Integr8 Fuels Inc. v. Daelim Corp., No. 1:17-cv-02191 (S.D.N.Y. Apr. 25, 2017) [click for opinion]

Daelim Corp. ("Daelim"), a vessel charterer, entered into a charter party agreement with Korea Line Corporation ("KLC"), the disponent owner of the vessel M/T DL NAVIG8 (the "Vessel"), which was owned by DL Maritime S.A. ("Maritime"). As part of the agreement, Daelim was required to keep the Vessel clear of encumbrances.

In 2014, Daelim contracted with Grace Young International, Ltd. ("Grace") to provide a bunker stem to the Vessel in Hong Kong, which was paid in full and delivered as agreed. To provide this bunker stem, Grace contracted with the Hitec corporation, which in turn contracted with Dynamic Oil Trading (Singapore) Pte Ltd. ("Dynamic"), who then contracted with Integr8 Fuels Inc. ("Integr8").

In November 2016, Integr8 alleged that it had not been paid for the bunker stem, and filed an action in Dubai against Maritime and Dynamic. The Dubai court granted Integr8's motion for a lien on the Vessel. The Vessel was subsequently arrested in Dubai, and Maritime deposited the claimed amount with the Dubai court to lift the arrest.

The Vessel owners notified Daelim of their intention to seek damages arising from arrest of the Vessel. Daelim responded in February 2017 by serving Integr8 with a demand for arbitration pursuant to the contract between Integr8 and Dynamic. In response, Integr8 responded with a declaratory action, to determine that no enforceable arbitration agreement exists between the parties. Integr8 also filed a motion for a preliminary injunction and temporary restraining order to enjoin Daelim from pursuing the arbitration.

Integr8 made two main arguments in support of its motion. First, Integr8 asserted that, because there was no contractual privity between Integr8 and Daelim, there was no enforceable arbitration agreement. The court disagreed. The contract between Dynamic and Integr8 defined the "Buyer" of the bunker stem as "Dynamic Oil Trading (Singapore Pte Ltd) and jointly and severally owners/managing owners/operators/managers/disponent owners/charterers." Since the term "Buyer" expressly covered the charterers of the Vessel, the parties intended that any dispute, even incidental to the bunker stem transaction, was within the scope of the arbitration clause.

Second, Integr8 argued that even if the arbitration agreement was valid, it did not cover this dispute. The court again disagreed, finding that the broad contractual language, "[a]ny dispute arising under, in connection with or incidental to this Contract shall be heard and decided at New York City, New York State, by three persons," evinced the parties' intention that the clause cover any and all issues arising from the bunker stem transaction.

Additionally, as to both of these arguments, the court concluded that Integr8 had not demonstrated a likelihood of success on the merits, had not shown that the balance of equities tipped in its favor, nor that irreparable harm would flow from the absence of injunctive relief. The court thus denied Integr8's motion for a preliminary injunction and temporary restraining order.