Tai Ping Ins. Co., Ltd. v. M/V Warschau

• Decision Date: 26 April 1984
• Docket Number: No. 83-3108,83-3108
• Citation: 731 F.2d 1141
• Parties: The TAI PING INSURANCE CO., LTD., et al., Plaintiffs-Appellees, v. M/V WARSCHAU, et al., Defendants. Alfred C. TOEPFER, Defendant-Appellant, v. CANADIAN TRANSPORT COMPANY, A DIVISION OF MACMILLAN BLOEDEL, LTD., a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1141

731 F.2d 1141

1985 A.M.C. 575

The TAI PING INSURANCE CO., LTD., et al., Plaintiffs-Appellees, v. M/V WARSCHAU, et al., Defendants.

Alfred C. TOEPFER, Defendant-Appellant, v. CANADIAN TRANSPORT COMPANY, A DIVISION OF MACMILLAN BLOEDEL, LTD., a corporation, Defendant-Appellee.

No. 83-3108.

United States Court of Appeals, Fifth Circuit.

April 26, 1984.

James R. Holmes, Harvey G. Gleason, New Orleans, La., for defendant-appellant.

James Hanemann, Franklin G. Shaw, New Orleans, La., for Tai Ping.

James R. Sutterfield, Donald A. Hoffman, New Orleans, La., for M/G Transport.

R. Glenn Bauer, Phelps, Dunbar, Marks, Claverie & Sims, George J. Fowler, III, New Orleans, La., for Canadian Transport.

F.A. Courtenay, Jr., Theodore W. Brin, New Orleans, La., for S.G.S. Control.

William E. O'Neil, Marcia L. Culley, New Orleans, La., for Cravat Coal.

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

Before RUBIN and RANDALL, Circuit Judges, and SEAR ^*, District Judge.

RANDALL, Circuit Judge:

The issue raised by this appeal is whether the district court abused its discretion in staying the London arbitration of a dispute between two of the defendants pending the outcome of the federal court litigation between all parties. Because we find that the district court abused its discretion, we vacate the stay of arbitration. Also before us is the appellant's motion to strike the brief of appellee Tai Ping, which was carried with the case and which we deny.

I. Factual and Procedural Background.

In 1975, defendant-appellant Kommanditgesellschaft Alfred C. Toepfer Schiffahrtsgesellschaft m.b.H. and Lumber Carriers ("Toepfer") time-chartered the M/V WARSCHAU to defendant-appellee Canadian Transport Company, Ltd. ("Canadian"). The charter provided, inter alia That should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to three persons in London one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them, shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the Court. The Arbitrators shall be commercial men experienced in Shipping.

In 1981, Canadian voyage-chartered the M/V WARSCHAU to the Asia Cement Corporation for the carriage of a cargo of coal from New Orleans to Taiwan. The vessel set forth from New Orleans with the cargo. En route, the coal began spontaneously to heat and had to be off-loaded in Long Beach, California.

Asia Cement and its insurer, Tai Ping, filed suit in federal court against Canadian, Toepfer, and numerous other parties, claiming $720,000 in damages. Canadian filed a third-party complaint and cross-claim against Toepfer, seeking indemnity should Canadian be found liable to Asia Cement. Toepfer moved for a stay of the third-party complaint and cross-claim pending their arbitration in London pursuant to the arbitration clause in the time charter between Canadian and Toepfer. ¹ Canadian, Asia Cement, and Tai Ping opposed the motion.

After a hearing, the district court granted Toepfer's motion to stay litigation of the third-party complaint and cross-claim pending arbitration. Tai Ping Ins. Co. v. Vessel M/V WARSCHAU, 556 F.Supp. 187 (E.D.La.1983). The court also ordered, however, that the arbitration be stayed pending the outcome of the main litigation in federal court. It is this latter order that forms the basis for this appeal.

II. Jurisdiction.

As an initial matter we note the appealability of the district court's order staying the arbitration. In Texaco, Inc. v. American Trading Transp. Co., 644 F.2d 1152, 1154 (5th Cir.1981), we held:

[A]n order granting a stay of arbitration pending outcome of litigation is an appealable interlocutory order under 28 U.S.C. Sec. 1292(a)(1).

See also City of Meridian, Miss. v. Algernon Blair, Inc., 721 F.2d 525 (5th Cir.1983).

