United States Asphalt Refining Co. v. Trinidad Lake Petroleum Co.

Decision Date23 January 1915
Docket Number58-121.,58-115
Citation222 F. 1006
PartiesUNITED STATES ASPHALT REFINING CO. v. TRINIDAD LAKE PETROLEUM CO. Limited (two cases).
CourtU.S. District Court — Southern District of New York

Norman B. Beecher, of New York City, for the motions.

Herbert Barry and James K. Symmers, of New York City, opposed.

HOUGH District Judge.

One of these actions is brought for the alleged breach of the charter party of the steamship Russian Prince, and the other for a similar breach of a like charter party relating to the steamship Roumanian Prince. Libelant is a corporation of South Dakota. Respondent was the chartered owner of the steamships above named. It is a British corporation, and the vessels are of British registry.

The charter parties by which libelant took the steamers from respondent were made in London, and granted libelant the right to use the vessels in any lawful traffic in most parts of the world. As matter of fact the steamers were employed between Trinidad and United States ports until the outbreak of war in August, 1914, when it is alleged that the vessels were wrongfully withdrawn from charterer's service. These actions in personam were begun with clause of foreign attachment, and appearance enforced by seizure of funds within this jurisdiction. Before any steps in the actions other than appearing and giving security for the seized property had been taken, these motions were made.

The charter party of each steamer contained the following very ordinary clause:

'19. Any dispute arising under this charter shall be settled in London by arbitration, the owners and charters each appointing an arbitrator, and the two so chosen, if they do not agree, shall appoint an umpire, the decision of whom shall be final. Should either party refuse or neglect to appoint an arbitrator within 21 days of being required to do so by the other party, the arbitrator appointed may make a final decision alone, and this decision shall be binding upon both parties. For the purpose of enforcing any award this agreement shall be made a rule of court.'

There can be no doubt that this was a submission to arbitration and for that reason was a contract between the parties to this action; District of Columbia v. Bailey, 171 U.S.at page 171, 18 Sup.Ct. 868, 43 L.Ed. 118; citing Whitcher v. Whitcher, 49 N.H. 176, 6 Am.Rep. 486. It is equally plain that under the law of the place of the contract-- i.e. England-- this arbitration agreement was at the time of making the charter parties entirely valid, and any endeavor to do exactly what libelant has done by bringing these suits would have been restrained by the English courts, acting under authority of the English Arbitration Act of 1889 (chapter 49, 52-53 Victoria). See, also, Manchester Ship Canal Co. v. Pierson & Son (1900) 2 Q.B. 606; Austrian Lloyd Co. v. Gresham, etc., Society (1903) 1 K.B. 249.

The contentions of the parties litigant may therefore be summed up as follows: Respondent urges that the contract for arbitration contained in the charter parties was valid and enforceable when and where it was made, and must consequently be enforced everywhere, unless some positive rule of the law of the forum prevents such recognition and enforcement. Libelant asserts that, whether the contract was or was not good at the time and place of making, it has always been invalid under the law of the United States and most of the states thereof, with the admitted and asserted result that an American may make a solemn contract of this nature in England and repudiate it at will in America with the approbation of the courts of his own country.

There has long been a great variety of available reasons for refusing to give effect to the agreements of men of mature age, and presumably sound judgment, when the intended effect of the agreements was to prevent proceedings in any and all courts and substitute therefor the decision of arbitrators. The remarkably simple nature of this libelant's contract breaking has led me to consider at some length the nature and history of the reasons adduced to justify the sort of conduct, by no means new, but remarkably well illustrated by these libels.

It has never been denied that the hostility of English-speaking courts to arbitration contracts probably originated (as Lord Campbell said in Scott v. Avery, 4 H.L.Cas. 811)--

'in the contests of the courts of ancient times for extension of jurisdiction-- all of them being opposed to anything that would altogether deprive every one of them of jurisdiction.'

A more unworthy genesis cannot be imagined. Since (at the latest) the time of Lord Kenyon, it has been customary to stand rather upon the antiquity of the rule than upon its excellence or reason: 'It is not necessary now to say how this point ought to have been determined if it were res integra-- it having been decided again and again, ' etc. Per Kenyon. J., in Thompson v. Charnock, 8 T.R. 139.

