UNITED STATES COURT
FOR THE SECOND CIRCUIT
August Term, 1999
(Argued: December 6, 1999) (Decided:
October 13, 2000)
Docket No. 99-7222
MEDITERRANEAN SHIPPING COMPANY
ATLANTIC CONTAINER LINE AB,
SCHREIBER FOODS INTERNATIONAL INC.,
CORPORATION, LOUIS DREYFUS CORPORATION,
CENTER, Inc., A.S.I. STONE IMPORTS,
CORPORATION, THOMSON CONSUMER ELECTRONICS,
TUPPERWARE CORPORATION, TYFIELD
COACH LEATHERWARE COMPANY, INC.,
TECHNOLOGIES, MATTEL, INC., CATHERINE
COMARO USA INC., V & S VIN &
SPIRIT, L'OREAL GROUP,
DE LONGHI S.P.A., PHILIPS CORP.,
DE VITRITE FABRIEK
B.V., GOODMARK AEROSOL COMPANY LIMITED,
LAGONDA LIMITED, IKEA WHOLESALE,
INC., J. BAKER, INC.,
AIR EXPRESS INTERNATIONAL, Inc./Radix,
CO., Inc., THE ROCKPORT COMPANY,
INC., RAYTHEON MARINE COMPANY, MED
MCCORMICK & COMPANY, INC., SYRATECH
CORP., THOMAS ALLRAUM, ANDERSON
COURTS AND SPORTS
SURFACE, INC., ASSOCIATED MERCHANDISING
WILLIAM BUTTRUM, EXTRA PLASTIC LTD,
GADOT BIO-CHEM INC.,
MR. GALLAGHER, CRP INDUSTRIES, INC,
MRS. JULIETTE HABIB,
MR. RAINS, MRS. C. RAINS, MS. ELIZABETH
SANDS, SKYWAY INTERNATIONAL FREIGHT FORWARDERS LTD., VICKSBURG
CHEMICAL CORPORATION, WOODWAY DARTS
& SUPPLIES, INC.,
MR UDAY YADAV, DART MART, INC.,
YMT INTERNATIONAL, Inc.,
OCEAN WORLD LINES, INC.,
HYUNDAI MERCHANT MARINE CO., LTD.,
INTERCARGO NAPOLI SRL, OTIM SPA
MILAN, A.L.S. SRL,
DENESI SPENDIZIONI, SRL, CIRCLE
ALBATRANS S.R.L., ARIMAR SPEDIZIONI,
SRL, EUROSHIP LINES,
CARGO SPECIALISTS INTERNATIONAL
TRANSPORTS INTERNATIONAL, MARITEAM
LOGISTIQUE FRET SA, EXPEDITIORS
DANMAR LINES LTD, TRANS WORLD SHIPPING
INC., CARGOLINE (USA) INC., SAVITRANSPORT
S.P.A., KAMDEN INTERNATIONAL SHIPPING, LTD., SCHENKER INTERNATIONAL
DEUTCHLAND GMBH, SAVINO DEL BENE
SPA TREVISO, ROCO
FREIGHT SERVICES, PROCON EXPRESS
LINES, CONCORD LOGISTICS
BEFORE: WALKER, Chief
Judge, CABRANES and PARKER,
Appeal from the January 26, 1999
memorandum and order of the United States District Court for
the Eastern District of New York (Richard Owen, Judge),
denying the motion of Third-Party-Defendant-Appellant Mediterranean
Shipping Company S.A. Geneva to compel arbitration and stay all
third-party proceedings and/or all legal actions by Defendants-Third-Party-Plaintiffs-Appellees
POL-Atlantic and Atlantic Container Line AB pending London arbitration
pursuant to the terms of a Vessel Sharing Agreement between the
parties and pursuant to the Federal Arbitration Act, 9 U.S.C.
§ 1 et seq.
VACATED and REMANDED.
Vincent M. De Orchis, De Orchis,
Walker & Corsa LLP, New York, NY (John A. Orzel, Marc I.
