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In re Oil Spill

September 15, 1981


Interlocutory Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 79 C 2631 and MDL 376 -- Frank J. McGarr, Judge.

Author: Crabb

Before SWYGERT, Senior Circuit Judge,*fn* BAUER, Circuit Judge, and CRABB, District Judge .*fn**

CRABB, District Judge . This is an interlocutory appeal taken from one of the many cases spawned by the March 16, 1978 oil spill off the coast of France.*fn1 The issue on appeal is whether the district court erred in denying the motion of defendant-appellant for a stay of proceedings pending arbitration of certain disputes between the parties. We conclude that the arbitration should proceed and, accordingly, we reverse.

Factual Background

A brief review of the events leading up to the disaster is necessary to an understanding of the claims at issue.

At about 0945 hours Greenwich Mean Time (GMT), on March 16, 1978, approximately eight miles north of Ushant Island off the French coast, the Amoco Cadiz, a crude carrier owned by plaintiff-appellee Amoco Transport, suffered a complete failure of her steering gear and began to drift, out of control, in heavy seas and strong winds. Her radio messages warning all ships to stand clear were intercepted by the Pacific, one of a number of ocean-going salvage tugs owned by defendant-appellant. The Pacific changed course immediately to come to the aid of the Cadiz and her 230,000 tons of Iranian oil. At 1128 GMT the Pacific advised the Cadiz of her change of course and offer of assistance, proposing that any assistance rendered be in accordance with Lloyd's Standard Form of Salvage Agreement (LSA). At about the same time the master of the Pacific called Bugsier's Hamburg office which in turn called its London agent, Hutton, with instructions to negotiate an LSA with the owners of the Cadiz . Hutton sent a telex to Amoco Transport's agent in Chicago, Amoco International, offering Bugsier's assistance and proposing performance under the LSA.

While Hutton was conducting trans-Atlantic negotiations with Amoco Transport in Chicago, the Pacific arrived alongside the Cadiz, again offering her services pursuant to the LSA. Although the master of the Cadiz declined to accept the LSA, the Pacific proceeded to prepare a tow line and attached its tow line to the tanker.It was not until about 1600 GMT that the Cadiz advised the Pacific that it would enter into the LSA. By this time, towing attempts had been under way for almost four hours, but the tanker's drift could not be stopped. At 1618 GMT the Pacific's tow line broke. At about 2055 GMT the Pacific was able to secure another line. At 2104 GMT the tanker ran aground while under tow. Finally, at 2212 GMT, the two connection broke, the Cadiz floated free briefly, grounded again and broke apart.*fn2

On January 16, 1979, Amoco Transport Company and Amoco International Oil Company began this action against Bugsier in the Eastern District of Virginia, obtaining personal jurisdiction by maritime attachment of Bugisier's tug Atlantic . Plaintiffs charged Bugsier with negligence, breach of an alleged warranty of seaworthiness, and false and fraudulent misrepresentations, acts, or omissions in connection with the attempted salvage of the Cadiz . Bugsier moved for dismissal on the ground of forum non conveniens or for a stay pending arbitration and, at about the same time, began arbitration proceedings in London in accordance with the LSA.*fn3 Those proceedings remain pending, but have been held in abeyance until final disposition of Bugsier's motion for a stay.

The Lloyd's Standard Form of Salvage Agreement

The LSA entered into by the parties is a standard form of salvage agreement commonly referred to as a "no cure, no pay" contract. Paragraph 1 of the agreement provides:

The Contractor agrees to use his best endeavours to salve the and/or her cargo and take them into or other place to be hereafter agreed. The services shall be rendered and accepted as salvage services upon the principle of "no cure -- no pay." In case of arbitration being claimed the Contractor's remuneration in the event of success shall be fixed by arbitration in London in the manner hereafter prescribed: and any difference arising out of this Agreement or the operations thereunder shall be referred to arbitration in the same way. In the event of the services referred to in this Agreement or any part of such services having been already rendered at the date of this Agreement by the Contractor to the said vessel and/or her cargo it is agreed that the provisions of this Agreement shall apply to such services.

The agreement also contains provisions for security (in lieu of a maritime lien) for services rendered, for arbitration and for appeal from arbitration. Of the eighteen separate provisions of the agreement, eleven relate to arbitration or to appeal from arbitration. Paragraph 8 of the LSA lists the parties who may file claims for arbitration: (1) the owners of the ship; (2) the owners of the cargo or any part thereof; (3) the owners of any freight separately at risk or any part thereof; (4) the contractor; (5) any other person who is a party to the agreement. Corresponding to the provisions for arbitration is a stipulation of the applicability of English salvage law.

Proceedings in the Lower Court

In their complaint against Bugsier, plaintiffs-appellees alleged that in undertaking to assist the Cadiz, Bugsier owed a duty to plaintiffs-appellees to act with due diligence and to exercise reasonable skill, care and prudent seamanship, and that Bugsier failed to so act, but instead acted negligently and improperly;*fn4 that Bugsier's actions constituted willful and wanton misconduct and gross negligence; that Bugsier warranted the seaworthiness and towing capabilities of its tug and breached those warranties; that Bugsier made material misrepresentations concerning the ...

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