Kondot S.A. v. Duron LLC

586 F.Supp.3d 246

KONDOT S.A., Petitioner,

v.DURON LLC, Respondent.

21 Civ. 3744 (ER)

United States District Court, S.D. New York.

Signed February 22, 2022

Kevin John Lennon, Patrick F. Lennon, Lennon Murphy & Phillips, LLC, Westport, CT, for Petitioner.

Michael J. Frevola, Holland & Knight LLP, New York, NY, for Respondent.

OPINION AND ORDER

Ramos, D.J.:

On April 17, 2020, Kondot S.A. and Duron LLC entered into a contract relating to the shipment of a cargo of wheat. Doc. 3 at 3. On July 2, 2020, Kondot commenced emergency arbitration against Duron, alleging Duron breached the contract when it failed to comply with its obligations to unload the cargo. Id. at 5. After hearing oral argument, the arbitrators issued a partial final award granting Kondot's emergency application and declaring that Duron had repudiated its contract with Kondot. See Doc. 4-2. On March 25, 2021, the arbitrators issued a second partial final award, ordering Duron to provide pre-award security in the amount of $2,000,000.00. See Doc. 4-1. Kondot then moved this Court to confirm and enforce the first and second partial final awards. See Doc. 3. Duron did not oppose the motion.

On August 27, 2021, the arbitrators issued a third partial final award, granting Kondot damages and fees totaling $2,078,382.50, and denying Duron's counterclaims as well as its claims for fees and expenses. Doc. 31-1 at 18. On September 3, 2021, Kondot moved this Court to confirm and enforce the third partial final award pursuant to the Convention on the Recognition of Foreign Arbitral Awards of June 10, 1958 (the "New York Convention") and Chapter Two of the Federal Arbitration Act, 9 U.S.C. §§ 201 et seq. (the "FAA"). See Doc. 30; Doc. 33. Duron then moved to vacate the third partial final award. See Doc. 36.

For the reasons set forth below, Kondot's motion to confirm the third partial final award is GRANTED and Duron's motion to vacate the award is DENIED.¹

I. BACKGROUND

A. Contractual Relationship

Kondot is an international ocean carrier with offices in Charlestown, Nevis. Doc. 3 at 2. Duron is an international commodity trader with offices in Miami, Florida. Id. On April 17, 2020, Kondot and Duron entered into a charter concerning the shipment of a cargo of wheat for Duron. Id. at 3. The charter provided the wheat would be loaded in Galveston, Texas between April 23 and April 28, 2020, and gave Duron the option to unload the cargo in Matarani, Peru or Puerto Cabello, Venezuela. Id. On April 30, 2020, the parties entered into an addendum—Addendum No. 1—which changed the loading port from Galveston to Houston, where the cargo was expected to be ready on May 4, 2020, and provided for Duron to pay vessel detention fees per day pro rata. Id. at 3-4. Addendum No. 1 also increased the freight for both optional discharge ports. Id. On May 8, 2020, the cargo ship Hanze Gendt (the "Vessel") completed loading the wheat, and bills of lading were issued, identifying Matarani, Peru as the discharge port. Id. at 4. On May 11, 2020, Duron paid Kondot $793,656.68 in lump sum freight. Id.

On May 23, 2020, the Vessel arrived at Matarani, Peru and waited for orders to discharge. Id. Duron, however, failed to comply with its obligation to discharge the cargo, as its sale of the wheat to its customer had fallen through. Id. On May 29, 2020, Duron and Kondot entered into Addendum No. 2 to the charter, which provided in part that: the Vessel would sail toward Puerto Cabello, Venezuela to discharge the entire cargo; Duron would pay Kondot a $365,600 lump sum in additional freight; that if the detention and lump sum freight were not paid by Duron into Kondot's bank account by the time the Vessel arrived at Balboa, Panama, the Vessel would drop anchor until the funds were received; and Kondot would not pay Panama Canal crossing fees until the funds were received and any transit delays would count as further detention to be paid by Duron to Kondot. Id.

On June 5, 2020, the Vessel arrived at Balboa, but Duron had failed to pay the lump sum freight to Kondot. Id. Therefore, the Vessel dropped anchor to await payment before crossing the Panama Canal toward Puerto Cabello. Id. On June 15, 2020, Kondot, through counsel, sent a demand for payment; however, Duron made no payment. Id. On June 18, 2020, Duron proposed to again change discharge ports to Maracaibo and Cumana, Venezuela. Id. On June 23, 2020, Kondot again wrote to Duron, urging Duron to make payment as agreed under Addendum No. 2; at this point, Kondot was due $620,143.83. Id. at 5.

