United States Court of Appeals,
Fifth Circuit.
No. 95-60780
Summary Calendar.
DOLE OCEAN LINER EXPRESS, Plaintiff-Appellee,
v.
GEORGIA VEGETABLE COMPANY, Defendant-Appellant.
June 6, 1996.
Appeal from the United States District Court for the Southern
District of Mississippi.
Before REAVLEY, SMITH and DeMOSS, Circuit Judges.
REAVLEY, Circuit Judge:
This is an appeal of a district court's reversal of an
arbitration panel's decision. There is no question that Dole
breached its contract with Georgia Vegetable. Pursuant to that
contract, Georgia Vegetable requested arbitration of its loss. The
arbitration panel awarded Georgia Vegetable damages in excess of
the amount provided for in the liquidated damages clause in the
contract. The district court found that the arbitration panel
exceeded its authority under the contract and reversed the
arbitration panel decision. The court reduced the damages to an
amount equal to the liquidated damages provision. Believing that
the arbitration panel did not exceed its authority to interpret the
contract, we reverse the district court.
Dole agreed to provide Georgia Vegetable with 40 foot
containers and to transport those containers. Georgia Vegetable
was the marketing manager for Manprosa, a Nicaraguan company.
1
Manprosa owned the onions being shipped and Georgia Vegetable
received commissions for the sale of the onions in America. The
perishable goods were to be transported aboard Dole's vessels from
a port in Nicaragua to America. The contract provided for a
minimum number of containers and a price per container. Georgia
Vegetable contracted for a total of 170 containers from Dole. Dole
shipped only 12. Through another carrier Georgia Vegetable was
able to arrange the shipment of 96 containers.1 However, despite
Georgia Vegetable's best efforts, 62 containers of onions were
never shipped, and the goods perished at the port.
Georgia Vegetable invoked the arbitration clause of the
contract and sought recovery of its expectancy damages for Dole's
breach.2 The arbitration panel threw out the liquidated damages
clause and awarded Georgia Vegetable $114,506.56, the value of its
lost commissions, and awarded Manprosa $550,606.50 for its loss.3
The basis for the arbitration panel's decision was as follows,
Faced with a rather severe container shortage, it would
appear that Dole made the business decision to maximize the
utilization of the available containers by restricting their
dispersal to other countries, i.e., Nicaragua. This policy
worked successfully for their ships operated at very close to
maximum capacity, principally with [Dole's] proprietary cargo.
1
The parties have settled the claim on 93 of the containers
shipped on other carriers pursuant to the liquidated damages
clause of the contract. Dole paid $46,500, the maximum permitted
under the contract.
2
The arbitration clause of the contract, section 14.4,
provides in pertinent part that, "[a]ny dispute, controversy or
claim, arising out of or relating to this Contract or a breach
thereof, shall be finally resolved by arbitration."
3
The total amount awarded was reduced by $14,000 due Dole
for unpaid freight.
2
[Dole,] after initial shipments, abandoned their contractual
obligations to [Georgia Vegetable] without sufficient or
adequate notification and having aborted by abandonment the
contract, [Dole] cannot seek protection under it.
The liquidated damages provision served its purpose, as
intended, to cover the additional expenses incurred on the
containers shipped via other carriers at higher expense. The
$500.00 per container provision in no way meets the
requirements of just and reasonable compensation for the loss
of approximately $10,728 per container not shipped on account
of abandonment of the contractual obligations to carry this
perishable commodity. It has been established that carriers
may not limit liability when possible causes could reasonably
be known to them.
