Petition for Writ of Certiorari — Triumph Tankers Ltd. v. Kerr-McGee Refining Corp.

‘ (VY)

60-1934

No.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

>_>

TRIUMPH TANKERS LTD.,

Petitioner,

—_vV—

KERR-MCGEE REFINING CORPORATION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JOSEPH C. SMITH

BURLINGHAM UNDERWOOD

& LORD

One Battery Park Plaza

New York, New York 10004

(212) 422-7585

Counsel of Record

for Petitioner

Of Counsel

R. SCOTT ERVIN

BURLINGHAM UNDERWOOD & LORD

Dated: June 17, 1991

QUESTIONS PRESENTED

1. Where a vessel owner agreed to arbitrate only those dis-

putes ‘‘arising out of’? a voyage charter party covering the

carriage of a single cargo of crude oil to the United States,

whether the arbitrators exceeded their powers by awarding

damages for a claim based on events and disputes arising out

of voyages not covered by the charter?

If the arbitrators did not exceed their authority,

2. Whether the Second Circuit erred in holding that the

arbitrators could award treble damages under the Racketeer-

ing Influenced and Corrupt Organizations Act based on a

‘*pattern’’ consisting of just one ‘‘racketeering act’’?

TABLE OF CONTENTS

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II.

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IF ALLOWED TO STAND, THE SECOND

CIRCUIT DECISION WILL UNDERMINE

ESTABLISHED PRINCIPLES OF LAW

GOVERNING THE ARBITRATION ACT

AND THis BAD AE ess cccsessseccseces

THE SECOND CIRCUIT HELD THAT THE

ARBITRATORS HAD AUTHORITY TO

RESOLVE CLAIMS BEYOND THE SCOPE

OF AUTHORITY GRANTED BY THE PAR-

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THE SECOND CIRCUIT HELD THAT IN

ARBITRATION, A RICO ‘‘PATTERN’’

CAN BE BASED ON JUST ONE ‘‘RACKE-

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PAGE

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TABLE OF AUTHORITIES

Cases

AT&T Technologies v. Communications Workers, 475

Cee eee reeked sev ened tésenes

Amalgamated Food v. Great A & P Co., 415 F.2d 185

TT ee ca kceeeieewewetees

Dewey v. Reynolds Metal Co., 291 F. Supp. 786 (W.D.

EE Oe

H.J. Inc. v. Northwestern Bell Telephone Company, 57

ccc wa aaccssevsescesscesess

Kerr-McGee Refining Corporation v. M/T TRIUMPH,

I EO, PED, oo cece accnccscscces

McAllister Bros. v. A & S Transport Co., 621 F.2d 519

a rr

Puma Industrial Consulting, Inc. v. Daal Associates,

ee

Shearson/American Express v. McMahon, 482 U.S.

ee

Trade & Transport, Inc. v. Valero Refining Co. (M/T

LAUBERHORN), S.M.A. No. 2699 (1990)........

United Steelworkers v. Warrior & Gulf Navigation

EE COMED cece ccaccccsccescscscces

U.S. v. Indelicato, 865 F.2d 1370 (2d Cir. 1989).....

PAGE

1]

1]

iv

PAGE

Other Authorities

Federal Arbitration Act, 9 U.S.C. §§ 1-14 (1991)..... 6

D RRB, BOE bc tide vececnsewsccencesessctesecss 6

BD Ries ac acces cvcconsscianseness6sssusesss 9, 11

Racketeering Influenced and Corrupt Organizations

Act, 18 U.S.C. §§ 1961-1968 (West ed. 1990)...... 6

18 U.S.C. § 1961

IN THE

Supreme Court of the United States

No. .

OCTOBER TERM, 1990

-

TRIUMPH TANKERS LTD. .

Petitioner,

=) ,

KERR-MCGEE REFINING CORPORATION,

Respondent.

>_>

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner, Triumph Tankers, Ltd.' (‘‘Triumph’’) respect-

fully prays that a writ of certiorari issue to review the deci-

sion of the United States Court of Appeals for the Second

Circuit dated January 28, 1991.

OPINIONS BELOW

The opinion of the Court of Appeals for the Second Cir-

cuit is reported at 924 F.2d 467 and is reprinted in the

Appendix (‘‘App.’’) at pages la-lla.

The memorandum decision of the United States District

Court for the Southern District of New York (Conner, D.J.)

1 Pursuant to Supreme Court Rule 29.1, Triumph Tankers Ltd. states

that it has no corporate parent or subsidiary.

2

has not been reported. It is reprinted in the Appendi~. at

pages 12a-18a.

JURISDICTIONAL STATEMENT

This action was commenced by Respondent Kerr-McGee

Refining Corporation (‘‘Kerr-McGee’’) in 1984 as an attach-

ment proceeding under Admiralty Rule B in the United States

District Court for the Southern District of New York. Fed-

eral jurisdiction was invoked under 28 U.S.C. §1332 and

§ 1333. The action was stayed pending arbitration, and upon

completion of the arbitration in 1990, Kerr-McGee moved

pursuant to the Federal Arbitration Act to confirm the two

awards issued by the arbitrators. Triumph cross-moved to

vacate the awards. By memorandum decision dated July 24,

1990 the District Court confirmed the Partial Final Award

and directed that judgment be entered thereon, and vacated

the Final Decision and Award.

Thereafter, Kerr-McGee appealed from that portion of the

District Court’s decision which vacated the arbitrators’ Final

Award and Triumph cross-appealed from that portion of the

court’s decision which confirmed the arbitrators’ Partial

Final Award. Both the appeal and the cross-appeal were pur-

suant to 28 U.S.C. § 1291. By decision dated January 28,

1991 the United States Court of Appeals for the Second Cir-

cuit affirmed the District Court’s confirmation of the Partial

Final Award but reversed the vacatur of the Final Award

(‘‘Second Circuit Decision’’).

On February 11, 1991 Triumph filed a Petition for a

Rehearing of the Second Circuit Decision, with a Suggestion

for Rehearing in Banc. The Petition was denied on March 19,

1991, (App., 19a), and on April 12, 1991, the District Court

entered judgment on the Final Award.

This Court has jurisdiction to review the Second Circuit

Decision pursuant to 28 U.S.C. § 1254(1).

3

STATUTES INVOLVED

Section 10 of the Federal Arbitration Act provides:

In either of the following cases the United States court

in and for the district where the award was made may

make an order vacating the award upon application of

any party to the arbitration—

* * *

(4) Where the arbitrators exceeded their powers, . . .

9 U.S.C. § 10(4) (1991).

Section 1961 of the Federal Racketeering Influenced and

Corrupt Organizations Act provides:

As used in this chapter—

(1) ‘‘racketeering activity’? means ... (B) any act

which is indictable under any of the following provisions

of Title 18, United States Code: . . . section 659 (relat-

ing to theft from interstate shipment). . .

* * .

(5) ‘‘pattern of racketeering activity’? requires at least

two acts of racketeering activity ....

18 U.S.C. § 1961 (1), (5).?

STATEMENT OF THE CASE

This dispute arises out of a single voyage charter party (the

‘‘Charter’’) dated March 5, 1984 between Triumph, as owner

of M/T TRIUMPH, and Kerr-McGee as charterer. The

Charter was for the carriage of a cargo of crude oil from the

United Kingdom to U.S. East Coast or Gulf ports, and pro-

vided for arbitration of all disputes ‘‘arising out of’’ the

Charter.

2 The full text of Section 1961 of the RICO Act is set out in cue

Appendix at pages 47a-49a.

4

On March 9, 1984, TRIUMPH loaded 539,999 net barrels

of Beatrice Crude oil at Nigg Oil Terminal in England. The

vessel sailed on March 10, and arrived at the discharge port,

Corpus Christi, on March 28, 1984. Upon arrival at Corpus

Christi, the amount of cargo on board was calculated by a

cargo surveyor appointed by Kerr-McGee to be 538,250.09

barrels. Following discharge, shore tank gaugings by the sur-

veyor indicated that a total of 528,060.65 net barrels had

been received from the vessel. On the basis of these measure-

ments, Kerr-McGee alleged short delivery of the cargo and

withheld freight due to Triumph in the amount of $213,000.

In 1984, Triumph commenced arbitration to recover the

10% balance of freight withheld by Kerr-McGee. Kerr-McGee

subsequently paid the freight due to Triumph, but counter-

claimed in the arbitration for $150,638.59 as damages for

short delivery of 4,835.91 barrels of cargo. Following several

hearings, Kerr-McGee increased the amount of its claim for

shortage to 11,938.35 barrels. In addition, Kerr-McGee

alleged that Triumph was part of an ‘‘enterprise’’ engaged in

a systematic pattern of cargo conversion onboard TRIUMPH

and several other vessels not owned by Triumph, and added

separate claims in the arbitration for punitive damages, for

treble damages based on the Racketeer Influenced and Cor-

rupt Organizations Act, 18 U.S.C. §§ 1961-1968 (‘‘RICO’’)

and for attorneys’ fees and costs.

On September 7, 1988, the Panel issued an interim award

on the shortage claim (the ‘‘Partial Final Award’’) which

determined the quantity of cargo short-delivered, awarded

Kerr-McGee damages plus interest for that amount and

apportioned the arbitrators’ fees between the parties. The

Panel reserved consideration of the claims for punitive dam-

ages, RICO damages, and the claim for attorneys’ fees and

costs, and requested the parties to submit briefs on those

remaining claims.

On March 28, 1990, the Panel issued its Final Decision and

Award (the ‘‘Final Award’’), in which a majority of the arbi-

trators found that Triumph had converted cargo onboard

5

TRIUMPH and that the conversion was ‘‘part of a pattern

sufficient to satisfy the requirements of civil liability under

. . « RICO.”’ App., 29a. Accordingly, the majority awarded

Kerr-McGee an additional $512,520.10, as treble damages

under RICO, costs of the arbitration and legal fees. The arbi-

trators’ finding of a ‘‘pattern’’ of activity was based on a sin-

gle ‘‘racketeering act,’’ namely the conversion of cargo

during the voyage by TRIUMPH. In finding a RICO ‘“‘pat-

tern,’’ the arbitators also referred to Kerr-McGee’s unproven

allegations of shortages on prior voyages of TRIUMPH and

to events transpiring onboard TRISUN, TRILIGHT, TRIAD

and TRISTAR, (App., 27a-28a), four vessels which the Panel

acknowledged were owned by parties other than Triumph.

App., 28a. Neither the prior voyages of TRIUMPH nor the

other four vessels were covered by the Charter.

The District Court confirmed the Partial Final Award but

vacated the Final Award because the panel majority exceeded

its power by resolving claims not within the scope of its

authority. Specifically, the District Court held that:

because the parties agreed to arbitrate only those claims

‘‘arising out of’’ the Charter, the panel majority

exceeded its powers in looking to occurrences on other

voyages in finding a pattern and enterprise to satisfy the

elements of RICO and was accordingly without author-

ity to award RICO damages on that basis.

App., 18a.

On appeal, the Second Circuit found that the arbitration

panel had acted within the scope of the arbitration clause and

that the District Court erred by not confirming the Final

Award. Kerr-McGee Refining Corporation v. M/T

TRIUMPH, 924 F.2d 467, 471 (2d Cir. 1991); App., 2a.

Accordingly, the Second Circuit reversed and directed the

District Court to confirm the Final Award. This petition fol-

lowed.

a

6

REASONS FOR GRANTING THE WRIT

I. IF ALLOWED TO STAND, THE SECOND CIRCUIT

DECISION WILL UNDERMINE ESTABLISHED PRIN-

CIPLES OF LAW GOVERNING THE ARBITRATION

ACT AND THE RICO ACT

The Second Circuit Decision directly conflicts with the stat-

utory provisions of the Arbitration Act, 9 U.S.C. §§ 1-14 and

the RICO Act, 18 U.S.C. §§ 1961-1968, as well as case law

interpreting such provisions. If upheld, the Decision will cast

doubt on the continued validity of the established principles

of law governing these statutes and lay a foundation for

much unnecessary litigation in the future. Certiorari should

be granted to preserve the hard-won uniformity of law relat-

ing to these two widely used federal statutes. Moreover, the

Second Circuit Decision violates accepted principles of Due

Process and it must not be allowed to stand.

Il. THE SECOND CIRCUIT HELD THAT THE ARBI-

TRATORS HAD AUTHORITY TO RESOLVE CLAIMS

BEYOND THE SCOPE OF AUTHORITY GRANTED

BY THE PARTIES’ AGREEMENT

It has long been settled that arbitration is a matter of con-

tract and that arbitrators may only resolve claims which the

parties have agreed to submit to them. AT&T Technologies

v. Communications Workers, 475 U.S. 643, 648 (1985);

United Steelworkers v. Warrior & Gulf Navigation Co., 363

U.S. 574, 582 (1960); McAllister Bros. v. A & S Transport

Co., 621 F.2d 519, 522 (2d Cir. 1980). The Arbitration Act

codifies this principle, permitting the court to vacate an

award where ‘‘the arbitrators exceeded their powers. . . .”’ 9

U.S.C. § 10(4).

