Victorias Milling Co. v. Hugo Neu Corporation

• Decision Date: 13 July 1961
• Citation: 196 F. Supp. 64
• Parties: In the Matter of the Arbitration between VICTORIAS MILLING CO., Inc., owner of THE Philippine Steamer SAN VINCENTE and HUGO NEU CORPORATION, Charterer under Voyage Charter Party of September 18, 1959.
• Court: U.S. District Court — Southern District of New York

196 F. Supp. 64

In the Matter of the Arbitration between VICTORIAS MILLING CO., Inc., owner of THE Philippine Steamer SAN VINCENTE and HUGO NEU CORPORATION, Charterer under Voyage Charter Party of September 18, 1959.

United States District Court S. D. New York.

July 13, 1961.

Webster, Sheffield & Chrystie, New York City, for owner.

Burlingham, Hupper & Kennedy, New York City, for charterer.

EDELSTEIN, District Judge.

Sub judice are motions arising out of a charter party between Victorias Milling Co., Inc., ("Victorias"), and Hugo Neu Corporation, ("Hugo Neu").

Victorias is a corporation organized and existing under the laws of the Republic of the Philippines. Hugo Neu is a New York corporation. Under a charter party dated September 18, 1959, Victorias, as owner, chartered the Philippine Steamer San Vincente to Hugo Neu to transport a cargo of scrap from Philadelphia to Japan. A dispute arose between the parties as to whether the vessel had met the requirements of the charter party concerning available cargo space. At the conclusion of the charter Hugo Neu refused to pay the balance due, alleging that the vessel failed to meet the requirements of the charter party and claiming damages. The charter party provided for arbitration at New York by three persons, one to be appointed by each of the parties and the third appointed by the two arbitrators so chosen. Victorias demanded arbitration. Arbitrators were appointed and a hearing was held on August 18, 1960. The arbitrators found, by a 2-1 vote, that the vessel met all the requirements of the charter party and awarded Victorias the balance of the freight.

On December 28, 1960, Hugo Neu moved, in the Supreme Court of New York, to vacate the award under § 1462 of the N.Y. Civil Practice Act. On January 3, 1961, Victorias moved in this court for an order pursuant to § 9 of the United States Arbitration Act, 9 U.S.C. § 9, to confirm the award. Victorias then filed on January 6, 1961, a petition for removal to this court of the motion to vacate. On January 12, 1961, Hugo Neu moved pursuant to 28 U.S.C. § 1447, to remand the motion to vacate to the New York Supreme Court. As a result of adjournment of return dates, this court has before it all three motions: (1) the motion to remand; (2) the motion to vacate; and (3) the motion to confirm. Since the motion to remand must be granted, the merits of the controversy will not be reached at this time.

The removal petition was filed pursuant to 28 U.S.C. § 1441(1958).¹ The plain words of the statute show clearly that the right to remove is confined to "the defendant or the defendants." Although either party was permitted to remove an action under the Judiciary Act of 1875, ch. 137, § 2, 18 Stat. 470, the right or removal has been withdrawn from the plaintiff by subsequent enactments. Judiciary Act of 1887-1888, ch. 373 § 2, 24 Stat. 552; Judicial Code of 1911, ch. 231, § 28, 36 Stat. 1087; see Chicago, Rock Island & Pacific R. R. Co. v. Stude, 1954, 346 U.S. 574, 74 S.Ct. 290, 98 L.Ed. 317; Rock Island Motor Transit Co. v. Murphy Motor Freight Lines, Inc., D.C.D.Minn.1952, 101 F. Supp. 978; Haney v. Wilcheck, D.C.W.D. Va.1941, 38 F.Supp. 345. Thus, the initial question to be resolved is whether Victorias is a defendant and a proper party to effect removal. Although this point has been raised by neither party, no discussion would be complete without considering the line of decisions in this district having its genesis in Minkoff v. Budget Dress Corp., D.C.S.D.N.Y.1960, 180 F.Supp. 818. See Wamsutta Mills v. Pollock, D.C.S.D.N.Y.1960, 180 F.Supp. 826, 828; Application of Rosenthal-Block China Corp., D.C.S.D.N.Y.1960, 183 F. Supp. 659; Hall v. Sperry Gyroscope Co., D.C.S.D.N.Y.1960, 183 F.Supp. 891.