The district court reversed the arbitration panel's decision
because it "exceeded "the express limitations of [the] contractual
mandate' by awarding $10,727.63 per container for a total of
$665,113.06—rather than $500 per container for a total of $31,000
(less $14,000 in undisputed unpaid freight)." Dist. Ct. Memorandum
Order p. 7.4
We review the district court's decision de novo. Our review
of the arbitrator's award itself is very deferential, and we should
4
The liquidated damages provision, section 7.2 of the
contract, provided,
In the event that [Dole] shall fail to transport
containers duly tendered by [Georgia Vegetable]
pursuant to this Contract, to the extent that [Georgia
Vegetable] must and does transport such containers on
alternative ocean carrier's vessels, [Dole] shall pay
to [Georgia Vegetable] a sum equal to the amount such
alternative carrier's rates exceed the Base Rates of
[Dole]; provided however that such sum shall in no
event exceed $500.00 per container. In the event that
[Georgia Vegetable,] after due diligence, is unable to
ship on an alternative carrier, then providing [Georgia
Vegetable] exercised due diligence to locate and ship
on an alternative carrier, [Dole] shall pay to [Georgia
Vegetable] US$500.00 for each container not shipped by
[Dole] after duly tendered by [Georgia Vegetable].
3
set aside that decision only in narrow circumstances.5 As we said
in Gateway Technologies, the award "shall not be vacated unless:
(1) the award was procured by corruption, fraud, or undue means;
(2) there is evidence of partiality or corruption among the
arbitrators; (3) the arbitrators were guilty of misconduct which
prejudiced the rights of one of the parties; or (4) the
arbitrators exceeded their powers."6 Dole argues, and the district
court found, that the arbitration panel exceeded its power in
awarding damages in excess of the liquidated damages provision in
the contract.
The contract provided that the arbitration panel was to
interpret the contract in accordance with the "procedural and
substantive laws of the Maritime Law of the United States and, to
the extent possible, the State of Mississippi." The determination
of whether a liquidated damages clause is enforceable is made by
application of a legal standard to the evidence.7 In Mississippi,
liquidated damages provisions are not enforceable if they are not
a reasonable pre-estimation of damages.8 The arbitration panel
determined that the $500.00 per container liquidated damage
5
First Options of Chicago, Inc. v. Kaplan, --- U.S. ----, --
--, 115 S.Ct. 1920, 1923, 131 L.Ed.2d 985 (1995).
6
Gateway Technologies, Inc. v. MCI Telecommunications Corp.,
64 F.3d 993, 996 (5th Cir.1995); 9 U.S.C. § 10(a).
7
See Farmers Export Co. v. M/V Georgis Prois, Etc., 799 F.2d
159, 162 (5th Cir.1986).
8
Varner v. Varner, 666 So.2d 493, 496 (Miss.1995); Board of
Trustees of State Institutions of Higher Learning v. Johnson, 507
So.2d 887, 890 (Miss.1987).
4
provision "in no way meets the requirements of just and reasonable
compensation for the loss ..."9
Whatever our belief about the enforceability of the
liquidated damages clause may be, it is clear that the arbitration
panel had the power to determine that it was not a reasonable
pre-estimate of damages and therefore void.10 Because the
determination of whether the liquidated damages provision was
legally enforceable was left to the arbitration panel under the
contract, the arbitration panel did not "exceed their powers" by
finding, as a matter of law, that it was void.
Dole believes our opinion in Delta Queen Steamboat11 controls
the disposition of this case and requires a different result. In
Delta Queen Steamboat, we held that "arbitral action contrary to
express contractual provisions will not be respected."12 The
arbitrator there lacked authority to order reinstatement of a pilot
found to be grossly careless. In this case, however, the
arbitration panel had the legal power to find the liquidated
damages clause void. Once done, there was no contractual provision
which the arbitration panel had to follow to determine Georgia
9
Arbitration Panel op. p. 6.
10
See Farmers Export, 799 F.2d at 162; Varner, 666 So.2d at
496; Johnson, 507 So.2d at 890.
11
Delta Queen Steamboat Co. v. District 2 Marine Engineers
Beneficial Ass'n., 889 F.2d 599 (5th Cir.1989), cert. denied, 498
U.S. 853, 111 S.Ct. 148, 112 L.Ed.2d 114 (1990).