Ignoring this principle, the Second Circuit held that since

RICO claims in general are arbitrable,

we see no reason here for limiting arbitrability to those

situations in which all of the necessary prior conduct

eal

7

giving rise to RICO liability is governed by an agreement

to arbitrate.

TRIUMPH, 924 F.2d at 471; App., 9a. The Second Circuit

holding allows the arbitrators, under the guise of a RICO

claim, to resolve disputes beyond the scope of authority

granted to the arbitrators by the parties’ agreement.

In this case, the arbitrators found only one ‘‘racketeering

act’’ to have arisen out of the voyage covered by the Charter

party, namely, the conversion of cargo. The arbitrators then

relied on allegations of shortages on prior voyages and events

on other vessels not owned by Triumph to find evidence of a

**pattern’’ of ra.xeteering activity. This required making legal

and factual determinations regarding events and disputes aris-

ing out of voyages unrelated to the subject Charter and with

respect to other vessels not in Triumph’s control.

The Second Circuit reasoned that the arbitrators ‘‘should

be able to consider any conduct of the parties that bears on

the damages appropriate for a covered dispute.’” TRIUMPH,

924 F.2d at 470; App., 8a. However, in looking beyond the

voyage covered by the Charter to find the necessary acts to

support a pattern under RICO, the arbitrators were not just

considering damages—they were determining the substantive

elements necessary to support a RICO cause of action. The

arbitrators could not get to the question of RICO damages

until they had found RICO liability, and here, the elements

necessary to establish that liability did not ‘‘arise out of’’ the

Charter. They arose ‘‘out of’’ voyages covered by other char-

ters, involving vessels not owned or controlled by Triumph.

District Judge Conner recognized that such adjudication in

respect of prior voyages of TRIUMPH or other vessels was

ultra vires on the arbitrators’ part, and acted properly in

vacating the Final Award. That decision should be reinstated.

The Second Circuit also reasoned that if Triumph’s argu-

ment were carried to its logical extreme, ‘‘a RICO claim

could not be arbitrated except in the rare instance in which

all the predicate acts occurred on a single voyage.’’

8

TRIUMPH, 924 F.2d at 470; App., 8a. Citing to this Court’s

holding in Shearson/American Express v. McMahon, 482

U.S. 220 (1987), the Second Circuit stated that,

[w]e do not believe that the [Supreme] Court, in approv-

ing arbitration for RICO claims, thought it was creating

a RICO arbitration forum only for situations in which

all acts constituting the pattern (and the enterprise) arise

under an agreement to arbitrate .... Since RICO

claims are arbitrable, we see no reason here for limiting

arbitrability to those situations in which all the necessary

prior conduct giving rise to RICO liability is governed

by an agreement to arbitrate.

TRIUMPH, 924 F.2d at 471; App., 8a-9a.

First, a distinction must be drawn between voyage charters

(such as the one involved here), which cover only a single

voyage, and time or bareboat charters which cover multiple

voyages over an extended period. It is only in cases involving

the former types of charters that all predicate acts must occur

during a single voyage; a situation which may not be all that

rare. E.g., Trade & Transport, Inc. v. Valero Refining Co.

(M/T LAUBERHORN), 3.M.A. No. 2699 (1990).

Second, Triumph has never contended that as a general

matter, RICO claims are not arbitrable; McMahon settled

that question. But the inquiry does not end there. An arbitral

award on any claim, be it for breach of contract, for a pat-

tern of conduct under RICO or for punitive damages,

remains subject to review for fraud, bias, prejudicial miscon-

duct or excess of authority under Section 10 of the Federal

Arbitration Act. In McMahon, this Court did not address the

application of the Arbitration Act in the context of a RICO

case, and, since the RICO claim there was based on events

expressly covered by the parties’ contract, the Court did not

reach the issue presented in this case. Certainly, there is no

indication in McMahon that this Court meant to narrow the

statutory grounds for review of arbitral awards.

9

The basis for the Second Circuit’s belief that this Court

does not require all acts supporting a RICO pattern to ‘‘arise

out of’’ the agreement to arbitrate is uncertain, particularly

since this Court has confirmed that arbitrators err when they

exceed the scope of their authority. United Steelworkers of

America v. Warrior & Gulf Navigation, Co., 363 U.S. 574,

582 (1960). If the Second Circuit Decision is upheld, the

effect will be to virtually immunize arbitral awards involving

RICO from judicial review under the ‘‘excess of powers’’

doctrine. Nothing in either the RICO Act or the Arbitration

Act supports such a result. The Court should grant certiorari

to review the Second Circuit’s conclusion that the long-

standing principle that arbitrators are limited by the scope of

the parties’ arbitration agreement does not apply in arbitra-

tions involving the RICO statute.

Ill. THE SECOND CIRCUIT HELD THAT IN ARBITRA-

TION, A RICO “PATTERN”? CAN BE BASED ON

JUST ONE ‘‘RACKETEERING ACT”’

In the event that the Court concludes that the arbitrators

did not exceed their powers in resolving claims arising out of

events not covered by the Charter, the Court should stil!

review the new standard set by the Second Circuit for Jiability

under RICO in the context of arbitration.

The RICO statute and relevant case law holds unequivo-

cally that liability under RICO requires a finding of a ‘‘pat-

tern’’ based on at least two acts of ‘‘racketeering activity.”’

18 U.S.C. § 1961(5). See H.J. Inc. v. Northwestern Bell Tele-

phone Company, 57 U.S.L.W. 4951, 4953 (1989); U.S. v.

Indelicato, 865 F.2d 1370, 1381 (2d Cir. 1989).

Here, the arbitrators identified the conversion of cargo by

TRIUMPH during the voyage to Corpus Christi as one rack-

eteering act in violation of 18 U.S.C. § 659. But the arbitra-

tors did not identify a second ‘‘racketeering act’’ in support

of their finding of a RICO pattern, merely concluding that

the conversion was ‘‘part of a pattern sufficient to satisfy the

requirements of civil liability under . . . RICO.’’ App., 29a.

10

By upholding this award, the Second Circuit has created a

new standard for RICO claims in arbitration. Under this new

principle of law, arbitrators need not find the two statutorily

required predicate acts to award treble damages under RICO,

but may rely instead on one predicate act coupled with alle-

gations of ‘‘prior misconduct.”’

In its recitation of the facts, the Second Circuit stated that

the arbitrators found,

that there was evidence of four other substantial short-

ages in crude oil cargo carried by the vessel over a two-

year period; that the managing company of the

chartered vessel also managed, but did not own, four

other vessels in the same group as the chartered vessel;

that one of the vessels was found to have converted

crude oil cargo in a similar manner during a voyage; and

that three of the vessels were suspected of doing so.

TRIUMPH, 924 F.2d at 469; App., 5a. The court concluded

that the arbitrators had found evidence of two sorts of

misconduct—alleged shortages on previous voyages of

TRIUMPH and events alleged to have occurred on other ves-

sels. None of this ‘‘evidence,’’ however, establishes that Tri-

umph has committed a second racketeering act triggering

RICO liability.

Any reliance by the arbitrators (or the Second Circuit) on

the alleged conversion of cargo on TRIAD, TRISUN, TRI-

LIGHT and TRISTAR was improper. The arbitrators dis-

cussed events occurring on these other vessels as part of their

RICO “‘pattern’’ analysis, (App., 28a & n. 14), however,

these vessels were not owned, operated or managed by Tri-

umph, and Triumph was not shown to have any ownership

interest or responsibility for them. The only link among the

vessels found by the arbitrators was that they were all man-

aged by the same company. App., 28a. That management

company was not a party to the arbitration and was not

shown to have any connection to Triumph. Triumph has

independent corporate status, and absent evidence sufficient

to ‘‘pierce the corporate veil,’’ cannot be held vicariously lia-

1]

ble for another’s actions. See Puma Industrial Consulting,

Inc. v. Daal Associates, Inc., 808 F.2d 982, 986 (2d Cir.

1987).

If the Second Circuit Decision is upheld, Triumph will be

forced to pay damages for the alleged misconduct of unre-

lated third parties occurring on vessels over which it had no

control. Such a result would violate fundamental Due Process

principles, because Triumph is only liable for its own actions.

For this reason alone, the Second Circuit Decision must be

set aside. The ‘‘rules of due process and other constitutional

protections must extend to [arbitration].’’ Dewey v. Reynolds

Metal Co., 291 F. Supp. 786, 790 (W.D. Mich. 1969); Amal-

gamated Food v. Great A & P Co., 415 F.2d 185, 189 (3rd

Cir. 1969).

Similarly, although the Second Circuit referred several

times to Triumph’s alleged ‘‘prior practice’’ and its ‘‘miscon-

duct’’ on ‘‘other voyages,’’ TRIUMPH, 924 F.2d at 470-71;

App., 8a, the record contains no evidence of ‘‘racketeering

activity’’ occurring on TRIUMPH’s prior voyages. At most,

the arbitrators stated that they were presented with allega-

tions of shortages occurring on the vessel’s previous voyages.

However, allegations of short delivery of cargo on previous

voyages are not equivalent to racketeering acts under RICO;

to qualify as such a racketeering act, there must be a finding

that, for example, the shortage resulted from conversion of

cargo in violation of 18 U.S.C. § 659. The arbitrators made

no such finding with respect to the prior voyages.

To find a second racketeering act based on TRIUMPH’s

prior voyages, the arbitrators would have had to make a

determination that there was in fact a shortage on a prior

voyage, that such shortage resulted from conversion of cargo

and was within the RICO definition of a ‘‘racketeering act’’

and, finally, that Triumph was responsible for that theft. Not

only did the arbitrators make no such finding, but as dis-

cussed above, the arbitrators only had the authority to make

such determinations with respect to disputes ‘‘arising out of’’

12

the voyage covered by the Charter, not with respect to pre-

vious voyages under other charters.

By ordering the confirmation of the Final award, the

Second Circuit has established a new rule for RICO arbitra-

tions; the arbitrators can base liability under the Act on just

one predicate act, notwithstanding the express provisions of

the statute that a pattern of racketeering activity ‘‘requires at

least two acts of racketeering activity.’’ 18 U.S.C. § 1961(5).

Certiorari should be granted so that this Court can review

this new standard for RICO liability in the arbitration con-

text.

CONCLUSION

For the foregoing reasons, the petition for certiorari should

be GRANTED.

Dated: June 17, 1991

Respectfully submitted,

JOSEPH C. SMITH

BURLINGHAM UNDERWOOD

& LORD

One Battery Park Plaza

New York, New York 10004

(212) 422-7585

Counsel of Record

for Petitioner

Of Counsel

R. SCOTT ERVIN

BURLINGHAM UNDERWOOD & LORD

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UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

oe

Nos. 820, 978—August Term 1990

Argued: January 7, 1991 Decided: January 28, 1991

Docket Nos. 90-7778, -7800

>

KERR-MCGEE REFINING CORPORATION,

Plaintiff-Appellant,

Cross-A ppellee,

—against—

M/T TRIUMPH, her boilers, tackle, etc.,

Defendant-A ppellee,

TRIUMPH TANKERS, LTD.,

Defendant-A ppellee,

Cross-Appellant.

Before:

FEINBERG, NEWMAN and MCLAUGHLIN,

Circuit Judges.

ieee

2a

Appeal and cross-appeal from a judgment of the

United States District Court for the Southern District of

New York, William C. Conner, J., confirming an arbi-

tration panel’s Partial Final Award but vacating the

panel’s Final Award on the ground that the panel

exceeded its authority under the arbitration agreement.

Reversed in part and affirmed in part.

a ae

JOHN P. VAYDA, New York, NY (Nourse &

Bowles, Maria L. Alonso, Peter T. Jen-

sen, of Counsel), for Plaintiff-

Appellant, Cross-Appellee.

