IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 2, 2008
No. 07-20063 Charles R. Fulbruge III
Clerk
THE RICE COMPANY (SUISSE), S.A.
Plaintiff-Appellant
v.
PRECIOUS FLOWERS LIMITED; IBN AGROTRADING GMBH; M/V
NALINEE NAREE, her engines, boilers and tackle
Defendants-Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:06-CV-588
Before JOLLY, HIGGINBOTHAM, and PRADO, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Precious Flowers Limited (“Precious Flowers,” or the “vessel owner”)
owned a vessel, the M/V NALINEE NAREE, and time chartered the vessel to
IBN Agrotrading GmbH (“IBN”). The time charter included a London
arbitration clause. The Rice Company1 (or “the shipper”) bought rice to ship to
Togo. It voyage chartered the vessel from IBN to ship the rice, but the vessel
allegedly had unseaworthy hatch covers and the rice was damaged. The voyage
1
The Rice Company (Suisse) bought the rice, and its parent company, The Rice
Company Roseville, chartered the vessel. We refer to both as “The Rice Company” or “the
shipper.”
No. 07-20063
charter required arbitration in New York, and the bill of lading2 that would have
issued, had the vessel not sailed early and the cargo not been damaged due to a
storm, incorporated the terms of the voyage charter. Precious Flowers’
insurance company issued a letter of undertaking to The Rice Company,
claiming jurisdiction in district court in Houston. The Rice Company brought
suit in district court against Precious Flowers, IBN, and the vessel, seeking
damages and making a motion to compel arbitration in New York and to stay the
proceedings pending arbitration. The district court denied the motion and did
not decide the liability issues. The Rice Company appealed.
I
Precious Flowers, a Philippine company, was the record owner of the
vessel the M/V NALINEE NAREE. It time chartered the vessel to the disponent
owner IBN, a German company. IBN then voyage chartered3 the vessel to The
Rice Company. The Rice Company bought rice that it planned to ship from Lake
Charles, Louisiana to Togo. It loaded approximately 1,752 metric tons of its rice
onto the vessel but had to leave port early because of the impending Hurricane
Rita. It was forced to dock in Houston, and it later discovered that seawater had
pierced the hold, allegedly due to unseaworthy hatch covers, and had damaged
2
“A Bill of Lading is a ‘document which is signed by the carrier or his agent
acknowledging that goods have been shipped on board a specific vessel that is bound for a
particular destination and stating the terms on which the goods are to be carried.’” Hale
Container Line, Inc. v. Houston Sea Packing Co., 137 F.3d 1455, 1462, n.12 (11th Cir. 1998)
(quoting Thomas J. Schoenbaum, 2 Admiralty and Maritime Law § 10-11 at 44 (2nd ed.1994)).
3
“A charter party is ‘a specialized form of contract for the hire of an entire ship,
specified by name.’ . . . [A] time charter provides for the charterer to obtain the vessel for a
fixed period of time, and under a voyage charter, the charterer obtains the vessel for the length
of a voyage.” Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 892, n.1 (5th Cir.
2005) (quoting Thomas J. Schoenbaum, Admiralty and Maritime Law, § 11-1 (4th ed. 2001)).
The contract between IBN and The Rice Company refers to IBN as the Time-Charter /
Disponent Owners, meaning that IBN time chartered the vessel from Precious Flowers and
then voyage chartered the vessel to The Rice Company. The contract between IBN and The
Rice Company is a voyage charter. The IBN-Precious Flowers contract is a time charter.
2
No. 07-20063
the rice. Precious Flowers gave The Rice Company a letter of undertaking from
its Protection and Indemnity Club, stating that jurisdiction of the suit would be
in Houston. The Rice Company filed suit in District Court under Rule 9(h) of the
Federal Rules of Civil Procedure (permitting designation of a pleading as an
admiralty or maritime claim), 28 U.S.C. § 1333 (providing original admiralty or
maritime jurisdiction in district court), and 9 U.S.C. § 8 (of the Federal
Arbitration Act, providing district courts with jurisdiction to direct arbitration
for complaints brought for libel and seizure of a vessel). It listed the vessel, IBN,
and Precious Flowers as Defendants, alleging that it had sustained damages of
$760,000. In a separate motion, The Rice Company moved to compel arbitration
in New York and stay the proceedings pending arbitration.
Precious Flowers filed a Claim of Owner in its in rem capacity arguing,
inter alia, improper venue, lack of in personam jurisdiction, and failure to state
a claim upon which relief can be granted. It restricted its appearance to an in
rem defense under Rule E(8) of the Supplemental Rules for Certain Admiralty
and Maritime Claims, reserving all other defenses. It also pled defenses under
the Carriage of Goods by Sea Act (COGSA)4 in its answer to The Rice Company’s
original complaint. The district court denied the motion to compel arbitration.
