Source: https://law.justia.com/cases/federal/appellate-courts/F2/767/1140/40112/
Timestamp: 2020-04-04 00:52:55
Document Index: 772370825

Matched Legal Cases: ['§ 181', '§ 1602', '§ 201', '§ 1', '§ 8', '§ 206', '§ 1292', '§ 1292', '§ 206', '§ 1602', '§ 1291', '§ 1292', '§ 1292', '§ 1292', '§ 201', '§ 3', '§ 4', '§ 1292']

In the Matter of the Complaint of Sedco, Inc., As Owner Ofthe Mobile Drilling Unit Sedco 135, Its Engines, Tackle,apparel, Etc., in the Cause of Exoneration from Orlimitation of Liability, Plaintiff-appellee, v. Petroleos Mexicanos Mexican National Oil Co., (pemex), Defendant,performaciones Marinas Del Golfo, S.a. (permargo),defendant-appellant, 767 F.2d 1140 (5th Cir. 1985) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 1985 › In the Matter of the Complaint of Sedco, Inc., As Owner Ofthe Mobile Drilling Unit Sedco 135, Its En...
In the Matter of the Complaint of Sedco, Inc., As Owner Ofthe Mobile Drilling Unit Sedco 135, Its Engines, Tackle,apparel, Etc., in the Cause of Exoneration from Orlimitation of Liability, Plaintiff-appellee, v. Petroleos Mexicanos Mexican National Oil Co., (pemex), Defendant,performaciones Marinas Del Golfo, S.a. (permargo),defendant-appellant, 767 F.2d 1140 (5th Cir. 1985)
US Court of Appeals for the Fifth Circuit - 767 F.2d 1140 (5th Cir. 1985) Aug. 12, 1985
Before us is an appeal from the district court's order, 610 F. Supp. 306, refusing to order arbitration in a major lawsuit flowing out of the world's largest oil spill.1 Presently plaguing the long suffering mariners on their litigious voyage is an historically hatched rule of admiralty which often rears its head like a leviathan from the deep in order to founder those who seek interlocutory relief.2 Today, however, possessed with recent chartings by the Supreme Court and Congress, we are able to keep hands steady on the helm past the Schoenamsgruber peril.3 As pilots, we have often groused about the treacherous course compelled by these instructions from astronautical heights.4 But as mariners of all ages, until such time as the wrecks and shoals disappear, we must ply our course with the navigational aids at our disposal. We hope our log which follows makes the voyage easier for those who must travel after us. The prizes secured on our voyage--judicial economy and the promotion of arbitration--are recompense for the perils. Safely ashore, we remand for the district court to order that Sedco and Permargo proceed to arbitration in accordance with their contract. Upon remand, the district court should consider whether the remaining litigation should be stayed pending arbitration.5
On September 11, 1979, Sedco filed a petition under the Limitation of Shipowners Liability Act, 46 U.S.C. § 181 et seq. All litigation by shrimpers, hotel owners, and governmental entities against Sedco, Permargo, and Pemex was consolidated into the limitation proceeding.7 On September 23, Sedco tendered its defense to Permargo pursuant to an indemnity clause in the charter party. In part, the bareboat charter party stated that Permargo would:
Permargo refused to defend Sedco. In the limitation proceeding Sedco then filed a third-party claim against Permargo and Pemex alleging that Permargo had breached its obligation to hold Sedco harmless under the charter. Sedco sought damages for the breach, indemnity for any sums Sedco was found liable to pay to third-parties, and attorneys' fees. The district court originally dismissed Pemex under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602 et seq., but denied Permargo's motion to dismiss. Sedco then settled with the United States and certain class action plaintiffs. Sedco demands indemnity from Permargo for these payments.
Clause 21 of the charter party between Sedco and Permargo provides that they would submit "any dispute or difference between the parties" to arbitration in New York under the rules of the International Chamber of Commerce.8 Sedco is a Texas company; Permargo is a Mexican company. Both Mexico and the United States are signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention), 3 U.S.T. 2517, T.I.A.S. No. 6957, 330 U.N.T.S. 38 [1970], republished as a note following 9 U.S.C. § 201.9 The Convention contemplates a very limited inquiry by courts when considering a motion to compel arbitration:
Ledee v. Ceramiche Ragno, 684 F.2d 184, 185-86 (1st Cir. 1982).
