Iota Shipholding Ltd v. Starr Indemnity and Liability Company
1:16-cv-04881
S.D.N.Y.May 31, 2017Background
- In 2013 Ternium Mexico shipped steel tubing aboard the M/V Lita to Ternium Costa Rica; storms damaged ~40–45% of the cargo and two bundles were lost. Starr, as subrogor for the Ternium Entities, sought $175,625.30 in arbitration.
- The shipment was governed by a Voyage Charterparty (July 26, 2013) between A&B (identified as Owner/disponent owner) and Ternium Mexico (Charterer), CONGENBILL bills of lading referencing that Voyage Charter, and a separate Time Charter (also dated July 26, 2013) under which Petitioners claim A&B was a disponent owner.
- The Voyage Charter contains an arbitration clause requiring arbitration in New York/London for disputes "between Owner and Charterer," and the Bills of Lading incorporate the Charter’s terms and arbitration clause by reference.
- Starr commenced arbitration under the Voyage Charter’s clause against Petitioners (Iota and Blumenthal), who were not signatories to that Voyage Charter and moved in federal court to enjoin the arbitration and declare no valid arbitration agreement exists. Starr cross-moved to compel arbitration.
- The narrow legal question: whether the Voyage Charter’s arbitration clause (a clause limited to disputes "between Owner and Charterer") can be enforced against non-signatory Petitioners via incorporation in the bills of lading and ordinary contract/agency principles.
Issues
| Issue | Plaintiff's Argument (Petitioners) | Defendant's Argument (Starr) | Held |
|---|---|---|---|
| Whether Petitioners are bound by the Voyage Charter’s arbitration clause | Petitioners: not signatories to Voyage Charter; clause applies only to the disponent owner named (A&B), not to Petitioners | Starr: the bills of lading incorporate the Voyage Charter; Petitioners are linked to the bill and thus bound; Petitioners were the vessel’s true owners | Held: Clause is narrow ("between Owner and Charterer") and does not bind Petitioners; arbitration enjoined |
| Whether incorporation + general contract/agency principles can bind nonsignatories | Petitioners: incorporation cannot stretch a narrow clause to bind other parties | Starr: incorporation by reference + linkage via contract/agency makes clause applicable to Petitioners | Held: Even if incorporated, a narrow clause limited to owners and charterers cannot be "unduly stretched" to bind nonsignatories; Starr did not prove alternative bases (alter ego or agency) |
| Whether the arbitration clause is broad or narrow in scope | Petitioners: clause is narrow, specifying disputes "between Owner and Charterer" | Starr: clause should govern disputes arising from the bills of lading and cargo claim | Held: Court classifies the clause as narrow; it covers only the parties identified (disponent owner A&B and Charterer) |
| Whether factual disputes preclude summary determination of arbitrability | Petitioners: no genuine dispute that they are not signatories; court can rule as matter of law | Starr: disputes about ownership/fixture may create triable issues | Held: No triable issue of fact on whether Petitioners are bound by this narrow clause; summary judgment for Petitioners enjoining arbitration |
Key Cases Cited
- United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960) (arbitration is a matter of contract; parties cannot be compelled to arbitrate unless they agreed to do so)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (courts decide arbitrability absent a clear agreement to delegate that question to arbitrators)
- Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004) (maritime contracts are governed by federal maritime law for interpretation)
- E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986) (general maritime law applies in the absence of a controlling statute)
- Import Export Steel Corp. v. Mississippi Valley Barge Line Co., 351 F.2d 503 (2d Cir. 1965) (distinguishing narrow and broad arbitration clauses; narrow clauses limited to identified parties)
- Matter of Arbitration Between S & R Co. of Kingston & Latona Trucking, Inc., 984 F. Supp. 95 (N.D.N.Y. 1997) (reiterating that arbitration cannot be compelled absent agreement and discussing nonsignatory enforcement)