R. SCOTT ERVIN, New York, NY

(Burlingham, Underwood & Lord,

Joseph C. Smith, of Counsel), for

Defendant-Appellee, Cross-Appellant.

ed

FEINBERG, Circuit Judge:

Plaintiff Kerr-McGee Refining Corp. (Kerr-McGee)

appeals from a judgment entered in accordance with an

order of the United States District Court for the South-

ern District of New York, William C. Conner, J., dated

July 10, 1990, vacating an arbitration panel’s Decision

and Final Award, dated March 28, 1990, which awarded

Kerr-McGee treble damages under the Racketeer Influ-

enced and Corrupt Organizations Act (RICO), 18

U.S.C. §§ 1961-68. The principal question on appeal is

whether the arbitration panel exceeded its authority

under a voyage charter party (the Charter) because the

3a

panel considered evidence of voyages not covered by the

Charter as proof of the ‘‘pattern’’ and ‘‘enterprise’’ ele-

ments of a RICO violation. Judge Conner’s July 1990

order (and the subsequent judgment) also confirmed a

Partial Final Award issued by the arbitration panel on

September 7, 1988. Defendant Triumph Tankers, Ltd.

(Triumph) cross-appeals from that portion of the district

court’s judgment. For reasons given below, we reverse

the judgment with respect to the March 1990 Final

Award and affirm with respect to the September 1988

Partial Final Award.

Background

The Charter was entered into in March 1984 by Kerr-

McGee, as charterer, and Triumph, as owner of the ves-

sel. Later that month, Triumph loaded 539,999 net

barrels of crude oil at a terminal in Scotland, and this

amount was incorporated into a bill of lading that

showed Kerr-McGee as consignee at Corpus Christi,

Texas. When the vessel arrived at Corpus Christi and

the oil was discharged, Kerr-McGee’s measurements

showed that only 528,060.65 net barrels had been

received from the vessel. Kerr-McGee accordingly

alleged short delivery of cargo and withheld freight in

the amount of $213,000 to cover the alleged shortage.

Triumph then sought arbitration to recover the bal-

ance of the freight withheld by Kerr-McGee, since the

Charter required that ‘‘[a]Jny and all differences and dis-

putes of whatsoever nature arising out of this Charter

shall be put to arbitration.’’ Kerr-McGee subsequently

paid the freight balance, but counterclaimed in the arbi-

tration for damages resulting from the alleged short

delivery.

4a

During the course of the arbitration, Kerr-McGee

obtained information, including numerous detailed

photographs of the vessel taken while it was being dis-

mantled for scrap metal in China, that showed that a

permanent concealed tank had been built into one of the

vessel’s cargo tanks. The vessel had been further modi-

fied to allow oil to be transferred from the cargo tank

to the concealed tank. In the words of the arbitration

panel, ‘‘[w]hat appeared at first sight to be a fairly sim-

ple case of a short delivery developed over the seven

hearings into a complex matter involving allegations of

cargo stealing by this vessel, as well as other vessels

operated by the same managers, perjury by the vessel’s

Chief Engineer, alterations to the Deck and Engine logs,

etc.’’ Because of the alleged theft of cargo, Kerr-McGee

amended its claim in arbitration to recompute its dam-

ages and to seek damages under RICO.

In September 1988, the three-person arbitration panel

issued a Partial Final Award in favor of Kerr-McGee for

the value of cargo short delivered, together with interest.

The arbitrators deferred decision on a number of other

issues, including Kerr-McGee’s RICO claim, its alterna-

tive claim for punitive damages and its claim for attor-

neys’ fees and costs.

In March 1990, the arbitration panel issued its Deci-

sion and Final Award, with one arbitrator dissenting.

The majority found, among other things, that the modi-

fication to the vessel’s cargo tank existed at the time of

the chartered voyage; that the modification was perma-

nent and was designed to divert cargo on more than one

occasion; that 7,497.4 net barrels of Kerr-McGee’s cargo

was converted in violation of 18 U.S.C. § 659, which

deals with theft from interstate or foreign shipments;

Sa

that there was evidence of four other substantial short-

ages in crude oil cargo carried by the vessel over a two-

year period; that the managing company of the

chartered vessel also managed, but did not own, four

other vessels in the same group as the chartered vessel;

that one of the vessels was found to have converted

crude oil cargo in a similar manner during a voyage;

and that three of the vessels were suspected of doing so.

The majority accordingly concluded that Triumph had

converted Kerr-McGee’s cargo through a pattern of

racketeering and awarded under RICO treble damages,

costs and attorneys’ fees, all totalling $512,520.10.

Kerr-McGee then moved in the district court to con-

firm the Partial Final and Final Arbitration Awards,

and Triumph cross-moved to vacate the awards. The

district court confirmed the Partial Final Award after

finding that it was not time-barred, but vacated the

Final Award on the ground that the arbitration panel

exceeded its power when it relied upon occurrences on

other voyages not covered by the Charter in order to

find a ‘‘pattern’’ and ‘‘enterprise’’ as required by

RICO. This appeal and cross-appeal followed.

Discussion

A. The Final Award

There is no longer any doubt that a RICO claim is

arbitrable. See Shearson/American Express Inc. v.

McMahon, 482 U.S. 220, 242 (1987). Thus, whether the

arbitration panel exceeded its authority under the Char-

ter in imposing RICO liability on Triumph turns solely

on the issue of whether the claim was nonarbitrable

because it was beyond the intended scope of the arbitra-

6a

tion agreement. In deciding this issue, we are guided by

the principle that ‘‘any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbitra-

tion, [including problems concerning] the construction

of the contract language itself.’” Moses H. Cone Memo-

rial Hospital v. Mercury Construction Corp., 460 U.S.

1, 24-25 (1983). Kerr-McGee argues that the district

court did not adhere to this principle when it determined

that the RICO claim was outside the scope of the Char-

ter. We agree.

The district court vacated the Final Award on the

ground that because the parties agreed to arbitrate only

those claims ‘‘arising out of’’ the Charter, the arbitra-

tion panel exceeded its authority when it relied on epi-

sodes occurring on voyages not covered by the Charter

to establish the predicate acts necessary for a RICO vio-

lation. We believe that this was too restrictive a con-

struction of the parties’ intent as expressed in the

Charter that ‘‘/aJny and all differences and disputes of

whatsoever nature arising out of this Charter shall be

put to arbitration’’ (emphasis added). The dispute here

was directly based on a shortage in the fuel oil delivered

at the end of the single voyage covered by the Charter.

It is true that Kerr-McGee thereafter obtained evidence

that the shortage was intentional and part of a prior

practice. This evidence, however, did not alter the facts

that the dispute arose ‘‘out of’’ the Charter and the

damages were inflicted during Triumph’s performance

under it. Even though the arbitration panel looked at

other voyages, it did not determine the liability of a per-

son not party to the contract, as was the case in Orion

Shipping & Trading Co. v. Eastern States Petroleum

Corp. of Panama, S.A., 312 F.2d 299 (2d Cir.), cert.

denied, 373 U.S. 949 (1963), relied on by Triumph. The

7a

award here imposes liability only on Triumph, a party

to the agreement to arbitrate.

Citing Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d

840 (2d Cir. 1987), Triumph argues that the RICO claim

was nonarbitrable. Genesco involved a plaintiff that had

purchased fabric from the defendants over the years,

and made each purchase on a written purchase order

form containing an arbitration provision. Plaintiff

asserted a RICO claim, and the Genesco court held the

claim arbitrable because ‘‘the predicate acts of [plain-

tiff’s} RICO claim all derive from the parties’ transac-

tions under the sales agreements.’’ Id. at 848. Triumph

points out that the predicate acts here, in contrast, were

not performed under contracts between the parties at

all, much less under contracts containing an arbitration

clause.

We do not believe, however, that Genesco determines

the result here, although, if anything, that decision sup-

ports the position taken by Kerr-McGee. The panel in

that case did look to transactions under a number of

sales agreements in determining that a RICO claim

could be brought under them, even though each sales

agreement provided only for arbitration of ‘‘[aJll claims

and disputes of whatever nature arising under this con-

tract.’’ 815 F.2d at 845 (emphasis added). There is noth-

ing in Genesco suggesting that the arbitration provision

in any of the sales agreements expressly applied to dis-

putes arising out of the series of agreements. The panel

nonetheless held the RICO claim arbitrable, reasoning

that ‘“‘if the allegations underlying the claims ‘touch

matters’ covered by the parties’ [arbitration agreement],

then those claims must be arbitrated, whatever the legal

labels attached to them.’’ 815 F.2d at 846. That same

8a

logic supports the conclusion that Kerr-McGee’s RICO

claim is arbitrable. Once the parties have agreed to arbi-

trate disputes arising under an agreement—here the

Charter—the arbitrators should be able to consider any

conduct of the parties that bears on the damages appro-

priate for a covered dispute. The dispute here over the

oil shortage is clearly arbitrable; the arbitrators could

treble that award if its occurrence violated the antitrust

laws. Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985). Or, in an appro-

priate case, the arbitrators could enhance it by punitive

damages if prior misconduct established entitlement to

such damages. Bonar v. Dean Witter Reynolds, Inc.,

835 F.2d 1378 (llth Cir. 1988). Indeed, punitive dam-

ages can be awarded because the party on whom they

are imposed has repeatedly engaged in the offensive con-

duct even though the prior dealings did not involve the

party claiming punitive damages.

Similarly, the arbitrators here could treble the award

if the misconduct was part of a RICO pattern. If Tri-

umph’s argument that the arbitrators could not look to

what happened on other voyages were carried to its logi-

cal extreme, a RICO claim could not be arbitrated

except in the rare instances in which all the predicate

acts occurred on a single voyage. In general, this court

has hardly been overly receptive to civil RICO claims,

see Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2d

Cir. 1984), or to their arbitrability, see McMahon v.

Shearson/American Express, Inc., 788 F.2d 94 (2d Cir.

1986). But the Supreme Court reversed us in both cases,

Sedima, 473 U.S. 479 (1985); Shearson, 482 U.S. 220

(1987), and has made it clear that RICO claims are arbi-

trable. We do not believe that the Court, in approving

arbitration for RICO claims, thought it was creating a

9a

RICO arbitration forum only for situations in which all

acts constituting the pattern (and the enterprise) arise

under an agreement to arbitrate, requiring the parties in

other situations to pursue the basic damage claim in

arbitration and to sue thereafter for treble damages

under RICO in a court. Since RICO claims are arbitra-

ble, we see no reason here for limiting arbitrability to

those situations in which all of the necessary prior con-

duct giving rise to RICO liability is governed by an

agreement to arbitrate.

Indeed, after the district court vacated the Final

Award, Kerr-McGee filed a ‘‘precautionary’’ complaint

in the district court in order to state its RICO claim in

that forum. Such a splintering of actions is contrary to

the broad language used in the arbitration provision of

the Charter, and would undermine the benefits the par-

ties sought to achieve by agreeing to arbitrate ‘‘any and

all’’ of their differences under it. We have held that a

court must accord ‘‘the narrowest of readings’’ to the

‘fexcess Of powers’’ provision of 9 U.S.C. § 10(d),

which the district court relied on in vacating the Final

Award. Andros Compania Maritima, S.A. v. Marc Rich

& Co., A.G., 579 F.2d 691, 703 (2d Cir. 1978). That

was not done here.

Accordingly, we find that the arbitration panel acted

within the scope of the Charter when it awarded Kerr-

McGee treble damages under RICO for Triumph’s con-

version of the chartered cargo, and that the district

court erred by not confirming the Final Award.

10a

B. The Partial Final Award

Under the Arbitration Act, a party has one year to

avail itself of summary proceedings for confirmation of

an award. 9 U.S.C. § 9. An award that finally and con-

clusively disposes of a ‘“‘separate independent claim’’

may be confirmed even if it does not dispose of all the

claims that were submitted to arbitration. See Metallge-

sellschaft A.G. v. M/V Capitan Constante, 790 F.2d

280, 283 (2d Cir. 1986). Triumph contends that Kerr-

McGee’s motion to confirm the Partial Final Award is

time-barred, because that award was a full and final dis-

position of the shortage claim and the motion was made

more than one year after the date of the award. We

question whether the one-year limitation should apply to

a party seeking confirmation of an award that does not

end the arbitration, since such a rule ‘‘will make arbitra-

tion more complicated, time consuming and expensive.”’

Id. at 285 (Feinberg, J., dissenting). We need not

resolve this issue, however, since we find that the Partial

Final Award did not finally dispose of a separate inde-

pendent claim, thus rendering the one-year limitation

inapplicable in any event.

When it issued the Partial Final Award, the arbitra-

tion panel expressly left open whether, as a result of Tri-

umph’s breach, Kerr-McGee was also entitled to

punitive or RICO damages, costs and attorneys’ fees. It

is thus apparent, as the district court found, that this

award merely decided the issue of liability and partial

damages on the shortage claim, which was a predicate

act to the RICO claim, and did not finally dispose of an

independent claim because it left open the question of

damages. Cf. Michaels v. Mariforum Shipping, S.A.,

624 F.2d 411, 414 (2d Cir. 1980).

lla

For the above reasons, we reverse the district court’s

judgment insofar as it vacates the Final Award and

affirm its judgment insofar as it confirms the Partial

Final Award. The district court is directed to enter judg-

ment confirming the Final Award in its entirety.

