## Facts

- A bulk carrier ran aground on a coral reef off Oahu, triggering a Coast Guard-led response to prevent an oil discharge.
- The vessel owner, as the statutorily responsible party, faced liability for removal costs and natural resource damages.
- The owner contracted with a marine salvage company under a written salvage agreement requiring the salvor to use best endeavors to salvage the vessel and deliver it to a place of safety.
- The agreement included an arbitration clause requiring “[a]ny dispute arising under this Agreement” to be arbitrated in London under the English Arbitration Act 1996, with English law and practice to apply.
- The salvage company refloated and removed the vessel, but substantial reef damage occurred during the grounding and/or removal operations.
- The owner sued the salvor in federal district court for indemnity and/or contribution, alleging the salvor’s gross negligence increased reef damage and the owner’s resulting environmental liability.
- The salvor moved to compel arbitration under the Federal Arbitration Act; the district court denied the motion, and the salvor took an interlocutory appeal.

## Issues

1. Whether the contract’s references to London arbitration, the English Arbitration Act, and English law clearly and unmistakably required applying non-federal (English) law to determine arbitrability.
2. Under the governing arbitrability standard, whether tort-based indemnity/contribution claims for alleged gross negligence “arise under” the salvage agreement and therefore fall within the arbitration clause.

## Decision

- The Ninth Circuit affirmed the denial of the motion to compel arbitration.
- Federal arbitrability law governed because the agreement did not clearly and unmistakably displace it in favor of English law for arbitrability determinations.
- The clause covering disputes “arising under” the agreement was construed narrowly and did not reach the owner’s tort-based gross-negligence indemnity/contribution claims.

## Legal Principles

- A court applies non-federal law to arbitrability only with clear and unmistakable evidence that the parties intended that result; generic forum, procedural, or choice-of-law language is insufficient if it does not expressly allocate arbitrability to non-federal law or to arbitrators.
- In the Ninth Circuit, an arbitration clause limited to disputes “arising under” an agreement is relatively narrow and generally reaches only disputes tied to interpretation and performance of the contract’s terms.
- A mere “but-for” connection to a contract does not bring an otherwise independent tort claim within a narrow “arising under” arbitration clause.

## Conclusion

The Ninth Circuit held that references to English arbitration procedures and English substantive law did not clearly transfer arbitrability questions away from federal law, and that a narrow “arising under” arbitration clause did not cover tort-based gross-negligence claims seeking indemnity or contribution for environmental damage allegedly worsened by salvage operations.


Cape Flattery Ltd. v. Titan Mar. LLC, 647 F.3d 914 (9th Cir. 2011)