United States District Court, D. Connecticut
RULING ON PLAINTIFF'S MOTION TO STAY OR ENJOIN
CHARLES S. HAIGHT, JR. SENIOR UNITED STATES DISTRICT JUDGE
declaratory action pits the owner of a Bahamas-flag ocean
going passenger ship against the American affiliate of a
Danish supplier of marine fuel oils who contracted with the
shipowner to fuel the vessel at a Greek port, and initiated
arbitration proceedings in London when the shipowner refused
to pay the invoice for that fueling.
shipowner, invoking the Declaratory Judgment Act, 28 U.S.C.
§ 2201, seeks a declaration that it is not liable to pay
that invoice and is not obligated to arbitrate the
supplier's claim that it should do so, and now moves
[Doc. 2] for an order of this Court staying or enjoining the
arbitration, in London or elsewhere. The American supplier
resists that motion. This Ruling resolves it.
means of propelling ships across the world's oceans has
changed over the centuries. In the age of sail shipowners
utilized the winds, free of charge but subject to
uncontrollable vagaries; in May 1588, for example, the
Spanish Armada was bound for England but "the wind was
blowing hard off the sea, right down the throat of the
passage, " and "blockaded by the elements, the
Armada lay for almost three weeks anchored off Belem" in
Portugal. Garrett Mattingly, The Armada 245-46
(1959). That complication changed when "in the 1840s,
steam propulsion began to seriously compete with sail on the
high seas." Alex Roland, W. Jeffrey Bolster, &
Alexander Keyssar, The Way of the Ship 158(2008).
"The introduction of steam gave rise to a new naval
requirement - coal - which soon became vital. Commerce under
steam quickly settled down upon fixed routes, and depots of
coal were established to meet its needs."
Encyclopedia Britannica (1911 edition).
limitations and disadvantages of coal gave rise in turn to
its replacement by fuel oil as the means of propulsion for
ocean-going ships. "Bunker fuel, " the name
commonly acquainted with marine use, is descended from the
days of coal. This general term for marine fuel oil "is
a legacy from the early days of shipping when coal was the
main source of fuel and the coal was loaded into coal
bunkers." 5 Paul A. Russell & E.A. Stokoe
Reeds Marine Engineering and Technology: Ship
Construction for Marine Engineers 9 (6thed. 2016).
Liquid bunker fuel is now stored aboard ship in "bunker
tanks." Id. The word "bunker" is also
used as a verb: "[t]he operation of filling or
replenishing a ship's bunker with fuel is known as
bunkering." The Oxford Companion to Ships and the
Sea 119 (Peter Kemp ed., 1st ed. 1976). The use of
bunker fuel remains to this day the means of propelling the
world's merchant fleets. While naval nuclear propulsion
is used within naval warships such as supercarriers and
submarines, nuclear-powered non-combatant vessels have not
developed beyond a few experimental ships. J.P. Ghose &
R.P. Gokarn, Basic Ship Propulsion 3 (2004).
very recently, a leading company in the global business of
refueling ships was O.W. Bunker, a Danish company founded in
1980, and by October of 2014 the world's largest bunker
supplier. According to publicly available business
publications, O.W. Bunker owned and directly supplied to
vessels some deliveries of bunkers, but for the most part the
Danish entity conducted its world-wide business by setting up
regional affiliated corporations, which would in turn
sub-contract with local suppliers to fuel a particular ship
on a particular date at a particular port. That commercial
practice is illustrated by the case at bar, which arises in
the following manner.
NCL (Bahamas) Ltd., doing business as Norwegian Cruise Lines
("NCL"), is, despite its nordic name, a Bahamas
corporation with its principal place of business in Miami,
Florida. At the pertinent times, NCL owned and operated,
among other vessels, the passenger ship M/V NORWEGIAN SPIRIT,
a 75, 904 gross ton vessel flying the Bahamas flag with a
guest capacity of 2, 018 (double occupancy). A time came in
October, 2014 when the NORWEGIAN SPIRIT required refueling at
the port of Pireaus, Greece.