—

12a

Opinion and Order

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

84 Civ. 3299

(WCC)

—

KERR-MCGEE REFINING CORP.,

Plaintiff,

—against—

TRIUMPH TANKERS LTD.,

Defendants.

>

APPEARANCES:

NOURSE & BOWLES

Attorneys for Plaintiff

One Exchange Plaza

55 Broadway

New York, New York 10006

John P. Vayda, Esq.

Maria L. Alonso, Esq.

Of Counsel

BURLINGHAM UNDERWOOD

& LORD

Attorneys for Defendant

One Battery Park Plaza

New York, New York 10004

Joseph C. Smith, Esq.

R. Scott Ervin, Esq.

Of Counsel

13a

CONNER, D.J.:

This action is presently before the Court on the motion of

plaintiff Kerr-McGee Refining Corp. (‘‘Kerr-McGee’’) to

confirm the Partial Final and Final Arbitration Awards and

the cross motion of defendant Triumph Tankers, Ltd. (‘‘Tri-

umph’’) to vacate such awards. Triumph moves to vacate the

partial award as time-barred and the final award on the

grounds that the arbitration panel (1) exceeded their powers,

(2) are guilty of misbehavior prejudicial to Triumph and (3)

acted in manifest disregard of the law. For the following rea-

sons, the partial award is confirmed and the final award is

vacated.

FACTS

The present dispute arises out of a voyage charter party

(the ‘‘Charter’’) dated March 5, 1984, between Kerr-McGee

Refining Corp. (‘‘Kerr-McGee’’), as charterer and Triumph

Tankers, Ltd. (‘‘Triumph’’), as owner of the vessel. On

March 9, 1984, the vessel loaded 539,999 net bbls. of Beatrice

Crude Oil at the Nigg Oil Terminal in Scotland and on

March 10, 1984, sailed for Corpus Christi, Texas, arriving on

March 28, 1984. Upon arrival at Corpus Christi, Kerr-McGee

found that the amount of cargo on board was only

538,250.09 net bbls. Following discharge of the oil, Kerr-

McGee discovered that a total of only 528,060.65 net bbls.

had been received from the vessel. On the basis of these mea-

surements, Kerr-McGee alleged short delivery and withheld

freight in the amount of $213,000.

Because the Charter provided for arbitration of disputes

‘arising out of’’ the Charter, Triumph sought arbitration to

recover the balance of freight withheld by Kerr-McGee. Kerr-

McGee subsequently paid the balance but counterclaimed in

the arbitration for $150,638.59 as damages for short delivery

of 4,835.91 net bbls. of cargo. Thereafter, Kerr-McGee

increased the amount of its shortage claim to 11,938.35 net

bbls. of cargo and sought treble damages based on the Rack-

l4a

eteer Influenced and Corrupt Organizations Act (‘‘RICO’’),

18 U.S.C. §§ 1962-1968.

On September 7, 1988, the arbitration panel issued a Par-

tial Final Award unanimously finding in favor of Kerr-

McGee for the value of 7,497.41 net barrels of cargo short

delivered, together with interest to the date of the Partial

Final Award at 9% per annum, in the combined amount of

$332,138.41 with interest to continue at 10% per annum until

payment or judgment. The arbitrators deferred Kerr-McGee’s

RICO claim for which both parties submitted further briefs.

On March 28, 1990, the panel issued its Decision and Final

Award whereby the majority concluded that Triumph had

converted 7,497.41 net bbls. of Kerr-McGee’s cargo through

a p.ttern of racketeering and awarded treble damages under

RICO, costs, attorneys’ fees and interest totaling

$512,520.10.

In 1984, prior to the arbitration, Kerr-McGee commenced

this action seeking to attach assets of Triumph located in

New York as security for its claim. By agreement of the par-

ties, this action was discontinued pending arbitration, upon

the posting of security by Triumph’s protection and indem-

nity underwriter. By order dated September 13, 1985, the

Court dismissed this action subject to reopening for the pur-

pose of confirming or vacating the arbitration award. The

Court now considers the cross motions to confirm and to

vacate.

DISCUSSION

I. Partial Final Award

Triumph first asks this Court to vacate the Partial Final

Award of September 7, 1988 because Kerr-McGee’s motion

for confirmation is time-barred. Triumph claims that the par-

tial award is a full and final disposition of the shortage

claim, subject to confirmation within one year from the date

issued, September 7, 1989. Kerr-McGee claims to the con-

trary, that the partial award did not fully and separately dis-

15a

pose of an independent claim and therefore was not subject

to confirmation until the date of the final award, allowing

confirmation at the present time.

The Federal Arbitration Act (‘‘Act’’) provides that if a

party wishes to avail itself of summary proceedings for con-

firmation of an award,

at any time within one year after the award is made, any

party to the arbitration may apply to the court for an

order confirming the award...

9 U.S.C. § 9. This provision limits the time in which a party

may move for confirmation to one year after the date of the

award. The law is well settled that an interim award which

finally and conclusively disposes of a separate independent

claim may be confirmed although it does not resolve all the

claims that were submitted to arbitration. Metallgesellschaft

A.G. v. M/V Captain Constante, 790 F.2d 280, 283 (2d Cir.

1986); Eurolines Shipping Co. v. Metal Transport Corp., 491

F. Supp. 590, 592 (S.D.N.Y. 1980). If, however, the award

left open the amount of damages or did not fully dispose of

a distinct claim, the limitations period is tolled until the final

award. See Metallgesellschaft A.G. v. M/V Captain Con-

stante, 790 F.2d 280, 283 (2d Cir. 1986); Michaels v. Mari-

forum Shipping. S.A., 624 F.2d 411, 414 (2d Cir. 1980)

({interim award] ‘‘did not finally dispose of any of the claims

submitted, since it left open the question of damages on the

' four counterclaims of Owner that it sustained and reserved

- decision on the fifth’’); Puerto Rico Maritime Etc. v. Star

Lines, 454 F. Supp. 368, 372 (S.D.N.Y. 1978) (declaration of

liability leaving the question of the amount owing unan-

swered and the possibility of further disputes between the

parties not separable and non-dependent). The question thus

before the Court in determining whether the one-year period

has run is whether the Partial Final Award finally and defin-

itely disposed of a separate and independent claim.

In the Partial Final Award, the panel determined that Tri-

umph breached the charter and was liable for shortage dam-

ages. Specifically, the panel found that Triumph ‘‘failed to

deliver 7,497.41 net bbls. of Beatrice Crude, which resulted in

l6a

a loss to Charterers of $233,544.32.’’ The panel further

awarded interest to Kerr-McGee, allocated the arbitrators’

fees and set interest at 10% to run until payment was made

or the award was reduced to judgment. Kerr-McGee argues

that because the panel left open whether, as a result of Tri-

umph’s breach, Kerr-McGee was also entitled to costs, attor-

neys’ fees and punitive and/or RICO damages and whether

Triumph was entitled to interest for late payment of freight,

the Partial Final Award did not finally dispose of an inde-

pendent claim, but merely decided the issue of liability and

partial damages on the predicate shortage claim. This Court

agrees.

Kerr-McGee likens its case to that of Michaels v. Mari-

forum Shipping, S.A., 624 F.2d 411 (2d Cir. 1980), in that

while the panel established a value for the damages Kerr

McGee was entitled to for its short-delivered cargo, it did not

determine all of Kerr-McGee’s damages arising out of its sin-

gle shortage claim. Because all damages stem from the short-

age claim, determination of Triumph’s liability and the value

of the short cargo alone does not completely dispose of an

independent claim. Tied to that claim are the costs, attor-

neys’ fees and punitive and/or RICO damages which are

determined in relation to the substantive claim of conversion

or theft.

II. Final Award

Section 9 of the Act provides that when an application for

an order confirming an arbitration award is made to a dis-

trict court, the court ‘‘must grant such an order unless the

award is vacated, modified, or corrected as prescribed in sec-

tions 10 and 11 of this title.’’ 9 U.S.C. § 9. Section 10 pro-

vides, in relevant part, that an award may be vacated where

the arbitrators ‘‘exceeded their powers.’ 9 U.S.C. § 10(d).

Triumph challenges the panel majority’s award of treble

damages under RICO! as exceeding their powers, claiming

1 18 U.S.C. 1964(c) provides:

Any person injured in his business or property by reason of a violation

of section 1962 of this chapter may sue therefor in any appropriate

PUD NGM reese

17a

that (1) the scope of the arbitration agreement did not

empower the panel to consider a RICO claim, and 2) the

panel considered evidence that had no relation to this voyage

and thus did not ‘‘arise out of’’ the charter party.

Although the charter party between Kerr-McGee and Tri-

umph does not specifically include RICO as a remedy for

breach, it provides that:

Any and all differences and disputes of whatsoever

nature arising out of this Charter shall be put to arbitra-

tion...

While the award of civil RICO damages indeed exceeds the

compensatory measure of damages typical in breach of con-

tract claims, the composite claim before the panel no longer

concerned only breach of contract but included a RICO ele-

ment on which treble damages are expressly authorized.

Therefore, Triumph’s contention that the panel was not

empowered to award the equivalent of punitive damages in a

breach of contract claim is inapt. The panel, empowered by

the arbitration agreement to consider ‘‘any and all differences

and disputes of whatsoever nature,’’ properly considered the

RICO claim. Shearson/American Express, Inc. v. McMahon,

107 S.Ct. 2332, 2335 (1987) (RICO claim arbitrable under the

terms of the Arbitration Act where parties contracted to arbi-

trate ‘‘any controversy arising out of or relating to my

accounts, to transactions with you for me or to this agree-

ment or the breach thereof.’’) Accordingly, it can not be

stated that the panel necessarily exceeded its power in consid-

ering the RICO claim and awarding treble damages.

Triumph further contends that the panel majority exceeded

its power when it considered Kerr-McGee’s allegations that

Triumph was part of a group of shipowners engaged in a

**pattern’’ of cargo conversion over a period of several years.

Triumph argues that such consideration ignores the parties’

agreement to arbitrate only those claims ‘‘arising out of this

United States district court and shall recover threefold the damages he

sustains and the cost of the suit, including a reasonable attorney’s fee.

18a

Charter,’’ a charter which governed only the single voyage

from Nigg Terminal to Corpus Christi.

In its Final Award, two of three arbitrators determined

that the theft of cargo aboard the Triumph was part of a pat-

tern sufficient to satisfy the requisites of civil liability under

18 U.S.C. §§ 1962(a) and (c) of RICO, including the ‘‘pat-

tern’’ and ‘“‘enterprise’’ requirements. In doing so, the panel

majority expressly concluded that the owners of TRISUM,

TRILIGNT, TRISTAR and TRIAD were converting cargo in

a similar manner and that because Triumph not only was

part of the same group but shared the same managing agent

as these vessels, Triumph should be held accountable for

their actions. The Court agrees with Triumph that because

the parties agreed to arbitrate only those claims ‘‘arising out

of’’ the Charter, the panel majority exceeded its power in

looking to occurrences on other voyages in finding a pattern

and enterprise to satisfy the elements of RICO and was

accordingly without authority to award RICO damages on

that basis.”

CONCLUSION

For the above stated reasons, Kerr-McGee’s motion to con-

firm the partial award dated September 7, 1988 in the princi-

pal amount of $233,544.32 plus $98,594.09 interest through

the date of the award, plus interest on the principal amount

at the rate of 10% per annum until payment has been made

in full is granted and Triumph’s motion to vacate the final

award is granted.

SO ORDERED.

United States District Judge

Dated: July 10, 1990

New York, New York

2 Because this Court finds that the panel exceeded its power, it is

unnecessary to determine whether the panel was guilty of misbehavior preju-

dicial to Triumph or whether the panel acted in manifest disregard of the

law.

19a

Denial of Rehearing

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

DOCKET NUMBERS 90-7778, 90-7800

—

At a stated term of the United States Court of Appeals for

the Second Circuit, held at the United States courthouse, in

the City of New York, on the 19th day of March, one thou-

sand nine hundred and ninety-one

Snell

KERR-MCGEE REFINING CORPORATION

Plaintiff-Appellant

Cross-Appellee,

,

M/T TRIUMPH, her engines, boilers

and tackle, etc.

Defendant-Appellee,

TRIUMPH TANKERS, LTD.

Defendant-Appellee,

Cross-A ppellant.

aaa

A petition for rehearing containing a suggestion that the

action be reheard in banc having been filed herein by Appel-

lee Triumph Tankers, Ltd.

