LANCE M. AFRICK, District Judge.
Although the Court previously granted an unopposed motion to stay and administratively close this matter while the parties arbitrate their claims, the Court now has two motions pending before it: (1) a "motion to re-open case to enforce the method of appointment of arbitrators"
For the purposes of resolving these motions, it is sufficient to note that Bordelon and Bibby entered into two charter agreements with respect to two vessels: the M/V SHELIA BORDELON and the M/V BRANDON BORDELON.
On April 11, 2016, Bordelon filed a motion to reopen the case, contending that Bibby violated the charter agreement provisions governing arbitrator selection. The Court will summarize the material facts and contractual language which are undisputed in all respects material to the resolution of these motions.
Both charter agreements contain identical provisions, which the parties refer to as Clause 34, which govern mandatory arbitration and voluntary mediation:
Clause 34 does not specify a time frame for either party to appoint arbitrators.
The SMA Maritime Arbitration Rules referred to in the charters state that "[w]herever parties have agreed to arbitration under the Rules of the Society of Maritime Arbitrators, Inc., these Rules . . . shall be binding on the parties and constitute an integral part of that agreement."
The motions implicate the interaction of Clause 34 of the charters and Section 10 of the SMA Rules.
On February 5, 2016 (the same day that this matter was removed and the motion to stay pending arbitration was filed), counsel for Bibby emailed two letters
On February 24, 2016, counsel for Bordelon sent a letter entitled "Mediation Notice" to counsel for Bibby, "formally request[ing] that Bibby mediate the dispute between the parties" pursuant to Clause 34(d) of the Charters.
The parties have spilled much ink regarding the existence, contents, and significance of a February 25, 2016 email from counsel for Bibby to counsel for Bordelon. Because Bordelon's motion should be denied regardless of the circumstances under which it received that February 25 email, and because Bibby has not moved for sanctions based on counsel for Bordelon's representations regarding that email, the Court declines to delve into this factual morass.
On March 10, 2016, counsel for Bibby sent an email to counsel for Bordelon declining mediation and stating the following regarding Bordelon's failure to designate an arbitrator:
On March 22, 2016, counsel for Bordelon sent an email to counsel for Bibby apparently disputing whether the matter should be arbitrated.
On April 1, 2016, 56 days after the initial arbitration demand, counsel for Bibby sent an email to counsel for Bordelon stating that:
On April 4, 2016, counsel for Bordelon sent an email to counsel for Bibby, disputing Bibby's appointment of the second arbitrator and purporting to appoint Bordelon's arbitrator.
Bordelon challenges Bibby's selection of a second arbitrator following Bordelon's purported failure to timely do so. As briefed by the parties, the motion raises three issues. First, Bibby raises a threshold issue of whether the Court may decide Bordelon's motion or whether the issue of the selection of the arbitrators must itself be referred to arbitration. Second, if the Court can decide the issue, the parties dispute how their arbitration agreement should be interpreted with respect to appointment of arbitrators. Third, if the arbitration agreement potentially allows Bibby to appoint the second arbitrator, Bordelon disputes whether Bibby gave proper notice before doing so.
As a threshold matter, Bibby contends that Bordelon's challenge to the appointment of arbitrators must be referred to the arbitration panel "because it is a procedural issue that the arbitrator must decide."
Neither party has cited a decision directly on point. On the one hand, as Bordelon points out, "as part of the `very limited' jurisdiction granted to the courts under the [Federal Arbitration Act] to intervene in the arbitral process before an award, 9 U.S.C. § 5 authorizes a court to intervene `to select an arbitrator upon application of a party,' in three instances:"
BP Exploration Libya, Ltd. v. ExxonMobil Libya Ltd., 689 F.3d 481, 490-91 (5th Cir. 2012).
