Opinion
Civ. No. 03-5044 (RLE).
December 14, 2004
ORDER
I. Introduction
This matter came before the undersigned United States Magistrate Judge pursuant to the consent of the parties, as authorized by the provisions of Title 28 U.S.C. § 636(c), upon the Motion of the Defendants North Star Maritime Company, and FEDNAV International, for Summary Judgment or, in the Alternative, to Stay Federal Court Proceedings Pending Arbitration. A Hearing on the Motion was conducted on November 18, 2004, at which time, the Plaintiff appeared by David M. Johnson, and James F. Sweeney, Esqs.; and the Defendants appeared by Thomas A. Clure, and Timothy S. McGovern, Esqs. For reasons which follow, we deny the Defendants' Motion for Summary Judgment, but grant their Petition to Stay these proceedings pending arbitration.
II. Factual Background
On October 24, 2001, Riss Transport, a subdivision of the Plaintiff Usinor Steel Corporation, chartered a cargo vessel, the M/V Marilis, from the Defendant, FEDNAV International, Ltd., pursuant to a Charter Party Agreement. The Charter Party Agreement was subsequently amended on May 5, 2002. The final agreement between the parties contained an arbitration clause, drafted by Riss Transport, which read as follows:
ARBITRATION
Arbitration, if any, to be settled in Paris by Chamber Arbitrale Maritime.
General Average, if any, to be settled in Paris.
Declaration of J.P. Stoclin of Riss Transport ("Stoclin Decl.") ¶ 4, Ex. (unnumbered 1) at unnumbered p. 9, ¶ 30; Affidavit of Thomas A. Clure ("Clure Aff."), Ex 1.
The clause was subsequently incorporated into Bills of Lading, under which the Defendants agreed to transport steel coils from Fos Ser Mer, France, to locations in the United States, including Milwaukee, Wisconsin, and Duluth, Minnesota. Neither party contests the validity of the arbitration clause, or its applicability to disputes arising out of the Bills of Lading — they only quarrel over whether the clause is mandatory, or permissive.
On August 21, 2003, the Plaintiff filed a Complaint in this Court alleging that the steel coils were damaged during their transport. The Defendants, by way of the pending Motion, contend that the arbitration clause, which is contained in the Charter Party Agreement, is mandatory, thereby requiring the parties to arbitrate the dispute, which has been raised in the Plaintiff's Complaint, prior to seeking Federal Court relief. The Plaintiff contends that the arbitration clause was permissive, in that it merely had the effect of determining the forum, and the tribunal of arbitration, in the event that the parties chose to arbitrate a dispute.
Also at issue is the proper recourse if the Court determines that arbitration, under the Charter Party Agreement, is mandatory. The Defendants urge us to direct Summary Judgment in their favor but, at the Hearing on the Motion, they advised that they would not oppose staying this proceeding pending the completion of arbitration.
III. Discussion
A. Arbitration.
1. Standard of Review. "The Supreme Court has repeatedly noted that the Federal Arbitration Act was designed to combat longstanding hostility to arbitration by establishing `a liberal federal policy favoring arbitration agreements.'" Bob Schultz Motors Inc. v. Kawasaki Motors, Corp., USA, 334 F.3d 721, 724 (8th Cir. 2003), citing Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); see Faber v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir. 2004); Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 679 (8th Cir. 2001). Under the Federal Arbitration Act ("FAA"), "written agreements to arbitrate are `valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'"Gannon v. Circuit City Stores, Inc., supra at 679, quotingTitle 9 U.S.C. § 2.
Accordingly, the role of the Court is limited to determining "whether the parties have entered a valid agreement to arbitrate, and if so, whether the existing dispute falls under the coverage of the agreement." Id. at 680; citing Larry's United Super, Inc. v. Werries, 253 F.3d 1083, 1085 (8th Cir. 2001); In engaging in the inquiry, the Court applies "ordinary state law contract principles to decide whether parties have agreed to arbitrate a particular matter." Keymer v. Management Recruiters Int'l, Inc., 169 F.3d 501, 504 (8th Cir. 1999). However, "the parties' intentions * * * are generously construed as to issues of arbitrability." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).