October 8, 2014, NCL ordered bunkers to be delivered to the
NORWEGIAN SPIRIT (hereafter sometimes "the Vessel")
at Pireaus on October 18, 2014. NCL placed that order with
Defendant O.W. Bunker USA Inc. ("O.W. USA"), a
Texas corporation and a wholly owned affiliate of a Danish
company, O.W. Bunker. O.W. USA's sales order
confirmation, dated October 8, 2014, and addressed to NCL
[Doc. 2-2], recited under the caption "Terms":
The sale and delivery of the marine fuels described above are
subject to the OW Bunker Group's Terms and Conditions of
sale(s) for Marine Bunkers. The acceptance of the marine
bunkers by the vessel named above shall be deemed to
constitute acceptance of the said general terms applicable to
you as "Buyer" and to O.W. Bunker USA Inc. as
USA thereupon placed an order for the bunkers destined for
the NORWEGIAN SPIRIT with O.W. Bunker Malta Ltd. ("O.W.
Malta"), another affiliate of the Danish company. O.W.
Malta's sales order confirmation, on the same terms and
addressed to O.W. USA, is dated October 9, 2014 [Doc. 34-1].
Malta thereupon placed an order for the bunkers destined for
the NORWEGIAN SPIRIT with the company that would physically
deliver the bunkers to the Vessel. This was a Greek company
called EKO. EKO delivered the bunkers to the Vessel without
incident as she lay at Pireaus on October 18, 2014. The
NORWEGIAN SPIRIT then departed the port, refueled and
presumably refreshed. It appears to be undisputed that EKO
sent its invoice for the bunkers it supplied to O.W. Malta,
which had ordered the bunkers from EKO, and O.W. Malta sent
its invoice to O.W. USA, which had ordered the same bunkers
from O.W. Malta. O.W. USA sent its invoice for the same
bunkers to NCL. That invoice, dated October 18, 2014 [Doc.
2-4], was in the amount of $694, 548.44. The due date was
November 17, 2014.
as October yielded to November in 2014, and the NORWEGIAN
SPIRIT continued on her voyage, there were three outstanding
invoices for the bunkers delivered to the Vessel at Pireaus
on October 8. In a well-ordered world these invoices would
have been promptly paid, but disorder intruded when, on
November 7, the parent company, O.W. Bunker, filed insolvency
proceedings in Denmark. The global O.W. Bunker group stopped
paying invoices submitted by local physical suppliers like
EKO, resulting in a tsunami-like tidal wave of
multi-jurisdiction litigation, of which the case at bar is
November 13, 2014, after all three bunker invoices had been
issued, but before payment became due or was made on any of
them, O.W. USA filed in this District a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy
Code. Compl. ¶ 5. See also Bankr.
Petition, Case No. 14-51720. The OWB USA Liquidating Trust
was created by the Debtors' First Modified Liquidation
Plans, confirmed by the Bankruptcy Court for this District.
Compl. ¶ 6. Defendant Kelly Beaudin Stapleton
("Beaudin Stapleton" or "the Trustee"), a
citizen of Pennsylvania, was named the Liquidating Trustee.
Id. ¶¶ 6-7.
the O.W. group bankruptcy filings, EKO reached the sensible
conclusion that if it wished its invoice for bunkers
delivered to the NORWEGIAN SPIRIT to be paid, it would have
to look elsewhere than an O.W. Bunker company. EKO's gaze
fell upon NCL in personam and the NORWEGIAN SPIRIT
in rem. According to the sworn declaration of
Ioannis A. Voskos, legal counsel to EKO [Doc. 2-8], EKO made
demand on NCL for payment of EKO's invoice, and informed
NCL that EKO would "immediately arrest the NORWEGIAN
SPIRIT, if the O.W. debt was not paid in full." Voskos
Decl. paragraph 5. In order to avoid the arrest and detention
of the Vessel, laden with passengers and the crew serving
them, NCL paid EKO $729, 929.09, the total amount of the
invoices EKO rendered to O.W. Malta for the bunkers delivered
to the Vessel at Pireaus on October 8, 2014. Beaudin
Stapleton, the O.W. USA Liquidating Trustee, whose functions
include collecting debts owed to O.W. USA, takes the position
that NCL must pay O.W. USA's invoice for the same
bunkers, in the amount of $694, 548.44. The Trustee professes
herself to be unmoved by the fact that NCL has previously
paid EKO a slightly larger amount for the same bunkers. NCL
made that payment, the Trustee contends through counsel, as a
volunteer, without effect upon NCL's obligation to pay
the O.W. USA invoice. NCL responds that in the circumstances
of the case, it is not liable to pay that invoice.
