United States District Court, S.D. Florida
INTERNAVES DE MEXICO s.a. de C.V., Plaintiff,
ANDROMEDA STEAMSHIP CORPORATION, AMERICAN NAVIGATION, INC., PEGASUS LINES, LTD. S.A., PANAMA, and JAMES KARATHANOS, Defendants.
ORDER AND OPINION GRANTING IN PART AND DENYING IN
PART DEFENDANTS' MOTION TO COMPEL ARBITRATION
D. MIDDLEBROOKS, UNITED STATES DISTRICT JUDGE
CAUSE comes before the Court upon Defendants Andromeda
Steamship Corporation, American Navigation, Inc., Pegasus
Lines, Ltd. S.A., Panama, and James Karathanos'
(collectively, "Defendants") Motion to Compel
Arbitration or, in the Alternative, Motion to Dismiss
("Motion"), filed on January 13, 2017. (DE 20).
Plaintiff Internaves de Mexico s.a. de C.V.
("Internaves") filed a Response in opposition on
February 3, 2017 (DE 28), to which Defendants replied on
February 10, 2017 (DE 30). For the reasons stated below, the
Motion is granted in part and denied in part.
filed a Complaint against Defendants on October 12, 2016 (DE
1, hereinafter "Complaint" or "Compl."),
alleging breach of contract, conversion, and fraud
(id. at ¶¶ 9-36) stemming from a contract
to transport an electrical transformer from Brazil to Mexico
(id. at ¶ 6). Defendants contend that the
relationship between the Parties is governed by a contract,
or "Charter Party, " that provides for arbitration
of all disputes in London, England and under English law. (DE
20 at 2). Plaintiff disputes where and under what law the
Charter Party provides for arbitration to take place. In
addition, Plaintiff also argues that the arbitration clause
in the Charter Party was induced by fraud and therefore
invalid. (DE 28 at 3). On February 24, 2017, the Court issued
an order staying proceedings pending resolution of the
instant Motion. (DE 33).
law strongly favors agreements to arbitrate, particularly in
international commercial transactions. See Scherk v.
Alberto-Culver Co., 417 U.S. 506, 519-20 (1974). Indeed,
the Eleventh Circuit has held that there is ample precedent
"in favor of freely-negotiated contractual choice of law
and forum selection provisions . . . with special force in
the field of international commerce." Undo v. NCL
(Bahamas), Ltd., 652 F.3d 1257, 1275 (11th Cir. 2011).
When enforcing an arbitration provision, a court may direct
the case to arbitration at any time before trial. See
Thomas v. Carnival Corp., 573 F.3d 1113, 1116 (11th Cir.
arbitration agreements are subject to the United Nations
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the "Convention"). Both the United
States and England have adopted the Convention, S & Davis
Int'l, Inc. v. The Republic of Yemen, 218 F.3d 1292,
1301 (11th Cir. 2000), the United States through its
incorporation into the Federal Arbitration Act
("FAA"), 9 U.S.C. §§ 201-208.
Thomas, 573 F.3d at 1116; Doe v. Princess Cruise
Lines, Ltd., 657 F.3d 1204, 1213, n.9 (11th Cir. 2011).
A court having jurisdiction under the Convention "may
direct that arbitration be held in accordance with the
agreement at any place therein provided for, whether that
place is within or without the United States." 9 U.S.C.
light of the policies favoring arbitration, courts should
conduct "a very limited inquiry" in deciding
whether to compel arbitration pursuant to the Convention.
Bautista v. Star Cruises, 396 F.3d 1289, 1294 (11th
Cir. 2005) (citations omitted). To compel arbitration under
the Convention, four jurisdictional prerequisites must be
satisfied: (1) there is an agreement in writing to arbitrate
the dispute; (2) the agreement provides for arbitration in
the territory of a Convention signatory; (3) the agreement
arises out of a commercial legal relationship; and (4) there
is at least one party to the agreement who is not an American
citizen. See Id. at 1294, n.7. A court "must
order arbitration unless (1) the four jurisdictional
prerequisites are not met or (2) one of the Convention's
affirmative defenses applies." Id. at 1294-95
(citations omitted). The Convention recognizes the following
affirmative defenses to an arbitration agreement: that the
arbitration agreement is "null and void, inoperative or
incapable of being performed." Undo, 652 F.3d
at 1276 (citing New York Convention, ar. 11(3)).
because the United States adopted the Convention through the
FAA, federal courts apply "FAA principles [to] guide the
analysis" of the parties' intent to arbitrate when
evaluating motions to compel arbitration pursuant to
international arbitration agreements. Princess
Cruise, 657 F.3d at 1213, n.9.
