Cape Flattery Ltd. v. Titan Maritime LLC

In 2005 a vessel owned by Cape Flattery Ltd. (plaintiff) hit a coral reef in Hawai’i. Cape Flattery entered into an agreement with Titan Maritime LLC (Titan) (defendant) to salvage the vessel. The agreement contained an arbitration clause, which stated that any disputes arising under the agreement would be settled by arbitration in London, England, in accordance with the English Arbitration Act 1996 and English laws. Titan removed the vessel from the coral reef, but there was serious damage to the reef. Cape Flattery was liable to the United States government for the damage. In October 2008, Cape Flattery sued Titan in the United States District Court for the District of Hawai’i, alleging that the damage caused in removing the vessel from the reef was due to Titan’s gross negligence. Cape Flattery sought to prevent Titan from requesting arbitration. In December 2008, Titan filed a motion to compel arbitration pursuant to the parties’ arbitration clause in their agreement, arguing that English law should govern. Cape Flattery argued that the parties could not contract out of federal arbitrability law, and even if they could, they had not done so. The district court denied Titan’s motion to compel arbitration, holding that the dispute did not arise under the parties’ agreement and that the language in the agreement was narrow. The court also held that Cape Flattery’s tort claims were not arbitrable, because Titan’s duty to prevent foreseeable damage was based on a federal statute separate from Titan’s obligations under the agreement. Titan appealed.