Whether arbitration ought to be compelled turns on three contracts. First,
there is a voyage charter of September 9, 2005, between IBN, the “Time
Charter/Disponent-Owners” of the vessel, and The Rice Company, the
charterers. The terms of this voyage charter are incorporated into a second
contract – the bill of lading or “cargo contract.” Finally, there is the September
16, 2005, time charter, a one-time contract between IBN, the disponent owner,
and Precious Flowers, the record owner of the vessel, for “one Timecharter-trip”
from Lake Charles to Togo, “duration about 45 - 48 days.”
4
46 U.S.C. § 30701.
3
No. 07-20063
The time charter between Precious Flowers and IBN5 contains a Rider
Clause 45(b), a broad arbitration clause requiring that “all disputes arising out
of this contract shall be arbitrated in London.”6 The parties rejected Rider
Clause 45(a), a New York arbitration clause, by striking out each line of the
clause and providing for London arbitration in Clause 45(b). The Time Charter
also allows the charterers of the vessel (IBN) to act on behalf of Precious
Flowers, providing,
30. Bills of Lading
(a) The Master shall sign the bills of lading for cargo as presented
in conformity with mates receipts. However, the Charterers [IBN]
may sign bills of lading on behalf of the Master, with the Owner’s
prior written authority, always in conformity with mates receipts,
without prejudice to this Charterparty.
- see also clause 58 -
(b) All bills of lading shall be without prejudice to this Charter Party
and the Charterers shall indemnify the Owners against all
consequences or liabilities which may arise from any inconsistency
between this Charter Party and any bills of lading signed by the
Charterers or by the Master at their request.
58. Bills of Lading
Charterers and/or their agents are hereby authorized by Owners to
sign on Master’s and/or Owner’s behalf Bills of Lading as presented
5
“Messrs. Precious Flowers Limited, Bangkok/ Thailand Owners” and “Messrs. IBN-
AGROTRADING GmbH Hamburg, Germany Charterers” signed the contract.
6
Clause 45(b) provides, in part,
LONDON All disputes arising out of this contract shall be arbitrated at
London and, unless the parties agree forthwith on a single Arbitrator, be
referred to the final arbitrament of two Arbitrators carrying on business
in London who shall be members of the Baltic Mercantile & Shipping
Exchange and engaged in Shipping, one to be appointed by each of the
parties, with power to such Arbitrators to appoint an Umpire. No award
shall be questioned or invalidated on the ground that any of the
Arbitrators is not qualified as above, unless objection to his action be
taken before the award is made. Any dispute arising hereunder shall be
governed by English Law.
4
No. 07-20063
in conformity with mate’s receipts records without prejudice to this
Charter-Party.
In case the original bill/s of lading are not available upon vessel’s
arrival at discharging port for any reason, the Master is to release
the entire cargo to the Charterers order against presentation by
Charterers or their agents of a single letter of indemnity with
wording as per Owners standard P & I Club form, signed by
Charterers only.
The voyage charter between IBN and The Rice Company is a pre-printed
contract. The parties struck out the term “Owners” when that term first appears
and replaced “Owners” with “IBN AGROTRADING GMBH HAMBURG as Time-
Charter / Disponent-Owners.” The charter describes “THE RICE COMPANY
ROSEVILLE CALIFORNIA” as the “Charterers.” Throughout the rest of the
voyage charter the parties use the term “Owners” and “Charterers.” Precious
Flowers is not a party to the voyage charter. The voyage charter, like the time
charter, contains an arbitration clause but requires arbitration in New York
rather than London, providing,
That should any dispute arise between Owners and Charterers, the
matter shall be referred to three persons at New York, one to be
appointed by each of the parties hereto, and the third by the two so
chosen, their decision or that of any two of them shall be final, and
for the purpose of enforcing any award, this agreement may be
made a rule of the Court. The Arbitrators shall be commercial men.
The arbitration is to be conducted in accordance with the rules of
the Society of Maritime Arbitrators, Inc., of New York.
The third contract, a CONGEN form bill of lading, provides, “(1) All terms
and conditions, liberties and exceptions of the Charter Party, dated as overleaf,
including the law and Arbitration Clause, are herewith incorporated.”