Kunkin, Of Counsel), for
Third-Party-Defendant-Appellant Mediterranean Shipping Co. S.A.
Stephen H. Vengrow, Cichanowicz
Callan Keane Vengrow & Textor LLP, New York, NY, forDefendant-Third-Party-Plaintiff-Cross-Defendant-Appellee
POL-Atlantic and Defendant-Third-Party-Plaintiff-Appellee Atlantic
Container Line AB.
This case concerns the appeal from
the January 26, 1999 memorandum and order of the United States
District Court for the Eastern District of New York (Richard
Owen, Judge), denying the motion of Third-Party-Defendant-Appellant
Mediterranean Shipping Company S.A. Geneva ("MSC")
to stay all third-party claims or legal actions by Defendants-Third-Party-Plaintiffs-Appellees
POL-Atlantic and Atlantic Container Line AB ("POL"
and "ACL," respectively, or the "slot charterers,"
collectively) pending London arbitration pursuant to the terms
of a Vessel Sharing Agreement ("VSA") between the parties
and pursuant to the Federal Arbitration Act ("FAA"),
9 U.S.C. § 1 et
On appeal MSC argues that the district
court improperly denied its motion to compel arbitration. We
hold that the district court erred in concluding that concursus
under the Limitation of Shipowners' Liability Act (1851) (the
Act" or the "Act"),
46 U.S.C. app. § 181 et
seq., applies to the
third-party claims at issue here
and that it provided a justification for denial of MSC's motion.
Therefore, we vacate the district court's decision and remand
for further proceedings.
The facts of this case are described
in detail in the district court opinion, Schreiber
Foods Int'l, Inc. v. Intercargo Napoli S.R.L., No. 98
CV 5954, 1999 WL 33469 (S.D.N.Y. Jan. 26, 1999); they are briefly
as follows. In November 1997, the 289-meter M/V MSC Carla (the
"Carla") departed from Le Havre, France on a westbound
voyage to the United States. The vessel encountered heavy weather
on November 24, 1997 and broke in half. The bow section sank
with all its cargo; the stern continued to float and ultimately
was towed to safety with its crew and cargo.
MSC is the bareboat charterer (1) and vessel operator of the Carla.
POL and ACL are slot charterers (2)
of the vessel. MSC, POL, and ACL are all ocean carriers which
operate services between Europe and the United States. Pursuant
to the VSA,
which is a charter party (3) entered into by MSC, POL and ACL,
the slot charterers (POL and ACL) placed containerized (4) cargo on board the Carla for shipment
by MSC. The cargo was moved for cargo owners under separate bills
of lading issued by POL and ACL to the cargo owners. Because
the cargo was destroyed, the cargo owners had the right to bring
claims against the bill of lading issuer or the vessel operator,
or both, under the United States Carriage of Goods by Sea Act,
46 U.S.C. § 1300 et
seq. ("COGSA"). However, the VSA is not subject
to COGSA. According to the VSA's terms, POL and ACL, as the bill
of lading issuers, must appear and defend all cargo claims. MSC,
the vessel operator, is required to cooperate with POL and ACL
in this defense.
