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Internaves de Mexico s.a. de C.V. v. Andromeda Steamship Corp.

United States District Court, S.D. Florida

March 29, 2017

INTERNAVES DE MEXICO s.a. de C.V., Plaintiff,
v.
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

          DONALD D. MIDDLEBROOKS, UNITED STATES DISTRICT JUDGE

         THIS 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.[1]

         BACKGROUND

         Internaves 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).

         LEGAL STANDARD

         Federal 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. 2009).

         International 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. § 206.

         In 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)).

         Finally, 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.

         DISCUSSION

         There 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.[2] 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.[3] 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).

         The 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.[4]

         Nonetheless, 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.

         The 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' ...


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