The Rice Company as the shipper claims that because Precious Flowers,
the vessel owner, permitted IBN in its time charter to execute bills of lading on
the owner’s behalf pursuant to the time charter, and because IBN would have
5
No. 07-20063
executed the bill of lading for the rice voyage, the owner is contractually bound
to the bill of lading and the voyage charter incorporated into the bill of lading
requiring New York arbitration. Precious Flowers argues that IBN cannot prove
that IBN would have signed the bill of lading on behalf of Precious Flowers and
that even if IBN signed for Precious Flowers, the New York arbitration clause
does not apply to Precious Flowers. The time charter between IBN and Precious
Flowers only permits IBN to sign bills of lading on behalf of Precious Flowers
“without prejudice” to Precious Flowers. Furthermore, Precious Flowers is not
a party to the voyage charter requiring New York arbitration, it argues, and it
never agreed to arbitration. Precious Flowers argues,
there was no evidence presented that Precious Flowers ever
intended, agreed, or consented to any party having authority to bind
it to New York arbitration in contravention of the broad London
arbitration clause in the Time Charter.
The shipper, in addition to arguing that the bill of lading binds the vessel
owner to arbitration, provides two other lines of argument for compelling New
York arbitration. First, it alleges that the term “Owner” in the voyage charter
containing the New York arbitration clause is ambiguous, and that the term
could be construed to include Precious Flowers. Second, it argues that because
the disponent owners of the vessel (IBN) signed the voyage charter with the New
York arbitration clause, any in rem disputes involving the vessel must also be
arbitrated. In other words, it argues that the voyage charter compels the vessel
to arbitrate and also requires the representative of the vessel to arbitrate. It
would be impractical and senseless, urges The Rice Company, to require
arbitration and allow a separate in rem proceeding in district court in that once
arbitrated, the award cannot be challenged in district court. Along these same
lines, it argues that because Precious Flowers filed a claim on behalf of its vessel
6
No. 07-20063
after the rice was damaged and would potentially benefit from the bill of lading,
it is estopped from arguing that the bill’s arbitration clause does not apply.
The district court concluded that the New York arbitration clause of the
voyage charter does not bind the vessel’s owner but rather its disponent owner
(IBN), and that there is no contract binding Precious Flowers to New York
arbitration. Nor does the in rem fiction of the vessel as defendant bind the
vessel owner, the court held; “the vessel cannot be construed as an ‘owner’ or
‘charterer’ against whom the [New York arbitration] clause may be enforced.”
The Rice Company appealed. We will affirm.
II
Reviewing de novo “the district court’s refusal to compel arbitration,”7 we
first address the voyage charter terms and the shipper’s claim that the voyage
charter is ambiguous and includes Precious Flowers. When interpreting the
terms of the charter party,
We must construe a charter “according to the intent of the parties
as manifested by the whole instrument rather than by the literal
meaning of any particular clause taken by itself.”8
“[A]ny doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration.”9 In determining whether ambiguity exists, we view the
7
Keytrade USA, 404 F.3d at 893; see also Terrebonne v. K-Sea Transp. Corp., 477 F.3d
271, 277 (5th Cir. 2007) (reviewing de novo “the district court’s ruling on . . . [Defendant’s]
motion to compel arbitration and stay litigation”).
8
Nitram, Inc. v. Cretan Life, 599 F.2d 1359, 1368 (5th Cir. 1979) (quoting The
Framlington Court, 69 F.2d 300, 303 (5th Cir. 1934)).
9
Sedco, Inc. v. Petroleos Mexicanos Mexican Nat. Oil Co. (Pemex), 767 F.2d 1140, 1147
(5th Cir. 1985) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25
(1982)).
7
No. 07-20063
disputed term “in the context of the entire charter party.”10 In so doing, we find
no ambiguity.
As we have observed, the parties, in the second line of the voyage charter,
struck out the term “Owners” and inserted the term “IBN AGROTRADING
GMBH HAMBURG as Time-Charter / Disponent-Owners.” The remainder of the
text refers to “Owners.” The only mention of the “ship owners” is in Clause 32,
“War risk,” providing, “For the purpose of this clause, the words: (a) ‘Owners’
shall include the ship owners, bare board charterers, disponent Owners,
manager or other operators who are charged with the management of the vessel,
and the master . . . .”
We think it clear from line 2, where the parties replaced “Owner” with
“IBN AGROTRADING GMBH HAMBURG as Time-Charter /
Disponent-Owners,” and the use of the term “Owner” throughout the rest of the
contract,11 that “Owner” is the “disponent-owner” IBN, and not Precious Flowers.
