Veerji Exports v. Carlos St Mary, Inc.

Background

Veerji Exports sued Brink’s Global Services, Inc. for gross negligence and negligent mishandling of a bailment, meaning the alleged careless handling of property entrusted to Brink’s. Veerji also sued Carlos St. Mary and Carlos St. Mary, Inc. for breach of contract and fraud. Veerji alleged that St. Mary fraudulently took possession of a shipment of diamonds without paying for them, partly because of Brink’s negligence. Default judgment had been entered against the St. Mary defendants.

In June 2021, Veerji contracted with BVC Brink’s Diamond and Jewellery Services LLP, identified as Brink’s designated agent, to ship diamonds from Surat, India, to St. Mary. The first air waybill incorporated Brink’s Valuable Transport Contract (the “VTC”), whose dispute-resolution provision required arbitration under International Chamber of Commerce rules for disputes involving shipments originating outside the United States. The same provision required disputes involving shipments originating within the United States to be adjudicated exclusively in the Southern District of New York.

After the diamonds arrived in Houston, Veerji asked Brink’s to keep them in its possession and release them to St. Mary only after Veerji instructed Brink’s to do so following payment. At St. Mary’s request, and with Veerji’s consent, Brink’s arranged for the diamonds to be viewed and ultimately delivered at Brink’s facility in New York. Brink’s issued a second air waybill during the rerouting. St. Mary took the diamonds from the New York facility without paying Veerji.

Motion and Issues

Brink’s moved to dismiss Veerji’s claims and to compel arbitration. The court first considered who should decide whether the dispute was subject to arbitration. It held that the court, not an arbitrator, had authority to decide that question because the VTC did not provide clear and unmistakable evidence that the parties agreed to arbitrate questions about the scope of the arbitration agreement. The VTC required arbitration for some disputes but directed other disputes to the court, so incorporating the International Chamber of Commerce rules was not enough by itself to transfer the arbitrability question to an arbitrator.

The parties agreed that the dispute had to be arbitrated unless it involved a shipment originating in the United States. Veerji argued that there were two shipments and that the second shipment originated in Houston. Brink’s argued that there was one shipment, which originated in India.

Court’s Analysis

The court adopted Brink’s interpretation. Under the VTC, a “Shipment” was one or more sealed or locked containers received by Brink’s at one place and time with a designated destination or consignee. The court concluded that Brink’s received the diamond containers in India and did not receive them anew in Houston. The containers remained in Brink’s possession as they passed through Houston, and the shipment did not reach its completion point until St. Mary took possession in New York.

The second air waybill did not create a new shipment because it listed the same shipper and consignee as the first air waybill. The court also relied on the undisputed record that Brink’s had not marked the first air waybill as delivered, had marked the second one as delivered when the diamonds reached St. Mary in New York, and had arranged the rerouting consistently with Veerji’s request and consent. The court therefore held that the shipment originated outside the United States and that Veerji’s claims against Brink’s were subject to arbitration.

Disposition

The court granted in part and denied in part Brink’s motion. It denied Brink’s motion to dismiss, granted Brink’s motion to compel arbitration, and stayed the action pending arbitration. The court vacated the scheduling order and denied all other pending motions without prejudice. It directed the parties to submit joint status letters every 60 days and to promptly report any resolution of the arbitration or other event affecting the stay.