Following the casualty, on December
9, 1997, the vessel's owner, Rationis Enterprises, Inc., and
MSC filed a Petition or Complaint for Exoneration from or Limitation
of Liability (the "limitation proceeding") in the United
States Court for the Southern District of New York, pursuant
to the Limitation Act and Rule F of the Supplemental Rules for
Certain Admiralty and Maritime Claims. The limitation proceeding, In
re Complaint of Rationis Enterprises, Inc., No. 97 CV
9052 (RO) (S.D.N.Y. filed Dec. 9, 1997), brings together nearly
1,600 claims filed by cargo owners and their underwriters (collectively,
the "cargo interests") against MSC. Under the Limitation
Act a shipowner (or its equivalent, including a bareboat charterer)
is entitled to limit its liability to the value of the vessel
after the incident, plus "freight then pending," (5) should exoneration (discussed infra)
be denied. (6)See
46 U.S.C. app. § 183; 2 Thomas J. Schoenbaum, Admiralty
and Maritime Law § 15-7, at 314 (2d ed. 1994). The
Act provides for a "concursus"
(7) whereby all claims against a shipowner are brought
"into concourse in an admiralty tribunal." Maryland
Cas. Co. v. Cushing, 347 U.S. 409, 414 (1954); see
2 Schoenbaum, supra,
§ 15-5, at 310. The Limitation Act is described in greater
The cargo interests also filed lawsuits
(collectively, the "cargo actions"), from which this
appeal arises, outside the limitation proceeding against POL
and ACL (and other carriers), who as slot charterers are not
entitled to limit their liability under the Limitation Act. On
September 10, 1998, POL and ACL filed in the cargo actions third-party
complaints pursuant to Rule 14(c) of the Federal Rules of Civil
Procedure seeking indemnity from MSC (the "third-party indemnity
claims") for the claims filed against them, on the ground
that the losses occurred while the vessel was solely under MSC's
control. POL and ACL moved on September 28, 1998 to consolidate
the cargo actions with the limitation proceeding. On October
7, 1998, MSC moved to stay the third-party indemnity claims brought
against it by POL and ACL pending London arbitration (8) pursuant to the VSA. The district
court denied MSC's motion, and granted POL and ACL's motion to
consolidate the cargo actions with the limitation proceeding
for discovery purposes. SeeSchreiber,
1999 WL 33469, at *3. MSC appealed the denial of its motion.
In the limitation proceeding MSC
may be exonerated from all liability if the court finds that
cargo loss was due to certain factors, including Act of God,
Peril of the Sea, or latent defect of the vessel not discoverable
through due diligence. See
46 U.S.C. § 1304. If MSC is not entitled to exoneration,
the court will determine whether MSC is entitled to limit its
liability under the Limitation Act. The slot charterers are not
protected under the Limitation Act, which protects only vessel
owners and bareboat charterers. See
46 U.S.C. app. §§ 185, 186. As slot charterers, POL
and ACL are thus liable for losses due to fault or negligence.
MSC contends that any claims by
POL and ACL to recover from MSC must be asserted in London arbitration,
pursuant to the VSA's arbitration clause, which reads as follows:
This Charter Party shall be governed
by and construed in accordance with laws of England.
Any dispute or claim arising out
of or in connection with this Charter Party shall be referred
to arbitration under the International Arbitration Rules of the
London Court of International Arbitration (LCIA), providing not
less than 60 day's notice of intention to refer the matter to
arbitration, specifying the nature of the dispute or claim, shall
have been delivered in writing to the other party(ies). The parties
agree to exclude any right of appeal with respect to any award
POL, ACL, and MSC separately requested
arbitration in letters exchanged among the parties between September
24, 1998 and September 28, 1998. However, ACL and POL demanded
arbitration to protect their interests in the event the district
court dismissed their third-party indemnity claims against MSC,
indicating that they would withdraw their arbitration demands
if the district court consolidated the cargo actions with the
limitation proceeding. In November 1998, the High Court of Justice,
Queen's Bench Division, permitted ACL and POL "to continue
their preparations in respect of MSC's application to stay the
Third Party Complaints against MSC in the United States District
Court for the Southern District of New York" (the limitation
proceeding). J.A. 265.
The district court below denied
MSC's motion to arbitrate pursuant to the VSA, concluding that
"federal policy favoring concursus takes precedence over
arbitration at this stage of the case." Schreiber
Foods, 1999 WL 33469, at *2. The court reasoned that our
decision in The
Quarrington Court, 102 F.2d 916, 918 (2d Cir. 1939), should
be read to preclude MSC's motion, at least at this point in the
proceedings. The district court quoted Quarrington
Court, which stated that "[t]he purpose of a limitation
proceeding is not merely to limit liability but to bring all
claims into concourse and settle every dispute in one action." Schreiber
Foods, 1999 WL 33469, at *2 (quotingQuarrington
Court, 102 F.2d at 918).
