Transmarine Seaways Corp. v. Marc Rich

• Decision Date: 15 June 1979
• Docket Number: No. 79 Civ. 1439-CSH.,79 Civ. 1439-CSH.
• Citation: 480 F. Supp. 352
• Parties: In the Matter of the Arbitration between TRANSMARINE SEAWAYS CORP. OF MONROVIA, as Owner of the M. S. OCEAN VOYAGER, Petitioner, v. MARC RICH & CO. A. G., as Charterer, Respondent.
• Court: U.S. District Court — Southern District of New York

480 F. Supp. 352

In the Matter of the Arbitration between TRANSMARINE SEAWAYS CORP. OF MONROVIA, as Owner of the M. S. OCEAN VOYAGER, Petitioner, v. MARC RICH & CO. A. G., as Charterer, Respondent.

No. 79 Civ. 1439-CSH.

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

June 15, 1979.

Healy & Baillie, New York City, for petitioner; Jack A. Greenbaum, New York City, of counsel.

Milgrim, Thomajan, Jacobs & Lee, New York City, for respondent; Robert A. Meister, Samuel D. Rosen, Robert Thomajan, New York City, of counsel.

MEMORANDUM

HAIGHT, District Judge:

Petitioner Transmarine Seaways Corp. of Monrovia ("Transmarine") and Marc Rich & Co. A.G. ("Rich") were parties to a commercial arbitration in New York City. Transmarine was the owner of the tanker OCEAN VOYAGER. Rich chartered the vessel, in the form of a fixing telex and incorporated Exxonvoy 1969 form, to load a cargo of crude oil at a Persian Gulf port for discharge into a larger tanker, the PEGASUS, or substitute vessel. The charterparty provided for arbitration of disputes before three commercial arbitrators in New York, and an arbitration in fact took place, the panel by a 2-1 vote awarding Transmarine $52,587.16. Transmarine now moves this Court for an order confirming the award and entering judgment thereon. Rich cross-moves to vacate the award. The parties are foreign corporations. This Court's jurisdiction is founded upon the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as implemented by Chapter 2 of the Federal Arbitration Act, 9 U.S.C. §§ 201, 207.¹ For the reasons stated, Transmarine's motion is granted, Rich's cross-motion is denied, and judgment will be entered confirming the award.

I.

The disputes giving rise to the arbitration are as follows. Shortly after the fixture of the vessel, Rich ordered the OCEAN VOYAGER to proceed to a designated Persian Gulf loading port, further stating in its instructions: ". . . Disport discharge port-Lavan Island for further orders . ." In response to these instructions, the OCEAN VOYAGER completed loading her cargo of oil on June 9, 1977, sailing that same day for Lavan Island. The vessel arrived in the vicinity of Lavan Island, and anchored some three miles offshore at 1400 hours on June 10. Rich intended to discharge the OCEAN VOYAGER's cargo into a larger vessel, the PEGASUS. On June 15, Rich advised Transmarine that a point three-quarters of a mile off Hormuz Island was being contemplated for the transfer of the cargo. Hormuz Island is approximately 200 miles from Lavan Island, within the Persian Gulf.

On June 16, Transmarine advised Rich that it rejected Hormuz Island as the location of discharge. Transmarine called upon Rich to send the vessel and her cargo on a long voyage to various discharging ports specified in the telex fixture as alternative options to Rich as charterer.

It is not necessary to set forth the reasons Transmarine gave for refusing to proceed to Hormuz Island to rendezvous with the PEGASUS, in conformity with Rich's orders. Suffice it to say, for the purposes of this motion, that the arbitrators unanimously held that Transmarine was not within its rights in refusing to send the OCEAN VOYAGER to Hormuz Island.

Rich believed it was entitled to send the OCEAN VOYAGER to Hormuz Island to transfer her cargo to the PEGASUS. Evidence elicited before the arbitrators indicated that the PEGASUS was due to arrive off Hormuz early on Sunday, June 19, Persian Gulf time.² During the late afternoon of Friday, June 17, New York time, a series of transatlantic and local telephone calls and telexes began. Shortly after 4:00 p. m. George Gibson, a tanker broker in New York, was telephoned by Jack Greenbaum, a maritime lawyer in New York. Gibson had negotiated the charter of the OCEAN VOYAGER between Transmarine and Rich. Gibson negotiated the charter with Neil Forsythe, a London tanker broker with the firm of John Jacobs. Gibson was the broker for Rich, and Forsythe the broker for Transmarine. Greenbaum was counsel in New York for Transmarine. Greenbaum did not reach Gibson on the telephone, but left a message for him to return the call. When he saw the message, Gibson recognized the name of Greenbaum's law firm, and correctly inferred that Greenbaum represented Transmarine in connection with the disputes concerning discharge of the OCEAN VOYAGER's cargo. Before returning Greenbaum's call, Gibson telephoned Robert Thomajan, maritime counsel for Rich. Gibson then telephoned Greenbaum. After an inconclusive discussion of the discharge dispute, Gibson suggested that Greenbaum telephone Thomajan, so that the lawyers would be in direct contact with each other. The substance of the ensuing telephone conversations between Messrs. Greenbaum and Thomajan are discussed post.³