Upon consideration by the panel that heard the appeal, it

is

Ordered that said petition for rehearing is DENIED.

It is further ordered that the suggestion for rehearing in

banc has been transmitted to the judges of the court in regu-

lar active service and to any other judge that heard the

appeal and that no such judge has requested that a vote be

taken thereon.

Elaine B. Goldsmith

Clerk

rien

20a

Decision and Final Award

In the Matter of the Arbitration

between

Triumph Tankers Ltd., as Owners of the TRIUMPH,

—and—

Kerr-McGee Refining Corp., as Charterers.

+>

Before: Alexis Nichols

Louis P. Sheinbaum, Esq.

Manfred W. Arnold, Chairman

Appearances: Burlingham Underwood & Lord

for and on behalf of Triumph Tankers Ltd.

by Joseph C. Smith, Esq., of Counsel

Nourse & Bowles

for and on behalf of Kerr-McGee

Refining Corp.

by John P. Vayda, Esq., of Counsel

On September 7, 1988, the panel issued its Partial Final

Award’ in Charterers’ favor for the value of cargo short

delivered, together with interest.

At the time, the panel did not render a decision on the fol-

lowing claims or issues:

a) whether or not Owners were privy to the modification

as a pre-existing condition when (or after) they acquired the

vessel, or whether Owners in fact arranged for those struc-

tural changes.”

b) Charterers’ claim for treble damages for Owners con-

verting or taking Charterers’ cargo under the Racketeer Influ-

1 SMA Award 2508 (1988).

2 Page 5 of the award.

ae ND RO 2,

me A aN a, lee —eae Die a ip sat <a a Sih an Sat NRA Nt eS eR Las

AO da. Nt a aA

2la .

enced and Corrupt Organizations Act — mB USA.

Secs. 1961-1968.

c) Charterers’ alternative claim for punitive damages.

d) Charterers’ claim for attorneys’ fees, the expenses of

the arbitration and expert fees, which Charterers claim as

costs.

e) Owners’ claim for interest on the late payment of

freight.

Having carefully reviewed and considered all submissions

and arguments by the parties, the panel reaches the following

decisions:

a) The panel accepted the presence of the modifications

within the vessel’s No. 3 centertank as a condition existent at

the time of the subject March 1984 voyage of the TRI-

UMPH. The information, supported by a survey narrative

and numerous detailed photographs, was obtained from a

report dated March 27, 1986, prepared by McLaren, Dick &

Co. (Asia) Ltd. for the account of Clyde & Co. in connection

with an investigation of an alleged cargo shortage of about

13,000 barrels of light Nigerian crude on a voyage of the

TRIUMPH in August/September 1983. There is no absolute

proof as to the exact time when the modifications in the No.

3 centertank were made or who in fact made them. However,

having accepted the fact that the conditions were existent in

March 1984, it follows that the modifications existed when

the Owners acquired the vessel or were made after the vessel

had been purchased by these Owners. Thus, the questions the

panel has considered include whether Owners did know or

should have known about the No. 3 centertank condition,

and whether there was a taking or conversion of cargo by

Owners on the subject voyage.

When the McLaren report was submitted into evidence’ by

Charterers to show, through the photographs and the narra-

tive, that conditions existed on board the vessel which could

have or in fact were used to effect the diversion of cargo, the

burden of coming forward shifted to Owners. Owners then

22a

produced the vessel’s Chief Mate and Chief Engineer. Neither

one confirmed nor recalled the existing conditions. Indeed,

the Chief Mate denied the existence of the conditions which

the panel has found existed on the vessel in the No. 3 center-

tank. The panel majority did not perceive the testimony of

either the Chief Mate or the Chief Engineer to be unequivo-

cal, forthright or trustworthy. Owners also submitted the

affidavits of a surveyor as well as those by various crewmen

commenting on the non-existence of the tank modifications

and additional piping in the No. 3 tank. The gravity and sig-

nificance of the McLaren report should have prompted a

more persuasive rebuttal than that presented by the Owners,

if one were available. The rebuttal presented was unconvinc-

ing.

There is no direct evidence that the Owners constructed or

knew about the modifications in tank No. 3. The Owners,

however, controlled the vessel for an extensive period of

time. As is implicit in the panel majority’s findings* on con-

version, the panel majority finds that Owners knew about the

existing conditions in the No. 3 centertank.

Having reached this conclusion, Owners must assume the

responsibility for the existence of the tank modifications and

the consequences resulting therefrom and their actions.

b) Although the charter party between Owners and Char-

terers does not specifically include RICO as a remedy for

breaches, the charter party provides:

‘‘Any and all differences and disputes of whatsoever

nature arising out of this charter shall be put to arbitra-

a

3. The surveyor of McLaren & Co. (Asia) Ltd. was not presented to

testify by either party to the arbitration. Neither side requested that the panel

do anything to have him appear or testify. After the issuance of the partial

Final Award herein, while the RICO issue was in the deliberation stage, the

dissenting member of the panel requested that the hearings be reopened on

the panel’s own initiative to demand and summon the surveyor to appear and

testify. The other members of the panel did not agree.

4 Infra.

23a

RICO was enacted in 1970. While originally devised to deal

with the illegal activities of organized crime, it is clear from

the statute itself that it has a civil side (Sec. 1964 is entitled

‘Civil Remedies’’).° In 1985, the Supreme Court stated in

Sedima, S.P.R.L. v. Imrex Co.:°

‘‘In sum, we can find no support in the statute’s [RICO]

history, its language, or considerations of policy for a

requirement that a private treble damages action under

Sec. 1964(c) can proceed only against a defendant who

has already been criminally convicted.’’ (p. 493)

When dealing with this issue, it must be kept in mind that

a claim under the RICO statute is directly and inseparably

tied to the arbitration proceeding under which the original

claim is pursued. If a matter has been submitted to arbitra-

tion, the moving/claiming party cannot pursue RICO in the

courts if the other party objects to the claimant bringing

suit.’ Thus, if an arbitration panel did not hear a RICO

claim, its failure to do so could deprive a claimant from hav-

ing any forum with jurisdiction to determine the claim, could

deprive a claimant of the contractual right to arbitrate its dis-

pute against the allegedly liable party and could result in the

undesirable circumstance of a party presumably having rights

but no remedy.

Section 1962, ‘‘Prohibited Activities,’’ consists of four sub-

sections, with sub-section (a) dealing with the situation where

the racketeering enterprise itself benefits from its own racke-

5 18 U.S.C. 1964 (c) provides:

‘“(c) Any person injured in his business or property by reason of a vio-

lation of section 1962 of this chapter may sue therefor in any appropri-

ate United States district court and shall recover threefold the damages

he sustains and the cost of the suit, including a reasonable attorney’s

fee.”’

6 473 U.S. 479 (1985).

7 See Shearson/American Express v. McMahon, 479 U.S. 812 (1987).

24a

teering activity.* In Harco Inc. v. American National Bank

and

Trust Co.,°? the court stated:

‘‘Under sub-section (a), therefore, the liable person may

be a corporation using the proceeds of a pattern of rack-

eteering activity in its operations. This approach to sub-

section (a) thus makes the corporation-enterprise liable

under RICO when the corporation is actually the direct

or indirect beneficiary of the pattern of racketeering

activity. This result is in accord with the primary pur-

pose of RICO, which, after all is to reach those who

ultimately profit from racketeering . . . .’’®

Sub-section (b) refers to the acquisition of an interest in or

control of the enterprise, and (c) covers the participation in

the enterprise."

The terms ‘‘enterprise,’’ ‘‘person,’’ ‘‘racketeering activity”’

and

‘‘pattern of racketeering activity’? are defined in 18

U.S.C. par. 1961, in relevant part, as follows:

9

18 U.S.C. 1962(a) provides:

**(a) It shall be unlawful for any person who has received any

income derived, directly or indirectly, from a pattern of racketeering

activity or through collection of an unlawful debt in which such person

has participated as a principal within the meaning of section 2, title 18,

United States Code, to use or invest, directly or indirectly, any part of

such income, or the proceeds of such income, in acquisition of any

interest in, or the establishment or operation of, any enterprise which

is engaged in, or the activities of which affect, interstate or foreign

commerce.

747 F. 2d 384 (7th Cir. 1984), aff'd 469 U.S. 1157 (1985). See also

Schofield v. First Commodity Corp. of Boston, 793 F.2d 28 (ist Cir. 1986);

Kimmel v. Peterson, 565 F. Supp. 476 (E.D.Pa. 1983).

10

11

At p. 402.

18 U.S.C. 1962(c) provides:

‘*“(c) It shall be unlawful for any person employed by or associated

with any enterprise engaged in, or the activities of which affect, inter-

state or foreign commerce, to conduct or participate, directly or indi-

rectly, in the conduct of such enterprise’s affairs through a pattern of

racketeering activity or collection of unlawful debt.’’

25a

**“(1) ‘racketeering activity’ means (B) any act which is

indictable under any of the following provisions of [18

U.S.C.]: . . . section 659 (relating to theft from inter-

state shipment). . .

= * a

**(3) ‘person’ includes any individual or entity capable

of holding a legal or beneficial interest in property;

**(4) ‘enterprise’ includes any individual, partnership,

corporation, association, or other legal entity, and any

union or group of individuals associated in fact although

not a legal entity;

**(S) ‘pattern of racketeering activity’ requires at least

two acts of racketeering activity

18 U.S.C. 659 provides in part:

**Whoever embezzles, steals, or unlawfully takes, car-

ries away, or conceals, or by fraud or deception obtains

from any pipeline system, railroad car, wagon, motor-

truck, or other vehicle, or from any tank or storage

facility, station, station house, platform or depot or

from any steamboat, vessel, or wharf, or from any air-

craft, air terminal, airport, aircraft terminal or air navi-

gation facility with intent to convert to his own use any

goods or chattels moving as or which are a part of or

which constitute an interstate or foreign shipment of

freight, express, or other property; . . . shall in each

case be fined not more than $5,000 or imprisoned not

more than ten years, or both;....

Before dealing with the applicability of RICO to this case,

it would be in order to make a few general comments.

The parties have not questioned the panel’s authority to

deal with the RICO claim and issues, but the question lies

with the appropriateness of applying it to the facts of this

case. The award of RICO damages, in the context of the gen-

eral law of damages, indeed does exceed the concept of mak-

26a

ing the injured party whole, but this is a concept which

ultimately is supposed to act as a deterrent.

Originally, the consideration and the awarding of RICO

civil damages was meant to fight commercial fraud. Most

recently, in its decision in H.J. Inc. v. Northwestern Bell Tel-

ephone Co.,'* the Supreme Court restated the pronounce-

ments of Sedima v. Imrex, and upheld the broad use of the

RICO statute, also restating that Congress had not meant to

limit the statute to organized crime cases.

The panel has previously determined that the TRIUMPH

failed to deliver 7,497.4 barrels of Beatrice Crude to the

Consignee/Charterer, Kerr McGee Refining Corp. at Corpus

Christi, Texas, and that the vessel contained a retaining area

or tank within the No. 3 centertank which was created by

welding and/or plating over apertures in the girders or inter-

nals of the No. 3 centertank. As set forth in the panel’s ear-

lier Partial Final Award, and as depicted and documented by

the photographs and narrative of the McLaren report:

‘Associated with the starboard outer main bottom

[cargo] line was a spur line of smaller diameter which

for most of its length ran inboard and parallel to the

main line on the outboard side of the starboard side

girder in the forward ‘‘bay’’ of No. 3 centre tank. At

the forward end the spur line was fitted with a (gate

type), suction valve and short bend which was connected

to a ‘tee’ piece in the main line adjacent to bulkhead

No. 2/3. At the aft end the spur line turned inboard,

and passed through the side girder into the starboard

after corner of the ‘enclosed area’ where it dropped

down and terminated in a suction strum.”’

During the course of this arbitration, the panel ordered

that the original engine log book of the TRIUMPH be pro-

duced by owners. Examination of the document indicated

that the entries in the log book, for about five days, for the

amount of bunkers on board, starting at the next port at

12 U.S. ___., 109 S.Ct. 2893 (1989).

27a

which bunkers were allegedly purchased (after departing from

Corpus Christi), were whited-out (covered over), and new

(substantially lower) entries/numbers were written over the

white-outs. The engine log book entry for the amount of

bunkers taken on board at this next bunkering port was also

whited over, and changed to substantially reduce the amount

of bunkers on board by about 550 tons.

When confronted with this, the Chief Engineer first testi-

fied that the numbers written over the white-out were the

same as the ones under the white-out, or the white-out had

been used to cover some smudges; but then testified that the

white-out had been made in order to correct errors in the

original numbers, or that he was uncertain why he had made

the changes. The Chief Engineer and Chief Mate were obvi-

ously not credible witnesses, just as the engine log book bun-

ker entries were obviously suspect.