2. Legal analysis. The applicability of the arbitration clause to the pending dispute is not at issue. Rather, the parties dispute the effect of that clause on the ability of the Plaintiff to bring its cause of action in Federal Court without first submitting the dispute to arbitration. As an initial matter, we note that the FAA specifically applies to provisions contained in "maritime transactions," which include Charter Party Agreements, and Bills of Lading. Title 9 U.S.C. §§ 1 and 2. Therefore, the principles, policies, and interpretive guidelines, which are espoused in the FAA, apply to the Charter Party Agreement, and Bills of Lading, extending between the Plaintiff and Defendants.
The parties have presented us with two decisions which are indistinguishable from the facts, and the procedural posture, of this case. See USINOR Steel Corp. v. M/V Koningsborg ("Usinor"), 2004 WL 230910 (S.D.N.Y., February 6, 2004);Eurosteel Corp. v. M/V Millenium Falcon ("Eurosteel"), 2002 WL 1972266 (N.D. Ill., August 20, 2002). The Plaintiff asks us to adopt the holding in Eurosteel, and find the language of the arbitration clause permissive, while the Defendants urge us to adopt the reasoning in Usinor, and find the arbitration clause mandatory.
The Defendants have also cited to several cases, in which Courts have found arbitration mandatory based upon language similar to that contained in the Charter Party Agreement. See Oriental Commercial Shipping Co. v. Rosseel, N.V., 609 F. Supp. 75, 77-78 (S.D.N.Y. 1985) (Clause stating "Arbitration: If required, in New York City," mandated arbitration); Salim Oleaochemicals, Inc. v. M/V/Shropshire, 169 F. Supp.2d 194, 199 (S.D.N.Y. 2001) (Clause stating "Law General average and Charter Party arbitration to be conducted in London. English law to apply," mandated arbitration.); Fox v. Giuseppe Mazzine, 110 F. Supp. 212, 214 (E.D.N.Y. 1953) (Clause "Arbitration to be settled in London" constitutes an agreement to arbitrate). Given the somewhat differing language in the agreements interpreted by those Courts, however, their holdings are of only limited guidance, except insofar as their analysis reveals a strong presumption in favor of mandatory arbitration, even in the presence of contract language that is somewhat equivocal.
The Plaintiff underscores the "if any" language of the arbitration clause, and argues that such language unambiguously evinces an intent that the arbitration clause be permissive. Such an interpretation was adopted by the Court in Eurosteel, supra at *3, which reasoned that "[t]he prepositional phrase `if any' indicates that the arbitration will take place in Paris, if arbitration takes place," and therefore, the arbitration of the dispute under the clause was not mandatory. [Emphasis in original]. However, the same argument was expressly rejected in Usinor, supra at *3, where the Court stated:
I likewise reject the argument that "if any" undermines the mandatory nature of the arbitration clause. "If any," by its natural language, simply means that if any sort of dispute arises, resolution by arbitration becomes mandatory. The Bill of Lading, too, specifically highlights the Charter Party's "arbitration clause" and by incorporating it, reflects the intent of the parties to arbitrate any disputes that might arise.
The holdings in Eurosteel, and Usinor, are flatly contradictory in addressing the issues pending before us. Therefore, we decide for ourselves which of the rulings is the more principled, and better conforms to the governing contract and arbitral laws. Both the Court in USINOR, and Eurosteel, began their analysis by recognizing the Federal policy which highly favors arbitration, as that favoritism is espoused by the FAA. However, where the Court, in Eurosteel, found the contract language unambiguous, Eurosteel, supra at *3, the Court, inUsinor, construed the language employed under the maxim that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Usinor, supra at *3, quotingMoses H. Cone Mem'l. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1982).
Given the conflicting decisions in Usinor and Eurosteel, the language at issue is susceptible to more than one reading, but not more than one reasonable reading. As noted by the Court in Usinor, the language "if any" could merely be an acknowledgment by the parties that the performance of the agreement may be completed without a dispute, and that, if a dispute does arise, then arbitration is required. Usinor, supra at *3. A less plausible reading would suggest that the purpose of the clause was simply to select the arbitral forum, without binding the parties to arbitration. We find this reading less plausible, because arbitration is always contractual — it requires the mutual assent of the contracting parties. It would make little sense to select the arbitration panel, but make arbitration optional. If, as the Plaintiff argues, only the panel was selected, we fail to see how that reading advances the alternative dispute mechanism, because the parties can always agree upon a panel, if arbitration is required.