On the other hand, Bibby cites Adam Technologies International S.A. de C.V. v. Sutherland Global Services., Inc., 729 F.3d 443 (5th Cir. 2013), as requiring the Court to refer this issue to the arbitration panel. In Adam Technologies, defendant Sutherland demanded arbitration with respect to a dispute with plaintiff Adam, to be administered by the International Centre for Dispute Resolution ("ICDR"). See id. at 444-45. Pursuant to their agreement, both Sutherland and Adam appointed arbitrators who would then appoint a third arbitrator, but pursuant to its rules the ICDR disqualified Adam's arbitrator and then appointed a replacement after Adam failed to do so despite having "received two extensions of the deadline to appoint." Id. at 445. The arbitrators selected by Sutherland and by the ICDR then selected the third arbitrator, and a hearing date was set. Id.
Adam sought relief in district court, requesting reinstatement of its disqualified arbitrator and re-selection of a third arbitrator. See id. at 447. The district court denied that request and the Fifth Circuit affirmed. First, the Fifth Circuit found no "lapse in time in the naming of the arbitrator or . . . other mechanical breakdown in the arbitrator selection process" that might warrant judicial intervention. See id. at 451 (citing BP Exploration, 689 F.3d at 491-92). The court found no "mechanical breakdown" because Adam was at fault for failing to timely appoint its arbitrator, and no "lapse" because an arbitration panel had in fact been empaneled by the ICDR, "an appointment which the ICDR determined was in accordance with its rules." See id. Second, the Fifth Circuit declined to construe Adam's arguments as seeking enforcement of the contractual "method of naming or appointing an arbitrator." Id. at 452. Rather, the Fifth Circuit held that the ICDR's disqualification of Adam's arbitrator and appointment of a replacement was consistent with and pursuant to the arbitration agreement because the parties had incorporated the ICDR's rules by reference. See id.
The Court finds that Adam Technologies is not directly analogous to this matter. Here, there is no disinterested third party that has appointed a second arbitrator pursuant to its interpretation of its own rules as agreed to by the parties. Rather, the second arbitrator has been appointed unilaterally by Bibby, an interested party to the dispute, pursuant to Bibby's interpretation of the parties' agreement. For the Court to find that there is no "lapse" or "mechanical breakdown" because an arbitration panel is already in place in this case, the Court would necessarily have to find that Bibby legitimately appointed the second arbitrator, which is the crux of Bordelon's motion.
The Court finds that Stop & Shop is more analogous to this matter. As in that case, there appears to have been a "breakdown in the [contractual] selection process" because both Bordelon and Bibby claim to have appointed the second arbitrator pursuant to conflicting interpretations of the terms of their arbitration agreement and each "refuse[s] to recognize as legitimate" the other's appointment. See Stop & Shop, 246 F. App'x at 11; see also BP Exploration, 689 F.3d at 492.
Next, the parties dispute the interpretation of their arbitration agreement and whether that agreement ever allows Bibby to select the second arbitrator. For the following reasons, the Court finds that Bibby offers the only reasonable interpretation of the arbitration agreement, which agreement allows Bibby to appoint both the first and the second arbitrator under certain circumstances.
When interpreting a contract governed by maritime law,
Up to a point, the method for selecting arbitrators agreed to by the parties is clear and undisputed. First, it is clear that the parties have an enforceable arbitration agreement. Their contract states that any dispute "arising out of or in connection with" the charters is subject to mandatory arbitration by three persons, "one to be appointed by each of the parties hereto, and the third by the two so chosen."
Second, it is clear that the SMA Rules are part of the parties' arbitration agreement. Both charters state that "[t]he proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators, Inc." The SMA Rules state that when the parties "have agreed to arbitration under the Rules of the" SMA, the Rules are "binding on the parties and constitute an integral part of that agreement."
Third, it is clear that in the event of a conflict between the charters and the SMA Rules with respect to the "method by which Arbitrators are to be appointed," the charters trump the SMA Rules.
Bordelon perceives a conflict between these provisions: Section 10 cannot allow Bibby to select two arbitrators because if it did so, that would conflict with Clause 34 which states that "one [arbitrator is] to be appointed by each of the parties hereto." Because the SMA Rules state that the charters prevail in the event of a conflict, Bordelon contends that Section 10 of the SMA Rules cannot allow Bibby to appoint the second arbitrator.