A good deal of time passed between the presentation of the

McLaren report to the panel and the testimony of the Chief

Mate and Chief Engineer. No officer, management person or

executive of the Owners, or the managing company of the

vessel, testified before the panel. Nor was the panel presented

with any affidavit from any such person or persons.

The panel was also presented with evidence to the effect

that there were four other substantial shortages sustained by

crude oil cargoes carried by the TRIUMPH during a two-year

period, including the time of the voyage in question. In

response, Owners submitted a list of voyages of the TRI-

UMPH purporting to indicate which voyages involved ‘‘dis-

puted’’ cargo claims. The list shows four ‘‘disputed”’’ claims.

However, the accuracy of the list is suspect by reason of the

fact that the very voyage of March 1984, which is the subject

of this arbitration, was indicated as ‘‘no dispute’’.

In the arbitration between 7risun Tankers. Ltd. v. Burmah

Oil Tankers Ltd.,’? the vessel was found to have converted

crude oil cargo on a voyage in June 1984, and the owner was

found liable for the taking. The managing company of the

TRISUN was also the managing company of the TRIUMPH.

13. SMA Award 2327 (1986).

28a

Both vessels were owned by single ship corporations, but

were in the same group.”

Finally, but certainly not last in importance in evaluating

the probabilities, the proper inferences to be drawn from the

facts, and the claim made herein under RICO, is the fact that

the modifications made in the No. 3 centertank of the TRI-

UMPH were permanent; the purpose of the modifications

was clearly to divert, convert or take cargo; and it would be

grossly naive or foolish to the point of absurdity to suggest

or believe (especially for the practical and real world of

commercial/maritime arbitration) that the tank within a tank

of the TRIUMPH was intended to be used, or was used, on

only one occasion.

It was common ground between the parties that in order to

prevail on its civil RICO claim, the charterer was obliged to

prove same by a preponderance of the evidence; i.e., based

upon the evidence presented, it was more likely than not that

the facts requisite for the claim to succeed were as alleged by

charterer.

On the basis of all the evidence presented, and the reason-

able, and even compelling, inferences to be drawn therefrom,

it is concluded that Owners (Triumph Tankers Ltd.) con-

verted the 7,497.4 barrels of Beatrice Crude to their own ben-

efit or use in violation of 18 U.S.C. 659, and that Charterers

14 —s‘In early October 1984, the TRILIGHT, a tanker managed by the

same company managing the TRIUMPH, was inspected in Wilhelmshaven,

Germany. The inspection was made in connection with the investigation of

an alleged cargo shortage on the previous voyage. A pipeline was discovered

leading from the ship’s No. 1 center cargo tank, through a cofferdam and

into a hidden tank within the vessel’s forward fuel oil deep tank.

In November 1982, the TRIAD, another vessel managed by the managing

company for the TRIUMPH, was inspected in Louisiana by representatives

of U.S. Customs. Crude oil was found in a fuel oil settling tank, in lines

where bunker fuel should have been, and in the bunker tanks.

Charterers also presented evidence to the effect that on May 17, 1984, an

explosion occurred on board the TRISTAR (still another vessel managed by

the company managing the TRIUMPH), as a result of which, a seaman was

fatally injured, and that the after fuel tanks of the vessel had contained an

explosive atmosphere.

1S Liquid Air Corp. v. Rogers, 834 F. 2d 1297 (7th Cir. 1987).

29a

have satisfied their burden of showing that the taking of said

cargo was part of a pattern sufficient to satisfy the require-

ments of civil liability under 18 U.S.C. 1962(a) and (c) of

RICO, including the ‘‘pattern’’ and ‘‘enterprise’’ require-

ments. '®

Accordingly, by reason of the egregious conduct present in

this arbitration, it is appropriate to apply RICO against Tri-

umph Tankers Ltd., together with its treble damage provision

(18 U.S.C. 1964 (c)), and Charterers are hereby awarded

additional damages against Owners of $368,495.55, calculated

by multiplying by three the value of the 7,497.4 barrels of

Beatrice Crude (3 x $233,544.32 = $700,632.96), and sub-

tracting therefrom the $322,138.41 (cargo value and interest)

awarded to Charterers under the Partial Final Award dated

September 7, 1988."

c) Given the above findings and award relative to RICO,

Charterers’ claim for punitive damages is moot.

d) Clause 24 of the charter party permits the awarding of

“costs, including a reasonable allowance for attorneys fees’’.

Owners have argued that Charterers wasted time and

incurred expenses by ‘‘attempting to create a case of bad

faith, conversion and racketeering where no such activity

took place’’. 18 U.S.C. 1964(c) of RICO provides that the

injured party ‘‘shall recover threefold the damages he sus-

tains and the cost of the suit, including a reasonable attor-

ney’s fee’’. It is the majority’s opinion that the events and

circumstances surrounding this voyage justify an award of

attorneys’ fees and costs, as well as the reallocation of the

_ arbitrators’ fees. Had it not been for the proven shortage in

the delivery of cargo and the modifications in the No. 3 tank,

this arbitration might never have arisen. Having brought this

16 Beauford v. Helmsley, 865 F.2d 1386 (2d Cir. 1989) vacated for fur-

ther consideration, U.S. ____., 109 S.Ct. 3236 (1989); upheld by

order of Second Circuit September 15, 1989; see also U.S. v. Indelicato, 865

F.2d 1370 (2d Cir. 1989).

17 Louisiana Power & Light v. United Gas Pipe Line, 642 F. Supp.

781, 811 (E.D. La. 1986).

30a

matter upon themselves, Owners should not now argue that

Charterers should bear the responsibility for the time and

moneys expended in this case.

The panel majority, therefore, rules that Charterers are

entitled to an award of $111,544.55 for legal fees and the dis-

bursements of counsel for Charterers. We also award to

Charterers the amount of $15,600 representing the share of

the arbitrators’ fees previously assessed against and paid by

Charterers, but now reallocated against Owners.

The panel majority also allows the expert fees claimed in

the sum of $16,880.

The panel is authorized to award the recovery of the above

legal fees, disbursements and expert fees, as ‘‘costs’’ and

‘the cost of the suit’’ under the charter party and 18 U.S.C.

1964(c).

e) Early in the arbitration, Owners claimed they were enti-

tled to recover interest on that portion of freight which had

been withheld by Charterers. Pursuant to the charter party,

freight was due upon delivery which was completed on March

30, 1984.

Charterers initially withheld freight of $213,000, an

amount less than the value of the cargo taken by Triumph

Tankers Ltd. Charterers subsequently paid $92,268.49 of the

$213,000 on April 10, 1984. On May 11, 1984, Charterers

paid an additional amount of $120,731.51. The amount of

interest claimed is calculated to be $1,935.76.

Interest is normally due and awarded to owners on freight

which is withheld or paid late by charterers. However, under

the circumstances of this case, involving the intentional tak-

ing and conversion of cargo by an owner, it would be

improper to award any interest on the withheld freight. The

denial of interest in this matter is in accord with the treat-

ment of the claim of the owners for interest in the TRI-

SUN."

As part of this Final Award, the panel majority has

decided that the arbitrators’ fees, as per Appendix are

18 SMA Award 2327 (1986).

3la

assessed in full against Owners. Payment of the fees, how-

ever, in the first instance is to be made in full by Charterers.

The liability for the panel’s fee is the joint and several obliga-

tion of both Owners and Charterers.

THE AWARD:

Owners are directed to pay to Charterers the additional

sum of $512,520.10, arrived at as follows:

be PPL SRC ereGaRSLeGakee Gh ecan ue vce $368,495.55

2. Legal fees and disbursements.......... 111,544.55

3. Arbitrators’ fees previously

ey ee I a b's Sas sede es ee os 15,600.00

Sy REEL Sen 6 h6Gyd00-66445665006084 16,880.00

$512.520.10

If this award has not been satisfied in full within 30 days

from the date of this award, interest at the rate of 10% per

annum shall become due on the amount of $512,520.10 from

the date of this award until payment in full has been made or

the award has been reduced to judgment, whichever first

occurs.

Alexis Nichols (dissenting)

Louis P. Sheinbaum

Manfred W. Arnold, Chairman

New York, New York

March 28, 1990

32a

APPENDIX A

DISSENTING OPINION ON THE ‘‘TRIUMPH’’ AWARD

by: Alexis Nichols

Four of the highest jurists of the land, Supreme Court Jus-

tices Marshall, Brennan, Blackmun and Powell, in dissenting

from the Sedima narrow majority which was cited by my col-

leagues, used unusually strong language in their indictment of

the abuses of the civil provisions of the Rico Statute;

‘‘Many a prudent defendants facing ruinous exposures

will decide to settle even a case with no merit. It is thus

not surprising that civil RICO has been used for extort-

ive purposes, giving rise to the very evils that it was

designed to combat.”’

Hon. Frederick C. Roucher, a U.S. Congressman, member

of the House Judiciary Committee had this to say about

Rico:

‘*There is a new form of extortion sweeping the country.

Business people of all types and professionals such as

accountants-bankers, insurance agents and securities

brokers are among its primary victims. They are being

threatened with a weapon that can inflict huge damages

and bring unjustified shame and ruin upon them. This

method of extortion can be made more effective than

brass knuckles, fire or vandalism. Ironically, Congress

inadvertently created it as part of a bill designed to help

legitimate businesses defend themselves against orga-

nized crime. Instead, it has been turned against the very

people Congress intended to aid. This weapon is the civil

component of the Racketeer Influenced and Corrupt

Organization Act (RICO).’’

New York Law School, Law Review 131 N.Y.L. Sch. L.

Rev. 133 (1986) “Closing the Rico floodgates in the after-

math of Sedima’’.

33a

Cries of legal outrage about the Rico Statute were also

heard from the U.S. Courts of Appeal for the Seventh, Fifth

and Second Circuits, the latter having federal jurisdiction

over New York where the Triumph arbitration was con-

ducted.

‘*. . . The Seventh Circuit recently sent out what it

called a ‘distress flag’ asking Congress to reform civil

Rico ... and the Second Circuit has opined that

[gliven the general purpose of the Rico legislation, the

uses to which private Rico has been extraordinary, if not

outrageous.’’’”

As if the outrage of the U.S. Courts was not enough, there

is a flood of proposed legislation intended to block its misuse

and reform the Rico statute. One out of the nine pending

bills is H.R. 5290 (99th Congress 2nd Session), introduced by

U.S. Senator Peter W. Rodino, Jr., Chairman of the House

Judiciary Committee.

The Statute’s civil provisions are so vague and expansive

that they make almost any claim for damages a potential

Federal RICO case. ‘Virtually everyone who has addressed

this question’’, said Chief Justice William Rehnquist in April

1989, ‘‘agrees that civil RICO is now being used in ways that

Congress never intended when it enacted the statute in 1970.

Most of the civil suits filed under the statute have nothing to

do with organized crime. They are garden variety fraud cases

of the type traditionally litigated in the State Courts.”’

With so many prominent legislators, judges and legal

scholars, strongly criticizing the abuse of RICO’s misguided

civil provisions and the pending legislation which may, any

day now, overturn the treble damage remedy of this Statute,

I find the majority’s rush to apply, for the first time ever, the

statute’s treble damage relief in maritime arbitration, an exer-

cise in arbitral arrogance.

19 Lacauora & Aronow, The legal shakedown of legitimate business

people: The Runaway Provisions of Private Civil Rico, 21 New Eng. L. Rev.

1 (1985-86).

34a

The fallout from today’s decision is not difficult to predict.

Although one arbitration does not establish a precedent,

aggressive maritime attorneys, who ordinarily handle run of

the mill commercial maritime disputes, will henceforth be

tempted to also plead treble damages, under the civil RICO

statute, having nothing to lose and everything to gain in so

doing. The informality of maritime arbitration, lack of judi-

cial restraints and the inherent freedom, from such annoying

technicalities as burden of proof and rules of evidence, will

transform every single, isolated and sporadic act of fraud,

into a pleading of an act of racketeering activity with dire

consequences.

The Triumph is a typical case of a greedy plaintiff who

was not satisfied with the compensatory damages of

$332,138.41 which the Panel awarded it in its Partial Final

Award. It now wants to line its pocket by collecting another

$1,115,638.80. Counsel for charterers implied that his client

seeks treble damages out of some noble calling to improve

the moral standards of society, as if it is society’s self-

appointed protector.

The Award of punitive damages, it has been said, makes it

too costly for others to commit similar acts of fraud. The

fact that it is not society, but the Charterers, who would

enrich themselves by one million dollars, is skillfully left out

from their otherwise altruistic motives.

