New England Energy Inc. v. Keystone Shipping Company, Keystone Shipping Company v. New England Energy Inc.

855 F.2d 1, 1989 A.M.C. 537, 1988 U.S. App. LEXIS 11487, 1988 WL 86800
CourtCourt of Appeals for the First Circuit
DecidedAugust 24, 1988
Docket88-1202, 88-1203
StatusPublished
Cited by67 cases

This text of 855 F.2d 1 (New England Energy Inc. v. Keystone Shipping Company, Keystone Shipping Company v. New England Energy Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New England Energy Inc. v. Keystone Shipping Company, Keystone Shipping Company v. New England Energy Inc., 855 F.2d 1, 1989 A.M.C. 537, 1988 U.S. App. LEXIS 11487, 1988 WL 86800 (1st Cir. 1988).

Opinions

COFFIN, Circuit Judge.

This case requires us to decide whether federal courts have the power to order consolidation of two arbitrations when the parties’ agreements to arbitrate make no [3]*3express reference to the issue of consolidation. The district court, although determining that consolidation was appropriate under the circumstances, held that it lacked the power to order consolidation. We have carefully reviewed the authorities and see no compulsion of law or policy barring a district court from issuing such an order, at least when the agreement between the parties is silent and the pertinent state law specifically provides for such. We therefore reverse.

I.

We shall briefly describe the facts at this point in order to give some context to our discussion, but the primary question before us is a purely legal one and so we need not dwell on the particulars of this case. The parties here are signatories to one of two maritime contracts, both of which provide that disputes arising out of the agreements will be referred to arbitration in Boston “pursuant to the laws relating to arbitration there in force.” In one contract, appellant New England Energy Inc. (NEEI) and appellee Keystone Shipping Co. (Keystone) created a joint venture known as the New England Collier Company (NECCO), which became owner and operator of a coal carrying ship named the Energy Independence. In the other agreement, appellant New England Power Company (NEP) chartered the Energy Independence from the joint venture. Both NEEI and NEP are part of the New England Electric System, an electric utility holding company. Arbitration # 1 is between NEEI and Keystone — the joint venturers — and Arbitration # 2 is between NEP, the ship operator, and NEC-CO, the joint venture that chartered the ship to NEP.

NEEI and NEP filed an action in state court in January 1988 seeking consolidation of the two arbitrations pursuant to the Massachusetts Uniform Arbitration Act, Mass.Gen.Laws Ann. ch. 251, § 2A.1 Keystone removed the action to federal court based on diversity jurisdiction. After a hearing, the district court ruled that the factual circumstances were appropriate for consolidation, but it nevertheless denied the application for consolidation on the ground that it lacked the power to join the cases. The court interpreted the Federal Arbitration Act and Supreme Court precedent to say that, in the absence of a specific provision in the parties’ contracts allowing consolidation, federal courts are without power to consolidate arbitrations. The district court implicitly found both that the Act preempted the Massachusetts statute providing for consolidated arbitrations, and that it deprived the court of its power to order consolidation under Fed.R.Civ.P. 42(a). NEEI and NEP then filed this appeal.

After carefully reviewing the Supreme Court cases and considering the policies of the Act, we conclude that consolidation could be ordered in this case pursuant to the Massachusetts arbitration consolidation statute. We need not decide whether a federal court also has the power, under Fed.R.Civ.P. 42(a), to order consolidation in the absence of a state law providing for it. We now turn to our reasons for concluding that Massachusetts law is not preempted in this case.

II.

The Federal Arbitration Act, 9 U.S.C. §§ 1-14, was passed to ensure that courts would honor the contractual agreements of parties who choose to resolve their disputes by means of the informal arbitration procedure. See, e.g., Mitsubishi Motors, Inc. v. Soler Chrysler-Plymouth, 473 U.S. 614, 625-626, 105 S.Ct. 3346, 3353-3354, 87 L.Ed.2d 444 (1985); Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219-220, [4]*4105 S.Ct. 1238, 1241-1242, 84 L.Ed.2d 158 (1985). Section 2 of the Act provides that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 4 provides that once a court is satisfied that a contract provides for arbitration, the court must order the parties “to proceed to arbitration in accordance with the terms of the agreement.” Id. at § 4. The Act makes no reference to consolidation of arbitrations.

Recognizing that this statute establishes a “federal policy favoring arbitration,” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983), the United States Supreme Court in a series of recent decisions repeatedly has stressed that courts must “ ‘rigorously enforce agreements to arbitrate,’ ” Shearson/American Express v. McMahon, — U.S. -, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 (1987) (quoting Dean Witter Reynolds, 470 U.S. at 221, 105 S.Ct. at 1242). See also Perry v. Thomas, — U.S. -, 107 S.Ct. 2520, 2525, 96 L.Ed.2d 426 (1987); Mitsubishi Motors, 473 U.S. at 625, 105 S.Ct. at 3353; Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984); Moses H. Cone Memorial Hospital, 460 U.S. at 24, 103 S.Ct. at 941.

Appellee argues that the principle of strict adherence to arbitration agreements, established by both the Act and the Supreme Court cases, means that unless consolidation is affirmatively approved in the agreement to arbitrate, it may not be ordered, notwithstanding any state law providing for consolidation. Specifically, ap-pellee contends that ordering consolidation in the absence of the parties’ explicit consent is barred by section 4 of the Act, which requires courts to enforce arbitration agreements “in accordance with [their] terms.” Appellee relies for this proposition on two circuit court decisions holding that a federal court’s role in this context is to determine “only whether the contract provides for consolidated arbitration, a question free of the underlying facts [concerning the merits],” Del E. Webb Construction v. Richardson Hospital Authority, 823 F.2d 145, 150 (5th Cir.1987). See also Weyerhaeuser Co. v. Western Seas Shipping Co., 743 F.2d 635, 637 (9th Cir.1984). One other circuit has held that federal courts may consolidate arbitrations. Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966 (2d Cir.1975).

We note first that, even when federal law applies to an arbitration agreement,2 the Federal Arbitration Act has never been construed to preempt all state law on arbitration.

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Bluebook (online)
855 F.2d 1, 1989 A.M.C. 537, 1988 U.S. App. LEXIS 11487, 1988 WL 86800, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-england-energy-inc-v-keystone-shipping-company-keystone-shipping-ca1-1988.