If these requirements are met, the Convention requires district courts to order arbitration. Language similar to that used in the charter party arbitration clause between Sedco and Permargo has been described by the Court in Caribbean Steamship Co. v. Sonmez Denizcilik Ve Ticaret, 598 F.2d 1264, 1266 (2d Cir. 1979). The court said " [i]t is difficult to imagine broader general language than that contained in the charter party's arbitration clause, 'any dispute'...."11 Additionally, when confronted with arbitration agreements, we presume that arbitration should not be denied "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue...." Commerce Park of DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 338 (5th Cir. 1984), quoting Wick v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir. 1979). Thus, as a general rule, whenever the scope of an arbitration clause is in question, the court should construe the clause in favor of arbitration. United Steel Workers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S. Ct. 1347, 1353, 4 L. Ed. 2d 1409 (1960); City of Meridian, Miss. v. Algernon Blair, Inc., 721 F.2d 525, 527 (5th Cir. 1983). We hold that the arbitration agreement between Sedco and Permargo is of the broad type.
Congress' implementing legislation for the Convention is found as part of the Arbitration Act. 9 U.S.C. § 1 et seq. Chapter 1 of Title 9 is the Federal Arbitration Act passed long ago to overcome American courts' common law hostility to the arbitration of disputes.12 Chapter 2 of Title 9 is devoted entirely to the Convention and Congress' enabling legislation. Thus, Sec. 201 provides that the Convention "shall be enforced" by United States courts.13 In substance, the Convention replicates the Federal Arbitration Act. Indeed, Sec. 208 of the enabling legislation for the Convention incorporates all of the Convention into Chapter 1 of Title 9.14 But while the Convention requires courts of the United States to enforce arbitration clauses along lines similar to those specified in the Arbitration Act, its reach is broader than the Arbitration Act. Both the Arbitration Act and the Convention provide that if a dispute in a pending lawsuit is subject to arbitration, the district court "shall on application of one of the parties stay the trial of the action until such arbitration has been had."15 Both provide that the district court "shall make an order directing the parties to proceed to arbitration" when the site for arbitration is within the district.16 But Sec. 206 of the enabling legislation for the Convention also authorizes district courts to order parties to proceed with a Convention arbitration even outside the United States.17 C. The Policy of Encouraging Arbitration and the End of
Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n. 15, 94 S. Ct. 2449, 2457 n. 15, 41 L. Ed. 2d 270 (1974).
The Fifth Circuit has been friendly to arbitration except possibly in those limited areas affected by the intertwining doctrine; the securities and antitrust laws.18 Now, however, the Supreme Court has rejected the intertwining doctrine19 and mandated that courts enforce arbitration agreements as part of party's legitimate contractual expectations. Dean Witter Reynolds v. Byrd, 83 U.S. ----, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985), involved the securities laws--long held to be an area of special federal concern in our circuit. Based on this special concern for the exclusive federal interest in enforcement of the securities laws, we used the intertwining doctrine to override party's arbitration agreements to prevent the piecemeal adjudication of disputes. As the Court said in Dean Witter Reynolds:
Thus, Dean Witter Reynolds confirms the Court's teaching in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1982). In Moses Cone the Supreme Court held " [t]he Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability."
Thus, " [a]bsent allegations of fraud in the inducement of the arbitration clause itself, arbitration must proceed when an arbitration clause on its face appears broad enough to encompass the party's claims." Life of America Insurance Co. v. Aetna Life Insurance Co., 744 F.2d 409, 413 (5th Cir. 1984); Commerce Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d 334, 338 (5th Cir. 1984); Prima Paint Corp. v. Flood and Conklin Manufacturing Co., 388 U.S. 395, 406, 87 S. Ct. 1801, 1807, 18 L. Ed. 2d 1270 (1967). "Under the Arbitration Act, an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute, but not to the arbitration agreement." Tai Ping at 1146; Cf. Commerce Park at 339.
In Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S. Ct. 475, 79 L. Ed. 989 (1935), the Supreme Court held Courts of Appeals lacked jurisdiction to hear appeals from a district court's order staying an admiralty proceeding pending arbitration.21 Accordingly, we must closely examine the district court's order and the Convention to see if Schoenamsgruber causes us to founder.
