UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-20017
Summary Calendar
FEDMET CORPORATION,
Plaintiff-Appellant,
VERSUS
M/V BUYALYK, Etc; ET AL,
Defendants,
NOBLE SEAFARER LTD; COMBINED ATLANTIC CARRIERS,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
November 11, 1999
Before SMITH, BARKSDALE, and PARKER, Circuit Judges:
ROBERT M. PARKER, Circuit Judge:
In this maritime cargo case, Plaintiff-Appellant Fedmet
Corporation (“Fedmet”) brought suit against the M/V Buyalyk; her
owner, Noble Seafarer Ltd. (“Noble”); and the charterer and bill of
lading issuer, Combined Atlantic Carriers GmbH (“COMBAC”), for
damage to a shipment of steel coils. Defendants-Appellees moved
separately for dismissal or abatement of the action pending
arbitration based on provisions in the bill of lading. The
district court granted the motions and dismissed the case without
prejudice to re-filing. On appeal, Plaintiff-Appellant argues that
the district court erred when it failed to stay rather than dismiss
the case. We affirm.
I.
Defendant-Appellee COMBAC issued a bill of lading for a
shipment of steel coils that were loaded onto the ocean-going
vessel M/V Buyalyk at Sczecin, Poland in February 1997. The M/V
Buyalyk traveled to the United States and discharged its cargo in
Houston, Texas, and New Orleans, Louisiana in March and April 1997,
respectively.
Plaintiff-Appellant Fedmet alleges that the coils arrived in
damaged condition. On March 16, 1998, Fedmet commenced this suit
in the United States District Court for the Southern District of
Texas, Houston Division, seeking to recover approximately $125,000
for damage to the cargo. Although Fedmet named the M/V Buyalyk as
a defendant in this action, Fedmet did not arrest the vessel.
Accordingly, the action proceeded solely against COMBAC and Noble
in personam.
On June 5, 1998, COMBAC moved to dismiss and/or abate or stay
the case primarily on the basis that the terms of the bill of
lading required the parties to resolve any dispute through
arbitration in Germany pursuant to the German Maritime Arbitration
Association (“GMAA”) Rules. Noble filed a similar motion on June
30, 1998. Fedmet opposed these motions on the basis that the
arbitration clause was ambiguous and unworkable for three parties
under GMAA rules.
The district court determined that the arbitration clause was
enforceable and that all issues raised in the action were
arbitrable. The district court granted both motions on September
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28, 1998, and dismissed the case without prejudice in favor of
arbitration in Germany. On October 5, 1998, Fedmet moved to alter
or amend the judgment, pursuant to Federal Rule of Civil Procedure
59(e), arguing that the case should have been stayed rather than
dismissed. Fedmet protested that a dismissal left it with no
effective remedy since the arbitration would likely be subject to
a one-year statute of limitations.1 For the first time, Fedmet
argued that the matter was governed by the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1 (1994) et seq., and that pursuant to § 3 of
the FAA, the court should have exercised its discretion to retain
jurisdiction over the case pending arbitration. The district court
denied Fedmet’s motion and Fedmet appealed. This appeal does not
challenge the validity of the arbitration clause; the only question
before us is whether the district court erred in its decision to
dismiss without prejudice rather than stay the case pending
arbitration.
II.
We have previously held that district courts have discretion
to dismiss cases in favor of arbitration under 9 U.S.C. § 3. See
Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir.
1992). Because a district court is afforded discretion in this
determination, we review the decision to dismiss for abuse of that
1
Although Fedmet did not originally invoke the Carriage of Goods
by Sea Act (“COSGA”), 46 U.S.C. § 1300 (1994) et seq., all parties
agreed that provisions of the bill of lading mandated that COSGA
governed the dispute. COSGA imposes a one-year statute of
limitations on cargo damage actions. See 46 U.S.C. § 1303(6).
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discretion. See id.
III.
A.
