Andorra Services Inc.; Chemoil Corp. v. VENFLEET, LTD., in personam

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-4902
ANDORRA SERVICES INC.; CHEMOIL CORP.,
Appellants
v.
VENFLEET, LTD., in personam and
M/T EOS, its engines, boiler, tackle, etc.
in rem
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 06-cv-00373)
District Judge: Honorable Peter G. Sheridan
Submitted Under Third Circuit LAR 34.1(a)
November 18, 2009
Before: RENDELL, BARRY and CHAGARES, Circuit Judges
Opinion Filed: December 10, 2009
OPINION
BARRY, Circuit Judge
Chemoil Corporation (“Chemoil”) and Andorra Services, Inc. BVI (“Andorra”)

-- 1 of 13 --

PDVSA, or Petroleos de Venezuela, is the Venezuelan national oil company that1
supplied the fuel oil that was loaded onto the EOS.
-2-
(collectively “Appellants”) appeal the final judgment of the District Court confirming an
arbitrator’s award in favor of Venfleet, Ltd. (“Venfleet”) and M/V EOS (“EOS”)
(collectively “Appellees”) and denying Appellants’ motion to vacate that award. We will
affirm.
I. BACKGROUND
We assume the parties’ familiarity with the facts, and include only those facts
necessary to resolve the issues on appeal. Chemoil, a purchaser and seller of petroleum
products in the global marketplace, directed Andorra, its affiliate, to arrange for the
shipment of fuel oil from Amuay Bay, Venezuela to Chemoil’s facility in Bayonne, New
Jersey. Andorra chartered EOS, an oil tanker owned by Venfleet. Ultimately, it was the
water content of the fuel oil that led to this litigation and arbitration.
The EOS arrived at the PDVSA Terminal in Amuay Bay on December 25, 2005,1
and, after a short delay, the fuel oil was loaded onto the tanker from shore tank 801. Tank
801, which serves as a storage tank for fuel oil, is described as an “open pit” having no
overhead protection from the elements. (App. at 84.) Once the fuel oil was loaded, it was
to be kept at the appropriate temperature by heating coils. In this case, however, Venfleet
“fail[ed] to properly pressure test and inspect the cargo heating coils . . . [and] Venfleet
concedes the coils were defective and leaked water into the cargo from the moment
heating commenced until the vessel arrived in New York.” (Id. at 102.)

-- 2 of 13 --

-3-
Discharge of the fuel oil began upon the EOS’s arrival in the Port of New York on
January 6, 2006. Shortly thereafter, however, Chemoil halted the operations, claiming it
was motivated by test results revealing that the water content of the cargo was between
1.7% and 1.8% when it should have been no greater than 1%. The EOS drifted for
roughly twenty days while several joint inspections took place. Ultimately, discharge
resumed and was completed on January 29.
II. PROCEDURAL HISTORY
Appellants filed a Verified Complaint in the U.S. District Court for the District of
New Jersey on January 26, 2006, seeking damages for cargo contamination. The parties
eventually agreed to arbitrate, selecting Jack Berg as the sole arbitrator. At that point,
Appellants sought $471,435.81 in damages allegedly the result of EOS’s leaking heating
coils, the EOS’s unseaworthiness, and other faults. For their part, Appellees sought to
recover $1,190,112.54, representing the costs associated with demurrage and other
expenses. The parties also sought interest and attorneys’ fees.
Arbitration took place over a period of twenty-one months, during which there was
“extensive discovery and production of relevant documents,” as well as testimony from
several witnesses; however, both sides were dissatisfied with certain aspects of the
discovery. (Id. at 92.) In seeking to ascertain the water content of the fuel oil at the time
it was loaded onto the EOS at Amuay Bay, the arbitrator made a comprehensive
assessment of a variety of evidence, including, for example, the moisture percentage of
the fuel oil loaded out of pit 801 onto another tanker just prior to the EOS’s loading, the