The Plaintiff argues that, if the provision is found to be ambiguous, then the averments of J.P. Stoclin ("Stoclin") disclose the contractual intent of the parties. Stoclin executed the agreement on behalf of Riss Transport, which had drafted the arbitration clause. In his declaration, Stoclin avers that "[i]t has never been the intent of Riss Transport that arbitration of any controversies be mandatory under the [Arbitration] Clause," and that the intent of Riss Transport was to "provide generally, that if the parties decided to arbitrate disputes, the location of the arbitration would be in Paris, and the dispute would be decided by the Chambre Arbitrale Maritime."Stoclin Decl. at ¶ 6, see also, Eurosteel, supra at *3. The Plaintiff contends that Stoclin's interpretation should control, since it purportedly expresses a rendition of the facts by the non-moving party.
Contrary to the Plaintiff's argument, we need not wade into the proffered parol evidence so as to determine the intent of the contracting parties. Well-established presumptions of contract interpretation, under both Minnesota common law, and the FAA, are sufficient to resolve the issue. Under Minnesota law, "ambiguous contract terms must be construed against the drafter." Hilligoss v. Cargill, Inc., 649 N.W.2d 142, 148 (Minn. 2002), citingCurrent Tech. Concepts, Inc. v. Irie Enter., Inc., 530 N.W.2d 539, 543 (Minn. 1995). Further, under the FAA, the parties' intent to arbitrate is "generously construed in favor of arbitration." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). Accordingly, to the extent that the arbitration provision requires a proper construction, we construe the agreement to favor arbitration.
As noted by the Defendants, our Court of Appeals has determined that the function of mutually agreed upon arbitration clauses cannot be fulfilled unless they are afforded a binding effect.American Italia Pasta Co. v. Austin Co., 914 F.2d 1103, 1104 (8th Cir. 1990), see also, Bonnot v. Congress of Indep. Union Local #114, 331 F.2d 355 (8th Cir. 1964). In American Italia, the arbitration clause contained the language that, "[i]f both parties agree that a dispute or disagreement is of such a nature that it cannot be settled as provided for above, then such dispute or disagreement may be submitted to arbitration." Id. at 1103. Using commonly understood principles of interpretation, the plaintiff, there, argued that the use of the term "may," which generally connotes a permissive intent, evidenced the intention of the parties to render arbitration permissive as opposed to mandatory. The Court held otherwise, however, by reasoning that "[t]here would be no reason for the arbitration language * * * if the parties intended it to be permissive, for the parties could voluntarily have agreed to submit a dispute to arbitration in the absence of such a provision." Id. at 1104. The Court's interpretation of the arbitration provision is wholly consistent with the well-settled authority which favors arbitration. See, United States v. Banker's Ins. Co., 245 F.3d 315, 321, 324 (4th Cir. 2001).
The Plaintiff urges us to distinguish American Italia on the ground that, there, the Court's decision was guided by a finding that, if the arbitration provision were permissive, the aggrieved party would be forced to abandon its claims on the other party's refusal to submit to arbitration. However, nothing contained in the opinion of the Court supports such a reading. While the Plaintiff is correct to note that the language at issue, inAmerican Italia, was part of a larger dispute resolution provision, nothing in the Court's construction of that provision, or in its reasoning, so much as intimates that the Court premised its decision on the effect that the construction would have on only one of the parties. As a consequence, we follow the Court's reasoning, in American Italia Past Corp., when interpreting the clause before us.
After reviewing the agreement, and applying its terms to the relevant presumptions and case law, we are satisfied that the parties' intended that the arbitration clause be mandatory, and therefore, arbitration is required before our adjudication of the parties' dispute. We find no satisfactory explanation for the parties' incorporation of an arbitration clause, which expressly selects the arbitral forum, if arbitration were truly optional. Accordingly, we read the clause as requiring arbitration if a dispute arises which cannot be resolved without such recourse. Had the parties intended a permissive resort to arbitration, they could have plainly provided that arbitration was available only if the parties' mutually agree to submit the matter to arbitrators. Accordingly, we conclude, on this Record, that arbitration between these parties is mandatory.
B. Summary Judgment or Stay. The Defendants assert that they are entitled to the entry of Judgment as a Matter of Law, because: 1) the Plaintiff's action is barred by the statute of limitations; and 2) all issues raised in the Plaintiff's Complaint are arbitrable. As to the statute of limitations issue, Title 46 U.S.C. § 1303(6) provides as follows:
In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods have been delivered.