From the outset, it bears repeating that we remain “mindful of
the strong federal policy favoring arbitration.” United Offshore
Company v. Southern Deepwater Pipeline Co., 899 F.2d 405, 408 (5th
Cir. 1990). The preference for arbitration is such that any
“[d]oubts as to the availability of arbitration must be resolved in
favor of arbitration.” Id. This partiality is reflected in § 3 of
the FAA which provides:
If any suit or proceeding be brought in any of the courts
of the United States upon any issue referable to
arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such suit
or proceeding is referable to arbitration under such an
agreement, shall on application of one of the parties
stay the trial of the action until such arbitration has
been had in accordance with the terms of the agreement,
providing the applicant for the stay is not in default in
proceeding with such arbitration.
9 U.S.C. § 3 (1994).
In its Rule 59(e) motion, Plaintiff-Appellant argued that § 3
governed this litigation. Now on appeal, Fedmet introduces a new
argument, namely that this is an admiralty case commenced in rem,
and therefore, it is § 8 of the FAA, not § 3, that controls.2
Previously, Fedmet argued that under § 3 the district court should
not have dismissed the case; Fedmet now argues that under § 8 the
2
Initially, Fedmet argued that the arbitration clause was
defective and should not be enforced at all.
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district court could not dismiss the case.3
Under the FAA, a party is entitled to commence legal
proceedings by libel and seizure of the vessel or other property.
See 9 U.S.C. § 8. Specifically, Section 8 of the FAA provides:
If the basis of jurisdiction be a cause of action
otherwise justiciable in admiralty, then, notwithstanding
anything herein to the contrary, the party claiming to be
aggrieved may begin his proceeding hereunder by libel and
seizure of the vessel or other property of the other
party according to the usual course of admiralty
proceedings, and the court shall then have jurisdiction
to direct the parties to proceed with the arbitration and
shall retain jurisdiction to enter its decree upon the
award.
9 U.S.C. § 8 (1994). The purpose of this section is to afford a
measure of protection to the aggrieved party by providing a means
of obtaining security for arbitration. See The Anaconda v.
American Sugar Refining Co., 322 U.S. 42, 46 (1944). Under the FAA
scheme, the federal district court where the action is brought
retains jurisdiction over the vessel or other property until an
arbitration award is rendered and the award is satisfied. The
important distinction between § 3 and § 8 is that the latter does
not appear to afford the district court discretion to dismiss when
3
Naturally, defendants-appellees object to the injection of this
new argument as a breach of the long standing rule that “a party
may not present a wholly new issue in a reviewing court.” Crawford
v. Falcon Drilling Co., 131 F.3d 1120, 1123 (5th Cir. 1997)
(quoting 9A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND
PROCEDURE § 2558, at 599 (2d ed. 1995). Plaintiff-appellant claims
that it argued broadly for a stay rather than dismissal, and that
we are free to review any legal theory upon which the district
could have relied. In this instance, the timeliness of Plaintiff-
Appellant’s argument has no affect on the outcome of this appeal
since § 8 is inapplicable to this action.
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the case is referred to arbitration.4
Of course, in this case there was no arrest of the vessel.
Therefore, Plaintiff-Appellant has failed to satisfy the basic
requirement found in the first portion of § 8 that the aggrieved
party “begin [its] proceeding hereunder by libel and seizure of the
vessel.” 9 U.S.C. § 8 (1994). Plaintiff-Appellant acknowledges
this fact but explains that it “was unable to arrest the vessel” or
otherwise “obtain jurisdiction over the vessel in this case.” It
is Fedmet’s position that its failure to arrest the vessel is not
fatal to its argument because “this Court has held in E.A.S.T.,
Inc. of Stamford, Conn. M/V ALAIA, 876 F.2d 1168, 1177-78 (5th Cir.
1989), that a lack of in rem jurisdiction over the vessel does not
affect the operation of Section 8 in an admiralty case.” We
disagree.
