Mediterranean Shipping Company S.A. Geneva v. Pol-Atlantic

229 F.3d 397 (2nd Cir. 2000)

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Nature of the Case

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Facts

The M/V MSC Carla departed from France on a westbound voyage to the United States. The vessel encountered heavy weather and broke in half. The bow section sank with all its cargo; the stern continued to float and ultimately was towed to safety with its crew and cargo. D is the bareboat charterer and vessel operator of the Carla. POL and ACL are slot charterers D, POL, and ACL are all ocean carriers that operate services between Europe and the United States. Pursuant to the VSA, which is a charter party entered into by D, POL, and ACL, the slot charterers (POL and ACL) placed containerized cargo on board the Carla for shipment by D. The cargo was moved for cargo owners under separate bills of lading issued by POL and ACL to the cargo owners. The cargo owners had the right to bring claims against the bill of lading issuer or the vessel operator, or both, under the United States Carriage of Goods by Sea Act, (COGSA). The VSA is not subject to COGSA. According to the VSA's terms, POL and ACL, as the bill of lading issuers, must appear and defend all cargo claims. MSC, the vessel operator, is required to cooperate with POL and ACL in this defense. The vessel's owner, Rationis Enterprises, Inc., and MSC filed a Petition or Complaint for Exoneration from or Limitation of Liability pursuant to the Limitation Act and Rule F of the Supplemental Rules for Certain Admiralty and Maritime Claims. There were nearly 1,600 claims filed by cargo owners and their underwriters against MSC with more than 100 times the value of the vessel at issue. On September 10, 1998, POL and ACL filed in the cargo actions third-party complaints pursuant to Rule 14(c) of the Federal Rules of Civil Procedure seeking indemnity from D for the claims filed against them, on the ground that the losses occurred while the vessel was solely under MSC's control. POL and ACL moved on September 28, 1998, to consolidate the cargo actions with the limitation proceeding. On October 7, 1998, D moved to stay the third-party indemnity claims brought against it by POL and ACL pending London arbitration pursuant to the VSA. D's motion was denied but the court granted POL and ACL's motion to consolidate the cargo actions with the limitation proceeding for discovery purposes. The district court concluded that 'federal policy favoring concursus takes precedence over arbitration at this stage of the case.' The district court also relied on Supreme Court precedent, stating that the Supreme Court has 'given the [Limitation Act] a very broad and equitable construction for the purpose of carrying out its purpose, and for facilitating a settlement of the whole controversy over such losses as are comprehended within it, and that all the ease with which rights can be adjusted in equity is intended to be given to the proceeding.' The court was concerned with the conflict with the Federal Arbitration Act in the face of the federal policy behind the Limitation of Liability Act's concursus which is in conflict with the arbitration policy. D appealed. D contends that any claims by POL and ACL to recover from D must be asserted in London arbitration, pursuant to the VSA's arbitration clause.