Tradax Ltd. v. M. v. Holendrecht

• Decision Date: 15 March 1977
• Docket Number: No. 389,D,389
• Citation: 550 F.2d 1337
• Parties: TRADAX LIMITED et al., Plaintiffs-Appellants, v. M. V. HOLENDRECHT, her engines, boilers, tackle, etc. and N. V. Stoomvaart Maatschappij De Maas and Phs. Van Ommeren, N.V., Defendants-Appellees. ocket 76-7346.
• Court: U.S. Court of Appeals — Second Circuit

Page 1337

550 F.2d 1337

TRADAX LIMITED et al., Plaintiffs-Appellants, v. M. V. HOLENDRECHT, her engines, boilers, tackle, etc. and N. V. Stoomvaart Maatschappij De Maas and Phs. Van Ommeren, N.V., Defendants-Appellees.

No. 389, Docket 76-7346.

United States Court of Appeals, Second Circuit.

Argued Jan. 10, 1977.

Decided March 15, 1977.

John T. Kochendorfer, New York City (George F. Chandler III and Bigham, Englar, Jones & Houston, New York City, of counsel), for plaintiffs-appellants.

Harold V. Higham, New York City (Richard H. Sommer and Kirlin, Campbell &amp Keating, New York City, of counsel), for defendants-appellees.

Before GURFEIN and MESKILL, Circuit Judges, and BARTELS, District Judge. ^*

GURFEIN, Circuit Judge:

This is an appeal from on order of the United States District Court for the Southern District of New York (Duffy, J.) staying this admiralty case pending arbitration. Plaintiffs' libel in admiralty alleged that they became holders for value of bills of lading issued by the M.V. "Holendrecht," representing a cargo of corn; and that this cargo was damaged by sea water while on the "Holendrecht," which was owned and under the control of the defendants. The defendants in their answer demanded arbitration pursuant to the bills of lading, which incorporated by reference a charter party containing an arbitration clause as well as the arbitration clause itself. ¹ Judge Duffy granted the defendants' motion to stay the cause pending arbitration, and transferred the matter to the Suspense Docket.

Appellants seek to appeal from Judge Duffy's order as improper on three grounds: First, that the defendants have no right to demand arbitration, because they were not parties to the charter of December 18, but only to a "head" charter party dated December 14, 1972, to which the bill of lading fails to refer. ² Second, that defendant PHS. Van Ommeren, N.V., the vessel's managing agent, has no right to a stay entered in its favor, because it is not a party to any bill of lading or charter party. Finally, that it would be fruitless to compel arbitration, because under the three-month provision of the arbitration clause the claim is now time-barred. ³

Appellants contend that the order below is not appealable. We agree. The Supreme Court held in the familiar case of Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S.Ct. 475, 79 L.Ed. 989 (1935), that when a district court is sitting in admiralty, a stay of the action pending arbitration under the United States Arbitration Act, 9 U.S.C. §§ 1-15, is (1) not a final order under 28 U.S.C. § 225 (now § 1291), 294 U.S. at 456, 55 S.Ct. 475; (2) not an injunction under 28 U.S.C. § 227 (now § 1292(a)(1)), id. at pages 456-57, 55 S.Ct. 475; and (3) not an appealable interlocutory decree under the present § 1292(a)(3), id. at pages 457-58, 55 S.Ct. 475. The only possible remaining basis for appeal, which was not discussed, is the collateral order doctrine which had not yet been brought into sharp focus by Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949).

The Supreme Court in Schoenamsgruber, while recognizing that admiralty courts have the capacity to apply equitable principles, noted that such courts do not have general equitable jurisdiction. It thus summarily distinguished its own cases which had held that where a court grants or denies a stay of an action at law to permit the trial of an equitable defense, Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440 (1935), or a stay of the action at law pending arbitration (an equitable defense), Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583 (1935), the orders are appealable. The distinction made was that when a court of equity issues or refuses such a stay (even when the equity judge and the law judge are the same person), it is issuing or denying an injunction. And this reasoning held true even after the adoption of the one form of action by Fed.R.Civ.P. 2. Ettelson v. Metropolitan Life Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 87 L.Ed. 176 (1942). When an admiralty court issues or denies such a stay, however, the Schoenamsgruber Court held, its order cannot be an injunction because it has no equitable jurisdiction. Its order is simply a postponement of the trial a "mere calendar order", see Moran Towing & Transp. Co. v. United States, 290 F.2d 660, 662, 663 (2d Cir. 1961).