“Ship owners” are specifically referenced in only one Clause, and Precious
Flowers did not sign the contract. We are persuaded that the parties to these
instruments unambiguously structured their relationship such that the vessel
owner was not a party to the voyage charter containing the New York
arbitration clause.12
10
Nitram, 599 F.2d at 1368.
11
The voyage charter states, for example, “Owners to satisfy themselves about any
restriction at loadingport but charterers confirm to know that there are minimum
9,55 m saltwater sailing draft loadingport”; “Vessel to be loaded at Owners’/Charterer’s
expense . . .”; “Charterers to pay Owners demurrage at the rate of US$ 14.000 per day or pro
rata upto and including 3 days of demurrage”; “Owners to be free of any Any extra
insurance owing to vessel’s age, flag or Ownership.”
12
Even if the contract were to be ambiguous, there is a powerful argument that the
same result would follow – that we ought to construe the terms against the party who wrote
the contract, particularly in light of the fact that Precious Flowers did not write the contract
or participate in its negotiations and expressly rejected New York arbitration in its time
charter with IBN. See Zapata Marine Serv. v. O/Y Finnlines, Ltd., 571 F.2d 208, 209 (5th Cir.
1978) (citing Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 957 (5th Cir. 1974)) (holding that
8
No. 07-20063
III
We now turn to The Rice Company’s claim that because Precious Flowers
permitted IBN to sign bills of lading on behalf of the Master, the bill of lading
that would have issued would have been signed by IBN as an agent of Precious
Flowers and would have bound Precious Flowers to New York arbitration. The
Rice Company, as part of this claim, argues that in interpreting the language of
the arbitration clause incorporated into the bill of lading, we should not consider
whether the language of the arbitration clause is “broad” or “narrow,” as that is
allegedly an outdated analysis.
“[T]he question of arbitrability is to be decided by the court on the basis of
the contract entered into by the parties.”13 Both the bill of lading and the voyage
charter are contracts.14 The voyage charter signed by IBN and The Rice
Company contains a New York Arbitration clause, and the bill of lading that
would have issued incorporates the arbitration clause. The parties do not
dispute that the bill of lading incorporated the clause, but Precious Flowers
argues that The Rice Company has presented no evidence showing that IBN
would have signed on behalf of the Master and would have made Precious
Flowers a party to the bill of lading. IBN could have signed for itself, as
disponent owner. And even if there were proof that IBN would have signed as
“when a contract provision is subject to opposing, yet reasonable interpretation, an
interpretation is preferred which operates more strongly against the party from whom the
words proceeded”).
13
Commerce Park at DFW Freeport v. Mardian Const. Co.,729 F.2d 334, 338 (5th Cir.
1984) (citing 9 U.S.C. § 3).
14
See Keytrade USA, 404 F.3d at 892 n.1 (quoting Thomas J. Schoenbaum, Admiralty
and Maritime Law, § 11-1 (4th ed. 2001)) (“A charter party is ‘a specialized form of contract for
the hire of an entire ship, specified by name.’”); Farmland Indus., Inc. v. Andrews Transp. Co.,
888 F.2d 1066, 1068 (5th Cir. 1989) (quoting Transp. Co. v. Commercial Metals, 456 U.S. 336,
342, (1982)) (defining a bill of lading as a “‘basic transportation contract’ between the shipper
and carrier”).
9
No. 07-20063
Precious Flowers’ agent rather than signing for itself, the time charter permits
IBN to sign on behalf of the Master only without prejudice to Precious Flowers.
Even assuming that the bill of lading would have been issued by IBN on
behalf of Precious Flowers, for which there is no evidence in this case,15 we are
not persuaded that Precious Flowers would have been bound by the New York
arbitration clause incorporated into the bill of lading, given the terms of the New
York arbitration clause.
The New York arbitration clause is not broad, as it provides “[t]hat should
any dispute arise between Owners and Charterers, the matter shall be referred
to three persons at New York.”16 Contrary to The Rice Company’s claim, we do
recognize the distinction between a broad and narrow arbitration clause. In
Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil Co. (Pemex), we held
that an arbitration agreement providing, “Any dispute or difference between the
parties arising out of this Charter shall, at the request of either party, be
15
The Rice Company argues that there is not “any dispute that the Vessel ratified the
bill of lading and that the Vessel owner is contractually bound to the contract.” This is true,
but as Precious Flowers argues, “The Rice Company offers no evidence that the vessel’s Master
would have authorized the bill to be issued for Precious Flowers, versus The Rice Company.”