Bibby responds that there is no conflict. According to Bibby, Clause 34 of the charters is silent regarding the timeline for selecting arbitrators as well as the consequences that would occur if the party responding to the arbitration demand fails to appoint an arbitrator. In its reading, Section 10 of the SMA Rules expressly fills that gap and therefore supplements, rather than conflicts with, Clause 34.
The Court must "interpret, to the extent possible, all terms in a contract without rendering any of them meaningless or superfluous." Chembulk Trading, 393 F.3d at 555. Furthermore, the Court must construe Clause 34 and Section 10 together. Cargill, 304 F. App'x at 282. Considering those principles, as well as the plain language of Clause 34 and Section 10, the Court concludes that Bibby offers the only reasonable interpretation of the parties' agreement. Pursuant to Clause 34, Bordelon has a right to appoint an arbitrator; pursuant to Section 10 of the SMA Rules, if Bordelon does not appoint an arbitrator within 20 days of receipt of satisfactory notice from Bibby, then Bibby is contractually authorized to appoint the second arbitrator. There is simply no conflict between the provisions. Accepting Bordelon's absolutist reading of Clause 34 would nullify Section 10 and render it meaningless and superfluous. See Chembulk, 393 F.3d at 555. Accordingly, Bordelon's proposed interpretation of the parties' arbitration agreement is unpersuasive.
Having concluded that the arbitration agreement allows Bibby under certain circumstances to appoint the second arbitrator, the Court next turns to whether Bibby did so in compliance with the terms of the arbitration agreement. For the following reasons, the Court finds that Bibby gave adequate notice to Bordelon and that, following Bordelon's failure to timely appoint an arbitrator, Bibby was contractually authorized to appoint the second arbitrator as permitted by the arbitration agreement. Accordingly, the second appointment was valid and the arbitration panel as it exists was selected in compliance with the terms of the parties' agreement.
Bibby gave the requisite notice on February 5, 2016. Those emails to Bordelon's counsel demanded arbitration, named Bibby's arbitrator, and "call[ed] upon Bordelon to appoint an arbitrator in accordance with the terms of the Charter
Bordelon contends that the February 5, 2016 emails were insufficient notice that Bibby would appoint the second arbitrator if Bordelon did not appoint one within 20 days. Notwithstanding the fact that the emails (1) demanded arbitration, (2) appointed an arbitrator, (3) "call[ed] upon" Bordelon to appoint its own arbitrator, and (4) invoked the SMA Rules, Bordelon complains that the notice was insufficient because the emails did not specifically identify Section 10 of the SMA Rules. Bordelon's argument exalts a technicality over substance and the Court is not persuaded. Bordelon offers no remotely plausible explanation of what being "call[ed] upon to appoint an arbitrator in accordance with . . . the SMA Rules" could mean other than the fact that Section 10 of the SMA Rules was being invoked. Moreover, as Bibby points out, Bordelon was warned at least three times to appoint an arbitrator: on February 5, 2016, February 25, 2016, and March 10, 2016. Bordelon, as a party to the arbitration agreement incorporating the SMA Rules, could not have been surprised that Bibby would invoke those Rules.
In short, Bibby acted well within its unambiguous contractual rights when it demanded arbitration, demanded that Bordelon appoint a second arbitrator, and then appointed that second arbitrator after Bordelon failed to do so within the 20 days required by the SMA Rules.
In response to Bordelon's motion, Bibby filed a cross-motion requesting an order "confirming the arbitrability of Bordelon's claims and compelling Bordelon to arbitrate them before the duly constituted Tribunal in these matters."
The threshold question is whether the Court can decide whether Bordelon's claims are arbitrable, or whether the arbitrability of the claims is itself a question for the arbitrators. The answer to this question is "fairly simple": the arbitrators should decide arbitrability if that is the parties' agreement. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995). But the Court "should not assume that the parties agreed to arbitrate arbitrability unless there is `clear and unmistakable' evidence that they did so." Id. at 944 (quoting AT & T Techs., Inc. v. Commc'ns Workers, 475 U.S. 643, 649 (1986)) (alterations omitted). When the parties' arbitration agreement is silent as to who decides whether a claim is arbitrable, the presumption is that the Court should make that determination. See id. at 944-45; accord AT&T Techs., 475 U.S. at 649 ("Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.").