-- 3 of 13 --

The matter was properly before the District Court pursuant to 28 U.S.C. §§ 1333 and2
1391. We have appellate jurisdiction under 28 U.S.C. § 1291.
-4-
difference in the EOS’s cargo tank ullages between when the EOS left Venezuela and
arrived in New Jersey, and the “limited quantity of fresh water the ship could have
generated or have in tanks to possibly increase the water content of the fuel oil . . . .” (Id.
at 98.) Based on the evidence he found credible, and declining to draw adverse
inferences from the evidence he did not, the arbitrator determined that the EOS’s
malfunctioning heating coils could not have contributed more than 0.4% of water to the
ship’s load and, thus, that the fuel oil had a water content between 1.4% and 1.5% at the
time it was loaded onto the tanker from pit 801. Accordingly, the arbitrator found in
favor of Appellees, finding no evidence to support Appellants’ rationale for forcing the
EOS to remain at sea for twenty days prior to discharging the fuel oil.
By order dated November 19, 2008, the District Court granted Appellees’ motion
to confirm the arbitrator’s award and denied Appellants’ cross-motion to vacate or modify
that award, pursuant to the Federal Arbitration Act (the “FAA”), 9 U.S.C. §§ 1-11. On
November 25, 2008, the Court entered final judgment for Appellees in the amount of
$1,986,882.67, plus interest and costs. This appeal followed.2
III. STANDARD OF REVIEW
“We review a district court’s denial of a motion to vacate a commercial arbitration
award de novo.” Dluhos v. Strasberg, 321 F.3d 365, 369 (3d Cir. 2003); Kaplan v. First

-- 4 of 13 --

Factual findings are reviewed for clear error, and we exercise plenary review over3
questions of law. China Minmetals Materials Imp. & Exp. Co. v. Chi Mei Corp., 334
F.3d 274, 278-79 (3d Cir. 2003).
One of Appellants’ contentions is that the award exceeded the scope of the4
arbitrator’s authority because he determined that Chemoil and Andorra were alter egos
-5-
Options, 19 F.3d 1503, 1509 (3d Cir. 1994). In so doing, we are mindful that the FAA3
was intended to overcome the “hostility of American courts to the enforcement of
arbitration agreements.” Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111 (2001).
Indeed, there is a “strong presumption . . . in favor of enforcing arbitration awards”
embodied in the FAA. Brentwood Med. Assocs. v. United Mine Workers, 396 F.3d 237,
241 (3d Cir. 2005). When parties agree to arbitrate, they agree to do so “through to
completion,” fully cognizant that “a district court may vacate . . . only under exceedingly
narrow circumstances.” Dluhos, 321 F.3d at 369-70; Citgo Asphalt Ref. Co. v. Paper,
Allied-Indus. Int’l Union, Local 2-991, 385 F.3d 809, 815 (3d Cir. 2004) (noting court’s
limited role in reviewing arbitrator’s decision because the decision is “bargained for by
the parties”). As a result, reviewing courts “affirm easily the arbitration award under this
extremely deferential standard—a result that is squarely in line with the purpose behind
the FAA where courts are tasked with reviewing an arbitration decision.” Dluhos, 321
F.3d at 370; see Brentwood Med. Assocs., 396 F.3d at 241.
IV. DISCUSSION
Appellants contend that, for various reasons, the arbitrator’s award should be
vacated, or, in the alternative, modified. We disagree.4