The Rice Company correctly points to Lykes Lines Ltd. v. M/V BCC SEALAND, 398 F.3d 319,
325 (5th Cir. 2005), where we held, “‘When cargo has been stowed on board the vessel and bills
of lading are issued, the bills of lading become binding contracts on the vessel in rem upon the
sailing of the vessel with the cargo. The sailing of the vessel constitutes a ratification of the
bills of lading. . . .’” (quoting Cactus Pipe & Supply Co., Inc. v. M/V MONTMARTRE, 756 F.2d
1103, 1113 (5th Cir. 1985)). However, Lykes Lines also supports Precious Flowers’ argument
that, although a bill of lading issues upon the sailing of the vessel and binds the vessel, we
cannot know whether the Master would have allowed the bill of lading to be signed on behalf
of Precious Flowers. IBN might have signed for itself. We recognized in Lykes Lines that
sometimes the “bills of lading are issued without the [M]aster’s authority.” Id. at 325. Where
bills of lading are issued without the Master’s authority, we also apply the principle that “when
the vessel starts upon the voyage, by implication, there is a ratification and adoption by the
ship of the charterer’s contract with the shipper,” but it does not follow that we assume that
the Master provided ratification on behalf of the record owner, as The Rice Company would
have us do. Id.
16
Emphasis added. The Rice Company concedes that the Second Circuit in Import
Export Steel Corp. v. Miss. Valley Barge Line Co., 351 F.2d 503, 505-06 (2d Cir. 1965), found
a similar clause to be narrow but argues that we should not apply this reasoning.
10
No. 07-20063
referred to three arbitrators” was “of the broad type” and that arbitration should
apply.17 We followed the Second Circuit’s holding that
“[s]imply stated, a court should compel arbitration, and permit the
arbitrator to decide whether the dispute falls within the clause, if
the clause is ‘broad.’ In contrast, if the clause is ‘narrow,’ arbitration
should not be compelled unless the court determines that the
dispute falls within the clause. Specific words or phrases alone may
not be determinative although words of limitations would indicate
a narrower clause. The tone of the clause as a whole must be
considered.”18
Even where an arbitration provision is broad, requiring arbitration of “[a]ny and
all differences and disputes . . . arising out of this Charter,” we have declined to
reverse a district court’s order to stay arbitration, holding that where a
complaint “is not the result of a difference or dispute arising out of the Charter,”
the parties cannot be compelled to arbitrate.19
The New York arbitration clause in the voyage charter applies only to
disputes “between Owners and Charterers” and as we have discussed, the term
“Owners” in the voyage charter refers to IBN as the disponent owner, not to
Precious Flowers as the vessel owner. “Arbitration agreements apply to
nonsignatories only in rare circumstances.”20 Where “some written agreement
to arbitrate” exists, federal courts have recognized “[s]ix theories for binding a
nonsignatory to an arbitration agreement . . . : (a) incorporation by reference; (b)
assumption; (c) agency; (d) veil-piercing/alter ego; (e) estoppel; and (f) third-party
17
767 F.2d at 1144-45.
18
Id. at 1145 n.10 (quoting Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64 (2d
Cir. 1983)).
19
Texaco, Inc. v. Am. Trading Transp. Co., 644 F.2d 1152, 1154 (5th Cir. Unit A May
1981).
20
Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347, 358 (5th Cir. 2003) (citation
omitted).
11
No. 07-20063
beneficiary.”21 The Rice Company’s argument, generously construed, urges three
of these theories. By alleging that Precious Flowers bound itself to the charter
party by allowing IBN to sign the bill of lading incorporating the voyage charter
terms on its behalf, The Rice Company alleges a combination of incorporation by
reference and agency. As we will explain, it also alleges that because the vessel
“benefits from any defenses contained in the bill of lading,” Precious Flowers is
estopped from arguing that it is not subject to the arbitration clause
incorporated into the bill of lading.
Bills of lading commonly incorporate charters and bind the signatories to
the charter terms.22 We have found arbitration clauses to be binding even where
the terms of incorporation were not entirely clear, but that was when there was
no chance that the parties were confused as to whether arbitration would
apply.23 In matters maritime the question of whether nonsignatories may be
21
Hellenic Inv. Fund, Inc. v. Det Norke Veritas, 464 F.3d 514, 517 (5th Cir. 2006) (citing
Bridas, 345 F.3d at 355-56).