The McLaren Report:

On March 12, 1986 an unidentified employee of McLaren,

Dick & Co. (Asia) Lytd., of Hong Kong, pursuant to instruc-

tions received from London attorneys, visited the vessel at a

demolition yard in China. Neither the name of the employee,

nor his educational background, training or business experi-

ence were ever disclosed to the arbitrators. In fact, the

employee was never produced to testify and owners were

never invited to attend the inspection in China. Given the

publicity charterers gave the McLaren Report, their subse-

quent silence about the disposition of the London proceed-

35a

ings and the impact the Report had on same is deafening. So

much for charterers’ ‘‘smoking gun’’ theory.

After an exhaustive search in No. 3 tank, which was parti-

ally cut-up, the first McLaren Report concluded that; ‘‘. . .

it will be appreciated that nothing of note concerning pilfer-

age of cargo was discovered in the course of our inspection.”’

On June 18, 1985 the solicitors instructed the same inspec-

tor to go back and re-inspect the vessel. Again owners were

not invited to attend.

The second inspection revealed certain weldings in No. 3

Tank as described in the majority’s decision. The Report con-

cluded that; ‘‘. . . based on what we found . . . we con-

clude that it would have been possible to divert oil cargo for

the ship’s own use . . .’’. The Report would have been less

partisan and consequently much more credible, if only its

author had also stated what everybody in this business knows

to be true; that every tanker afloat, by design, has the facility

to ‘‘divert’’ oil to any one of its many compartments, with-

out same constituting an indictment of cargo theft.

Even if one accepts that cargo was retained on board,

whether deliberately or negligently, charterers’ witnesses were

unable to explain how a small 500 cubic meter container

described in the McLaren Report, could hide 12,000 barrels

of the allegedly missing oil. Uniquely large though the quan-

tity of the missing oil was, none of it was located and no sin-

gle explanation was suggested to account for the whole loss.

The main thrust of the majority’s decision is its totally

unsubstantiated conclusion that Triumph Tankers Ltd.,

‘*knew about the existing conditions in No. 3 Center Tank’’

and ‘‘owners must assume the responsibility for the existence

of the tank modifications and the consequences resulting

therefrom and their actions’’, despite the fact that, in March

1986, the McLaren inspector, himself, could not find the so-

called ‘‘modifications’’, having spent a full day looking spe-

cifically for same, upon receipt of solicitors’ instructions to

that effect.

The ‘‘Triumph’’ changed hands several times during the

period 1969-1985. She was launched as the ‘‘Credo’’ in 1969

and in 1976 she changed ownership and name to ‘‘Getafix’’.

Se

36a

In 1982 she was purchased by Triumph Tankers Ltd., and

sold for scrap in 1985. The McLaren Report sets no date as

to when the weldings in No. 3 Tank were made and charter-

ers made no effort whatsoever to procure evidence suggesting

their age, which would have been easily determined by a met-

allurgical test.

Charterers submitted the McLaren Report without the cor-

roborating testimony of the person who authored it and

offered no foundation whatsoever to qualify him as an expert

witness. Given the fact that the suspicious No. 3 Center Tank

was a dirty ballast tank which, minutes before loading com-

menced, contained some 22,000 tons of sea water, common

sense dictates that both the arbitrators and Triumph Tankers

Ltd. should have been given the opportunity to cross-examine

the mystery man who conducted the two inspections in

China. My request to the Panel that he be produced for

cross-examination was denied.

The Partial Final Award correctly states that the modifica-

tion to the No. 3 Center Tank rendered the vessel’s measure-

ments unreliable. Consequently, in order to calculate the

intransit loss, one had no alternative but to use the shore

tank measurements both at the loading and discharging port.

The Partial Final Award, howevever, did not ‘‘make a deter-

mination as to whether or not owners were privy to the modi-

fications . . . or whether owners in fact arranged for these

structural changes.

This was left to be decided in the Final Award, such

inquiry forming the comer-stone of plaintiffs’ cargo theft

claim. It is in this context, therefore, that I requested that

this crucial, albeit unnamed witness be produced.

The majority mistakenly alleged that I requested that the

hearings be reopened, something which the S.M.A. arbitra-

tors have the power to so order. For purposes of the Final

Award, however, no hearings whatsoever were held with

respect to the determination of the cargo theft and Rico

claims.

37a

In Colorifico Italiano Max Meter S.p.A. -vs- S/S ‘‘Hellenic

Wave’’, 1419 F.2d 223 (5 Cir. 1969), the Court of Appeals

said:

‘‘The rule is well established that survey reports and

similar documents—offered without supporting testi-

mony, are not admissible in evidence. The VIVID, Fed.

Cas. No. 16. 978, 4 Ben.319, 14 Int. Rev. Rec. 163

[E.D.N.Y. 1970]; Watson -vs- Insurance Co. of North

America, Fed. Cas. No. 17 284, 2 Wash. c.c. 152 (1980);

The Director, 34 F. 57 (1988). ‘The proper proof of the

facts ascertained on the surveys. . . is the testimony of

the surveyors’ 34 F at 60.’’

‘‘The right to cross-examination has been described as

the greatest engine ever invented for the discovery of

truth’’ 5 Wigmore on Evidence § 1367, p. 29. These cru-

cial rights cannot be denied upon the mere ground that

the rules of evidence are very liberal in admiralty mat-

ters.”’

Charterers introducted the McLaren Report as the ‘‘smok-

ing gun’’ in support of their treble damage claim. Charterers

have failed to meet their burden of proof that Triumph

Tankers Ltd., had anything to do with the weldings in No. 3

Tank.

RICO:

The majority correctly cites Sedima, 475 U.S. 479 (1985),

in support of the statute’s unrestricted application against

defendants who have not necessarily been criminally con-

victed before.

The majority, however, is totally off the mark in citing Li-

quid Air Corp. -vs- Rogers, 1834 F. 2d 1297 (7th Cir. 1987),

in support of its finding that the facts required for the Rico

claim in Triumph to succeed ‘‘were as alleged by Charter-

ers’’. The brevity of this one-sentence sweeping indictment

compares most unfavorable with the expansive and detailed

38a

legal analysis Rico complaints have received in the hands of

learned jurists throughout the country.

A brief narrative of the background of Liquid Air will

assist in placing the Triumph Rico claim in its proper per-

spective. ,

Liquid Air, a compressed gas manufacturer, leased several

thousand cylinders containing compressed gas to D&R Weld-

ing Supply Corp. in which two of the shareholders were Jack

Rogers and George Michlik. Through a series of fraudulent

shipping orders, D&R Welding Supply Corporation mis-

appropriated over 3,000 cylinders of compressed gas.

A jury found all the defendants guilty, namely, D&R

Welding Supply Corporation, Jack Rodgers, George Michlik

and Ray Bridges. Bridges was recruited to handle all the

paperwork and under the scheme, Bridges falsified docu-

ments so that it would appear that D&R had returned all the

leased cylinders. The scheme was accomplished through nine-

teen separate falsified shipping orders, over a period span-

ning 7 months. The jury assessed Rico damages against the

defendants who filed an appeal to overturn the jury’s verdict.

The following are excerpts from the Liquid Air decision of

the Court of Appeals:

‘‘All subsections 1962(a)(b)(c)(d) require plaintiff to

show that defendants engaged in a pattern of racketeer-

ing activity. A pattern of racketeering activity requires at

least two acts of racketeering activity in ten years, 18

U.S.C. 1961(5).”’

‘‘In Sedima the Court noted that a pattern of racketeer-

ing activity requires more than two acts committed

within a ten year period; acts must have ‘continuity plus

relationship which combines to produce the pattern’.’’

‘‘Borrowing from another statute the Sedima U.S.

Supreme Court defined Pattern as ‘criminal acts that

have the same or similar purpose, results, participants,

victims or other methods of commission or othervise are

related by distinguishing characteristics and are not iso-

lated events.

39a

Since Sedima, the various courts have wrestled with the

definition of ‘‘pattern of racketeering activity’? under Rico.

In Liquid Air the Court opted for a middle course definition

requiring:

‘. . . The predicate acts to be ongoing over an identifi-

able period of time so that they can fairly be viewed as

constitututing separate transactions. . .

*‘A single fraudulent scheme with one injury to one vic-

tim was not transmutted into a federal case simply

because it required several acts of mail and wire fraud to

inflict the single injury. Accord, Marks -vs- Pannel Kerr

Foster, 811 F.2d 1108 (7th Cir. 1987).

In Liquid Air the Court concluded:

**Therefore, we have a single scheme which lasted seven

months and defrauded a single victim. The defendants

committed nineteen separate acts, each act resulted in a

distinct injury to Liquid Air and concommitment benefit

to D&R (defendant). We find that the repeated infliction

of economic injury upon a single victim of a single

scheme is sufficient to establish a pattern of racketeering

activity for purposes of Civil Rico. Accord, Sun Savings

& Loan Ass’n. -'s- Dierdorff, 825 F.2d 187 (9th Cir.

1987).”’

This is hardly the case in Triumph where the alleged predi-

cate act, i.e., pilfering of cargo, merely constitutes a single,

isolated injury to one single victim.

The majority also cites Louisiana Power & Light -vs-

United Gas Pipe Line, 642 F. Supp. 781, 809 (E.D. La.

1986), in support of its finding that a pattern of racketeering

activity existed in Triumph. However, the Court defined the

term ‘‘pattern of racketeering activity’’ as follows:

**Rico is meant to punish those who harm others in a

continuous systematic way, not those who harm others

only once by a series of actions. When a plaintiff is hurt

by one fraud which is only furthered by several mailings

40a

rather than hurt by repeated acts of fraud, the Courts

are reluctant to impose Rico damages. . .”’

‘‘The exact meaning of the term ‘multiple criminal epi-

sodes’ is not clear, but at a minimum it means that the

defendant must harm the plaintiff more than once—it

must committed acts which are ongoing and which have

an indendent and repeated harmful significance for the

plaintiff.’’

The Charterers in Triumph did not allege, much less prove,

that they were harmed by the vessel owner more than once.

Based on Louisiana Power the Triumph Rico claim has no

standing.

In Louisiana Power the Court makes another significant

point, which is fatal to plaintiffs’ Rico claim in this arbitra-

tion. Said the Court;

‘*Because the Rico statute does not specify a limitations

period for civil actions. the applicable period is that of

the most analogous limitations period set by state law

Johnson -vs- Railway Express Agency Inc., 421 U.S.

454- 462, 95 S. Ct. 1717; 1721, 44 L. Ed. 2d (1975).

This court recently held that civil Rico claims are gov-

erned by the one year prescriptive period applicable to

fraud actions in Louisiana. Moore -vs- A.G. Edwards &

Sons, Inc., 631 F. Supp. 138. 144 (E.D. La. 1986).

In the instant matter, charterers amended their claim to

include a Rico claim in June 1987, whereas, the predicate act

took place in February of 1984. In view of this, I respectfully

submit, that based on the above case cited by the majority

the Rico claim appears to be time-barred, on the basis of the

one year prescriptive period applicable to fraud actions.

The majority finally cites Beauford -vs- Helmsley, 865 F.2d

1386 (2nd Cir 1989), in support of the proposition that char-

terers have ‘‘satisfied their burden of showing that the taking

of said cargo was part of the pattern sufficient to satisfy the

requirements of civil liability under 18 U.S.C. 1962 (a) and

(c) of Rico including the Pattern and enterprise requirements.

4la

The United States Court of Appeals, Second Circuit,

reheard en banc Beauford and affirmed the dismissal of the

civil Rico complaint which had alleged a pattern of racketeer-

ing activity in the sale of 8,286 apartments converted into

condominiums. Said the Court:

‘‘We stated that our precedents were confusing but

seemed to require the conclusion that ‘a single alleged

scheme to defraud buyers, tenants and the authorities

overseeing the law pertaining to the conversion is not

sufficient to allege Rico enterprise regardless of how

many fraudulent acts it entails’. We concluded that the

Beauford complaint was properly dismissed for lack of

Rico enterprise.”’

‘‘What is required is that the complaint plead a basis

from which it could be inferred that the acts of racke-

teering activity were neither isolated nor sporadic.’’

The Beaufort Court then discussed Jndelicato who was

convicted for three acts of murder.

Said the Court:

‘‘In Jndelicato we found the threat of continuity inher-

ent in the criminal nature of the enterprise at whose

threat the three related murders were committed. . .

‘‘When, however, there is no indication that the enter-

prise . . . is associated with organized crime the nature

of the enterprise does not of itself suggest that racketeer-

ing acts will continue, and proof of continuity or the

threat of continuity of Racketeering activity must thus

be found in some other factor other than the enterprise

itself.”’