First Options of Chicago and AT&T Technologies are clear and have been followed repeatedly by the Fifth Circuit. See, e.g., General Motors Corp. v. Pamela Equities Corp., 146 F.3d 242, 247 (5th Cir. 1998) (holding that whether a particular dispute falls within the scope of an arbitration agreement "is a question of contract interpretation for the courts, unless the parties have clearly and unmistakably agreed that even that issue shall be submitted to binding arbitration"); see also Douglas v. Regions Bank, 757 F.3d 460, 462 (5th Cir. 2014) ("Parties may agree to arbitrate whether a particular claim is subject to arbitration so long as they clearly and unmistakably do so in their agreement."); Agere Sys. Inc. v. Samsung Elecs. Co., 560 F.3d 337, 339 (5th Cir. 2009) ("In other words, even the issue of arbitrability may be submitted to binding arbitration if there has been a clear demonstration that the parties contemplated it.") (internal quotation marks and alteration omitted).
Clause 34 and the SMA Rules do not address who should decide arbitrability. Therefore, there is no "clear and unmistakable evidence" of the kind that the Fifth Circuit has found sufficient to demonstrate an agreement to arbitrate arbitrability. See Agere, 560 F.3d at 340 (agreement stated that "[t]he arbitrator . . . shall determine issues of arbitrability"); Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012) (agreement stated that "[T]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement"); Allen v. Regions Bank, 389 F. App'x 441, 446 (agreement stated that "[a]ny dispute regarding whether a particular controversy is subject to arbitration . . . shall be decided by the arbitrator(s)").
Bordelon cites In re Hornbeck Offshore (1984) Corp., in which the Fifth Circuit stated that "[t]his circuit distinguishes between broad and narrow arbitration clauses. If the clause is broad, the action should be stayed and the arbitrators permitted to decide whether the dispute falls within the clause." 981 F.2d 752, 754 (5th Cir. 1993) (emphasis added); see also Terrebonne v. K-Sea Transp. Corp., 477 F.3d 271, 286 (5th Cir. 2007) (quoting Hornbeck for the same proposition).
In Pennzoil, the Fifth Circuit emphasized that "the question of whether a party can be compelled to arbitrate, as well as the question of what issues a party can be compelled to arbitrate, is an issue for the court rather than the arbitrator to decide." 139 F.3d 1061, 1066 (5th Cir. 1998). The Fifth Circuit emphasized that this proposition is "abundantly clear" and it proceeded to review the arbitrability of the claims in that case, notwithstanding the fact that the arbitration agreement contained a "broad" arbitration clause. See id. at 1066, 1067. Significantly, the court in Pennzoil noted the evident inconsistency between AT&T Technologies (and necessarily, First Options of Chicago) and Hornbeck, although it declined to delve further into that conflict. See id. at 1066 n.7.
The Court also notes and agrees with Judge Engelhardt's analysis in LLOG Exploration Offshore, LLC v. Newfield Exploration Company that Hornbeck incorrectly applies the general presumption in favor of arbitration to the separate question of whether parties have agreed to arbitrate arbitrability. See 15-1746, 2016 WL 98618, at * 4-6 (E.D. La. Jan. 8, 2016). Accordingly, the Court declines to rely on Hornbeck for the proposition that a broad arbitration clause, by itself, is evidence of an agreement to arbitrate arbitrability. On that point, Hornbeck is irreconcilable with First Options of Chicago and the vast weight of Fifth Circuit authority. Because Bordelon and Bibby's agreement is silent regarding arbitrability, the Court must decide the arbitrability of Bordelon's claims. See First Options of Chicago, 514 U.S. at 944-45.
Bordelon and Bibby agree that Clause 34, by requiring arbitration of "any dispute arising out of or in connection with" the charters, contains a broad arbitration clause.
Finally, Bibby requests that the Court compel Bordelon to proceed through arbitration. "A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition . . . for an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4. By refusing to recognize the properly appointed arbitration panel, Bordelon has refused to arbitrate in the manner provided for in the parties' agreements. Accordingly, an order compelling arbitration is warranted.
For the foregoing reasons,