22
See, e.g., Cargill Ferrous Int’l v. SEA PHOENIX MV, 325 F.3d 695, 698-99, 705 (5th
Cir. 2003) (reversing a district court’s denial of a motion to compel arbitration where the
“charter party . . . requires all bills of lading issued under the voyage charter to incorporate,
among other things, the voyage charter’s arbitration clause” and “where there is no confusion
concerning who was the charterer or which charter party the bills of lading sought to
incorporate”); Cargill Inc. v. Golden Chariot MV, 31 F.3d 316, 318 (5th Cir. 1994) (holding, in
a dispute over enforcement of an arbitration clause, that “[a] bill of lading can incorporate a
charter party if the bill of lading specifically refers to the charter party”); Steel Warehouse Co.,
Inc. v. Abalone Shipping Ltd. of Nicosai, 141 F.3d 234, 237 (5th Cir. 1998) (holding that a bill
of lading that incorporated “all terms and conditions” of a charter party incorporated the
charter party’s arbitration clause and bound the parties to the charter party to arbitration).
23
See, e.g., SEA PHOENIX, 325 F.3d at 704 (holding that even where a “bill of lading
did not name the parties to the charter party it was attempting to incorporate, or state the
date or place of its making,” an arbitration clause was binding, provided there was no
confusion as to the parties); Keytrade USA, Inc., 404 F.3d at 896, 897 (holding that “it is clear
that the . . . bill of lading refers back to the . . . voyage charter. While that determination would
be buttressed if the voyage charter included provisions regarding the incorporation of
arbitration . . . the lack of such clauses does not change our fundamental conclusion” and that
“there was no confusion as to which charter party the bill of lading sought to incorporate”
(citations omitted)).
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No. 07-20063
bound by an arbitration clause incorporated into a bill of lading is seldom
reached.
Outside of the maritime context, we have consistently held that where
parties have not signed an arbitration agreement, they cannot be compelled to
arbitrate. “Who is actually bound by an arbitration agreement is a function of
the intent of the parties, as expressed in the terms of the agreement.”24 In Del
E. Webb Construction v. Richardson Hospital Authority, a hospital authority
contracted with an architect to supervise a construction project. The contract
provided for arbitration.25 The authority signed two other contracts with the
construction contractor, and these contracts also contained arbitration clauses.26
We held that the architect could not be compelled to participate in arbitration
between the hospital authority and the construction contractor because the
architect and construction contractor had “not agreed to arbitrate disputes
between them.”27 In Bridas, an Argentinian energy corporation made an
agreement with a Turkemenian production association, which represented the
Government of Turkmenistan, to produce hydrocarbon.28 We held that an
arbitral tribunal did not properly exercise jurisdiction over the Government of
Turkmenistan where the Government was not a signatory to the contract
containing the arbitration clause.29
24
Bridas, 345 F.3d at 355.
25
823 F.2d 145, 146 (5th Cir. 1987).
26
Id. at 147.
27
Id. at 148.
28
345 F.3d at 351.
29
Id. at 351, 363.
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No. 07-20063
At the same time, the core principle that the “FAA does not require parties
to arbitrate when they have not agreed to do so”30 is not offended by principles
of agency familiar to the law of contracts. Directly put, where an agent signs a
contract requiring arbitration, the principal is bound by the arbitration
requirement.31 That said, the distinction between a general grant of authority
to sign on behalf of the Master and a grant that is conditioned by a requirement
that the agent sign the bill of lading “without prejudice to the charter party”32
is self-evident. Where a charter party contains fixture language similar to the
language here, providing that “Charterers shall indemnify Owners from all
consequences arising out of Master or agents signing Bills of Lading in
accordance with Charterers’ instructions,” the Fourth Circuit has held that the
charterer assumes “exclusive responsibility for . . . issuance of bills of lading.”33
Precious Flowers’ and IBN’s time charter provided that IBN could sign bills of
lading “without prejudice” to Precious Flowers and that “Charterers shall
indemnify the Owners against all consequences or liabilities which may arise
from any inconsistency between this Charter Party and any bills of lading signed
by the Charterers or by the Master at their request.”
Precious Flowers expressly rejected a New York arbitration clause in its
time charter with IBN and opted for a broad London arbitration clause, granting
IBN the authority to sign on its behalf only “without prejudice” to Precious
30
Id. at 353 n.3 (quoting Volt Info. Scis, Inc. v. Bd. of Trustees of Leland Stanford
Junior Univ., 489 U.S. 468, 478 (1989)).
31
See id. at 357.
32
Keytrade USA, 404 F.3d at 896 n.3.
33
Yeramex Int’l v. S.S. TENDO, 595 F.2d 943, 947-48 (4th Cir. 1979); cf. Pacific
Employers Ins. Co. v. M/V Gloria, 767 F.2d 229, 237-38 (5th Cir. 1985) (distinguishing
Yeramex where a charter contained a provision authorizing the charterers or agents to sign on
the Master’s behalf but did not contain a provision whereby the charterer would indemnify the
owner from the consequences of the Master’s signing).