With respect to stays in admiralty, it could have been argued that Congress by statute specially conferred on admiralty courts the "equitable jurisdiction" to issue an "interlocutory injunction" pending arbitration. For a stay to permit arbitration to proceed is, even in an admiralty court, based on the statutory provision of 9 U.S.C. § 3 which is applicable to "any suit or proceeding . . . brought in any of the courts of the United States," (emphasis added) or, in the case of a libel in rem, on § 8 of the Act, which is applicable to admiralty courts only. In Shanferoke, supra, Justice Brandeis noted that the stay there was, in fact, authorized by § 3 of the Arbitration Act, 293 U.S. at 451, 55 S.Ct. 313 and that "the motion for a stay is an application for an interlocutory injunction based on the special defense." 293 U.S. at 452, 55 S.Ct. at 314. The decision in Schoenamsgruber, the very next term, disposed of any such argument on a motion for a stay under § 8 simply by holding that a court of admiralty had no general equitable jurisdiction. Though the Supreme Court earlier had construed the power of an admiralty court to grant a stay under § 8 of the Arbitration Act as a statutory grant, permitting it to decree specific performance, Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 278, 52 S.Ct. 166, 76 L.Ed. 282 (1932), the Schoenamsgruber Court did not mention that particular holding of Marine Transit. Thus, a quite persuasive argument could have been made that Congress by granting to admiralty courts the right to direct the parties to proceed to arbitration when there is a libel in rem, and to stay its proceedings when the libel is in personam, meant to vest this kind of equitable jurisdiction in courts of admiralty. But the argument was stillborn because of the pervasive effect of the Schoenamsgruber decision.

The failure of the courts to address the implications of the statutory grants in the Arbitration Act is even more anomalous, as we know, because if the party in an admiralty dispute resorts to an independent action under § 4 of the Arbitration Act to compel arbitration, the order is appealable as a final order. Lowry & Co., Inc. v. S.S. LeMoyne D'Iberville, 372 F.2d 123, 124 (2d Cir. 1967); Farr & Co. v. Cia. Intercontinental de Navegacion de Cuba S.A., 243 F.2d 342 (2d Cir. 1957). See The Sydfold, 25 F.Supp. 662 (S.D.N.Y. 1938) (Patterson, J.). Though realistically such an order might be viewed merely as an intermediate step in a proceeding, as was noted by Judge Friendly, it is, nevertheless, an appealable final order. Chatham Shipping Co. v. Fertex S.S. Corp., 352 F.2d 291 (2d Cir. 1965). Cf. Goodall-Sanford, Inc. v. United Textile Workers of America, 353 U.S. 550, 77 S.Ct. 920, 1 L.Ed.2d 1031 (1957). And we have recently extended appealability, on the basis of the final order doctrine, not only to independent orders to arbitrate under the Arbitration Act, but also to a declaration of arbitrability (in a controversy over a contract of affreightment) under the Declaratory Judgments Act, 28 U.S.C. § 2201. Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966 (2d Cir. 1975).

On this summary review thus far we have not yet mentioned Rule 9(h) of the Federal Rules of Civil Procedure. ⁴ This Circuit has held that Rule 9(h) has made no change in existing law and that Schoenamsgruber still rules. Penoro v. Rederi A/B Disa, 376 F.2d 125 (2d Cir. 1967), cert. denied sub nom. Rederi A/B Disa v. Cunard S.S. Co., 389 U.S. 852, 88 S.Ct. 78, 19 L.Ed.2d 122 (1968). Accord, O'Donnell v. Latham, 525 F.2d 650 (5th Cir. 1975); J. M. Huber & Co. v. M/V Plym, 468 F.2d 166 (4th Cir. 1972).

The Schoenamsgruber rule is applicable, of course, only to admiralty cases, and not to actions at law. Enelow, supra; Shanferoke, supra. And a claim which may seem to a layman to be maritime, may be a claim at law. If it is, an order granting or denying arbitration is an appealable order. Carcich v. Rederi A/B Nordie, 389 F.2d 692 (2d Cir. 1968); cf. Standard Chlorine of Delaware, Inc. v. Leonard, 384 F.2d 304, 308-09 (2d Cir. 1967).

In order to avoid the Schoenamsgruber rule, therefore, appellants contend that the instant case is a civil action, with admiralty as the basis for jurisdiction only. They point out that the first allegation of their complaint was that "This is a case of contract, cargo damage and nondelivery of cargo, civil and maritime, and is an admiralty and maritime claim within the meaning of (Fed.R.Civ.P.) Rule 9(h). Plaintiffs invoke the maritime procedures specified in Rule 9(h)." Appellants further note that this action has been assigned a civil case number, 75 Civ. 3173.

The argument is unpersuasive. Pursuant to the last sentence of Rule 9(h), this pleading constituted an election to have the case treated as an admiralty claim, inter alia, for purposes of applying 28 U.S.C. § 1292(a)(3), in which case the stay would not be appealable. Schoenamsgruber,supra. Nor can appellants press upon us that this is a civil case for purposes of applying 28 U.S.C. § 1292(a)(1). For we find that, regardless of any conclusory allegation in the complaint, this is a case in admiralty. It is a suit for damage to cargo shipped at sea, brought by the holder of a bill of lading. See 1 Benedict on Admiralty § 222 (7th ed. 1974); Gilmore & Black, The Law of Admiralty 22 & nn.63, 65 (2d ed. 1975); id. at 23 & n.74.

Apparently appellants' argument that this case is a civil action is designed to bring the appeal...