The district court also relied on
Supreme Court precedent, stating:
The Supreme Court has "given
the [Limitation Act] a very broad and equitable construction
for the purpose of carrying out its purpose, and for facilitating
a settlement of the whole controversy over such losses as are
comprehended within it, and that all the ease with which rights
can be adjusted in equity is intended to be given to the proceeding."
Accident & Indem. Co. v. Southern Pac. Co.
Bolikow), 273 U.S. 207, 215-16 (1927)). The district court
While the purpose behind the Federal
Arbitration Act is "to ensure judicial enforcement of privately
made agreements to arbitrate" and to "overrule the
judiciary's longstanding refusal to enforce agreements to arbitrate,"
I am concerned here with more than mere judicial economy in the
face of the federal policy behind the Limitation of Liability
Act's concursus which is in conflict with the arbitration policy.
at *3 (quoting Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219-20 (1985))
On appeal MSC argues that the district
court erred in denying MSC's motion to proceed to arbitration.
Alternatively, MSC argues that the district court erred in declining
to order POL and ACL's third-party indemnity claims to be brought
within the limitation proceeding and thus made subject to the
limitation fund. Because we do not agree with the district court
that concursus under the Limitation Act applies to the claims
at issue here, we vacate the decision of the district court.
This Court has jurisdiction pursuant
to 9 U.S.C. § 16, as this is an appeal from an order denying
MSC's motion to compel arbitration under the FAA. We review de
novo the denial of a motion to stay an action pending arbitration. (9)SeeHaviland
v. Goldman, Sachs & Co., 947 F.2d 601, 604 (2d Cir.
The Limitation Act provides an admiralty
procedure "to enjoin all pending suits and to compel them
to be filed in a special limitation proceeding so that liability
may be determined and limited to the value of the shipowner's
vessel and freight pending." 2 Schoenbaum, supra,
§ 15-1, at 299. The limitation proceeding provides a single
forum for determining whether the vessel owner is liable, and,
if so, for determining whether the owner may limit its liability,
assessing the value of the limitation fund and the claims on
the fund, and deciding how the fund will be distributed. Seeid.
§ 15-5, at 305-06.
The owner's liability under the
Act is limited as follows:
The liability of the owner of any
vessel, whether American or foreign, for any . . . loss, or destruction
by any person of any property, goods, or merchandise shipped
or put on board of such vessel, or for any loss, damage, or injury
by collision, or for any act . . . loss, damage, or forfeiture,
. . . occasioned, or incurred, without the privity or knowledge
of such owner or owners, shall not . . . exceed the amount or
value of the interest of such owner in such vessel, and her freight
46 U.S.C. § 183(a). (10) The Act thus limits a vessel owner's
liability to the value of the vessel and freight pending when
the owner is sued "for the acts of the master or crew done
without [the owner's] privity or knowledge." American
Car & Foundry Co. v. Brassert, 289 U.S. 261, 264 (1933)
(internal quotation marks and citation omitted). Privity and
knowledge "exist where the owner has actual knowledge, or
could have and should have obtained the necessary information
by reasonable inquiry or inspection." 2 Schoenbaum, supra,
§ 15-6, at 312. The value of the vessel is determined as
of the conclusion of the voyage, after the casualty. Seeid.,
§ 15-7, at 314. (11)
Personal contracts entered into
by a vessel owner or bareboat charterer are not subject to limitation
under the Act. (12)SeeAmerican
Car, 289 U.S. at 264 (shipowners entitled to limit liability
for acts of master and crew done without their privity or knowledge,
but remain liable for own fault, neglect, and contracts); Richardson
v. Harmon, 222 U.S. 96, 106 (1911) (shipowner entitled
to limit liability under Limitation Act for all claims arising
out of conduct of master and crew, but remains liable for own
fault, neglect, and contracts); The
Nat Sutton, 62 F.2d 787, 789 (2d Cir. 1933) (Limitation
Act leaves charterer "liable for his own fault, neglect,
and contracts"); The
Loyal, 204 F. 930, 932-33 (2d Cir. 1913) (owner's personal
contract is outside limitation statute); 2 Schoenbaum, supra,
§ 15-8, at 318-19. This exception to limitation determines
the result we reach here. The personal contract exception prevents
shipowners and bareboat charterers from attempting to limit liability
that they have contracted to bear. "In application this
is an equitable doctrine based on the proposition that a shipowner
should not be able to promise an undertaking or performance that
was within his personal control and then turn around and limit
liability when his performance was faulty." 2 Schoenbaum, supra,
§ 15-8, at 318; seeRichardson,
222 U.S. at 106. "[T]he test of the personal contract exception
is not merely that the shipowner entered into the contract personally,
but is whether the obligation (and therefore the breach) was
one the shipowner was personally bound to perform, rather than
one contemplated he would delegate to his agents and servants."