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No. 07-20063
Flowers; the voyage charter arbitration clause was not broad and applied only
to any “dispute aris[ing] between Owners [IBN, the disponent owners] and
Charterers [The Rice Company],” and Precious Flowers limited the authority of
agents in signing bills of lading. Together, these circumstances persuade us that
the bill of lading did not bind Precious Flowers.34 The district court did not err
in holding that the bill of lading does not bind Precious Flowers to the voyage
charter’s mandatory arbitration clause.
IV
Finally, we turn to The Rice Company’s claim that if the bill of lading
contains any arbitration clause, the in rem vessel and the in personam
representative of the vessel must be compelled to arbitrate. The Rice Company
similarly alleges that by filing a Claim of Owner for the vessel in its in rem
capacity, Precious Flowers is estopped from arguing that it is not subject the
arbitration clause.35 The Rice Company reasons that “[m]aritime law expressly
34
The facts of SEA PHOENIX are somewhat similar to the facts here, but we reached
a different result in that case based on several important distinctions. We held that a shipper
who had signed the voyage charter and a bill of lading incorporating the arbitration clause of
the voyage charter was bound to arbitration. We did not address the question of whether the
vessel owner would be bound by the arbitration clause through agency principles. SEA
PHOENIX differs substantially from this case because a) the disponent owner/carrier, not the
vessel owner, had expressly granted authority to the agent to sign the bill of lading on its
behalf, 325 F.3d at 699; b) there were not two conflicting arbitration clauses, id. at 697; c) the
party that the court compelled to arbitrate through the terms of the bill of lading was also a
party to the voyage charter containing the arbitration clause and had at all times in its
possession the relevant bills of lading, id. at 699; and d) a nonsignatory to the voyage charter
and the bill of lading was the party that moved to compel arbitration. Id. at 697.
35
Specifically, The Rice Company argues, “The Vessel in rem is a party to the bill of
lading, and any claimant of the vessel must arbitrate on behalf of the Vessel in rem pursuant
to the incorporated arbitration clause.” Precious Flowers alleges that this is a new argument
on appeal. In its motion to compel arbitration before the district court, The Rice Company
argued that “the parties are bound to arbitrate this matter, whether or not they are direct or
indirect parties to the bills of lading and/or the charter party.” Generously construed, this
phrase, combined with the motion’s discussion of Precious Flowers’ in rem Claim of Owner,
raised the argument before the district court.
15
No. 07-20063
forbids a party from re-litigating issues in an in rem proceeding against a vessel
if those issues were decided in a previous arbitration” and that
[i]mplicit in this prohibition is the requirement that the vessel
claimant arbitrate a dispute that is in any way subject to
arbitration. Without this implicit requirement, a vessel claimant
would be allowed to re-litigate arbitrated issues in subsequent
district court litigation.
Adopting this reasoning would compel nonsignatory vessel owners to arbitrate
and would violate the principle that “[d]ue to its inherently contractual nature,
arbitration may be ordered only for a dispute that the parties have agreed to
arbitrate.”36 The Second Circuit case cited by The Rice Company, Thyssen, Inc.
v. Calypso Shipping Corp., holds that a party that was properly compelled to
arbitrate in personam may not later bring an in rem claim in court to attempt
to cure its in personam claim that failed in arbitration.37 It does not hold that
a nonsignatory to an arbitration agreement may be compelled to arbitrate simply
because that party brings an in rem claim for the vessel or because a bill of
lading with an arbitration clause was issued for the vessel.
As Precious Flowers argues, the in rem proceeding exists so “that the
vessel itself can be held liable for a debt that creates a maritime lien.”38 The ship
is its own entity in the in rem proceeding,39 and “the owner bears no personal
liability.”40 This is so even where an agent has signed on behalf of the Master
36
Baton Rouge Oil & Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 376 (5th
Cir. 2002).
37
310 F.3d 102, 106 (2d Cir. 2002).
38
Perez & Compania (Catalune), S.A. v. M/V MEXICO I, 826 F.2d 1449, 1451 (5th Cir.
1987).
39
Bank One La. N.A. v. MR. DEAN M/V, 293 F.3d 830, 832 (5th Cir. 2002).
40
Perez & Compania, 826 F.2d at 1451.