resolve that dispute, the O.W. Liquidating Trust has
instructed United Kingdom counsel to commence arbitration
proceedings against NCL in London. The Trust contends that an
arbitration clause in the underlying sales contract between
NCL and O.W. USA obligates NCL to participate in the London
arbitration. NCL makes two responses. The first is that by
virtue of its prior payment to EKO for these bunkers, it is
under no liability to pay O.W. USA for them. That is a
substantive question of law and equity. NCL's second
response is that on a proper construction of the underlying
contract, it has not agreed to arbitrate this dispute, in
London or anywhere else. That is a question of contract law,
as are all issues of whether a party has agreed to arbitrate
a particular dispute.
NCL initially sought to raise these questions in the
Bankruptcy Court, Chief Judge Manning concluded that Court
lacked subject matter jurisdiction, and dismissed NCL's
adversary proceeding without prejudice. See Order of
Dismissal, Adversary Proceeding No. 17-05008 (JAM) Doc. 55,
Aug. 16, 2017. This action in this Court followed. NCL's
complaint prays for a declaration of non-liability with
respect to the O.W. USA bunkers invoice, and an injunction
against arbitrating that issue.
case is now before the Court on NCL's self-styled
"emergency" motion to stay or enjoin the London
arbitration. The parties stipulated to stay the arbitration
(for which the parties have appointed arbitrators) until the
Court decides the motion. The issues have been elaborately
briefed and counsel presented oral arguments at a hearing.
agreed to arbitrate this dispute with O.W. USA (as O.W. USA
contends and NCL denies), it is because of the "OW
Bunker Group Terms and Conditions for Sale of Marine
Bunkers" [Doc. 2-5] (sometimes referred to herein as
"the OWB T&C"), which were incorporated by
reference in the sales order confirmation sent by O.W. USA to
NCL on October 8, 2014.
B, the "Definitions" section of the OWB T&C,
specifies at subparagraph B.1 that for purposes of the
contracted-for bunkers delivery, O.W. USA is the
"Seller" and NCL is the "Buyer." Article
P, captioned "Law and Jurisdiction, " provides in
P.1 This Agreement shall be governed and construed in
accordance with English law. . . . Except for circumstance
referred to in Clause P.5 below all disputes arising in
connection with this Agreement or any agreement relating
thereto, save where the Seller decides otherwise in its sole
discretion, shall be finally settled by arbitration in
London, England in accordance with the Arbitration Act of
1996 (or any subsequent amendment).
P.2 In the event that the Seller determines to refer any
dispute to arbitration it shall be referred to a tribunal of
three arbitrators consisting of one arbitrator to be
appointed by the Seller, one by the Buyer, and one by the two
arbitrators already appointed. . . .
provisions are preceded and governed by Article L, captioned
"Exemptions and Force Majeure, " which provides in
Article L.4 in pertinent part:
(a) These Terms and Conditions are subject to variation in
circumstances where the physical supply of the Bunkers is
being undertaken by a third party which insists that the
Buyer is also bound by its own terms and conditions. In such
circumstances, these Terms and Conditions shall be varied
accordingly, and the Buyer shall be deemed to have read and
accepted the terms and conditions imposed by the said third
(b) Without prejudice or limitation to the generality of the
foregoing, in the event that the third party terms include: .
. . .
(iii) A different law and/or forum selection for disputes to
be determined, then such law selection and/or forum shall be
incorporated into these terms and conditions.
contends that "the physical supply of the Bunkers"
to the NORWEGIAN SPIRIT was "undertaken" by EKO,
"a third party" which "insists that the Buyer
[NCL] is also bound by its terms and conditions, " all
within the meaning of Article L.4 (a) of the OWB T&C. In
those circumstances, NCL's argument emphasizes, the O.W.
Bunker "Terms and Conditions shall be varied
accordingly, " Article L.4 (a), and, because EKO's
terms and conditions provide for the exclusive jurisdiction
of "Pireaus Courts" over any dispute in connection
with this bunkering, the OWB T&C provision for
arbitration in London is abrogated, pursuant to Article L.4
USA and the Trustee contend that the factual predicate for
NCL's contentions does not exist, and in any event, those
contentions misread the provision for London arbitration
contained in the contract between O.W. USA and NCL.
begins its complaint [Doc. 1] with the assertion that it is
filed "pursuant to 28 U.S.C. § 2201, " the
Declaratory Judgment Act. The Court must at the threshold
consider its jurisdiction, since it is well established that
"the Declaratory Judgment Act does not by itself confer
subject matter jurisdiction on the federal courts. Rather,
there must be an independent basis of jurisdiction before a
district court may issue a declaratory judgment."
