THE SILVERBROOK
| Decision Date | 07 March 1927 |
| Docket Number | No. 18509.,18509. |
| Parties | THE SILVERBROOK. |
| Court | U.S. District Court — Eastern District of Louisiana |
Denegre, Leovy & Chaffe and Jas. Hy. Bruns, all of New Orleans, La., for libelant.
George H. Terriberry (of Terriberry, Young, Rault & Carroll), of New Orleans, La., for claimant.
The Mountain Oil & Refining Company, an American corporation, claimant herein, has applied by a motion for a stay of these proceedings on the ground that the contract (bills of lading) sued upon, including the charter party incorporated by reference therein, constitutes a maritime transaction or contract involving commerce, within the terms of the United States Arbitration Act, approved February 12, 1925 (43 Stat. 883 Comp. St. §§ 1251 4/5 — 1 to 1251 4/5 — 15).
This seems to be the first case presented to a court of the United States since the Arbitration Act was passed by Congress. Libelant, Ayer & Lord Tie Company, Incorporated, an American corporation, holder of bills of lading for a bulk shipment of creosote, commenced the suit by filing its libel in rem against the American steamship Silverbrook for shortage and damage to cargo which had been shipped and received aboard the vessel in good condition. The bills of lading had been purchased by it for value from the New York Trust Company of New York City, by virtue of which it became the owner of the cargo. Attached to the libel were two bills of lading, showing the shipment to have been made in two parts, one by E. A. Gibson & Co., Limited, as agents, dated in London, July 15, 1926, and the other by the S. A. Agence, Maritime Minne, dated Selzaete, July 7, 1926.
Each bill of lading contains a clause reading: The charter party, also attached to the libel, is dated at London and designated as a "tank steamer creosote charter party" between the Mountain Oil & Refining Company, Incorporated, as owners, and Charles Page & Co., Limited, of London, stipulating for a voyage from Selzaete and London to Port Chalmette, New Orleans, the twenty-sixth stipulation of which reads:
The settled law is that where bills of lading contain a plain reference to the charter party and a clear indication of an intention to incorporate the terms of the charter party into the contract, such provision is just as binding on the parties, including the consignees who accept and indorse same, as if the bill of lading itself had expressed by repetition the terms of the charter party. Gronstadt v. Withoff et al. (C. C.) 21 F. 253; The Sandfield (D. C.) 79 F. 371. It was also well settled, before the passage of the United States Arbitration Act, that arbitration agreements of this character were void and not enforceable in the federal courts, sitting as courts of admiralty.
The decision in the case entitled The Eros (D. C.) 241 F. 186, was to the effect that a provision in a charter party that it shall be construed in accordance with the laws of a particular country does not limit the parties with respect to remedies, but simply supplies a particular rule of construction in case of dispute as to the meaning of its terms; and also to the effect that a provision of a charter party that any dispute thereunder shall be submitted to arbitration relates to the remedy only, and its effect is to be determined by the law of the forum; that under the law, in the American admiralty courts, such a clause cannot deprive the parties of the right to appeal to the court.
In the case entitled U. S. Asphalt Ref. Co. v. Trinidad Lake Petroleum Co. (D. C.) 222 F. 1006, the decision was to the effect that an agreement in a contract that differences arising thereunder shall be submitted to arbitration relates to the remedy, and the question whether such an agreement was enforceable was governed by the law of the forum; and also to the effect that a provision in a charter party made in London that "any dispute arising under this charter shall be settled in London by arbitration, * * * and this decision shall be binding upon both parties," was an agreement for arbitration applied to the whole contract, and, while valid under the English Arbitration Act of 1889, it was void in a federal forum. In this opinion Judge Hough (then District Judge, Southern District of New York) carefully reviewed the existing jurisprudence and concluded that the doctrine was settled by the Supreme Court; that is, that where such clauses in contracts operate a complete ouster of the jurisdiction of the courts, they should be held void in a federal court. In the course of this opinion it was strongly suggested that the rule could not be sustained in reason; that it resulted from an ancient judicial jealousy of jurisdiction, of English origin.
In Red Cross Line v. Atlantic Fruit Co., 264 U. S. 125, 44 S. Ct. 278 (68 L. Ed. 582), where the Supreme Court had under consideration an Arbitration Law of the state of New York (Laws 1920, c. 275), which was enacted in 1920, the rule was recognized, though the state statute then under consideration was sustained. The opinion concludes in the following language: "As the constitutionality of the remedy provided by New York for use in its own courts is not dependent upon the practice or procedure which may prevail in admiralty, we have no occasion to consider whether the unwillingness of the federal courts to give full effect to executory agreements for arbitration can be justified." In a footnote the court refers specifically to the following decided cases as indicia to the rule: The Atlanten, 252 U. S. 313, 40 S. Ct. 332, 64 L. Ed. 586; U. S. Asphalt R. Co. v. Trinidad Lake P. C. (D. C.) 222 F. 1006; Aktieselskabet Korn-og, etc. v. Rederiaktiebolaget, etc. (C. C. A.) 250 F. 935, Ann. Cas. 1918E, 491; Atlantic Fruit Co. v. Red Cross Line (D. C.) 276 F. 319.
Report No. 96, submitted by the congressional committee on the judiciary, on the bill which was designated as H. R. 646, shows that the Congress took particular notice of the state of the jurisprudence relating to arbitration agreements generally. The report reads in part:
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