Our decision is further supported by the recent opinion in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., --- U.S. ----, 105 S. Ct. 3346, 85 L. Ed. 2d ---- (1985). Despite the uniform rule throughout the Circuits that federal antitrust claims are inappropriate for arbitration, the Court ruled that antitrust claims are arbitrable under the Federal Arbitration Act when they are encompassed within a valid arbitration clause in an agreement embodying an international commercial transaction. The Court focused on:
The Convention was passed in order to secure the right of arbitration in a commercial context among foreign and domestic parties. Congress could not have intended that a court's refusal to enforce an arbitration agreement falling under the Convention would be immediately appealable in a nonmaritime action--at law or equity--but would be shielded from appellate scrutiny in an admiralty suit. Accordingly, Schoenamsgruber's mummified prohibition on the nonappealability of stays in admiralty, to the extent that it interferes with United States obligations under the Convention, must give way.23 We cannot extend the relic of Schoenamsgruber under 9 U.S.C. § 8 to 9 U.S.C. § 206. We hold that we have jurisdiction on this appeal to carry out the important congressional policy of insuring that arbitration contracts are enforced in the courts pursuant to the Convention. Moreover, to the extent that Schoenamsgruber was influenced by the ancient view that an admiralty court lacked the power to issue an injunction, the law has progressed. Judges may now "stride the quarterdeck" and issue injunctions. C.A.V.N. v. Perez, 303 F.2d 692 (5th Cir. 1962), cert. denied, 371 U.S. 942, 83 S. Ct. 321, 9 L. Ed. 2d 276 (1962). Although the trial court did not style its order as the denial of an injunction, its order has all the earmarks of a denial of injunctive relief under 28 U.S.C. § 1292. Permargo sought an order to compel the affirmative action of arbitration outside the litigation. If Permargo's motion had been granted instead of denied, the court's order would have required Sedco to participate in arbitration in New York. Such an order would be, in effect, a mandatory injunction. Accordingly, the district court's refusal to grant the injunction mandated by the Convention is appealable under 28 U.S.C. § 1292 in order to prevent the United States from violating its Treaty obligations with 65 nations.24
Although our usual course would be to remand for the district court to correct its error of law in not ordering arbitration, here the district judge who entered the order is no longer on the bench. However, after three years of extensive discovery with well over 400 docket entries, the record before us is adequate to see that the requisites mandating the issuance of an order to arbitrate under the Convention have been met. Indeed, under the Convention any factual inquiry prior to a court being required to enforce an arbitration clause is strictly limited. See, Convention, Art. II; Ledee v. Ceramiche Ragno, 684 F.2d at 185-86; Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1982); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, 87 S. Ct. 1801, 1806-07, 18 L. Ed. 2d 1270 (1967); cf. Oil, Chemical & Atomic Workers v. American Petrofina Co., 759 F.2d 512, 515 (5th Cir. 1985) ("obligation of the parties to submit to the arbitrator the issue of arbitrability....").25
Although arbitration is a contractual right which can be waived27 and Article II of the Convention contemplates the possibility of waiver of an arbitration agreement, the facts of this case do not demonstrate such a waiver. See I.T.A.D. Associates, Inc. v. Podar Bros., 636 F.2d 75, 77 (4th Cir. 1981). Here Permargo raised the defense of arbitration in its answer. The only foundation for Sedco's assertion of waiver is the passage of time between filing of the limitation proceeding and the filing of Permargo's answer. As the court observed in Hilti v. Oldach, 392 F.2d 368, 371 (1st Cir. 1968) " [w]e start with the fact that defendant's answer, in its special defense, served notice on plaintiff of the arbitration defense. Given this, the burden is heavy on one who would prove waiver."
Indeed, though the sparring in Hilti was for "nearly two years," the court thought it more important that the delay in the proceedings was caused by legitimate pre-arbitration discovery.28 Southwest Industrial Import & Export v. Wilmod Co., Inc., 524 F.2d 468, 470 (5th Cir. 1975) (willing participation in settlement discussions & reselling goods not waiver of arbitration rights); Germany v. River Terminal Railway Co., 477 F.2d 546, 547 (6th Cir. 1973) ("waiver may not be inferred from the fact that a party does not rely exclusively on the arbitration provisions of a contract, but attempts to meet all issues raised in litigation between it and another party to the agreement.")