Correspondent Servs. Corp. v. First Equities Corp. of
Florida, 442 F.3d 767, 769 (2d Cir. 2006) (citation
case, there are ample bases for the Court's subject
matter jurisdiction. The complaint alleges diversity of
citizenship pursuant to 28 U.S.C. § 1332. Diversity is
adequately alleged. In addition, O.W. USA invoked federal
jurisdiction by filing a voluntary Chapter 11 bankruptcy
petition in this District. This Court's jurisdiction of
bankruptcy cases is conferred by 28 U.S.C. § 1334, which
extends to the Liquidating Trustee's attempted
enforcement of the bunkers invoice as an asset of the
debtor's estate. Moreover, O.W. USA, an American supplier
of necessaries to a vessel in navigation on the order of her
owner, has a maritime lien on the vessel pursuant to 46
U.S.C. § 31342(a), and the case falls within the
Court's admiralty and maritime jurisdiction under 28
U.S.C. § 1333. See Garanti Finansal Kiralama A.S. v.
Aqua Marine and Trading Inc., 697 F.3d 59, 71 (2d Cir.
2012) (where federal court would have admiralty jurisdiction
over contract to deliver bunkers to vessels, "we have
jurisdiction over this declaratory judgment action as
of these three bases for the Court's subject matter
jurisdiction would suffice. All three are present. The Court
may therefore consider the merits of the present motion, by
which NCL seeks to stay or enjoin the London arbitration
initiated by O.W. USA.
is frequently praised as a salutary alternative to
litigation. However, there are occasions when arbitration
generates litigation. One such occasion arises when a party,
confronted by another party's demand for arbitration of a
dispute between them, responds that there is no arbitration
agreement justifying the demand.
case presents that situation. O.W. USA demands that NCL
participate in an arbitration in London to determine
NCL's liability as to payment of the invoice O.W. USA
sent to NCL for the value of the bunkers delivered to the
NORWEGIAN SPIRIT by the Greek supplier EKO at the port of
Pireaus on October 18, 2014. NCL responds that, in the
particular circumstances attending that bunkering, there is
no contract between O.W. USA and NCL obligating NCL to
arbitrate O.W. USA's claim in London. NCL bases that
contention upon its interpretation of certain provisions in
the OWB T&C, which both parties agree were incorporated
by reference in the sales order for the bunkers delivery in
question. O.W. USA contends that on a proper construction of
the OWB T&C, the parties' contractual obligation to
arbitrate disputes in London is not affected by events at the
bunkers delivery port of Pireaus.
case turns, then, upon whether NCL agreed to a contract which
obligates it to participate in a London arbitration. That is
a decisive element in light of the principle declared by the
Supreme Court in United Steelworkers of America v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582
(1960): "[A]rbitration is a matter of contract and a
party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit." While
Steelworkers was decided in the context of the
federal labor management relations statute, its concept of
arbitration as a creation of contract, broadly stated, is
broadly applied. See, e.g., In re Am. Express Fin.
Advisors Sec. Litig., 672 F.3d 113, 127 (2d Cir. 2011)
(citing and quoting Steelworkers in an action
brought by investors against a financial services company).
related and equally established principle is stated in
Granite Rock Co. v. International Brotherhood of
Teamsters, 561 U.S. 287, 296 (2010): "It is well
settled in both commercial and labor cases that whether
parties have agreed to submit a particular dispute to
arbitration is typically an issue for judicial
determination." (citations and internal quotation marks
omitted). Supreme Court decisions uniformly reach that
conclusion. "Unless the parties clearly and unmistakably
provide otherwise, the question of whether the parties agreed
to arbitrate is to be decided by the court, not the
arbitrator." AT & T Techs., Inc. v.
Commc'ns Workers of Am., 475 U.S. 643, 649 (1986).