On July 1, 2020, the Vessel was still at anchor in Balboa, and counsel for Kondot demanded that Duron provide adequate assurance of performance by remitting $500,000 to Kondot's bank account by 11:00 AM on July 2, 2020, and that Duron provide voyage instructions no later than noon on July 3, 2020, with the condition that if Duron failed to provide the demanded assurance, Kondot reserved the right to declare Duron in repudiatory breach of the charter, to terminate the charter party, and to commence legal proceedings to discharge and sell the cargo in mitigation of further loss and damage. Id. Having received no assurance of performance from Duron, Kondot demanded emergency arbitration on July 2, 2020, requesting a partial final award confirming Kondot's right to terminate the charter. Doc. 4-2 at 4, 8-9. That same day, Kondot nominated its arbitrator. Id.

Kondot initiated arbitration on July 2, 2020. Id. at 9. In the following days, Kondot continued to urge Duron to perform its contractual obligations. Id. On July 8, 2020, Duron requested further patience as it expected to have a signed contract for the cargo, at which time Duron's buyer would have 72 hours to open a letter of credit and Duron would be able to fully satisfy the outstanding cost and pay $150,000 by July 9, 2020. Id. On July 9, 2020, Kondot confirmed with Duron that the promised payment had not been received and repeated that Duron remained in repudiatory breach of the charter. Id. On July 16, 2020, Duron nominated its arbitrator and on the following day the two arbitrators appointed a third as panel chairman. Id. at 3.

On July 24, 2020, the parties, through counsel, negotiated a further agreement pursuant to which Duron would make a $500,000 unconditional lump sum payment to Kondot within one business day of the agreement; Kondot, upon receipt, would make immediate arrangements to clean the Vessel's hull, re-bunker the Vessel at Balboa, and commence sailing toward Matarani; and the parties would execute a third addendum to the charter changing the discharge port back to Matarani, stipulating the amount of lump sum freight to be paid by Duron, and conferring on Kondot a lien on the cargo for all outstanding freight, detention, and demurrage. Id. at 10-12.

However, Duron failed to make the additional payment and, thereby, failed to comply with the July 24 agreement. Doc. 3 at 6. On July 28, 2020, Kondot accepted Duron's total material breach and repudiation of the charter and began to arrange for the discharge and sale of the cargo. Id.

B. First Partial Final Award

After receiving submissions from both parties,² the arbitrators heard oral argument on August 12, 2020. Doc. 4-2 at 3. On August 17, 2020, the arbitrators issued a unanimous partial final award ("first partial final award") granting Kondot's emergency application and declaring that Duron repudiated the April 17, 2020 charter and its addenda, as a result of which Kondot was entitled to accept Duron's repudiation and terminate the charter. Id. at 23. In particular, the arbitrators found

Kondot was fully justified in treating Duron's breach of its obligation to make the agreed unconditional payment and its failure otherwise to comply with Kondot's reasonable request for adequate assurance as a repudiation of the contract by Duron. Upon that ground, Kondot was entitled to accept Duron's repudiation and to treat the contract as having been terminated, which it did on July 28, 2020.

Id. at 19.

The arbitrators further found "Kondot was also justified in accepting the repeated breaches by Duron of its contractual obligations as constituting the total and material breach and repudiation of the Charter." Id. According to the arbitrators, Duron first breached the charter when it failed to comply with its obligation to discharge the cargo in Matarani; Duron next breached the charter when it failed to comply with its obligation to discharge the cargo in Puerto Cabello as the parties agreed in the second addendum to the charter. Id.

The arbitrators found these breaches "had placed Kondot in a situation radically different form what it had contracted for." Id. at 20. As the arbitrators made clear,

[t]he Vessel, which had been booked for a relatively short voyage to Peru, had been waiting fully laden at anchor at Balboa for nearly two months while Duron sought a buyer for the cargo. The cargo, which was perishable, had been on board the Vessel for 82 days. ... Kondot, which had the Vessel on time charter and was paying charter hire to its head owners, had not received for an extended period any income whatsoever from the employment of the Vessel. As of July 28, Kondot was owed a substantial and growing sum by a charterer which had failed to pay any part of what it owed for detention at Galveston, for the stay in Matarani, for the contracted voyage to Puerto Cabello or for the long detention at Balboa, had failed to make a promised $150,000 payment on account and had failed to make the agreed $500,000 unconditional payment on account due by July 27, 2020.

Id. As the arbitrators concluded, the "breaches by Duron were fundamental and material, going to the very root of constituting a repudiation of the Charter." Id. As a result, the arbitrators found, "Kondot was entitled to accept those breaches as bringing the Charter to an end." Id.

Last, the panel addressed its authority to grant Kondot's emergency application: "[i]t is historically well-established that...