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IN RE TODD SHIPYARDS CORP.

March 21, 1989

IN RE ARBITRATION BETWEEN TODD SHIPYARDS CORPORATION and CUNARD LINE LIMITED, AMERICAN ARBITRATION ASSOCIATION CASE NO. 13-110-0658-84


The opinion of the court was delivered by: LECHNER, JR.

 ALFRED J. LECHNER, JR., UNITED STATES DISTRICT JUDGE.

 This matter is before the court on a motion brought by Todd Shipyards Corporation ("Todd") to transfer this action filed by Cunard Line Limited ("Cunard") to the federal district court for the Northern District of California pursuant to 28 U.S.C. §§ 1404(a) and 1406(a). For the reasons which follow, the motion is granted.

 Background1

 Todd is a New York corporation engaged in the business of shipbuilding. Its principal place of business at the present time is in Seattle, Washington. *fn2" Todd currently conducts its shipbuilding activities in Seattle, Washington, Los Angeles, California and Galveston, Texas. Todd previously conducted shipbuilding activities in San Francisco, California (including the work on behalf of Cunard which is the subject of this dispute), but in July, 1987 decided to close that shipyard and did so within a few months.

 Cunard is an English corporation with its principal office in the United States located in New York, New York. Cunard is engaged in the pleasure cruise business and does business in various seaport cities including San Francisco, where it engaged Todd's Shipyards to do certain work.

 On September 22, 1983, Todd and Cunard entered into a contract under which Todd agreed to repair and convert Cunard's cruise ship, the M.V. Sagafjord. Section 21 of the contract required arbitration of "any and every dispute, difference or question between the parties . . . relating to this agreement . . . ." Exhibit A to the Affidavit of Allan J. Joseph (the "Joseph Aff.") (contract attached as Appendix A to Todd Complaint filed in Northern District of California on June 18, 1984 (the "Complaint")). The arbitration clause further specified that any arbitration was to occur in New York City, and to be governed by New York law. According to Cunard, the forum-selection clause represented a negotiated compromise between the parties, with Cunard proposing that any arbitration be held in London and Todd countering that it should be held in California. The parties ultimately agreed that arbitration was to take place in New York. Cunard's Brief, p. 15.

 The work performed by Todd on the Sagafjord was done at its shipyard in San Francisco in late 1983. Disputes arose between the parties relating to both the scope of the original work and additional work on the ship which, according to Todd, it was directed or compelled to perform. Todd's Brief, p. 4-5. On June 18, 1984, Todd filed an action in the Northern District of California against Cunard and the ship in rem3 which was assigned to the Honorable Spencer Williams, U.S.D.J. The action is based upon the admiralty and diversity jurisdiction of the court under 28 U.S.C. 1333, and seeks damages and arrest of the vessel as security. Todd's complaint also pleaded the arbitration clause of the contract and specifically reserved the right to seek arbitration of Todd's claims. Complaint, para. 13.

 According to Todd, venue for the action was authorized by Section 8 of the Federal Arbitration Act (the "Act") *fn4" and by 28 U.S.C. § 1391. *fn5" Id. As discussed more fully below, Cunard has argued Todd did not bring the action under the Act and nowhere in its complaint did Todd reference the Act. It was not alleged by Cunard in the California action, however, that it was necessary, as a pleading matter, to specifically invoke Section 8 of the Act. Cunard has never questioned the propriety of the California lawsuit; it has neither disputed jurisdiction in that action nor attempted to seek a dismissal.

 To avoid arrest of the ship, Cunard filed with the California court a bond of approximately $ 9 million; the bond is still in effect. In July, 1984, Todd informed Cunard it would file a demand for arbitration pursuant to Section 21 of the contract. Accordingly, Cunard and Todd stipulated the California matter should be stayed pending arbitration of the dispute between the parties as provided in Section 21 of the contract. Judge Williams entered a stay order pursuant to the stipulation and the parties proceeded to arbitration. *fn6" Todd Brief, p. 5.