2 Schoenbaum, supra,
§ 15-8, at 318.
When a vessel owner personally warrants
the seaworthiness of the vessel, the owner has made a personal
contract and is not entitled to limitation under the Act. SeePendleton
v. Benner Line, 246 U.S. 353, 355-56 (1918) (owners who
warranted seaworthiness of vessel to charterer in charter party
could not subsequently limit liability under the Act because
"the [owner] by his own act knowingly made himself a party
to an express undertaking for the seaworthiness of the ship"); Cullen
Fuel Co. v. W.E. Hedger, Inc., 290 U.S. 82, 87 (1933)
(same); In re Reliance
Marine Transp. & Constr. Corp. (The M.J. Woods), 206
F.2d 240, 243 (2d Cir. 1953) (same); 2 Schoenbaum, supra,
§ 15-8, at 318 ("[T]he shipowner who enters into a
charter for his vessel and expressly or impliedly warrants its
seaworthiness cannot limit as to the claim of a charterer that
the vessel sank because the vessel was unseaworthy at the beginning
of the voyage.").
The VSA includes such a warranty
of seaworthiness here: "The Vessel Operator [MSC] shall
be responsible for the seaworthiness of the Containership . .
. [and] will be responsible for the proper and careful carriage,
custody and care of the goods and containers whilst on board
the Containership . . . ." Therefore, POL and ACL's third-party
indemnity claims against MSC are based on personal contract,
and, as such, they are not subject to limitation under the Act. SeeAmerican
Car, 289 U.S. at 264;Pendleton,
246 U.S. at 355-56; Richardson,
222 U.S. at 106; S
& E Shipping Corp. v. Chesapeake & Ohio Ry. Co.,
678 F.2d 636, 644 (6th Cir. 1982). We hold that the district
court's concursus justification for denying MSC's motion was
in error because the VSA is a personal contract that, by incorporating
MSC's warranty of seaworthiness, takes POL and ACL's third-party
indemnity claims against MSC out of the limitation proceeding.
Because the claims at issue are not subject to limitation under
the Act, the district court's order must be vacated. The policy
favoring concursus, which the district court found to override
the policy favoring arbitration, is not affected where, as here,
the indemnity claims at issue are not subject to the limitation
Our conclusion is supported by our
decision in W.E.
Hedger Transp. Corp. v. Gallotta, 145 F.2d 870 (2d Cir.
1944) (Learned Hand, C.J.). In W.E.
Hedger, this Court concluded that there was no concursus
justification for marshaling claims brought under a personal
contract into a limitation proceeding. Gallotta, a longshoreman
injured while working on a barge owned by Hedger Transportation,
sued Hedger in state court for personal injuries. Hedger had
chartered the barge orally to appellant Manhattan Lighterage,
which in turn subchartered it to another company. Hedger filed
a petition in federal district court for limitation of liability,
and Gallotta consented to limitation and agreed that the value
of the barge should be fixed in the federal court. Seeid.
at 871. The federal court thereupon vacated a stay of Gallotta's
state action, which Hedger had obtained when it filed the limitation
Gallotta then joined Manhattan and
the subcharterer as defendants in the state action against Hedger,
charging them with responsibility for the condition of the barge.
