Kanematsu Corp. v. M/V GRETCHEN W

897 F. Supp. 1314

1995 AMC 2957

KANEMATSU CORP, et al., Plaintiffs, v. M/V GRETCHEN W, et al., Defendants.

Civ. No. 93-1437-ST.

United States District Court, D. Oregon.

September 15, 1995.

Guy C. Stephenson, C. Kent Roberts, Schwabe Williamson & Wyatt, Portland, OR, for plaintiffs.

Robert I. Sanders, Wood Tatum Sanders & Murphy, Portland, OR, for claimant Black Stallion, Ltd.

OPINION AND ORDER

ROBERT E. JONES, Judge.

Plaintiffs, Kanematsu Corporation and Kanematsu U.S.A., Inc. (collectively, "Kanematsu"), filed this admiralty action in rem and in personam on November 12, 1993, against defendants, the M/V Gretchen W, Black Stallion Ltd., Gretchen W. Ltd., Pacific Carriers Ltd., Denholm Ship Management (Oversees) Ltd., and Hyundai Merchant Marine Company Ltd. Kanematsu alleges that its shipment of corn was damaged in transit from Louisiana to Japan. Kanematsu seeks ¥ 44,919,928 Japanese Yen (approximately $450,000 U.S. Dollars) in damages.

There are three motions currently before this Court: Black Stallion's motion to reopen this case (# 83), Black Stallion's motion for approval of stipulation waiving time bar defense and for immediate referral of dispute to London arbitration (# 76), and Kanematsu's motion to certify for interlocutory appeal this Court's prior order (# 68). Black Stallion's motions to reopen the case, approve the stipulation, and compel London arbitration are GRANTED. Accordingly, Kanematsu's motion for interlocutory appeal is DENIED.

BACKGROUND

In November 1993, Kanematsu purchased approximately 37,000 metric tons of corn from Louis Dreyfus Corporation ("Dreyfus"). The contract required Dreyfus to arrange for shipping of the corn from Westwego, Louisiana to various ports in Japan, with Kanematsu as the consignee.¹ Dreyfus chartered the M/V Gretchen W from Hyundai, who in turn had chartered the vessel from Black Stallion, the vessel's owner. Pursuant to this arrangement, Dreyfus and Hyundai entered into a bill of lading.²

The bill of lading provided that "all terms, conditions and provisions of the Strike, Kighterage Clause No. 6 and Arbitration Clause of the `Centrocon' charter party would apply." Bill of Lading, ¶ 9. The Centrocon charter party is a form of contract designed specifically for the grain trade. It provides that "all disputes from time to time arising out of this contract shall ... be referred to the final Arbitrament of two Arbitrators carrying on business in London."

When the shipment of corn arrived in Kashima, Japan in December 1992, Kanematsu alleges that much of it had been damaged by exposure to water and heat. Kanematsu then brought suit in Portland, Oregon³ under the bill of lading.

Defendants moved to stay the proceeding pending arbitration of the dispute in London. The case was heard by Magistrate Judge Stewart on August 4, 1994. She recommended that the London arbitration clause be enforced and that the court stay proceedings pending the outcome of that arbitration. I adopted her Findings and Recommendation on December 7, 1994 and stayed this action pending the Supreme Court's decision in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, ___ U.S. ___, 115 S.Ct. 2322, 132 L.Ed.2d 462 (1995), because that case addressed the validity of foreign arbitration clauses in bills of lading. Sky Reefer has now been decided, clearing the way for this Court to reopen the present action.⁴

DISCUSSION

I. Background of Sky Reefer

At the time this action was commenced, there was considerable disagreement among the circuits as to whether foreign arbitration clauses in bills of lading conflicted with the Carriage of Goods by Sea Act, 46 App. U.S.C. § 1300-1315 ("COGSA").⁵ The Supreme Court's decision in Sky Reefer resolves this conflict.

In Sky Reefer, petitioners, a New York fruit distributor and its insurer, sued respondent vessel and carrier company for damage to a shipload of oranges and lemons that were being shipped from Morocco to Massachusetts. Respondents, noting that the bill of lading between the Morrocan fruit supplier and the carrier company contained a provision that required arbitration of all disputes in Tokyo, moved to stay the action pending arbitration. ___ U.S. at ___, 115 S.Ct. at 2325. Petitioners responded that the arbitration clause was invalid because it violated COGSA.⁶ Specifically, petitioners asserted that the increased costs to petitioners to arbitrate in Tokyo would lessen respondents' liability⁷ and that there was no guarantee that foreign arbitrators would apply COGSA's standards. Id. Respondents countered that COGSA was not violated and that, even if it was, COGSA was overridden by the FAA.⁸ Id.

