The owner of a citrus fruit company could proceed with a
federal lawsuit over
damaged goods despite a clause in a bill
of lading that called
for all disputes to be
resolved by an arbitrator in London, a
U.S. District Court judge has ruled.
The defendant vessel charterer argued
that a 1995 U.S. Supreme Court case, Vimar Seguros y Reaseguros S.A. v. M/V Sky
Reefer, required the complaint to be
stayed or dismissed pursuant to the terms
spelled out in the agreement.
But Judge Joseph L. Tauro disagreed on
grounds that Sky Reefer, which originated
out of Massachusetts, did not control because the Supreme Court matter involved
a U.S. litigant and the case before him
named only foreign parties.
As a result, Tauro found that Chapter
Two of the Federal Arbitration Act controls, unlike Sky Reefer, which was decided under Chapter One.
“Plaintiff is … not bound by the arbitration clause contained in the charter
party agreement because the bill of lading
does not meet the requirement for an
‘agreement in writing’ under Chapter
Two,” he said. “While Defendant … urges
this court to follow the [Sky Reefer] line of
cases, those are inapposite because they
are interpreting Chapter One of the
The seven-page decision is Maroc Fruit
Board S.A., et al. v. M/V Vinson, et al.,
Lawyers Weekly No. 02-413-12. The full
text of the ruling can be found at masslawyersweekly.com.
Law review article
The plaintiffs’ lawyer, Bradley F. Gandrup Jr. of Boston, said the case marks the
first federal maritime decision to distinguish Sky Reefer by applying Chapter Two
of the FAA, which incorporated the 1958
New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards into United States law.
The FAA is broken into three chapters,
he said, the first of which was enacted in
1925. The second chapter, implementing
the New York Convention, was recognized in the U.S. in 1970. In Sky Reefer,
the Supreme Court applied Chapter One
of the FAA, Gandrup said.
“There are a number of cases in the 1st
Circuit and elsewhere holding that international commercial agreements are governed by Chapter Two, and not by Chapter One, which is ultimately what Judge
Tauro found,” the Pierce Atwood lawyer
Tauro stated in the decision that Chapter Two specifically applies to international commercial contracts and was
adopted later in time than Chapter One,
“In Chapter Two, there is a specific provision requiring that, to be enforceable,
the agreement to arbitrate has to be an
agreement in writing, which courts have
interpreted in different ways,” he said.
The 2nd and 3rd Circuits had all previously construed that provision to mean
that an arbitration provision is enforceable only if it is contained in a writing
signed by the parties or in an exchange of
correspondence, he said.
“In Sky Reefer, there was an arbitration
provision contained on the face of the
bill of lading itself, but in our case there
was not, ”Gandrup said, noting that much
of his argument came from a law review
article written by Martin Davies, a prominent professor of admiralty law at Tulane
James B. Re of Sally & Fitch in Boston,
who represented the defendants, said it
is important for parties in admiralty litigation to know with certainty in what
venue their disputes will be heard.
“Generally speaking, bills of lading are
not signed by both parties, but frequently they incorporate arbitration provisions,”he said, “So it’s very problematic to
insist that there has to be a single document in a maritime case signed by both
parties to the arbitration agreement.”
He said Sky Reefer was valid Supreme
Court precedent involving a similar fact
“We cite cases from the 1st Circuit in
our filings that we say should control and
that should lead to enforcement of the arbitration provision,” Re said. “We did not
agree with the conclusion that the issue
has never been addressed here.”
The plaintiff, Maroc Fruit Board, alleged that a 2010 fruit shipment transported from Morocco to New Bedford
arrived in the United States in a moldy
The plaintiff sought approximately $4
million in damages.
The transport agreement called for the
fruit to be delivered in good condition
and was made in accordance with the
terms of the bill of lading signed by the
plaintiff. The agreement contained an arbitration clause calling for “any disputes”
to be arbitrated in London according to
The plaintiff filed suit in 2010 in U.S.
District Court in Boston against a co-defendant vessel and vessel owner.
The following year, Navimar was added
as a defendant. Navimar was the voyage
charterer for the vessel, but did not play a
role in the operation of the ship.
Navimar moved to dismiss on grounds
that the case must be stayed in order to
allow for arbitration in London.
Tauro denied the motion, finding the validity of arbitration agreements between
parties from foreign countries to be governed by Chapter Two of the FAA, which
requires an arbitration clause to be part of
an “agreement in writing.”
“An ‘agreement in writing’ is defined in
Article II, §2 … as an arbitral clause in a
contract or an arbitration agreement,
signed by the parties or contained in an
exchange of letters or telegrams,’” he
Tauro found that the definition has been
read differently by federal courts across
“While the First Circuit has not yet addressed this matter, the Second Circuit …
interpreted Article II, §2 to require ‘both
an arbitral clause in a contract and an arbitration clause in a contract and an arbitration agreement to be signed by the
parties or contained in an exchange of
letters or telegrams,’” he said. “This is in
stark contrast to the Fifth Circuit’s approach to the same problem, where it
found that Article II, §2 requires only that
an arbitration clause be contained in a
contract or by an arbitration agreement
signed by the parties.”
Tauro chose to adopt the 2nd Circuit’s
“The bill of lading here, while it forms the
contract between Plaintiff and Defendant, is
more akin to a receipt than an agreement or
an exchange of letters or telegrams,” he said.
“As such, the bill of lading in this case was
never signed by Plaintiff … and so fails to
constitute an ‘agreement in writing’ under