Manhattan filed a cross-claim against Hedger seeking to recover
on breach of Hedger's covenant of seaworthiness implied in the
oral charter. Seeid.
Hedger moved in the limitation proceeding to vacate the federal
order dissolving the stay of Gallotta's state action, arguing
that Manhattan's indemnity claim constituted a second claim against
it, making it necessary to bring the two claims into concourse
in the limitation proceeding. Seeid.
Hedger court concluded that the oral charter was a "personal
undertaking" in which Hedger warranted seaworthiness to
Manhattan, and therefore that the indemnity claim was "not
of a kind to be brought into a concourse with Gallotta's claim,
and to be tried in the limitation proceeding." Id.
at 872. "The Manhattan Company's claim is . . . [grounded]
upon a breach of a warranty of seaworthiness, and, since such
a breach is of a personal undertaking of the shipowner, the liability
cannot be limited." Id.
246 U.S. at 353). Consequently, the Court held that Hedger was
"liable without limitation for the full amount of any loss
which the Manhattan Company may suffer, if the barge was unseaworthy"
because "[w]hen the Hedger Company personally assured the
Manhattan Company that the barge was seaworthy, it agreed to
make good all loss which the charterer might suffer in reliance
upon that assurance; and the fact that the Hedger Company's liability
to Gallotta, based upon its relation assumed towards him, was
limited, had nothing to do with its liability on the warranty." Id.W.E.
Hedger specifically noted that the limitation fund would
not be affected by the indemnity claim because that claim was
outside limitation: "The justification for limitation proceedings
is that there is a fund to be distributed among several claimants
. . . . The jurisdiction of the admiralty court to adjudicate
the merits of the claims is derivative from, and ancillary to,
these considerations; it does not extend to a claim which is
not subject to limitation." Id.; accordKreta
Shipping S.A. v. Preussag Int'l Steel Corp., 192 F.3d
41, 49 (2d Cir. 1999) (primary purpose of the limitation procedure
is to apportion the fund among the eligible claimants); In
re Texas Co. (The Washington), 213 F.2d 479, 482 (2d Cir.
1954) ("Concourse is to be granted only when . . . necessary
in order to distribute an inadequate fund. The purpose of limitation
proceedings is not to prevent a multiplicity of suits but, in
an equitable fashion, to provide a marshalling of assets-the
distribution pro rata of an inadequate fund among claimants,
none of whom can be paid in full." (alteration in original)
(internal quotation marks and citations omitted)).
In reaching the opposite conclusion,
the district court relied on The
Quarrington Court, 102 F.2d 916 (2d Cir. 1939), which
we find distinguishable. In Quarrington
Court, cargo owners and underwriters sued the owner and
the time charterer of a steamship to recover the value of cargo
lost after the vessel sank. Seeid.
at 917. The time charterer in turn filed a third-party petition
impleading the vessel owner for indemnification. Seeid.
The owner of the vessel filed a limitation proceeding. The time
charterer filed two claims in the limitation proceeding: one
for indemnity, and one to recover $75,260, which it claimed it
would have earned had the cargo been delivered. Seeid.
The charter party executed by the
owner and time charterer contained a warranty by the owner of
the vessel's seaworthiness, and an arbitration clause providing
for arbitration of any dispute arising between the parties. Seeid.
The owner moved in the limitation proceeding to stay all proceedings
initiated by the time charterer pending arbitration. Seeid.
This Court held that the owner could not proceed to arbitration. Seeid.