In the Triumph arbitration we are not dealing with murder.

Triumph Tankers Ltd., were not linked to organized crime

and the vessel itself was sold for scrap in 1985, some two

years before the Rico claim was filed, therefore presenting no

continuing threat.

42a

Another Rico decision which supports the dismissal of this

Rico claim is Albany Insurance Company -vs- Esses, 821

F.2d 41, 44 (2nd Cir 1987).

In Albany, on motion by the defendants, plaintiffs’ Rico

suit was dismissed by the District Court Eastern District of

New York, and the dismissal was affirmed by the U.S. Court

of Appeals for the Second Circuit.

The Court summarized the law regarding ‘‘continuity of

the Rico enterprise’’ as follows:

‘‘In Sedima the Supreme Court indicated that proof of

two acts of racketeering activity without more does not

establish a pattern...

‘*. . . To establish more there must be a threat of con-

tinuing activity . . . the Court emphasized that it is this

factor of continuity plus relationship which combines -to

produce a pattern ... continuity plus was required

because Rico was not aimed at sporadic criminal or at

the isolated offender...

‘‘With its straightforward and short-lived goal, the

enterprise alleged by Albany is not sufficiently continu-

ing to constitute a Rico enterprise under 18 U.S.C.

1961(4) 1962, Beck, 820 F.2d at 51. We therefore affirm

the dismissal of the Rico claim. (All Citations Omitted)

Charterers in their Reply Brief dated January 31, 1989 (p.

20) defined Triumph’s continuity of the Rico enterprise by

stating that Oscar managed the TRI-vessels (T371) and that

Chief Mate Votis and Chief Engineer Petropoulos, were the

prime actors in the enterprise (meaning Oscar) and their

movement throughout the fleet of other vessels managed by

Oscar united them, owners (meaning Triumph Tankers Ltd.),

the common manager Oscar of the TRI-fleet and the vessel

‘*Triumph’’.

Neither Oscar nor Chief Mate Votis, or Chief Engineer

Petropulos are Rico codefendants in the Triumph arbitration.

Neither Oscar nor its employees injured the plaintiff in this

action or at any other time. |

43a

The vessels ‘‘Trisun’’, ‘‘Trilight’’ or ‘‘Triad’’ mentioned in

the majority decision, are unrelated to Triumph Tankers

Ltd., except for allegedly having a common managing com-

pany, which is not a co-defendant in this action. In shipping,

managing companies operate vessels in a similar fashion as in

real estate, where managing agents run a variety of other

people’s real estate Properties. Therefore, to hold a vessel

owner liable, under Rico, for alleged predicate acts commit-

ted by the non-defendant managing agent, is as untenable as

holding individual apartment-owners liable under Rico, for

the acts of their real estate agents, solely on the grounds of

‘‘common management’’, a rather outrageous proposition.

The sole defendant in this arbitration is Triumph Tankers

Ltd. In terms of the Rico statute, the ‘“‘person’’ can only be

the named defendant, i.e., Triumph Tankers Ltd., who it was

never alleged to have been associated with organized crime

(See Beaufort and Indelicato).

Triumph Tankers Ltd., cannot be found liable with respect

to predicate acts allegedly committed by third parties unre-

lated to this defendant.

For purposes of sub-section 1962(c) the ‘‘person’’ sued

must be separate from the ‘‘enterprise’’ that the ‘‘person’’ is

alleged to have participated in or conducted. Therefore, for

the purpose of 1962(c) Triumph Tankers Ltd. cannot be con-

sidered the enterprise. In fact, charterers in their January 31,

1989 Reply briefs identified Oscar as being the enterprise.

Plaintiff has listed several separate predicate acts commit-

ted by various entities other than Triumph Tankers Ltd., in

support of an allegation of a pattern of racketeering activity.

The only predicate act involving Triumph Tankers Ltd.,

the voyage presently under discussion which, based on sound

legal principles represents at best a single and isolated injury

to one victim.

Since there is no evidence of continuity and ‘‘relationship

plus’’ according to Albany, charterers’ Rico claim fails. Even

if, for argument’s sake, charterers could prove a racketeering

violation in all the other vessels listed, charterers still cannot

recover under Rico, because charterers must also show that

they themselves were injured as a result thereof.

44a

This is not possible because the charterers (Kerr McGee)

were not a party to and of the other voyages mentioned in

the post-hearing briefs and the majority’s decision.

Finally, under Section 1962(a) District Courts have held

that plaintiffs suing under 1962(a) must show that the injury

for which they seek Rico damages was caused by the use or

investment of the ill-gotten funds rather than the racketeering

activity itself. Louisiana Power & Light, 642 F. Supp. 805

(E.D. La. 1986). Plaintiff has failed to prove the element

covering the investment of racketeering-driven izicome in the

enterprise as was required by 1962(a).

The Rico Statute awesome as it may be, places a heavy

burden upon plaintiff to satisfy all the elements pleaded. To

do so, one should come forward with evidence not just theo-

ries. This plaintiff failed to meet its burden of proof.

The arbitrators received absolutely no independent evidence

or testimony about the Rico statute and its application. What

we did receive, were partisan post-hearing briefs by the par-

ties, which, as expected, were conflicting and contradicted

each other’s positions.

By June 1989, at the conclusion of the last session of the

arbitrators’ lengthy deliberations, the two party appointed

arbitrators had adopted opposite view points, with the Chair-

man still pondering the Rico issue.

On August 17, 1989, the Chairman wrote the arbitrators;

. 1 have come to the conclusion that this is a case

which, on the face of it, meets the requirements to invoke

Rico; there is also no doubt in my mind that we have the

power to apply Rico; but I feel that despite the pre-existing

conditions, I do not have to apply Rico. . .’’.

On November 1, 1989, without the arbitrators having met

to deliberate again, the Chairman wrote; ‘“‘. . . after agoniz-

ing hours and days of review and analysis I have now

reached the conclusion that Rico damages should be awarded

. . .’. This sudden change of mind prompted the exchange

of several letters amongst the arbitrators.

On November 28th, in a letter to the Panel Chairman, the

other party-appointed arbitrator explained that he had called

him, after he received his August 17th letter because; “‘. . .

ee

.

45a

it was not clear to me whether you were leaning one way or

the other or had made up your mind on the Rico issue. . .

that was the substance of the conversation which I believe

was on August 23, 1989. It was a short conversation. We did

not discuss the facts, the merits, the law, and I told you that

I would send you my comments on your draft and my ver-

sion of the Rico section. . .’’.

The only legal analysis on Rico received by the arbitrators,

consisted of the two partisan, post-hearing briefs, prepared

by opposing attorneys and the comments and version of the

Rico section prepared by the other party-appointed arbitra-

tor, who, by June 1989 and during the final deliberations,

had openly adopted charterers’ Rico pleadings (as much as

the writer had endorsed the opposite viewpoint).

Understandably, the two opposing attorneys owe allegiance

to their respective clients, therefore one cannot quarrel with

the bias evident in their respective legal briefs. Similarly,

arbitrators at the end of the deliberations are expected to

have formulated their own conclusions based on the evidence.

Therefore, given the partisan nature of the legal analysis

the Rico statute received, I requested the arbitrators to invite

an independent legal expert on Rico to testify as a ‘‘friend of

the Court’’ before the arbitrators and the parties. My request

was summarily and unfairly rejected.

Although arbitrators have broad discretion to control their

own proceedings, Scherk -vs- Alberto-Culver, 417 U.S. 506

(1974); John Wiley & Sons -vs- Livingston, 376 U.S. 543, 557

(1964), their discretion is limited by their duty to receive all

‘‘relevant”’ evidence.

I sincerely felt then and still feel now, that we would all

have derived an immeasurable benefit listening to such an

independent and disinterested witness whose legal analysis

with respect to this complex federal statute is most relevant.

The compelling interest to get to the truth and reach a cor-

rect legal analysis of this complex statute, should have been

balanced against the need to keep the process relatively quick

and inexpensive. In this case, however, with the proceedings

spanning almost 6 years, I respectfully submit, that one more

46a

hearing would not have caused prejudice to either of the

parties.

We, as arbitrators, have wide discretion to accept or

exclude witnesses and hear the evidence we deem relevant. It

has been said that parties who agree to arbitration must be

content with the informalities of the system. However, this

informality must still give way to the requirement of funda-

mental fairness afforded the parties, which fairness, I regret

to say, we failed to safeguard in this particular matter.

Alexis Nichols

New York, New York

March 26, 1990

47a

RACKETEERING INFLUENCED AND

CORRUPT ORGANIZATIONS ACT

§ 1961. Definitions

As used in this chapter—

(1) ‘‘racketeering activity’’ means (A) any act or

threat involving murder, kidnaping, gambling, arson,

robbery, bribery, extortion, or dealing in narcotic or

other dangerous drugs, which is chargeable under State

law and punishable by imprisonment of more than one

year; (B) any act which is indictable under any of the

following provisions of title 18, United States Code: Sec-

tion 201 (relating to bribery), section 224 (relating to

sports bribery), sections 471, 472, and 473 (relating to

counterfeiting), section 659 (relating to theft from inter-

state shipment) if the act indictable under section 659 is

felonious, section 664 (relating to embezzlement from

pension and welfare funds), sections 891-894 (relating to

extortionate credit transactions), section 1084 (relating to

the transmission of gambling information), section 1341

(relating to mail fraud), section 1343 (relating to wire

fraud), section 1503 (relating to obstruction of justice),

section 1510 (relating to obstruction of criminal investi-

gations), section 1511 (relating to the obstruction of

State or local law enforcement), section 1951 (relating to

interference with commerce, robbery, or extortion),

section 1952 (relating to racketeering), section 1953

(relating to interstate transportation of wagering para-

phernalia), section 1954 (relating to unlawful welfare

fund payments), section 1955 (relating to the prohibition

of illegal gambling business), sections 2314 and 2315

(relating to interstate transportation of stolen property),

sections 2341-2346 (relating to trafficking in contraband

cigarettes), sections 2421-24 (relating to white slave traf-

fic), (C) any act which is indictable under title 29,

United States Code, section 186 (dealing with restrictions

on payments and loans to labor organizations) or section

50l(c) (relating to embezzlement from union funds), or

48a

(D) any offense involving fraud connected with a case

under title 11, fraud in the sale of securities, or the felo-

nious manufacture, importation, receiving, concealment,

buying, selling, or otherwise dealing in narcotic or other

dangerous drugs, punishable under any law of the

United States.

(2) ‘‘State’’ means any State of the United States, the Dis-

trict of Columbia, the Commonwealth of Puerto Rico, any

territory or possesion of the United States, any political sub-

division, or any department, agency, or instrumentality

thereof;

(3) ‘‘person’’ includes any individual or entity capable of

holding a legal or beneficial interest in property;

(4) ‘‘enterprise’’ includes any individual, partnership, cor-

poration, association, or other legal entity, and any union or

group of individuals associated in fact although not a legal

entity;

(5) ‘‘pattern of racketeering activity’’ requires at least two

acts of racketeering activity, one of which occurred after the

effective date of this chapter and the last of which occurred

within ten years (excluding any period of imprisonment) after

the commission of a prior set of racketeering activity;

(6) ‘‘unlawful debt’? means a debt (A) incurred or con-

tracted in gambling activity which was in violation of the law

of the United States, a State or political subdivision thereof,

or which is unenforceable under State of Federal law in

whole or in part as to principal or interest because of the

laws relating to usury, and (B) which was incurred in connec-

tion with the business of gambling in violation of the law of

the United States, a State or political subdivision thereof, or

the business of lending money or a thing of value at a rate

usurious under State of Federal law, where the usurious rate

is at least twice the enforceable rates;

(7) ‘‘racketeering investigation’’ means any attorney or

investigator so designated by the Attorney General and

rs

49a

charged with the duty of enforcing or carrying into effect this_

chapter;

(8) ‘‘racketeering investigation’’ means any inquiry con-

ducted by an racketeering investigator for the purpose of

ascertaining whether any person has been involved in any vio-

lation of this chapter or of any final order; judgment, or

decree of any court of the United States, duly entered in any

case or proceeding arising under this chapter;

(9) ‘‘documentary material’ includes any boox, paper,

document, record, recording, or other material; and

(10) ‘‘Attorney General’’ includes the Attorney General of

the United States, the Deputy Attorney General of the United

States, any Assistant Attorney General of the United States,

or any employee of the Department of Justice or any

employee of any department or agency of the United States

so designated by the Attorney General to carry out the

powers conferred on the Attorney General by this chapter.

Any department or agency so designated may use in investi-

gations authorized by this chapter either the investigative pro-

visions of this chapter or the investigative power of such

department or agency otherwise conferred by law.