In the case before us, the long fought dispute about whether the district court had jurisdiction over Permargo and Pemex likewise must be described as legitimate. Nor has Sedco been able to demonstrate that this jurisdictional jousting has been prejudicial. See also I.T.A.D. Associates, Inc. at 77; Robert Lawrence Co. v. Devonshire Fabrics, 271 F.2d 402, 412-13 (2d Cir. 1959), cert. granted, 362 U.S. 909, 80 S. Ct. 682, 4 L. Ed. 2d 618 (1960), cert. denied, 364 U.S. 801, 81 S. Ct. 27, 5 L. Ed. 2d 37 (1960). We hold there has been no waiver.29
Our review of the language and purposes of the Convention and its enabling legislation lead us to conclude that (i) this appeal is properly before us and (ii) the district court erred in refusing to order arbitration. The parties agreed in writing that all disputes arising from their contractual relationship would be submitted to arbitration. Such an agreement falls squarely within Article II of the Convention. 9 U.S.C. § 206 does not confer discretion in compelling arbitration. I.T.A.D. Associates, Inc. v. Podar Bros., 636 F.2d 75, 77 (4th Cir. 1981). On remand the district court should order the parties to perform their arbitration agreement.
The district court entered its order on August 21, 1984. This order amended the court's order of March 30, 1982. See, Matter of Sedco, Inc., 543 F. Supp. 561 (S.D. Tex. 1982). The March 1982 order had dismissed Petroleos Mexicanos (Pemex) under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602 et seq. The August 1984 order vacated this decision and the district court ordered that Pemex' motion to dismiss for lack of subject matter jurisdiction be carried along with the trial on the merits. Before us, however, is the further portion of the district court's August 1984 order which denied the motion of Perforaciones Marinas del Golfo S.A. (Permargo) to order arbitration and issue a stay of litigation pending arbitration
In Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S. Ct. 475, 79 L. Ed. 989 (1935), the Supreme Court held that Courts of Appeals lacked jurisdiction to hear an appeal from a district court's stay of admiralty proceedings pending arbitration. The Court held that such stays are not final orders under what is now 28 U.S.C. § 1291, that they are not injunctions under what is now 28 U.S.C. § 1292(a) (1), and that they are not appealable interlocutory decrees under what is now 28 U.S.C. § 1292(a) (3). The Court reached its decision by means of an analytical framework premised on the differences among actions at law, in equity, or in admiralty. Stays in admiralty were deemed calendar orders and were nonappealable. The Supreme Court has reaffirmed its allegiance to Schoenamsgruber. See Baltimore Contractors, Inc. v. Bodinger, 348 U.S. 176, 182-85, 75 S. Ct. 249, 253-54, 99 L. Ed. 2d 233 (1955); Coastal (Bermuda) Ltd. v. E.W. Saybolt & Co., Inc., 761 F.2d 198, 202 (5th Cir. 1985); Texaco, Inc. v. American Trading Transportation Co., 644 F.2d 1152, 1154 (5th Cir. 1981)
At oral argument, the Court sua sponte raised the issue of whether it had appellate jurisdiction because of Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S. Ct. 475, 79 L. Ed. 989 (1935). While neither party in this case challenges our jurisdiction, we must, of course, resolve any such problem before reaching the merits
Coastal (Bermuda) Ltd. v. E.W. Saybolt & Co., Inc. at 200 ("a lumbering, antedeluvian concept that remains embedded in the judicial esse."); Texaco v. American Trading at 1154; Mar-Len of Louisiana, Inc. v. Parsons-Gilbane, 732 F.2d 444, 445-47 (5th Cir. 1984) (Rubin, J., dissenting)
After this appeal was taken, and subsequent to oral argument, the district court certified this case as worthy of an interlocutory appeal under 28 U.S.C. § 1292(b). Seeing no need to cross this jurisdictional reef in order to dispose of this case, we do not rush where angels fear to tread. For the record, the appeal came within ten days after entry of the order
The district court has determined that the SEDCO 135 is a vessel under the Limitation Act. Matter of Sedco, Inc., 543 F. Supp. 561 (S.D.Texas 1982). That determination is not before us on this appeal
As the court in Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64 (2d Cir. 1983) said:
The charter party contains several examples that the parties anticipated a possible blowout of the IXTOC I well. Clause 25 refers to a "wild well." Clause 24 specifies Permargo's obligations to indemnify Sedco for "loss or damage arising from pollution or contamination." Such anticipations are exactly the kinds of damage at issue in this lawsuit. This suffices to make Sedco's reliance upon Texaco, Inc. v. American Trading Transportation Co., 644 F.2d 1152 (5th Cir. 1981), ill-founded. In Texaco there was no question that Texaco's delictual claim for damages to its dock arose outside the Charter. Here the precise issues at stake--pollution, contamination, drilling operations, indemnity--revolve around a "contemplated" blowout and thus fall within the Charter party agreement between Sedco and Permargo
Cf., Lincoln Mills of Alabama v. Textile Workers Union, 230 F.2d 81 (5th Cir. 1956) (Brown, J. dissenting), reversed, 353 U.S. 448, 77 S. Ct. 912, 1 L. Ed. 2d 972 (1957).