Court is distinguishable from the instant case for two
reasons. First, in Quarrington
Court this Court concluded that the time charterer's claim
for consequential damages was subject to the limitation fund,
and that "after the limitation proceeding has begun steps
outside of that proceeding which would affect the fund should
not be allowed." Id.
at 919;see alsoIn
re Nakliyati, Nos. 87 CV 455 (JMM), 88 CV 506 (JMM), 1989
WL 128581, at *17 (E.D.N.Y. July 10, 1989) ("The central
thrust of the court's reasoning [in Quarrington
Court] . . . concerned the potential negative impact on
the limitation fund were the English arbitration permitted to
proceed, apparently because the issues to be arbitrated involved
not only indemnification but also the charterer's claim against
the owner for lost freight charges which, if successful, would
have affected the division of the limitation fund."). Here,
POL and ACL do not make claims for their own cargo losses or
lost profits--they seek indemnification if they become responsible
for losses incurred by cargo owners. Furthermore, as POL and
ACL have stipulated, the well-established personal contract exception
applies to remove POL and ACL's claims from the limitation proceeding
and, therefore, from the fund. (13)
Court relied on equitable considerations that do not exist
here. The circumstances of the case are not described in detail,
but the Court apparently viewed the owner's litigation strategy
as inequitable when it concluded that the owner "should
be required to adjust its disputes with [the time charterer]
in the limitation proceeding and not seek to have two strings
to its bow in order that it may invoke limitation or exoneration
in the arbitration proceeding under the English law and, if it
fails, still seek similar relief under ours." Quarrington
Court, 102 F.2d at 918. We do not find similar equitable
concerns to exist here. (14)
We disagree also with the district
court's conclusion that "as to POL and ACL's indemnity claims,
there is nothing at this point to be submitted to London arbitration." Schreiber,
1999 WL 33469, at *3. Under the VSA the arbitration panel possesses
the authority to decide the indemnity questions, and other claims
related to that charter party, pursuant to English Law. Under
English Law, the arbitration panel "may make a declaration
as to any matter to be determined in the proceedings." The
English Arbitration Act § 48(3) (1996); Thomas Carbonneau, A
Comment on the 1996 United Kingdom Arbitration Act, 22
Tul. Mar. L.J. 131, 152 (1997) (Section 48 recognizes arbitrators'
authority to issue declaratory relief). Thus, the issue of liability
may be resolved in the first instance by London arbitration.
Because we conclude that the third-party
claims are not subject to the limitation proceeding, we do not
credit MSC's alternative argument that the third-party claims
should be brought into the limitation proceeding and made subject
to the fund.
We vacate the district court's denial
of the motion by MSC to stay all third-party claims or legal
actions, and we remand to the district court for further proceedings
consistent with this opinion. If on remand the district court
concludes that the parties agreed to arbitrate within the meaning
of the Federal Arbitration Act, and POL and ACL raise no other
valid defenses, the court should grant MSC's motion to stay POL
and ACL's third-party indemnity claims and require that such
claims be brought before the arbitration proceeding in London.
Accordingly, the decision of the district court is VACATED and
REMANDED. No costs to either party.
Under a "bareboat" charter, "the charterer takes
complete control of the vessel, mans it with his own crew, and
is treated by law as its legal owner." 2 Thomas J. Schoenbaum, Admiralty
and Maritime Law § 11-1, at 169 (2d ed. 1994) (footnote
Slot charterers reserve a certain number of container slots on
a ship owned by another party.
A charter party is a contract by which a vessel is leased by
the owner (or bareboat charterer in this case) to charterers
(here, subcharterers) for the conveyance of goods. See
2 Schoenbaum, supra,
§ 11-1, at 169.
Cargo is shipped in a number of large containers which are loaded
on board the vessel. Seeid.
§ 10-4, at 16.
"Freight then pending" means the total earnings of
the vessel for the voyage, including charges for carriage of
cargo and passengers. See
2 Schoenbaum, supra,
§ 15-7, at 314.
According to MSC, the value of the limitation fund is approximately
$3.265 million; there are more than $130 million in claims. SeeSchreiber
Foods, 1999 WL 33469, at *2.
