Case of the Day: Ocean Partners Holdings v. Doe Run Resources
Posted on March 28, 2012
The parties had a contract for the sale of lead and copper concentrates. Doe Run shipped the lead concentrates by barge down the Mississippi River to New Orleans, where they were loaded onto a ship, the Shahrazade Dream, for shipment to China. While the ship was being loaded, observers saw water leaking from the cargo. The vessel agent halted the loading and ordered the wet cargo set aside. Ocean Partners hired an investigator, but then decided to finish loading the cargo without waiting for the results of the tests. After the ship left port, water appeared in the hold. The master sought refuge at the port of Cristobal, in Panama, where the water was pumped from the holds. But when the ship was passing through the Panama Canal, water appeared again. The ship therefore put in to port, this time in Manzanillo, Mexico. There, the cargo was unloaded and dried, and ultimately shipped to China on another ship.
The contract had an agreement to arbitrate requiring arbitration in London under the rules of the London Metal Exchange. Doe Run’s claim was that Ocean Partners owed it the unpaid shipping charges. Ocean Partners claimed it was not liable because the goods did not conform to the moisture level specifications in the contract. The tribunal agreed that the goods were nonconforming but found that Ocean Partners knew of the nonconformity and that a prudent shipper would not have loaded the cargo in the circumstances. The award found that Doe Run was entitled to the unpaid balance but that Ocean Partners was entitled to the costs of removing, drying, and reloading the cargo.
Ocean Partners sought confirmation in Missouri. Ocean Partners proceeded on the assumption that the award was an international award subject to the New York Convention, but Doe Run challenged this conclusion on the grounds that the original contract had been signed by Doe Run and Pechiney USA, Inc., both US citizens. This issue mattered because the statute of limitations for confirmation of a domestic award is one year, but the statute of limitations for confirmation of a foreign award is three years. If Ocean Partners was right, then the award could be confirmed. If Doe Run was right, then the motion for confirmation was untimely.
Pechiney had later assigned its interest to Ocean Partners USA, Inc., another US entity, not to Ocean Partners Holdings, the firm that was seeking confirmation, and Doe Run argued that the award was, therefore, domestic under 9 U.S.C. § 202. The judge dismissed this argument, noting that Doe Run had admitted to the tribunal that the parties had agreed that Ocean Partners Holdings, the foreign firm that brought the action to confirm, “would assume the rights of Pechiney under the Sales Contract.” As a backstop, Doe Run also argued that because it had not admitted, in its papers, that Ocean Partners Holdings was a UK company, the court could not find that it was. The judge correctly rejected this argument, which was a misapplication of ideas relevant to Rule 12(b)(6) motion practice but not to motions to confirm.
Last, Doe Run argued manifest disregard of the law. The judge adopted what I will call the emerging majority view that manifest disregard is not an available defense under the New York Convention.
Photo credit: Ivan Meshkov