16
No. 07-20063
of the vessel; “[a]lthough signature as agent of the vessel may confer in rem
jurisdiction over the vessel once it sets sail with the cargo, it does not confer in
personam jurisdiction over the owner.”41 The sailing of the vessel ratifies the bill
of lading but does not automatically confer jurisdiction over a vessel owner.42
Nor does a vessel owner’s Claim of Owner automatically subject the owner to in
personam jurisdiction.43
We have anticipated that arbitration of a portion of a dispute will lead to
duplicated efforts and inefficiency if the dispute, once arbitrated, must then be
resolved in court with nonsignatory parties.44 But we have held that “any
41
Asarco, Inc. v. Glenara, Ltd., 912 F.2d 784, 786-87 (5th Cir. 1990). An agent’s
signature may confer in personam jurisdiction over the vessel owner if there is an indication
that the owner gave actual or apparent authority to a particular agent to sign on its behalf,
and that agent then signed the bill of lading. See id. at 786. The charterer for whom the agent
would have signed the bill of lading had it issued is unclear. Even where a case presents us
with a letter of agency, wherein a Master had given permission to a specific agent to sign on
his behalf, we have declined to determine “the charterer on whose behalf . . . bills of lading
were issued.” Cactus Pipe, 756 F.2d at 1106 n.1. And where a designated agent has in fact
signed a bill of lading, if the charterer, not the owner, has directed the cargo to a destination,
Asarco suggests that a court may not have personal jurisdiction over the vessel owner. See
Asarco, 912 F.2d at 786 (Where a vessel is under the control of a charterer rather than an
owner and “sailed only on orders from its charterers,” the owner has not agreed or contracted
to deliver cargo to a certain destination).
42
Id.
43
See Cactus Pipe, 756 F.2d at 1108, 1112 (Where a vessel owner filed a Claim of
Owner, this was sufficient to confer in rem jurisdiction but not in personam jurisdiction).
Although the facts of Cactus Pipe are distinguishable from the present case, as the vessel
owner had not given agents authority to sign on behalf of the Master in Cactus Pipe, the case
is relevant to our analysis. As we have discussed, Precious Flowers has successfully argued
that it is unclear whether agents would have signed the bill of lading on behalf of Precious
Flowers or the charterer, IBN. Even assuming the agents had signed on behalf of Precious
Flowers and thus bound Precious Flowers to the terms of the bill of lading, Precious Flowers
granted agency authority to sign only “without prejudice” to Precious Flowers.
44
Tai Ping Ins. Co., Ltd. v. M/V Warschau, 731 F.2d 1141, 1142-43 (5th Cir. 1984). In
Tai Ping, a vessel owner time chartered a vessel to a carrier, and the time charter contained
an arbitration clause. The carrier voyage chartered the vessel to a corporation. The
corporation sued the vessel owner and carrier in federal court, and the carrier filed a cross-
claim against the vessel owner. As a result, arbitration was required between the owner and
the carrier but not the corporation.
17
No. 07-20063
inconvenience or duplication of effort is a consequence of having agreed to
arbitrate.”45 Specifically,“duplication of effort, redundant testimony, and the
possibility of inconsistent findings . . . are the risks that parties to an arbitration
clause must be considered to have contemplated at the time they struck their
bargain.”46 “‘The relevant federal law requires piecemeal resolution when
necessary to give effect to an arbitration agreement.’”47 This is so
“‘notwithstanding the presence of other persons who are parties to the
underlying dispute but not to the arbitration agreement,’” meaning that parties
subject to arbitration will have to re-litigate issues with non-parties.48
Although this result may be inconvenient to The Rice Company, we may
not force Precious Flowers, as an in rem or in personam complainant or
Defendant, into an arbitration agreement that Precious Flowers didn’t sign. It
is the case that Precious Flowers, by bringing a Claim of Owner and arguing
defenses under COGSA and the common law after The Rice Company filed a
complaint with the federal district court in Houston, did not avail itself of the
benefits of the vessel’s bill of lading before litigation commenced.49 The district
court did not err in so finding and in holding that direct benefit estoppel did not
apply.
AFFIRMED.
45
Id. at 1144 n.4.
46
Id. at 1145 (internal quotations omitted).
47
Sedco, 767 F.2d at 1147 n. 19 (quoting Dean Witter Reynolds v. Byrd, 470 U.S. 213
(1985)).
48
Id. at 1148 (quoting Tai Ping, 731 F.2d at 1146).
49
See, e.g., Hellenic Inv. Fund, Inc., 464 F.3d at 518. In Hellenic, we held that where
a nonsignatory party benefits from a contract during the life of a contract, it cannot later
repudiate portions of the contract in litigation. In the present case, as in Bridas, “‘the
[non-signatory] . . . has not sued [the signatory] . . . under the agreement.’” Id. (quoting Bridas,
345 F.3d at 362).
18