 On September 11, 1984 Todd filed a demand for arbitration with the American Arbitration Association in New York City and served a copy on Cunard. Because the arbitration clause of the contract specified New York City as the site of arbitration proceedings, the proceedings began there. In January, 1985, the arbitration panel (consisting of three members) convened and conducted an informal procedural hearing at the office of the American Arbitration Association in New York City. According to Cunard, at that hearing the parties agreed the arbitration would be held in New Jersey because it was the most convenient location. Todd, on the other hand, argues it was simply for the convenience of two of the arbitrators that it was agreed the first eight days of substantive hearings would be held in Newark, New Jersey.

 The explanations from Todd and Cunard as to why most of the ensuing arbitration hearings were held at locations other than New York City differ considerably. Setting the parties' extreme characterizations aside, it is clear that most of the arbitration hearings were held in New Jersey, although a significant number of days of hearings were held in San Francisco. Of the nearly 150 days of hearings, approximately one forth of them were held in San Francisco *fn7" because the arbitrators concluded it was in the interest of convenience to witnesses. Cunard acknowledges hearings were held in California, but stresses it disputed such location and refrained from attending. *fn8"

 A disagreement quickly arose between Cunard and Todd as to the meaning of the agreement covering the Sagafjord repair and conversion work. On April 2, 1985, Cunard instituted an action in this court (under Section 4 of the Act), *fn9" seeking a judicial determination of what constituted the contract; this motion was assigned to the Honorable Frederick B. Lacey. *fn10" According to Todd, Cunard sought to have the court determine the contract was limited to the terms which Cunard was asserting and asked the court to order the arbitration panel to conduct further proceedings limited to Cunard's version of the contract. Todd's Brief, pp. 6-7. Cunard apparently alleged the panel was wrongly considering evidence of contractual obligations not explicit in the signed agreement. Cunard claimed this was a violation of the panel's authority and inconsistent with the contract's integration clause. Id.

 On April 4, 1985, following a hearing on Cunard's complaint and motion, Judge Lacey ordered the action transferred to the Northern District of California, *fn11" noting:

 
When your California people went before Judge Spencer Williams in San Francisco, there had to be some kind of an agreement or understanding about what you were going to arbitrate. The stipulation obviously envisaged that it was clear as between the two of you, two sides, that you were going to arbitrate a specific agreement . . . .
 
It's further clear to me that when that stipulation was entered it was in contemplation of arbitrating and then going back before Judge Williams. So that you would get a confirmation of an award, you would do that to button it down.
 
I'm going to deny your application. This matter is going to be referred to Judge Williams where it should be decided in the first instance.

 Exhibit D to the Joseph Aff., the April 4, 1985 hearing transcript, pp. 22-23 (emphasis added); Order of Judge Lacey, dated April 4, 1985.

 It is clear Judge Williams is familiar with the Todd/Cunard dispute. Cunard filed voluminious papers before Judge Williams in support of its renewed motion for an order to compel arbitration under its version of the contract. Cunard argued the arbitrators had no authority to consider any evidence of contract rights or obligations beyond the express provisions of the eleven page signed agreement.

 According to Todd, it set forth in papers in opposition to Cunard's motion its position "that the written agreement was incomplete and ambiguous, that the parties had supplemental understandings not inconsistent with the agreement which were directly relevant to their contractual obligations, and that New York law imposed implicit obligations on contracting parties which were also material to the dispute." Todd's Brief, p. 9. Todd asserted the arbitrators had the sole authority to resolve these issues and determine the composition and content of the agreement. Id.

 Thorough filings were effected in connection with the motion before Judge Williams. Todd's Brief, p. 9. *fn12" On May 15, 1985, Judge Williams heard the matter and found in favor of Todd. He denied Cunard's motion and, according to Todd, ordered the parties to continue with the arbitration.

 The underlying contract and arbitrability issues were revisited by Judge Williams when Cunard moved for reconsideration of the sanctions which he imposed on Cunard in connection with its motion under Section 4 of the Act. *fn13" Following a further hearing, Judge Williams affirmed his earlier order denying Cunard's motion and, according to Todd, again directed that the arbitration ...


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