Sea Shipping Inc v. Half Moon Shipping, LLC
1:11-cv-08152
| S.D.N.Y. | Jan 26, 2012Background
- Petitioners Sea Shipping, Mason, and Ocean Shipping (all non-US domicile) seek to confirm an arbitration award; Half Moon opposes and moves to vacate under the New York Convention and FAA §10.
- Shareholders’ agreements with Half Moon created Star Corp., Leader Corp., and Sapphire Corp. with pro rata funding and 76% approval requirements for governance actions.
- Section 4 of Leader Agreement requires borrowing pro rata from shareholders; non-defaulting shareholders may cure a loan default by advancing the shortfall with 2% monthly interest.
- After complex transactions, Petitioners loaned Sapphire Corp. $3 million; in 2009 Petitioners sought Half Moon’s pro rata loan of $960,000, which Half Moon refused.
- Arbitration panel in August 2011 held three independent grounds: (i) pro rata funding obligation; (ii) implied joint venture; (iii) promissory estoppel; award awarded $4,504,888 plus fees and 2% interest, with post-award fee provisions.
- Court proceedings in 2011–2012 proceeded under FAA and New York Convention; petition to confirm granted, cross-petition to vacate denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the panel correctly apply the pro rata funding obligation? | Leader Agreement §4(c) requires pro rata loans to Leader/Sapphire. | Half Moon argues §4(c) creates discretionary loans, not a firm obligation. | No manifest disregard; obligation to lend pro rata exists. |
| Was there an implied joint venture among the parties? | Conduct created a mutual venture with shared profits/losses and joint funding. | No express joint venture; corporate structure precludes implied JV. | Implied joint venture found; parties liable based on ownership. |
| Did promissory estoppel support damages against Half Moon? | Half Moon promised to fund loans; Petitioners relied to their detriment. | No clear promise; communications show consideration, not a formal promise. | Promissory estoppel supported damages. |
Key Cases Cited
- T. Co. Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010) (manifest disregard standard requires egregious misapplication)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2008) (voucher for deference to arbitrator under the FAA)
- Hall Street Associates L.L.C. v. Mattel, Inc., 552 U.S. 576 (Supreme Court 2008) (FAA review is limited and deferential)
- D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir. 2006) (summary vacatur standard; limited review of awards)
- Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir. 1997) (Convention governs transnational arbitration; FAA can apply on vacatur)
- Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir. 2003) (separate independent grounds: vacatur viable if one ground fails)
- Richbell Info. Servs., Inc. v. Jupiter Partners, L.P., 765 N.Y.S.2d 575 (1st Dep’t 2003) (joint venture implied from conduct; factors include mutual contribution and risk sharing)
- ST Microelectronics, N.V. v. Credit Suisse Securities (USA) LLC, 648 F.3d 68 (2d Cir. 2011) (manifest disregard is narrow; arbitration aims to be efficient)