Concursus may be very generally understood as a concept where
numerous claimants to a single fund have an opportunity to litigate
over their share of the fund in a single lawsuit. See
2 Schoenbaum, supra,
§ 15-6, at 310.
POL, ACL, and MSC had earlier requested arbitration (on September
24 and 28, 1998).
POL and ACL, the slot charterers, argue unpersuasively that "the
district court simply adjourned or deferred a determination of
the arbitrability of the indemnity claims," so the order
appealed from "was actually a calendaring or scheduling
order rather than a substantive denial [of] arbitration."
They argue, therefore, that our review should be for abuse of
discretion. While it is correct that the district court may revisit
this issue at a later stage of the proceeding, the order being
appealed herein clearly denied MSC's motion to compel arbitration
and stay POL and ACL's third-party indemnity claims pending arbitration. SeeSchreiber,
1999 WL 33469, at *3.
Rule F of the Supplemental Rules for Certain Admiralty and Maritime
Claims governs the filing and adjudication of a limitation action.
It provides, interalia,
requirements for the complaint and a procedure for enjoining
the further prosecution of any action or proceeding against the
plaintiff with respect to claims subject to limitation.
The Limitation Act differs from the law of limitation that applies
under English law, which the VSA provides for in its arbitration
provision. England has adopted the International Convention on
Limitation of Liability for Maritime Claims (the "1976 Convention");
it has not been adopted by the United States. See
2 Schoenbaum, supra,
§ 15-1, at 299-300. The limitation fund is greater under
the 1976 Convention than under the Limitation Act; it is based
on the tonnage of the vessel, rather than the vessel's value
after the casualty. Seeid.,
§ 15-7, at 315. Under Article 4 of the 1976 Convention,
the shipowner loses its right to limit its liability only "if
it is proved that the loss resulted from its personal act or
omission, committed with the intent to cause such loss, or recklessly
and with knowledge that such loss would probably result."
3 Schoenbaum, supra,
App. D, at 924. Thus, the 1976 Convention "provides for
a virtually unbreakable system of limiting liability." 2
§ 15-7, at 315 n.10.
The parties recognize this exception to limitation; the slot
charters stipulated to it below. See
Appellees' Br. at 24.
It appears that the parties in Quarrington
Court did not raise, and hence this Court did not consider,
whether the vessel owner's warranty of seaworthiness entitled
the charterer to invoke the personal contract exception so as
to avoid limitation.
Court rests upon the particular circumstances therein
and should not be read to preclude an owner from pursuing arbitration
under its charter party whenever it has already filed a complaint
seeking limitation. In Afram
Carriers, Inc. v. Moeykens, 145 F.3d 298 (5th Cir. 1998),
the Fifth Circuit noted its disagreement with what it considered
to be outdated reasoning in Quarrington
Quarrington Court was decided in an era in which forum-selection
and arbitration clauses were disfavored by the courts because
they were thought to "oust their jurisdiction." In
those days, nearly any public policy could undo such a clause.
. . .
1972, the Supreme Court had rejected the "ouster of jurisdiction"
notion as parochial. Now, there is a heavy presumption in favor
of such clauses . . . .
at 303 n.9 (citing The
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9 (1972)); seeThe
Bremen, 407 U.S. at 9, 15 (rejecting the ouster of jurisdiction
argument and holding that forum selection clauses should control
absent a strong showing of unreasonableness, fraud, or overreaching); Vimar
Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S.
528, 537-39 (1995) (viewing foreign arbitration clauses as a
subset of forum selection clauses, and relying on The
Bremen in support of its holding enforcing foreign arbitration
clause); see alsoDean
Witter Reynolds, 470 U.S. at 219-20 (Congressional purpose
in enacting FAA was to "overrule the judiciary's longstanding
refusal to enforce agreements to arbitrate" on ground of
ouster of jurisdiction). As we have indicated, this Court favors
agreements to arbitrate; any broad suggestion that Quarrington
Court may have provided to the contrary should not be