The Supreme Court followed the district court and the First Circuit Court of Appeals in concluding that the arbitration clause did not violate COGSA. The Court explained that the cost and inconvenience of resolving a dispute in a distant forum had no bearing on a carrier's liability for loss or injury. Id., 115 S.Ct. at 2326-2329. The Court also noted that a district court would retain jurisdiction of the case pending arbitration to ensure that a carrier met its legal obligations under U.S. law. Id., 115 S.Ct. at 2330. Because the foreign arbitration clause did not violate COGSA, the Court held that there was no conflict between COGSA and the FAA. Id.

II. Applicability of Sky Reefer to the Present Action

Sky Reefer bears directly on the case at hand. Like the petitioner in that case, Kanematsu wishes to avoid arbitration in a foreign county as required by a routine bill of lading for the shipment of goods it had purchased. Kanematsu also raised the same challenges to the arbitration clause as did the petitioners in Sky Reefer—that foreign arbitration would lessen defendants' liability and that it would not ensure that COGSA's provisions were enforced.

Kanematsu attempts to distinguish Sky Reefer from the present action by noting that petitioner in Sky Reefer was both a shipper and a consignee of the goods in question in that case, whereas Kanematsu is only a consignee.⁹ This "innocent consignee" argument is without merit for two reasons.

First, Magistrate Judge Stewart specifically found that Dreyfus acted as an agent for Kanematsu when Dreyfus entered into the bill of lading with Hyundai.¹⁰ Thus, acting on Kanematsu's behalf, Dreyfus bound Kanematsu to the bill of lading.

Second, under Sky Reefer, the fact that Kanematsu did not sign the bill of lading or directly consent to its conditions does not free it from the terms of the bill of lading. In Sky Reefer, the petitioner, Bacchus Associates ("Bacchus"), was a fruit distributor that contracted with a Morrocan fruit supplier, Galaxie Negoce ("Galaxy"), to have fruit shipped from Morocco to the United States. Galaxie then entered into a standard bill of lading created by Nichiro Gyogyo Kaisha, Ltd. ("Nichiro"), a carrier company temporarily in control of the shipping vessel. Bacchus, like Kanematsu, had no direct involvement with the bill of lading but merely received it from Galaxy after the ship had already commenced its voyage. Nonetheless, the Supreme Court enforced the arbitration clause against Bacchus. ___ U.S. at ___-___, 115 S.Ct. at 2326-2329. Therefore, the same result is compelled in the present situation.

Third, when a party brings suit for damaged goods under the terms of a bill of lading,¹¹ that party consents to all of the conditions of the bill of lading. All Pacific Trading Inc. v. M/V Hanjin Yosu, 7 F.3d 1427, 1432 (9th Cir.1993), cert. den., ___ U.S. ___, 114 S.Ct. 1301, 127 L.Ed.2d 653 (1994) ("at the very least, plaintiff's initiation of this suit constituted acceptance of the terms of the ... bills of lading); see also, Citrus Marketing Bd. of Israel, 754 F.Supp. at 231.

For these reasons, I find that Kanematsu's failure to sign or expressly consent to the bill of lading is irrelevant; Kanematsu is bound by its terms.

III. The Parties' Motions

Because Kanematsu is bound by the conditions of the bill of lading and, under Sky Reefer, the bill of lading's foreign arbitration clause does not conflict with COGSA, Kanematsu must arbitrate its dispute with Black Stallion and the other defendants in London. This decision squares with the Supreme Court and Congress' strong preference to promote arbitration agreements.¹² Moreover, judicial economy is promoted by requiring a unified proceeding because the defendants will be arbitrating the dispute among themselves in London regardless of Kanematsu's presence.

Contrary to Kanematsu's assertion, the order does not produce an inequitable result. First, Kanematsu is a very large company that is familiar with the international grain trade and with the customary contractual provisions for arbitration of disputes. Second, Kanematsu, a major Japanese importer and exporter, should not have to exert much more effort settling this dispute in London rather than Portland, Oregon. Third, the London arbitration will be conducted by persons familiar with the shipping and/or grain trades. Fourth, as the Supreme Court noted, if the arbitrators do not make findings consistent with the mandate of COGSA, "the district court which has retained jurisdiction over the case and `will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the ... laws has been addressed.'" Id., ___ U.S. at ___-___, 115 S.Ct. at 2329-30 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 638, 105 S.Ct. 3346, 3360, 87 L.Ed.2d 444 (1985). Finally, Black Stallion agreed to waive any statute of limitations defenses it could have asserted, so there is no threat that Kanemastu's claims will not be heard on their merits in London.¹³

As discussed above, Kanematsu is clearly bound by the London arbitration clause. Therefore, Kanematsu's motion for certification for interlocutory appeal is DENIED.¹⁴

CONCLUSION

IT IS ORDERED that Black Stallion's motion to reopen this case (#83-1)...