## Facts

- Kulukundis Shipping Co., owner of the vessel *Mount Helmos*, negotiated a voyage charter with Amtorg Trading Corp. through ship-broker intermediaries.
- On March 15, 1940, the brokers reached agreement and memorialized the deal in a customary “fixture slip,” intended in the trade to signify a concluded charter.
- The fixture slip contained all material terms, except demurrage, dispatch, and commencement date, which the parties had agreed to but omitted by oversight; additional terms were incorporated by reference to an earlier charter (including a war risks clause).
- The broker acting for Amtorg had authority to bind Amtorg.
- After the fixture slip, Amtorg refused to sign the formal charter and repudiated the agreement.
- The contemplated charter form contained a broad arbitration clause requiring disputes under the charter to be arbitrated.

## Issues

1. Whether the district court’s findings that a binding charter party was formed and breached should be disturbed on appeal.
2. Whether, under the charter’s arbitration clause and the Federal Arbitration Act, the district court was required to stay litigation (at least as to damages) pending arbitration.
3. Whether Amtorg could deny contract formation while also asserting, in the alternative, a right to arbitration if a contract were found.
4. Whether Amtorg was “in default” under FAA § 3 for not initiating arbitration before the suit was filed.

## Decision

- The Second Circuit accepted the district court’s fact findings that a binding charter party was concluded through the brokers and that Amtorg breached it.
- The court held the district court erred by refusing to allow an amendment asserting arbitration in the alternative and by proceeding without staying the action pending arbitration.
- The court ruled that the arbitration clause, once the charter’s existence was established, required arbitration of matters within its scope, including damages.
- The court found Amtorg was not “in default” within FAA § 3 merely because it had not initiated arbitration before Kulukundis sued.
- The judgment was reversed and the case remanded with directions to stay proceedings and permit arbitration on covered issues.

## Legal Principles

- Appellate review in admiralty gives substantial deference to the trial court’s credibility determinations and fact findings; appellate courts do not retry the facts.
- The Federal Arbitration Act requires courts to enforce valid arbitration agreements and to stay litigation of issues referable to arbitration when requested and when the movant is not in default.
- A party may plead inconsistent defenses in the alternative, including denying contract formation while invoking an arbitration clause if the contract is found to exist.
- Broad arbitration clauses in commercial maritime contracts may operate as a precondition to judicial resolution of disputes within the clause, such as damages for breach.
- A party is not necessarily “in default” under FAA § 3 for failing to commence arbitration before suit where the opposing party initiated litigation without first pursuing arbitration.

## Conclusion

The Second Circuit upheld the finding that the parties formed and breached a binding charter, but required enforcement of the charter’s arbitration clause under the FAA by allowing an alternative arbitration defense and staying court proceedings so arbitrators could decide damages within the clause’s scope.


Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978 (2d Cir. 1942)