Gibson's next involvement came as the result of a telephone call, at about 6:30 p. m. on June 17, from one Hugh Williams, a tanker broker associated with the Jacobs firm in London. Williams, on behalf of Transmarine, passed on to Gibson a "commercial proposal," pursuant to which Transmarine would send the OCEAN VOYAGER to Hormuz Island to discharge into the PEGASUS, if Rich agreed to renegotiate the charter party terms, in such a way that would produce about $100,000 in additional charter party revenues for Transmarine. Gibson expressed outrage at what he regarded as blackmail, but communicated the proposal to Mr. Marc Rich, the principal officer of the Rich Company. Upon Rich's instructions, Gibson telexed a counter-proposal to Williams at about 8:00 p. m. on June 17, the counter being made "without prejudice to rights" under the original charter party.

Forsythe of Jacobs in London called Gibson at home on the morning of Saturday, June 18. There were further discussions between the two brokers about a commercial settlement, Gibson also communicating during the day with Rich and Thomajan. During a telephone conversation between Forsythe and Gibson at 4:30 p. m. on June 18, Forsythe advised that Transmarine insisted Rich give up its rights under the original charter party. Upon Rich's authority, Gibson signified agreement to Transmarine's "commercial proposal." A telex confirmation of the agreement was exchanged on Monday, June 20.

In response to the agreement entered into between the brokers on June 18, the OCEAN VOYAGER sailed from Lavan Island at 1830 hours on Sunday, June 19, bound for Hormuz Island in accordance with Rich's orders. The OCEAN VOYAGER rendezvoused with the PEGASUS off Hormuz Island on June 20, the PEGASUS having in fact arrived on June 18. Discharge of the cargo from the OCEAN VOYAGER to the PEGASUS was completed on June 22.

The June 18 agreement, memorialized in the June 20 telex, obligated Rich to pay freight and demurrage in excess of the amounts called for by the original charter party. It was made clear, during the arbitration hearing, that Rich gave first priority to getting the cargo out of the OCEAN VOYAGER and into the PEGASUS. Rich never intended to abide by the June 18 agreement. Its strategy was to obtain discharge of the cargo into the PEGASUS, and then repudiate the agreement.

Reference was made ante to telephone conversations between counsel on Friday, June 17. Messrs. Thomajan and Greenbaum have agreed to a summary of those conversations, and the text of that summary is set out in full:

"At 4:50 p. m., Mr. Thomajan asked Mr. Greenbaum to consent to an immediate arbitration of this dispute before a single arbitrator who would hear the matter that evening or over the weekend. Mr. Greenbaum does not recall which attorney first mentioned an immediate arbitration but does recall that it was his intention to propose an arbitration for Monday, having received authority to do so.

"Mr. Greenbaum expressed reservations about a one-man panel, but inquired as to the name of an arbitrator who would be acceptable to Charterer. Mr. Thomajan suggested a person who Mr. Greenbaum said would probably not be contractable at that time. Mr. Thomajan said he would try to reach that person and would report back.

"Mr. Thomajan then called the proposed arbitrator and ascertained that he would be available to hear a dispute that evening or over the weekend. Later that evening, Mr. Thomajan advised Mr. Greenbaum of this arbitrator's availability. Mr. Greenbaum does not recall such advice but it is possible. Mr. Greenbaum replied that he could not arbitrate that evening; he had an engagement for 7:00 p. m. which had been scheduled long previously. Moreover, Mr. Greenbaum had reservations about arbitrating on Friday or Saturday without possessing at least a telex quotation of the CP and the exchange of telexes between the parties and an opportunity to prepare legal arguments supported by precedents.

"Mr. Greenbaum recommended that since the brokers were talking directly, he would contact Mr. Thomajan the first thing Monday morning.

"Mr. Greenbaum recalls that he would have been in touch with Mr. Thomajan Monday morning but on that day he was advised by Owner that the parties had resolved the dispute over the weekend. "In all, there were about four conversations between Mr. Greenbaum and Mr. Thomajan, the last being approximately 6:30 p. m."

Transmarine asserted claims against Rich for additional freight and demurrage, arising out of the June 18 agreement. Rich repudiated the agreement and rejected the claims. The disputes were submitted to arbitration, in accordance with the terms of the original contract. The arbitration panel consisted of an arbitrator appointed by each of the two parties, and a third arbitrator, selected by the two arbitrators so chosen. Transmarine appointed Mr. Lloyd C. Nelson as its arbitrator. Rich appointed Mr. Michael A. van Gelder. Messrs. Nelson and van Gelder selected Mr. Jack Berg as third arbitrator.

At the commencement of the hearings, Rich objected to the presence of Mr. Nelson on the panel, and demanded that he recuse himself. Rich based this demand upon...