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NCL (Bahamas) Ltd. v. O.W. Bunker USA, Inc.

United States District Court, D. Connecticut

November 29, 2017

NCL (BAHAMAS) LTD., d/b/a NORWEGIAN CRUISE LINE, Plaintiff,
v.
O.W. BUNKER USA, INC. and KELLY BEAUDIN STAPLETON, Liquidating Trustee of the OWB USA Liquidating Trust, Defendants.

          PRELIMINARY INJUNCTION ORDER

          CHARLES S. HAIGHT, JR. SENIOR UNITED STATES DISTRICT JUDGE.

         This matter came before the Court on motion by Plaintiff NCL (Bahamas) Ltd. d/b/a Norwegian Cruise Lines ("NCL"), requesting "a stay of arbitration and/or an injunction to prevent the Defendants [O.W. Bunker USA Inc. ("O.W. USA") and the OWB USA Liquidating Trustee ("Liquidating Trustee")] from pursuing arbitration proceedings that the OWB USA Liquidating Trustee has attempted to initiate in London, England." Doc. 2, at 1. See also Doc. 15 (NCL's "Emergency Motion for Temporary Restraining Order and Preliminary Injunction"), at 1-2.[1]

         Defendants demand that NCL participate in an arbitration in London to determine NCL's liability to pay an invoice O.W. USA sent to NCL for the value of bunkers delivered to one of NCL's ships, the M/V NORWEGIAN SPIRIT, by the Greek supplier EKO at the port of Pireaus, Greece, on October 18, 2014. See Doc. 2-4 ("Invoice" dated "18. October 2014"). O.W. USA makes this demand pursuant to Article P.1 of the "OW Bunker Group Terms and Conditions for Sale of Marine Bunkers" [Doc. 2-5] (herein "the OWB T&C"), which contains a provision dictating that the agreement "shall be governed and construed in accordance with English law" and disputes arising under the agreement "shall be finally settled by arbitration in London."[2] Doc. 2-5, at 11.

         In the particular circumstances attending the EKO bunkering in Piraeus in October 2014, NCL has responded to the arbitration demand by asserting that there is no contract between O.W. USA and NCL obligating NCL to arbitrate O.W. USA's claim in London. NCL has based that contention upon its interpretation of certain provisions in the OWB T&C, which were incorporated by reference in the sales order for the bunkers delivery in question. Specifically, "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, " Article L.4(a), in the event that the third party's terms include "[a] different law and/or forum selection for disputes, " those different selections are, and in this case have been, "incorporated into" the contract, Article L.4(b)(iii).[3]

         As NCL's barrister, Mr. Karia, explained:

The prima facie position [of NCL] is that the contract between the Seller [OW USA] and the Buyer [NCL] is subject to the OWB T&Cs, including the English law and London arbitration clause in clause P.1 (cls. A.2 & P.1).
Clause L.4, however, makes an exception to that prima facie rule when the third party physically supplying the bunkers to the Buyer (i.e. "the physical supplier" - here, EKO) "insists that the Buyer is also bound by its [i.e. the physical supplier's] own terms and conditions." (cl. L.4(a)).
In that situation, the Contract is varied so as to incorporate that physical supplier's standard terms and conditions, which then take precedence over the OWB T&Cs.

Doc. 39-1 ("Expert Declaration of Chirag Karia, Q.C., " dated June 16, 2017), ¶¶14.1-14.3 (emphasis in original).

         In opposition, 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 Piraeus. In particular, O.W. USA asserts that EKO's choice of Greek law and its forum selection of Greece in its sales contracts with O.W., have not superseded the London arbitration clause in the OWB T&C. See Doc. 34, at 9-11.

         Upon review of the parties' briefs and numerous declarations of their respective barristers, Messrs. Karia and Mander, the Court has determined that there is no written agreement obligating NCL to arbitrate the claim (relating to the October 2014 EKO bunkering) in London.[4] See Doc. 47 ("Ruling on Plaintiff's Motion to Stay or Enjoin Arbitration, " filed November 29, 2017). Article L.4 of the contract for supply of bunkers to the M/V NORWEGIAN SPIRIT, between O.W. USA as Seller and NCL as Buyer, has varied and superseded the provisions of the OWB T&C's Article P.1. The sale was performed "in circumstances where the physical supply of the Bunkers [was] being undertaken by a third party [EKO] which insist[ed] that the Buyer [was] also bound by its own terms and conditions, " Article L.4(a). See Doc. 2-5, at 9. Third party EKO's terms included "[a] different law and/or forum selection for disputes, " so that those different selections were "incorporated into" the terms and conditions of the OWB T&C, Article L.4(b)(iii). See Doc. 2-5, at 9; see also Doc. 47 (Ruling, filed November 29, 2017).

         In general, in the Second Circuit, "[a] party seeking a preliminary injunction must demonstrate: (1) a likelihood of success on the merits or ... sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the plaintiff's favor; (2) a likelihood of irreparable injury in the absence of an injunction; (3) that the balance of hardships tips in the plaintiff's favor; and (4) that the public interest would not be disserved by the issuance of an injunction." Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F.3d 887, 895 (2d Cir. 2015) (citation and internal quotation marks omitted).

         However, as stated in the Court's Ruling, the Second Circuit holdings in In re Am. Exp. Fin. Advisors Sec. Litig., 672 F.3d 113, 142 (2d Cir. 2011), and Goldman, Sachs & Co. v. Golden Empire Sch. Fin, Auth., 764 F.3d 210, 213-14 (2d Cir. 2014), arguably suggest "that a preliminary injunction enjoining an arbitration in these particular circumstances does not depend for its issuance upon the movant's showing of irreparable harm if the injunction is not granted or likelihood of success on the merits, prerequisites for a preliminary injunction in other contexts." Doc. 47, at 41-42.

         Nonetheless, the Court alternatively includes in this Order the typical prerequisites for preliminary injunction to ensure completeness of analyses and reasoning. The Second Circuit has observed that a party "would be irreparably harmed by being forced to expend time and resources arbitrating an issue that is not arbitrable, and for which any award would not be enforceable." Merrill Lynch Inv. Managers v. Optibase, Ltd., 337 F.3d 125, 129 (2d Cir. 2003) (quoting Maryland Cas. Co. v. Realty Advisory Bd. on Labor Relations, 107 F.3d 979, 985 (2d Cir.1997)). See also J.P. Morgan Sec. LLC v. Quinnipiac Univ., No. 14 Civ. 429 (PAE), 2015 WL 2452406, at *6 (S.D.N.Y. May 22, 2015) ("As a matter of law, there is irreparable harm when a party is 'compelled to arbitrate ... without having agreed to arbitration' because that party is 'forced to expend time and resources arbitrating an issue that is not arbitrable.'") (quoting NASDAQ OMX Group, Inc. v. UBS Secs. LLC, No. 13 Civ. 2244(RWS), 2013 WL 3942948, at *12 (S.D.N.Y. June 18, 2013)); UBS Sec. LLC v. Voegeli, 684 F.Supp.2d 351, 354 (S.D.N.Y. 2010) ("[I]t is not merely expense that underlies the prohibition against forcing a party to arbitrate a ...


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