9 U.S.C. § 201:
9 U.S.C. § 3:
9 U.S.C. § 4:
We most recently summarized the intertwining doctrine in Tai Ping Insurance Co. v. M/V WARSCHAU, 731 F.2d 1141 (5th Cir. 1984):
"Along with the Ninth Circuit in this case, the Fifth and Eleventh Circuits have relied on the 'doctrine of intertwining.' " Dean Witter Reynolds at 1240. "In contrast, the Sixth, Seventh and Eighth Circuits have held that the Federal Arbitration Act divests the district courts of any discretion regarding arbitration...." Dean Witter Reynolds at 1240. "We agree with these latter courts...." Dean Witter Reynolds at 1241. " [T]he relevant federal law requires piecemeal resolution when necessary to give effect to an arbitration agreement." Dean Witter Reynolds at 1242, quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1982) (emphasis in original)
See note 2, supra. We have, of course, consistently adhered to Schoenamsgruber. See Texaco, Inc. v. American Trading Transp. Co., 644 F.2d 1152, 1154 (5th Cir. 1981): "For reasons more historical than logical an order denying a stay pending arbitration in a proceeding in admiralty is not an appealable order." In Coastal (Bermuda) Ltd. v. E.W. Saybold & Co., 761 F.2d 198, 200 (5th Cir. 1985): "We are as a rule bound to the mummified notion that stays in admiralty are nonappealable interlocutory orders." This is distinguished from the rule in our circuit which has allowed immediate appealability under 28 U.S.C. § 1292(a) (1) of "an order granting a stay of arbitration pending [the] outcome of litigation...." Texaco, Inc. v. American Trading Transp. Co., 644 F.2d 1152, 1154 (5th Cir. 1981)
The court in Rhone Mediterranee Compagnia v. Lauro, 712 F.2d 50 (3d Cir. 1983), held Schoenamsgruber to be inapplicable to the stay of a lawsuit pending arbitration under the Convention
Since this arbitration arises under the Convention it is different than domestic arbitration. However, we express no opinion on the availability of mandamus or Cohen's collateral order doctrine. Cf., Coastal (Bermuda) Ltd. v. E.W. Saybolt, 761 F.2d 198, 203 n. 5 (5th Cir. 1985)
Arbitration is justified additionally because the arbitrators appointed by the parties are presumably specialists, familiar not only with the relevant statutory and common law, but also with custom and usage of the trade. Moreover, the use of arbitration procedures eases the workload of busy courts. See Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59 (2d Cir. 1983). Indeed, arbitration is a classic alternative dispute resolution mechanism which needs to be encouraged, not discouraged. Further, as we observed in Tai Ping Ins. Co. at 1145 n. 3, arbitration may promote judicial efficiency since the arbitrator's determination essentially establishes ultimate liability
See City of Meridian, Miss. v. Algernon Blair, Inc., 721 F.2d 525, 528-29 (5th Cir. 1983):
In Burton-Dixie Corp. v. Timothy McCarthy Constr. Co., 436 F.2d 405, 407-08 (5th Cir. 1971), we said:
Thus, while it is true that " [a] defendant can waive arbitration by actions which it takes during determination in the legal forum of the threshold issue of existence of an arbitration contract, if those actions are sufficiently inconsistent with the right to arbitrate ... it loses sight of the purposes and effects of arbitration ... to treat the court proceedings as a sort of judicial tightrope which the party seeking arbitration walks at his peril." General Guar. Ins. Co. v. New Orleans General Agency, Inc., 427 F.2d 924, 929 (5th Cir. 1970)
"We note that matters of procedural arbitrability, such as, inter alia, whether the request for arbitration was timely under the arbitration agreement, are for the arbitrator to decide." Commerce Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d at 339 n. 5 (5th Cir. 1984)