III. The Stay of Arbitration.

In staying the arbitration between Canadian and Toepfer, the district court invoked the "inherent equitable power of a federal court to control its docket." 556 F.Supp. at 190. It went on to hold:

In this case, justice is best served by proceeding first with the main action, since the resolution of plaintiff's claims will determine whether there is any liability at all to plaintiff, and, if there is any such liability, will undoubtedly reach factual conclusions about the nature of and relative responsibility for any such liability. Specifically, the trial of the main action should resolve many of the contested issues of fact about what precisely happened to the coal and thus who was responsible.

After such factual resolution, arbitration of the claims between Canadian Transport and Toepfer under the time charter would proceed more justly and expeditiously, particularly in that the possibility of inconsistent fact-finding between the arbiter and the court would be prevented.

Id.

Toepfer contends that the stay of arbitration contravened the language and intent of the Federal Arbitration Act, 9 U.S.C. Secs. 1-14 (1982). Section 3 of the Act provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

There is no provision in the Act for a stay of arbitration. Nonetheless, the case law clearly establishes that, in the appropriate circumstances, such an order is within the power of the district court. See, e.g., Landis v. North American Co., 299 U.S. 248, 57 S.Ct. 163, 81 L.Ed. 153 (1936); Sibley v. Tandy Corp., 543 F.2d 540 (5th Cir.1976), cert. denied, 434 U.S. 824, 98 S.Ct. 71, 54 L.Ed.2d 82 (1977); cf. Texaco v. American Trading, supra (stay of arbitration affirmed where dispute not covered by arbitration clause). We view the issue presented, therefore, as being whether the district court properly invoked its power in this case.

Our analysis proceeds from the Supreme Court's recent decision in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., --- U.S. ----, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). There, the Court reiterated the strong pro-arbitration policy embodied in the Arbitration Act:

Congress's clear intent, in the Arbitration Act, [was] to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.

103 S.Ct. at 940. In Moses Cone, the party seeking arbitration filed a motion to compel arbitration. See 9 U.S.C. Sec. 4 (1982). Because the other party had filed a state declaratory judgment action, the district court stayed the federal action pending resolution of the state suit. The Supreme Court held that the district court had abused its discretion because there had been no showing of exceptional circumstances justifying the stay. 103 S.Ct. at 942.

We recognize that Moses Cone dealt with the relinquishment of its jurisdiction by a federal court, and the case before us presents a federal court's refusal to relinquish jurisdiction. ² Nonetheless, we think that the policy so clearly stated in Moses Cone is applicable to this case. The Court's essential concern in Moses Cone was not that the parties be afforded a federal forum for the resolution of their underlying dispute; rather, the Court's unmistakable intent was to clarify the federal court's narrowly circumscribed authority in a case involving an arbitrable dispute. Because it was unclear in Moses Cone whether the state court was obliged to grant a motion seeking to compel arbitration under section 4, and the federal court was so obliged, staying the federal action contravened the intent of the Arbitration Act to the extent that it delayed the parties along the path to arbitration. 103 S.Ct. at 942-43. See also Southland Corp. v. Keating, --- U.S. ----, 104 S.Ct. 852, 859-60, 79 L.Ed.2d 1 (1984) (" '[T]he purpose of the act was to assure those who desired arbitration and whose contracts related to interstate commerce that their expectations would not be undermined by federal judges ....' ") (quoting Metro Industrial Painting Corp. v. Terminal Construction Corp., 287 F.2d 382, 387 (2d Cir.1961) (Lumbard, C.J., concurring)).

We are aware that this court has sanctioned a stay of arbitration pending the outcome of a related litigation. See Petroleum Helicopters, Inc. v. Boeing-Vertol Co., 478 F.Supp. 84 (E.D.La.), aff'd per curiam on basis of opinion below, 606 F.2d 114 (5th Cir.1979). In light of Moses Cone, however, we have more recently reversed an injunction of arbitration pending litigation as an abuse of the district court's discretion. See City of Meridian v. Algernon Blair, supra (because swift and less costly dispute resolution underlies agreement to arbitrate, injunctions staying arbitration are viewed with disfavor).

Although we think that Moses Cone casts substantial doubt on the correctness of our determination in Petroleum Helicopters, upon which the district court relied in granting the stay of arbitration, we also find it distinguishable from the case before us. In Petroleum Helicopters, the plaintiff sued the manufacturers and the distributor of the plaintiff's helicopter, which had crashed. The distributor cross-claimed against the manufacturers for indemnity or contribution. The manufacturers moved to stay litigation of the cross-claim pending its arbitration pursuant to an arbitration clause in the contract between the manufacturers and the distributor. The district court granted the stay, but went on to stay arbitration of the...