is no dispute among the Parties that the four jurisdictional
prerequisites have been met. First, Defendants invoke the
Charter Party's arbitration agreement and Internaves
admits in its Response brief that the Charter Party contains
an arbitration clause. (DE 28 at 3). Thus, there is an
agreement in writing to arbitrate the dispute. Second, although
the Parties disagree as to where the Charter Party calls for
arbitration to be held, the two ostensible options - New York
or London - are both located within countries that are
signatories to the Convention. S & Davis Int'l,
218 F.3d at 1301. Third, as the Complaint itself alleges,
the present dispute arises out of a commercial legal
relationship, since the underlying transaction involved
Internaves' retention of Defendants, the shipping agents,
to "carr[y]  an electrical transformer from Brazil to
Mexico." (Compl. at ¶ 6). Fourth and finally, there
are several Parties to this action who the Complaint alleges
are not American citizens. These include Internaves itself,
which is a Mexican corporation (id. at ¶ 1),
Defendant Pegasus Lines, Ltd. S.A., Panama, "believed to
be" a Panamanian corporation (id. at ¶ 4),
and possibly also Andromeda Steamship Corporation, described
as a corporation "organized under the laws of a state or
country other than Florida" (id. at ¶ 2).
heart of the disagreement is whether the arbitration clause
is voided by the defense of fraud in the inducement. As
previously discussed, the Convention recognizes the defense
that an arbitration agreement is "null and void."
Undo, 652 F.3d at 1276. The Eleventh Circuit has
clarified that an agreement can be found null and void
"only where it is obtained through those limited
situations, such as fraud, mistake, duress, and
waiver, constituting standard breach-of-contract defenses
that can be applied neutrally on an international
scale." Id. (citing Bautista, 396 F.3d
at 1301-02) (emphasis added). Thus, a fraud defense is
available, at least in theory.
because "FAA principles" guide the Court's
analysis, Princess Cruise, 657 F.3d at 1213, n.9, it
is not enough for Internaves to allege merely that
some type of fraud was involved in the underlying
transaction. The Supreme Court has repeatedly stressed that
an arbitration agreement is severable from the rest of a
contract. Rent-A-Center, West, Inc. v. Jackson, 561
U.S. 63, 70 (2010); Buckeye Check Cashing v.
Cardegna, 546 U.S. 440, 445 (2006); Prima Paint
Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04
(1967). That is because an arbitration clause may, depending
on its scope, delegate to the arbitrator "gateway"
questions, "such as whether the parties have agreed to
arbitrate" in the first instance (i.e., the question of
"arbitrability") or whether any defenses to the
contract defeat its operation. Rent-A-Center, 561
U.S. at 68-69. When the arbitration clause encompasses the
issue of contract defenses, the "severability
doctrine" insists that a federal court's treatment
of fraud claims be bifurcated. "[I]f the claim is fraud
in the inducement of the arbitration clause itself - an issue
which goes to the 'making' of the agreement to
arbitrate - the federal court may proceed to adjudicate it.
But the [FAA] does not permit the federal court to consider
claims of fraud in the inducement of the contract
generally." Prima Paint, 388 U.S. at 403-04.
threshold question, then, is what is the scope of the
arbitration clause in this case? Although the Parties dispute
which of two contender clauses determines the
arbitration's location, each says essentially the same
thing when it comes to the extent of the arbitrable issues.
Section 19(a) states that "any dispute arising out
of this Charter Party shall be referred to arbitration
in London . . . ." (DE 1-8 at 4) (emphasis added).
Similarly, Section 19(b) provides that "should any
dispute arise out this Charter Party, the matter in
dispute shall be referred to three persons at New York . . .
." (Id.) (emphasis added). The present dispute
centers on Defendants' performance under the contract by
allegedly failing to deliver a vessel to transport an
electrical transformer. "A dispute arising pursuant to
or in any related to" a contract "includes a
dispute over the terms or performance" of the contract.
Int'l Underwriters AG v. Triple I: Int'l Inv.,
Inc.,533 F.3d 1342, 1345 (11th Cir. 2008). Only
disagreements that "are not related - with at least some
directness - to performance of duties specified by the
contract do not count as disputes 'arising out of the
contract, and are not covered by the standard arbitration
clause." Telecom Italia, SpA v. Wholesale Telecom
Corp.,248 F.3d 1109, 1116 (11th Cir. 2001). Because the
subject of the present litigation concerns Defendants'