12
Id. at 604.
5
Vegetable's loss.13 The district court's and Dole's reliance on
Delta Queen was misplaced.
Finally, Dole asserts the arbitration panel exceeded its
authority in ordering payment to Manprosa, a third party. As a
part of its decision, the arbitration panel awarded a portion of
the losses to Manprosa, the grower of the onions in Nicaragua.
Dole asserts it has been forced to arbitrate its dispute with
Manprosa without any contractual duty to do so. We disagree.
In determining whether the arbitration panel exceeded its
jurisdiction, we resolve all doubts in favor of arbitration.14
There is no question that Georgia Vegetable had the right to seek
damages on behalf of Manprosa as its agent.15 Manprosa explicitly
authorized Georgia Vegetable to handle any type of litigation
concerning the onions, "in its own name just as if it were owners
of said onions."16 "A person with whom an agent makes a contract
13
We note, however, that Georgia Vegetable is still limited
in its recovery to only damages submitted to the arbitration
panel. Compare Valentine Sugars, Inc. v. Donau Corp., 981 F.2d
210, 213 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 3039,
125 L.Ed.2d 725 (1993) (broad arbitration provision permitted
resolution of issues presented to arbitrator), and Totem Marine
Tug & Barge, Inc. v. North American Towing, Inc., 607 F.2d 649,
651 (5th Cir.1979) (where party expressly stated issue was not
before arbitrator and other party relied on representation then
issue could not be decided by arbitrator).
14
Valentine Sugars, 981 F.2d at 213.
15
Dole asserts on appeal that the arbitration panel misread
the applicable contract between Manprosa and Georgia Vegetable.
As the agreement is not in the record, we have deferred to the
arbitration panel's factual determination of the contract's
scope.
16
Arbitration Panel op. p. 2-3.
6
on behalf of a principal is subject to liability in an action
brought thereon by the agent in his own name on behalf of the
principal if the agent is a party promisee."17 Furthermore, the
contract between Dole and Georgia Vegetable required the
arbitration of "[a]ny dispute, controversy or claim, arising out of
or relating to [the] contract or a breach thereof...."18 From
Dole's perspective, the two entities were one for purposes of
recovering under the contract. Because Georgia Vegetable was free
to sue Dole on behalf of Manprosa, we believe it was entitled to
also seek arbitration.19
Any error which occurred concerned not whether Dole had to pay
the damages, but rather to whom the damages should be paid.
Because the arbitration was between Dole and Georgia Vegetable, the
entire amount should have been awarded to Georgia Vegetable. For
purposes of Dole's agreement with Georgia Vegetable, Georgia
Vegetable was the owner of the perishable goods. Dole was not
forced to arbitrate a dispute with Manprosa. Dole was only forced
17
Restatement (Second) of Agency § 364 (1958); Lubbock Feed
Lots, Inc. v. Iowa Beef Processors, Inc., 630 F.2d 250, 258 (5th
Cir.1980), reh'g denied, 634 F.2d 1355 (5th Cir.1980); Forest
Oil Corp. v. Tenneco, Inc., 626 F.Supp. 917, 921-22
(S.D.Miss.1986).
18
§ 14.4 of the Contract.
19
As evidence that Dole is being forced to arbitrate the
case with Manprosa, Dole asserts that it refused to permit
Manprosa to be a signatory of the contract. Dole Brief, p. 18 n.
12; Arbitration Panel op. p. 3. However, the mere fact that
Dole insisted it deal with Manprosa's agent and not Manprosa does
not support such a contention. Dole was aware that Georgia
Vegetable was Manprosa's agent, and as such should have been
aware that Manprosa's agent would enforce the contract on behalf
of the principal.
7
to pay an amount due to Georgia Vegetable, and by it to a third
party. Because Georgia Vegetable does not complain, we find Dole's
argument meritless.
The district court is REVERSED, the cause is REMANDED to that
court to reinstate the arbitration panel award.
8