-- 5 of 13 --

and jointly liable without having heard any argument on the issue. There was no
argument because, as the District Court noted, Appellants never raised this issue to the
arbitrator.
-6-
A. VACATUR
Pursuant to the FAA, courts may vacate an arbitration award in any of four
instances, two of which are implicated here: where there was “evident partiality or
corruption in the arbitrators,” or “where the arbitrators were guilty of misconduct in
refusing to postpone the hearing . . . or in refusing to hear evidence pertinent and material
to the controversy. . . .” 9 U.S.C. § 10(a); Hall Street Assocs. v. Mattel, Inc., 552 U.S.
, 128 S.Ct. 1396, 1402, n.4 (2008). Appellants argue that these provisions, as well as
public policy concerns, justify vacating the arbitrator’s award in this case.
1. The Arbitrator’s Conduct Neither Created the Appearance of Bias Nor Violated
Fundamental Fairness in Contravention of 9 U.S.C. § 10(a)(2)-(3).
In order to set aside an arbitrator’s award on the ground of § 10(a)(2) “evident
partiality,” “the challenging party must show ‘a reasonable person would have to
conclude that the arbitrator was partial’ to the other party to the arbitration.” Kaplan v.
First Opinions of Chi., Inc., 19 F.3d 1503, 1523 n.30 (3d Cir. 1994) (quoting Apperson v.
Fleet Carrier Corp., 879 F.2d 1344, 1358 (6th Cir. 1989)). Under this standard, the
evidence must be “powerfully suggestive of bias.” Id. (quoting Merit Ins. Co. v.
Leatherby Ins. Co., 714 F.2d 673, 681-82 (7th Cir. 1983)). Bias in refusing to consider
certain evidence could result in an unfair hearing, and so, pursuant to § 10(a)(3), “a
district court may vacate an award if a party to an arbitration proceeding has not been

-- 6 of 13 --

-7-
given notice and opportunity to present arguments and evidence on the merits of the
dispute.” Teamsters Local 312 v. Matlack, Inc., 118 F.3d 985, 995 (3d Cir. 1997)
(emphasis added). Of course, vacatur is not required in every case where certain relevant
evidence is excluded; rather, § 10(a)(3) is implicated where the procedural error
constitutes “fundamental unfairness.” Id.
Appellants argue that the arbitrator demonstrated his bias by failing to ensure that
relevant documentary evidence was disclosed in a timely manner. More specifically, they
argue that they were prejudiced by the arbitrator’s refusal to order the production of
documents related to the EOS’s SAAB radar system, “which records the level of liquids
in the cargo control room.” (App. at 84.) Appellants contend that they first learned that
the EOS was equipped with SAAB technology on the eve of their expert’s testimony.
They maintain that the SAAB radar’s “sophisticated electronic liquid cargo measuring
system” would have provided valuable insight into the water content of the fuel oil at
various points during the journey from Amuay Bay to New Jersey. (Appellants’ Br. at
37.) For their part, Appellees contend that the SAAB radar is “not used for cargo
measurements” while tankers are at sea, Appellees’ Br. at 14-15, but, instead,
measurements are taken by the EOS’s gauges when the ship is “relatively static,” Supp.
App. at 19.
There is no evidence to suggest that the arbitrator’s refusal to delay the
proceedings and order the production of this evidence was motivated by bias, nor is there
any indication that it resulted in a fundamentally unfair proceeding. It is clear from the

-- 7 of 13 --

-8-
arbitrator’s written decision that he was aware of the SAAB radar system, and despite
Appellants’ contentions, he found that the “remote SAAB gauges, trim and list gauges,
digital draft readings, etc. are available for readouts by all inspectors and surveyors.”
(App. at 84.) Ultimately, whether Appellants were on notice of the SAAB radar system
so that they could request its data is immaterial, because the arbitrator did not find the
system important to his decision. He viewed the SAAB system as being one of two
“closed cargo measurement systems,” the other being the MMC equipment. (Id.) Based
on his expertise, the arbitrator made a judgment as to the cargo’s water content after
considering a variety of factors, one of which was “the difference in the EOS’ cargo tank
ullages between loading Amuay Bay and arrival at Bayonne.” (Id. at 98.) That the
arbitrator relied on the inspection reports from Amuay Bay and Bayonne – in conjunction
with other evidence the result of the extensive discovery in this case – instead of the
SAAB radar system to come to his conclusion about water content is not “powerfully
suggestive of bias.” See Kaplan, 19 F.3d at 1523, n.30. Furthermore, the arbitrator’s
evidentiary rulings concerning the SAAB equipment did not “so affect[] the rights of
[appellants] that it may be said that [they were] deprived of a fair hearing.” See
Teamsters Local 312, 118 F.3d at 995. The District Court was justified in rejecting
Appellants’ argument that § 10(a) of the FAA required that the arbitrator’s award be
vacated.

