Non-Signatory to an Arbitration Agreement Cannot Compel Arbitration if not “Intertwined” With a Signatory

The District of Connecticut denied a non-signatory’s motion to compel a signatory shipping company to arbitrate a dispute based upon the shipping company’s agreement with another company.

In Oilmar Co. Ltd., Panama v. Energy Transport, Ltd., No. CIV.A.303CV1121(CFD), 2006 WL 1549986 (D.Conn. May 31, 2006), Oilmar owned the vessel San Sebastian. It chartered the San Sebastian to ETL and the charter agreement contained an arbitration clause. ETL in turn sub-chartered space on the vessel to two other companies. Oilmar was not a signatory to the sub-charter agreements.

Carbon Black and Thai Tokai had an agreement with the sub-chartered companies to deliver oil. A fire occurred on the vessel and the oil was not delivered. Carbon Black and Thai Tokai argued that the principle of estoppel obligated Oilmar to arbitrate their claims that the San Sebastian was unseaworthy, even thought the two were not signatories to the arbitration agreement.

The Court reiterated the rule of estoppel that a signatory “is estopped from avoiding arbitration with a non-signatory ‘when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed.’” Citing Choctaw Generation Ltd. Partnership v. American Home Assurance Co., 271 F.3d 403, 404 (2d Cir. 2001). To determine how “intertwined” the parties were, the Court engaged in a “detailed factual inquiry.”

In this case, the Court found that the factor that the claim was about the seaworthiness of Oilmar’s vessel was outweighed by the lack of any corporate or operational relationship between the parties. Neither Carbon Black nor Thai Tokai had an affiliation with ETL or Oilmar. Also, neither Carbon Black nor Thai Tokai took any direction from Oilmar or ETL during the voyage. Therefore, the Court found that the relationship among the parties was not sufficiently intertwined, and it denied the motion to compel arbitration.