In E.A.S.T., the parties agreed to charter the M/V ALAIA, but
upon inspection of the vessel, the charterer, E.A.S.T., determined
that she was unfit and unseaworthy. E.A.S.T. rejected the ship and
filed an action in rem under 9 U.S.C. § 8 in federal district court
to compel arbitration and to obtain security for the arbitration
award by arrest of the vessel. See id. at 1169-70. The vessel’s
owners claimed that in rem jurisdiction was an insufficient basis
upon which to refer the parties to arbitration. We held that the
owners had submitted to the district court’s in personam
4
This circuit has yet to address the question of whether a
district court retains some measure of discretion under § 8 and we
need not take a definitive position on the issue today.
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jurisdiction, and therefore there was no need to reach the question
of whether in rem jurisdiction was in fact an adequate basis for
referral. See id. at 1178. We did not hold that parties were free
to invoke § 8 without first satisfying its in rem jurisdiction
requirement.
Plaintiff-Appellant’s argument is based on a misreading of our
holding in E.A.S.T. Yet, even if a narrow equitable exception were
available, the facts of this case would not support its
application. This is not a case in which an aggrieved plaintiff
was left standing on the dock, complaint in hand, as the vessel
escaped to sea. The plaintiff in this case waited approximately 12
months to commence this lawsuit. The fact that the M/V Buyalyk was
not still waiting in port should not have been a surprise.
Having discarded § 8 as inapplicable to the case before us, we
turn to the question of whether dismissal of the case was proper
under § 3 of the FAA.
B.
Although the express terms of § 3 provide that “a stay is
mandatory upon a showing that the opposing party has commenced suit
upon any issue referable to arbitration under an agreement in
writing for such arbitration ...," Alford v. Dean Witter Reynolds,
Inc., 975 F.2d 1161, 1164 (5th Cir. 1992), we have interpreted this
language to mean only that the district court cannot deny a stay
when one is properly requested. Id. “This rule, however, was not
intended to limit dismissal of a case in the proper circumstances.”
Id. If all of the issues raised before the district court are
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arbitrable, dismissal of the case is not inappropriate. Id. As we
explained in Alford:
Although we understand that plaintiff's motion to compel
arbitration must be granted, we do not believe the proper
course is to stay the action pending arbitration. Given
our ruling that all issues raised in this action are
arbitrable and must be submitted to arbitration,
retaining jurisdiction and staying the action will serve
no purpose. Any post-arbitration remedies sought by the
parties will not entail renewed consideration and
adjudication of the merits of the controversy but would
be circumscribed to a judicial review of the arbitrator's
award in the limited manner prescribed by law.
Id. (quoting Sea-Land Service, Inc. v. Sea-Land of Puerto Rico,
Inc., 636 F. Supp. 750, 757 (D. Puerto Rico 1986)).
In this case, any dispute arising from the shipment of the
steel coils was governed by the provisions of the bill of lading
and the contract of carriage. The bill of lading expressly
provided that all claims were to be brought and decided in Bremen,
Germany by arbitration under GMAA rules. Rather than comply with
this provision, Fedmet chose to file suit in federal court
approximately one year after the allegedly damaged cargo arrived at
its destination ports. The prospect that the arbitration may now
be time-barred is simply a consequence of Fedmet’s own making. Had
Fedmet not waited a year to act, and then to act in circumvention
of the express provisions of the bill of lading, the consequences
of a dismissal without prejudice would not be so potentially
harmful. At this late juncture, neither equity nor judicial
economy favor Fedmet’s position.
In the case at hand, the district court determined that all of
the claims and issues presented were subject to arbitration under
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the provisions of the bill of lading. In light of this
determination, the district court concluded that dismissal without
prejudice was the preferred means of enforcing the governing
provisions of the bill of lading and permitting the parties to
conduct arbitration in Germany. The district court acted well
within its discretion when it dismissed this case without prejudice
to re-filing.
IV.
Accordingly, for the reasons set forth above, we AFFIRM the
judgment dismissing without prejudice Fedmet’s claims.
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