-- 8 of 13 --

The District Court did not consider “manifest disregard for law” as a basis for5
vacatur given its understanding that the Supreme Court’s decision in Hall Street stands
for the proposition that the FAA provides the only grounds for vacatur. Our sister circuits
have expressed varying views on the impact of Hall Street. Compare Telenor Mobile
Commc’ns AS v. Storm LLC, 584 F.3d 396, 407 n.6 (2d Cir. 2009) (“[W]e [previously]
read Hall St. to hold that the FAA set forth the ‘exclusive’ grounds for vacating an
arbitration award, and that the term ‘manifest disregard’ was merely a ‘judicial gloss’ on
some of those grounds.”), with Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 355
(5th Cir. 2009) (“[T]o the extent that manifest disregard of the law constitutes a
nonstatutory ground for vacatur, it is no longer a basis for vacating awards under the
FAA.”).
-9-
2. The Arbitrator Did Not Impose An Improper Burden on Appellants Such that
Vacatur is Required.
Appellants next argue that the District Court erred in denying the motion to vacate
because the arbitrator “manifestly disregarded the law” in reaching his decision.
(Appellants’ Br. at 39.) That an arbitrator’s manifest disregard of the law may support a
decision to vacate an arbitration award is not a new concept. See, e.g., Tanoma Mining
Co., Inc. v. Local Union No. 1268, 896 F.2d 745, 749 (3d Cir. 1990); Local 863 Int’l Bhd.
of Teamsters v. Jersey Coast Egg Producers, Inc., 773 F.2d 530, 533 (3d Cir. 1985).
Whether this concept continues to exist today as an independent, viable ground for
vacatur, an issue we need not decide, this case does not evidence one of those “extremely5
narrow circumstances” supporting a decision to vacate. Metromedia Energy, Inc. v.
Enserch Energy Servs., Inc., 409 F.3d 574, 578 (3d Cir. 2005) (narrow ground supporting
vacatur exists “where an arbitration panel manifestly disregards, rather than merely
erroneously interprets, the law”).
Appellants complain, in particular, of the arbitrator’s consideration of

-- 9 of 13 --

-10-
unauthenticated evidence, which he then found sufficient to support Appellees’ claim that
the cargo had inherent defects. The result, they argue, was that an unduly heavy burden
was shifted to them “to show by a preponderance of the evidence the water content of the
cargo when loaded and during discharge . . . .” (Appellants’ Br. at 46.) The arbitrator
made a choice to credit some pieces of evidence more than others. Appellants submitted
cargo test results showing the fuel oil’s water content to be 0.7% at loading. They also
presented evidence of a “retained sample,” which showed a 0.8% water content at
loading. Nonetheless, the arbitrator expressed concern that, among other things, the
samples were “improperly drawn.” He found that the contrary evidence undermining
those figures was “substantial and controlling.” (App. at 100.) Thus, the arbitrator did
not manifestly disregard the law in setting out burdens but, rather, made a factual
determination that the weight of the evidence supported one theory of water content over
another, and carefully explained his reasoning. As such, this is not “the rarest case”
compelling us to vacate. Newark Morning Ledger Co. v. Newark Typographical Union
Local 103, 797 F.2d 162, 165 (3d Cir. 1986); see Major League Umpires Ass’n v. Am.
League of Prof’l Baseball Clubs, 357 F.3d 272, 289 (3d Cir. 2004) (quoting Remmey v.
PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir. 1994)) (“Limited judicial review is
necessary to encourage the use of arbitration as an alternative to formal litigation . . . . A
policy favoring arbitration would mean little, of course, if arbitration were merely the