The Defendants contend that, since the steel coils were delivered on or before December 12, 2002, and the Plaintiff has not, as of yet, submitted its dispute to arbitration, that its request for relief is now barred by the statute of limitations.
The Defendants argument is unavailing. The United States Supreme Court has outlined general limitations on disputes that a District Court may consider, when compliance with an arbitration agreement is sought, explaining as follows:
With respect to cases brought in federal court involving maritime contracts or those evidencing transactions in `commerce,' we think that Congress has provided an explicit answer. That answer is to be found in § 4 of the [FAA], which provides a remedy to a party seeking to compel compliance with an arbitration agreement. Under § 4 with respect to a matter within the jurisdiction of the federal courts save for the existence of an arbitration clause, the federal court is instructed to order arbitration to proceed once it is satisfied that `the making of the agreement for arbitration or the failure to comply (with the arbitration agreement) is not in issue.' * * * We hold, therefore, that in passing upon a § 3 application for a stay while the parties arbitrate, a federal court may consider only issues relating to the making and performance of the agreement to arbitrate.Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395, 403-404 (1967); accord, Bob Schultz's Motors, Inc. v. Kawasaki Motors Corp., USA, supra at 726 ("If the parties have agreed to arbitrate their dispute, other claims are for the arbitrator to decide."); see also, Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 592 (2002) (finding "gateway question" of whether arbitration was precluded by application of a NASD time limit rule to be "a matter presumptively for the arbitrator, not the judge.").
The Defendant's Motion to Stay has been brought under Section 3 of the FAA. The application of the statute of limitations in defense against an arbitration claim bears no relation to either the formation, or performance, of the agreement to arbitrate. Therefore, dismissal of the Plaintiff's Complaint, as opposed to a stay under Section 3, is inappropriate based upon a claimed application of a statute of limitations. See, Conticommidity Serv., Inc. v. Phillips Lion, 613 F.2d 1222, 1225 (2nd Cir. 1980) ("It is well-settled that the validity of time-bar defenses to the enforcement of arbitration agreements should generally be determined by the arbitrator rather than by the Court.").
The Plaintiff has also argued that the one-year statute of limitations, which is contained in Title 46 U.S.C. § 1303(6), does not apply to private agreements. Since the applicability of Section 1303(6) does not involve either the formation, or performance, of the arbitration agreement, we leave, once again, such arguments to the arbitrator.
The Defendants also maintain that dismissal is appropriate because all of the issues, which have been raised in the Plaintiff's Complaint, are arbitrable. In support of their argument, the Defendants rely on Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674 (5th Cir. 1999). In Fedmet, the Court of Appeals determined that the District Court, there, had not abused its discretion by dismissing a suit brought under Section 3, once the District Court found that all of the issues, which were brought before it, were arbitrable. In so holding, the Court of Appeals concluded:
Although the express terms of § 3 provide that "a stay is mandatory upon a showing that the opposing party has commenced a suit upon any issue referable to arbitration under an agreement in writing for such arbitration * * * *," Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992), we have interpreted this language to mean only that a district court cannot deny a stay when one is properly requested. Id. "This rule, however, was not intended to limit dismissal of a case under the proper circumstances." Id. If all of the issues raised before the district court are arbitrable, dismissal of the case is not inappropriate.Id. at 678.
Unfortunately for the Defendants' argument, we can discern no benefit in dismissing the Plaintiff's Complaint, as opposed to staying the proceedings in order to await the outcome of arbitration. Neither we, nor the parties, are in a position to speculate as to the arguments that will be presented to the arbitrator, nor as to what remedies the arbitrator might direct. Accordingly, the possibility remains that the arbitrator could invalidate the arbitration clause, or otherwise refuse to arbitrate the parties' dispute. In staying this action, we assure that, in the event the arbitrator refuses to address the substance of the parties' dispute, a forum will be available to address the parties' respective positions, if not to confirm, or vacate, the arbitration award.
NOW, THEREFORE, It is —
ORDERED:
That the Plaintiff's Motion for a Stay [Docket No. 16] is GRANTED, and the Clerk is directed to administratively stay this action until a party requests that the stay be lifted.