Cargo Company Says Contract Prevents Arbitration Over Spoiled Goods, Urges SDNY to Keep Disputes in Court

The U.S. District Court for the Southern District of New York should issue an injunction against One Banana North America Corp. from seeking arbitration in New York over claims that cargo company MSC Mediterranean Shipping Co. damaged banana shipments, MSC said in a June 27 complaint. The shipping company said that the terms of the contract between MSC and One Banana clearly stipulate that cargo claims can only be litigated before the Southern District of New York (MSC Mediterranean Shipping Co. v. One Banana North America Corp., S.D.N.Y. #22-05425).

One Banana entered into a contract with MSC to send "several hundred" banana shipments from Ecuador to Seattle, via Panama. MSC said in its complaint that it has two types of refrigerated containers that are used to send produce, among other things. One is a standard container while the other has atmosphere control technology allowing for the removal of ethylene, slowing the ripening of produce. These special containers are called "ACS reefers" and cost more to book.

For One Banana's shipments, though, the company opted to go with the regular containers after originally agreeing to go with the ACS containers. MSC said it expressed its concern over the length of the trip in the regular containers and the risk of spoiling the bananas. To cover its liability, MSC had One Banana sign a Letter of Indemnity to cover any damage. Once the shipments actually went out, they faced serious delays due to port congestions relating to the pandemic economic recovery. One Banana and MSC also agreed to certain conditions in the sea waybill terms and conditions which say that any disputes are to be litigated in the Southern District of New York.

Nevertheless, in May, One Banana served MSC with a notice for arbitration for damages over $2.7 million over the port delays for 130 banana shipments. MSC now says that arbitration is barred by the terms of the contract, and asks the Southern District of New York court to block such a proceeding.

"As a matter of law, unless OBNA is enjoined from pursuing its cargo claims in the arbitration proceeding, MSC will suffer irreparable harm because it will be forced to arbitrate a dispute it has not agreed to arbitrate, and be forced to incur the substantial time and expense of defending itself in the arbitration proceeding, or risk an adverse outcome in those proceedings, even though MSC is not legally compelled to arbitrate OBNA’s cargo claims," the complaint said. "Being compelled to arbitrate a dispute when the parties have not agreed to arbitrate constitutes irreparable harm as a matter of law."