-- 10 of 13 --

Assuming without deciding that, post-Hall Street, “[a]rbitration awards . . . can be6
vacated when such awards violate public policy,” United Transp. Union Local 1589 v.
Suburban Transit Corp., 51 F.3d 376, 381 (3d Cir. 1995), there was no such violation
here. Appellants contend that vacatur is appropriate because Appellees’ actions allegedly
ran afoul of two public interests, namely environmental protection and the
safety/seaworthiness of vessels. Although the arbitrator found the EOS to be
unseaworthy because of its defective heating coils, Appellants did not show that the
leaking coils posed environmental or safety risks beyond damaging the cargo, much less
that upholding this award “would thwart achievement of the overriding interest in public
safety furthered by the [laws and] regulations.” Exxon Shipping Co. v. Exxon Seamen’s
Union, 993 F.2d 357, 364 (3d Cir. 1993).
-11-
prologue to prolonged litigation”).6
B. MODIFICATION
The FAA also empowers courts to modify an arbitration award in any of the
following instances: “[w]here there was an evident material miscalculation of figures. . .”;
[w]here the arbitrators have awarded upon a matter not submitted to them, unless it is a
matter not affecting the merits of the decision upon the matter submitted”; and “[w]here
the award is imperfect in matter of form . . . .” 9 U.S.C. § 11(a)-(c). Any modification is
entirely discretionary and should “promote justice between the parties.” Id. (“[T]he
United States court in and for the district wherein the award was made may make an
award modifying or correcting the award . . . .”) (emphasis added); see Hall Street, 552
U.S. , 128 S.Ct. at 1403.
1. The Arbitrator Did Not Exceed His Authority by Awarding Pre- and Post-
Judgment Interest.
Appellants argue that the arbitrator lacked the authority to award Appellees pre-
and post-judgment interest and that, in any event, the interest rates that he imposed were

-- 11 of 13 --

The arbitrator found that the EOS should have been discharged without delay, and7
further noted that, while the delay cost Venfleet, “Chemoil profited enormously . . . due to
the appreciation of fuel oil values during the period for which demurrage is being
claimed.” (App. at 107.) The arbitrator awarded Venfleet interest on the more than nine-
month delay in receiving payment after hearing “no rational explanation” from Appellants
for that delay. We reject without further comment Appellants’ claim that the delayed
payment was neither in dispute nor was an issue before the arbitrator.
-12-
in excess of what 28 U.S.C. § 1961 permits. At the center of their claim is the argument
that because the parties agreed to arbitrate without any prior agreement as to interest, they
“had every reason to believe . . . the District Court would determine any award.”
(Appellants’ Br. at 51.) We disagree. As the arbitrator’s decision indicates, “[b]oth
parties have demanded interest on their respective claims.” (App. at 108). Because the
parties agreed to submit the dispute to an arbitrator, the arbitrator had the authority to see
the matter “through to completion.” Dluhos, 321 F.3d at 369-70. There is simply no
basis for believing that the arbitrator was to handle only certain matters, while leaving
related pieces of the overall dispute for the District Court to resolve. Furthermore,
Appellants offer nothing to square their argument that 28 U.S.C. § 1961 requires an
interest rate different from that imposed by the arbitrator with the language in Sun Ship,
Inc. v. Matson Navigation Co., which states that the interest rate is “a matter of district
court discretion . . . guided by 28 U.S.C. § 1961.” 785 F.2d 59, 63 (3d Cir. 1986). And,
we note, the arbitrator explained the basis for the interest rates he imposed, namely “the
average prime interest rate” during the relevant periods. (App. at 108.)7
2. The Arbitrator Did Not Err in Awarding Attorneys’ Fees.
Appellants argue that the arbitrator erred in awarding attorneys’ fees to Appellees

-- 12 of 13 --

-13-
because such an award was outside the scope of the arbitration, although they concede
that they requested attorneys’ fees for themselves. The District Court upheld the award of
attorneys’ fees because that award “dr[ew] its essence” from the parties’ decision to
arbitrate; furthermore, the Court did not find the award to be “completely irrational.” (Id.
at 9.) No serious argument compels us to alter that determination.
CONCLUSION
We will affirm the final judgment of the District Court.

-- 13 of 13 --