138 F. Supp. 3d 629
S.D.N.Y.2015Background
- Plaintiffs ICS and Peraco are U.S. shipbrokers who claim entitlement to commissions under thirteen 2007 charter parties between Korea Line (Charterer) and vessel-owning subsidiaries of Anemi (Owners); Plaintiffs are not signatories but participated in negotiations and contend commissions were separately agreed in a May 4, 2007 email.
- Each of the four master charter parties contains identical arbitration clauses (London, three arbitrators) and a choice-of-law clause selecting English law.
- Eagle acquired Anemi and its ship-owning subsidiaries shortly after the charters were signed; Korea Line later entered rehabilitation and the parties modified performance terms in 2011.
- Plaintiffs sued in New York state court for commissions and related relief; Defendants removed and moved to compel arbitration under the charter parties.
- The district court originally denied the motion to compel arbitration under federal maritime law because Plaintiffs were non-signatories not covered by the phrase “Owners and the Charterers.” The Second Circuit reversed in part, directing the district court to resolve whether English or federal maritime law governs arbitrability (because English law would treat Plaintiffs as assignees covered by the arbitration clause) and whether Plaintiffs have claims independent of the charters.
- On remand the district court held the charter parties’ English choice-of-law clauses apply to Plaintiffs (bound by direct-benefit estoppel/third-party beneficiary principles) and therefore English law deems Plaintiffs within the arbitration clause; the court granted arbitration in part and ordered further briefing on whether any claims are independent of the charters and who decides that question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which law governs arbitrability (English or federal maritime law)? | Federal maritime law should govern; under it Plaintiffs are not covered by “Owners and the Charterers.” | English law governs per the charter parties’ choice-of-law clauses; under English law Plaintiffs are assignees and covered. | Choice-of-law clauses are presumptively valid; English law governs interpretation of the charter parties, so Plaintiffs fall within arbitration scope. |
| Can Plaintiffs (non-signatories) be bound by the contract’s choice-of-law and arbitration clauses? | Plaintiffs argue non-signatory status prevents binding; reliance on American policy against binding non-signatories. | Defendants argue Plaintiffs are estopped/third-party beneficiaries who receive a direct benefit and thus are bound. | Non-signatories who seek benefits from the contract are bound by its choice-of-law and arbitration clauses via direct-benefit estoppel; Plaintiffs are bound. |
| Do Plaintiffs’ claims arise under the charter parties or from an independent prior agreement (May 4 email)? | Claims arise from an independent May 4, 2007 agreement, so not subject to charter arbitration. | Claims arise under the charter parties (commissions incorporated therein) and thus must be arbitrated. | Court did not resolve independence; it concluded arbitration applies to claims arising under the charters and ordered further briefing on independence. |
| Who decides whether any claims are independent (court or arbitrators) and which law applies to that question? | Plaintiffs implicitly prefer court resolution under federal law. | Defendants favor arbitration (and English law) or at least application of choice-of-law clauses. | Court ordered additional briefing addressing (1) whether the court or English arbitrators should decide independence, and (2) how the question is resolved under English and federal law. |
Key Cases Cited
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (upholds forum-selection clauses and presumption of validity in international maritime contracts)
- Roby v. Corp. of Lloyd’s, 996 F.2d 1353 (2d Cir. 1993) (framework for when choice-of-law/forum clauses are unreasonable or contrary to public policy)
- Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2d Cir. 2004) (applies contract choice-of-law clauses to arbitrability and favors uniform law for international arbitration)
- Sarhank Group v. Oracle Corp., 404 F.3d 657 (2d Cir. 2005) (refuses to bind an American non-signatory to foreign-law arbitration absent an American-law theory of consent)
- Blue Whale Corp. v. Grand China Shipping Dev. Co., 722 F.3d 488 (2d Cir. 2013) (federal maritime choice-of-law framework guidance)
- Advani Enterprises v. Underwriters at Lloyds, 140 F.3d 157 (2d Cir. 1998) (contacts-based factors for maritime contract choice-of-law analysis)
- JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004) (arbitration requires consent; context on non-signatory theories)
- Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349 (2d Cir. 1999) (direct-benefit estoppel can bind non-signatories to arbitration clauses)