No Contractual Privity-No Indemnification
Monjasa A/S v. Mund & Fester GMBH & Co. KG, 2020 WL 4547301, at *1 (S.D.N.Y. Aug. 6, 2020); U.S. Dist. LEXIS 140904.
By: William Tebbe
Mund & Fester GMBH & Co. KG (“Defendant”) time-chartered M/V BBC SCOTLAND (the “Vessel”) to Angola de Navegacao, Lda (“ANNA”). Monjasa Lda is an affiliate of Plaintiff Monjasa A/S (“Plaintiff”). On December 12, 2014, Monjasa Lda, entered into a contract (the “Contract”) with ANNA. Under the Contract, Monjasa Lda was to fuel the Vessel and sent the M/V GOLDEN OAK (the “GOLDEN OAK”) to do so. On December 19, 2014, attempting to fuel via ship-to-ship transfer, the Vessel collided with and damaged the GOLDEN OAK. Subsequently, Monjasa Lda sent another vessel, the DUZGIT VENTURE, to fuel the Vessel. The DUZGIT VENTURE issued a bunker delivery note (“BDN”).
As a result of the collision, the owners of the GOLDEN OAK and Defendant, owner of the Vessel, entered into a settlement agreement. Subsequently, Defendant sent an arbitration demand to Plaintiff seeking indemnification for the damages paid to the owners of the GOLDEN OAK. On July 1, 2019, Plaintiff sought declaratory relief contending that (1) it was not bound by the contract because it did not act as a principal for Monjasa Lda and (2) Defendant was not a party to the contract between Monjasa Lda and ANNA and, therefore, had no right to compel arbitration. Plaintiff filed a Motion for Summary Judgment, and, in response, Defendant filed a Cross-Motion for Summary Judgment.
First, the court inquired into whether Monjasa Lda had the actual authority or apparent authority to enter into the Contract with ANNA on behalf of Plaintiff. An agent has actual authority “only where the agent may reasonably infer from the words or conduct of the principal that the principal has consented to the agent's performance of a particular act. Minskoff v. Am. Exp. Travel Related Servs. Co., 98 F.3d 703, 708 (2d Cir. 1996) (citing Restatement (Second) of Agency (the “Restatement ”) § 7 cmt. b (1958)). Additionally, “under maritime law, apparent authority cannot be evidenced by statements of an agent alone.” Garanti Finansal Kiralama A.S. v. Aqua Marine & Trading Inc., 697 F.3d 59, 73 (2d Cir. 2012) (quoting Coastal Drilling Co., L.L.C. v. Shinn Enterprises, Inc., Civil Action No. 05–4007, 2008 WL 907520, at *2 (E.D. La. Mar. 31, 2008)). To recovery under the theory of apparent authority, the purported agent must prove that “principal was responsible for the appearance of authority in the agent.” Id. (quoting Herbert Constr. Co. v. Cont'l Ins. Co., 931 F.2d 989, 994 (2d Cir. 1991)). The court determined that the record contained no evidence as to Plaintiff’s actions or conduct and, therefore, contained no evidence of actual authority or apparent authority. The trial judge noted that the BDN was not an act of Plaintiff; instead, the BDN was a communication solely between the DUZGIT VENTURE and ANNA.
Next, the court inquired into whether Defendant, as a non-party, may invoke the arbitration provision of the Contract. The trial judge determined that Defendant’s contentions had no merit. As to the language of the contract documents, the court determined that even though the contract documents intend to add Defendant as a party, Defendant produced no evidence that it agreed to be bound by the Contract. Further, the court found that Defendant was not a third-party beneficiary to the Contract as the record contained no evidence that the parties to the Contract intended Defendant to benefit from the Contract. The judge further concluded that Defendant may not invoke arbitration because Plaintiff was not a signatory to the Contract. Lastly, the Court denied Defendant’s cross-motion because neither Plaintiff nor Defendant was a party to the Contract.
