arbitrator and called upon Samsun to do the same, failing which, under the arbitration clause KMK relied upon, the arbitrator KMK appointed would act as sole arbitrator. Samsun commenced the proceedings in this Court by Order to Show Cause. KMK has agreed not to press for London arbitration until the petition at bar has been decided.

Discussion

Arbitration is a matter of contract. Haviland v. Goldman, Sachs & Co., 947 F.2d 601, 604-05 (2d Cir.1991), cert. denied, 504 U.S. 930, 112 S.Ct. 1995, 118 L.Ed.2d 591 (1992). A party cannot be compelled to submit to arbitration if it has not agreed to do so. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986). Samsun, alleging an agreement by KMK to New York arbitration, bears the burden of proof on the issue. Fisser v. International Bank, 175 F.Supp. 305, 307 (S.D.N.Y.1958).

In determining whether the parties' minds met with respect to an arbitration clause, a court applies the ordinary principles of contract construction. McAllister Brothers, Inc. v. A & S Transport Co., 621 F.2d 519, 524 (2d Cir.1980). However, where as here the contract is one of charter party, established practices and customs of the shipping industry inform the court's analysis of what the parties agreed to.

The custom pertinent to this case is that of "fixing `sub details'." Translated into a landsman's language, the phrase means entering into a binding charter of a vessel ("fixing"), subject to details which, while to be agreed to later, do not prevent the prior creation of a binding contract. "Sub details" means "filling in the blanks — not reviewing the whole negotiations again." Interocean Shipping Co. v. National Shipping and Trading Corp., 523 F.2d 527, 535 (2d Cir. 1975), cert. denied, 423 U.S. 1054, 96 S.Ct. 785, 46 L.Ed.2d 643 (1976).

Wilford, Coghlin, Kimball, Time Charters (3d ed. 1989), describes the practice at page 30:

The widespread practice of fixing `sub details' ordinarily will not be construed as requiring agreement on each and every charter term before a binding contract is created. Once there has been agreement on essential terms, a contract is deemed to exist and the negotiation of remaining details becomes a ministerial task.

The Second Circuit had occasion to summarize this industry custom in Great Circle Lines, Ltd. v. Matheson & Co., Ltd., 681 F.2d 121, 125 (2d Cir.1982) (footnote omitted):

Charter parties are formed in two stages. First, significant "main" terms are negotiated through brokers. These terms usually include the name of the charterer, name of owner, ship and its characteristics, time and place of delivery, duration of charter, place of redelivery, hire rate, printed form upon which the contract is based, and any other term that a party deems important. These are considered the "bare-bones" of the contract. The "main" terms when agreed upon are entitled a "fixture." Second, after a "fixture" has been reached, the parties continue to negotiate "details" amending the form contract specified in the "fixture". These minor or side issues "flesh-out" the original agreement or fixture. The "details" include a wide variety of matters, for example: fuel used, speed of vessel, condition of ship's holds, exact time of ship's delivery to charterer, brokerage, breakdown, bunkering, option to extend charter, cargo capacity, demurrage and whatever else is deemed by the parties to be of minor importance. The details are not meaningful to the trade in the same way that the main terms of the fixture are, inasmuch as the fixture affects the trade directly and determines whether it will be a successful piece of business. Where no amendment of

...