There is little difference between Lord Kenyon's remark and the words of Cardozo, J., uttered within a few months in Meacham v. Jamestown, etc., R.R. Co., 211 N.Y.at page 354, 105 N.E.at page 656:

'It is true that some judges have expressed the belief that parties ought to be free to contract about such matters as they please. In this state the law has long been settled to the contrary.'

Nevertheless the legal mind must assign some reason in order to decide anything with spiritual quiet, and the causes advanced for refusing to compel men to abide by their arbitration contracts may apparently be subdivided as follows:

(a) The contract is in its nature revocable.
(b) Such contracts are against public policy.
(c) The covenant to refer is but collateral to the main contract, and may be disregarded, leaving the contract keeper to his action for damages for breach of such collateral covenant.
(d) Any contract tending to wholly oust the courts of jurisdiction violates the spirit of the laws creating the courts, in that it is not competent for private persons either to increase or diminish the statutory juridical power.
(e) Arbitration may be a condition precedent to suit, and as such valid, if it does not prevent legal action, or seek to determine out of court the general question of liability.

The Doctrine of Revocability.

This seems to rest on Vynior's Case, 8 Coke, 81b, and is now somewhat old-fashioned, although it appears in Oregon, etc., Bank v. American, etc., Co. (C.C.) 35 F. 23, with due citations of authority; and in Tobey v. County of Bristol, 3 Story, 800, Fed. Cas. No. 14,065, it is treated at great length.

The Public Policy Doctrine.

No reason for the simple statement that arbitration agreements are against public policy has ever been advanced, except that it must be against such policy to oust the courts of jurisdiction. This is hardly a variant of the reasoning ascribed by Lord Campbell to the 'courts of ancient times':

'Such stipulations (for arbitration) are regarded as against the policy of the common law, as having a tendency to exclude the jurisdiction of the courts. ' Hurst v. Litchfield, 39 N.Y. 377.
'Such agreements have repeatedly been held to be against public policy and void. ' Prince Co. v. Lehman (D.C.) 39 F. 704, 5 L.R.A. 464.

The above are two examples of the cruder forms of statement; but of late years the higher courts have been somewhat chary of the phrase 'public policy,' and in Insurance Co. v. Morse, 20 Wall. 457, 22 L.Ed. 365, Hunt, J., quotes approvingly from Story's Commentaries, thus: 'Where the stipulation, though not against the policy of the law, yet is an effort to divest the ordinary jurisdiction of the common tribunals of justice, such as an agreement in case of dispute to refer the same to arbitration, a court of equity will not, any more than a court of law, interfere to enforce the agreement, but will leave the parties to their own good pleasure in regard to such agreements.'

But neither the court nor the commentator pointed out any other method by which an arbitration agreement could be against the policy of the law, unless it were by seeking to divest the 'ordinary jurisdiction of the common tribunals of justice.'

Having built up the doctrine that any contract which involves an 'ouster of jurisdiction' is invalid, the Supreme Court of the United States has been able of late years to give decision without ever going behind that statement. Thus in Insurance Co. v. Morse, supra, it is said:

'Agreements in advance to oust the courts of the jurisdiction conferred by law are illegal and void.'

In Doyle v. Continental Insurance Co., 94 U.S. 535, 24 L.Ed. 148, the case last cited is distinctly reaffirmed. The lower courts have followed, and in Perkins v. United States, etc., Co. (C.C.) 16 F. 513, Wallace, J., said:

'It is familiar doctrine that a simple agreement inserted in a contract, that the parties will refer any dispute arising thereunder to arbitration, will not oust courts of law of their ordinary jurisdiction.'

Even a partial ouster was held 'evidently invalid' when inserted in a bill of lading, in The Etona (D.C.) 64 F. 880, citing Slocum v. Western Assurance Co. (D.C.) 42 F. 236, and the Guildhall (D.C.) 58 F. 796.

The Doctrine That the Covenant to Refer is Collateral Only.

This idea is set forth with his customary clearness by Jessel M.R., in Dawson v. Fitzgerald, 1 Ex.D. 257. It was repeated in Perkins v. United States, etc., Co., supra, and accepted in Crossley v. Connecticut, etc., Co. (C.C.) 27 F. 30. The worthlessness of the theory was amply demonstrated in Munson v. Straits of Dover (D.C.) 99 F. 787, affirmed 102 F. 926, 43 C.C.A. 57, where Judge Brown, accepting without query or comment the doctrine...

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