In Budget Dress, a union had initiated an arbitration by the filing of a complaint with an industry arbitrator pursuant to an agreement between the parties. The state court denied the employer's motion to stay the arbitration. The arbitration was had and resulted in an award for the union. The union's motion in the New York Supreme Court to confirm the award was removed to this court by the employer. The union then moved to remand on the ground that the removal was not timely in that the time for removal should be computed from the moment the motion to stay the arbitration was made. In order to decide when all the prerequisites for removal were met so as to begin the running of the time limit, the court found it necessary, as one of the steps in its reasoning, to determine who is the plaintiff for purposes of removal. The court accepted the characterization of the New York courts that arbitration conducted pursuant to the New York Civil Practice Act is a single, indivisible "special proceeding" pending from the moment the notice to arbitrate is served. Although the proceeding is "brought" and is thus ripe for removal only when intervention by the state court is requested, Minkoff v. Scanton Frocks, Inc., D.C.S.D.N.Y. 1959, 172 F.Supp. 870, yet the court held that each phase of the proceeding, irrespective of which party motivates it, is merely a step in the unitary "special proceeding." The court then found that the union, as the party that instituted the arbitration by filing a notice, was the plaintiff. The parties became fixed in their respective positions at that time, without regard to which party first moved a court for relief.

If the reasoning of Budget Dress is to be followed here, then Victorias, as the party that initiated the proceedings by demanding arbitration, would be cast in the posture of plaintiff. And that would dispose of the motion to remand without more, since removal is a right exclusively available to a defendant. However, I cannot agree with the rationale of Budget Dress that the party who demands arbitration is irrevocably denominated as a plaintiff for removal purposes. Nevertheless, I reach the result that remand in this case is proper on the jurisdictional ground.

Budget Dress, standing by itself, is distinguishable on the facts from the case at bar. In a companion case, on reargument, decided the same day, the court made clear the basis of its decision. "Crucial to the Minkoff v. Budget Dress Corp. decision was the fact that the arbitration was conducted pursuant to New York law." Wamsutta Mills v. Pollock, supra, at page 828 of 180 F.Supp. There, the contract between the parties provided for arbitration pursuant to the New York arbitration laws, and that court proceedings shall be taken in the New York Supreme Court. Here, the arbitration clause provides merely that the arbitration shall be held "at New York", but is devoid of any specific mandate as to the law pursuant to which it shall be conducted, or the forum in which disputes will be resolved. But such a facile distinction merely glides over the more basic issue involved. And it would also fail to take cognizance of the extension of the Budget Dress doctrine in Application of Rosenthal-Block China Corp., supra, decided by the same court.

In Rosenthal, the court held that notwithstanding the absence of an agreement that court proceedings relating to the arbitration shall be taken in the New York courts, the invocation of the power of the New York courts by a motion to stay arbitration brought into existence a special proceeding in that court. The party having instituted the arbitration was denominated a plaintiff and was denied the right of removal.

The removing party argued that although defined as plaintiff, it had no choice of forum. The court responded by pointing out that the choice of forum could have been assured by bringing on a motion to compel arbitration contemporaneous with the service of the notice to arbitrate. However, this negates the concept that commercial arbitration is intended as a substitute for litigation. The result thus obtained would be an increase of applications for judicial relief in an area where the desired policy is to minimize resort to the courts. It would appear that the better rule is to classify as plaintiff, for the purposes of removal of arbitration questions, the party who first invokes the aid of the court.

A state may choose to characterize arbitration proceedings in any manner it wishes for purposes of its own internal procedure. But in deciding removal questions, federal courts must construe the removal statute based upon their own determinations. "For the purpose of removal, the federal law determines who is plaintiff and who is defendant. It is a question of the construction of the federal statute on removal, and not the state statute. The latter's procedural provisions cannot control the privilege of removal granted by the federal statute. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 104 61 S.Ct. 868, 85 L.Ed. 1214." Chicago R. I. & P. R. Co. v. Stude, 1954, 346 U.S. 574, 580, 74 S.Ct. 290, 294, 98 L.Ed. 317. The purpose of the Removal Act in limiting removal to defendants is to restrict the right to the party who had no choice in the selection of the forum. See Mohawk Rubber Co. of New York v. Terrell, D.C. W.D.Mo.1926, 13 F.2d 266. The party who, by his own affirmative and voluntary act, chose the jurisdiction of the state court, should be bound by his choice of forum. See Haney v. Wilcheck, supra. The Budget Dress-Rosenthal rule binds a party as plaintiff or defendant without regard to choice of forum. It may be argued that on its own facts, Budget Dress is compatible with the purpose of limiting removal to defendants, for both parties there agreed to be controlled by the state forum. But the Rosenthal extension disregards that purpose by classifying as defendant the very party who had made the choice of forum. And in the instant case, where the contract specified no forum, and where there is concurrent jurisdiction in the state and federal courts, to bind Victorias as plaintiff would fly in the face of the concept of forum choice. It was Hugo Neu that chose to proceed in ...