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The Southern District of New York refused to confirm an arbitration award against a non-signatory and rejected an estoppel argument because the non-signatory never received a benefit from the agreement containing the arbitration clause.
In Stolt-Nielsen Transportation Group B.V. v. Edible Oil Trading Corporation, No. 06 Civ. 0703 (NRB), 2007 WL 194182 (S.D.N.Y. Jan. 24, 2007), Stolt entered into a charter agreement with Edible, whereby Stolt would provide a vessel for Edible to ship oil to Turkey.
Two days before Stolt was to provide the vessel, Edible canceled the contract. Stolt then brought claims against Stolt and Lio Oil, the company in Turkey that Stolt alleged was also a party to the charter agreement.
Pursuant to an arbitration clause in the charter agreement, Stolt demanded arbitration. Neither Edible nor Lio appeared at the arbitration, and the arbitrators issued an award finding Edible and Lio jointly and severally liable to Stolt.
When Stolt asked the court to confirm the arbitration award, Lio opposed confirmation, arguing that it was not a party to the charter agreement containing the arbitration agreement. First, the Court noted that Lio was clearly not a party to the agreement because it was not listed as the charterer on the agreement.
However, Stolt argued that Lio was bound to the agreement under the theory of estoppel. The Court rejected this argument because estoppel is not applicable when a party was to have received the benefits of an agreement but never received those benefits. Lio was not the sole beneficiary of the contract between Stolt and Edible, and Lio had received not benefit from that contract.
Therefore, the Court confirmed the arbitration award against Edible, but denied confirmation against Lio. The Court did grant Stolt's request to conduct additional discovery to determine whether Lio could be considered an alter ego of Edible.
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