In John Wiley & Sons, Inc. v. Livingston, 376
U.S. 543 (1964), the threshold question was whether the court
or an arbitrator should decide if arbitration provisions in a
collective-bargaining contract survived a corporate merger so
as to bind the surviving corporation. The Court reasoned that
this question was for the courts:
Under our decisions, whether or not the company was bound to
arbitrate, as well as what issues it must arbitrate, is a
matter to be determined by the Court on the basis of the
contract entered into by the parties. . . . The duty to
arbitrate being of contractual origin, a compulsory
submission to arbitration cannot precede judicial
determination that the collective bargaining agreement does
in fact create such a duty.
Id. at 546-47 (ellipsis omitted).
case at bar, it is for this Court, whose subject matter
jurisdiction is manifest, and not for London arbitrators
(however distinguished), to decide whether (as NCL contends)
Article L.4 of OWB T&C operates to vary and supersede the
London arbitration clause contained in Article P.1 of that
document; or whether (as O.W. USA contends) the London
arbitration clause is unaffected and remains fully
enforceable. Under these Supreme Court cases and their
progeny, that question of contractual construction falls to
this Court to decide.
noted supra, the O.W. Bunker Group Terms and
Conditions provide in Article P.1: "This Agreement shall
be governed and construed in accordance with English
law." The parties' submissions assume that this
choice of law applies to the decision this Court must make.
The assumption is warranted. The contractual choice of
English law was made by two substantial and sophisticated
parties. I do not suggest the choice of law was negotiated.
It is clear enough from the record that O.W. imposed its
Terms and Conditions upon shipowners needing bunkers, and a
shipowner unwilling to accept the choice of English law would
probably have to find a different bunkers broker or supplier.
But there is no reason to reject this choice of law. I accept
that English law governs the contract between O.W. USA and
NCL, and in addressing the question posed in Part VI of this
Ruling, this Court must construe the contract according to
competence of this United States district court to decide
that question of foreign law is declared and governed by
Federal Rule of Civil Procedure 44.1, which provides:
"In determining foreign law, the court may consider any
relevant material or source, including testimony, whether or
not submitted by a party or admissible under the Federal
Rules of Evidence. The court's determination must be
treated as a ruling on a question of law." The Advisory
Committee's Notes to the Rule state: "In further
recognition of the peculiar nature of the issue of foreign
law, the new rule provides that in determining this law the
court is not limited by material presented by the parties; it
may engage in its own research and consider any relevant
material thus found. . . . Rather, the rule provides flexible
procedures for presenting and utilizing material on issues of
foreign law by which a sound result can be reached with
fairness to the parties."
Faggionato v. Lerner, 500 F.Supp.2d 237 (S.D.N.Y.
2007), Judge Preska said:
Ultimately, the responsibility for correctly identifying and
applying foreign law rests with the court. In acting under
Rule 44.1, a court may reject even uncontradicted expert
testimony and reach its own decisions on the basis of
independent examination of foreign legal authorities. The
Court of Appeals has urged district courts to invoke the
flexible provisions of Rule 44.1 . . . .
Id. at 244-45 (citations and internal quotation
district judges are endowed with broad flexibility in
determining foreign law, one is also acutely aware of the
provision in the last sentence of Rule 44.1 that the district
court's "determination must be treated as a ruling
on a question of law." The intended distinction is
between a "finding of fact, " where the less
demanding standard of review on appeal is "clearly
erroneous, " and a "question of law, " which
the court of appeals considers de novo. District
judges may enjoy the flexibility of research the Rule
provides, but they know their determinations of foreign law
will receive no deference from circuit judges if the case
sails from the shallows into deeper appellate waters.
case at bar, I have the benefit of opinions submitted by two
English barristers, each with notable litigation and
arbitration experience in the relevant areas of international
trade, commerce and shipping. C. Marcus Mander is instructed
on behalf of O.W. USA and the Liquidating Trustee. Chirag
Karia QC is instructed on behalf of NCL. Messrs. Mander and
Karia exchanged a series of expert declarations which began
when the case was before the Bankruptcy Court and continued
after it moved to this Court. Specifically, I have considered
the following declarations, signed on the indicated dates:
Mander, June 6, 2017; Karia, June 16, 2017; Mander, June 23,
2017; Karia, September 14, 2017; and Mander, September 22,
2017. Some declarations answer or criticize
opposing declarations. English appellate decisions and pages