Opinion
Case No. CV 00-08032 DDP (AIJx)
June 14, 2001
ORDER GRANTING CHO YANG'S MOTION TO DISMISS, MARINE TERMINALS' MOTION TO DISMISS, AND TOTAL TERMINALS' MOTION TO DISMISS
This matter comes before the Court on motions to dismiss filed by defendants Cho Yang Shipping Co., Ltd. ("Cho Yang"), Total Terminals, Inc. ("Total Terminals"), and Marine Terminals Corporation ("Marine Terminals"). The motions are based on the forum selection clause contained in the Cho Yang bill of lading, which states that any claim arising under it shall be determined by the courts in Seoul, Korea. In the alternative, Total Terminals and Marine Terminals move for partial summary judgment limiting the liability of each to $500 per package. After reviewing the materials submitted by the parties and hearing oral argument, the Court adopts the following order.
BACKGROUND
This case concerns damage to a paper embosser shipped from Felixstowe, England to Long Beach, California. Plaintiff American Tissue, owner of the embosser, hired freight forwarder defendant Schneider Freight USA ("Schneider") to arrange transport of the embosser from England to American Tissues's plant in Calexico, California. Schneider went through a shipper, defendant Teco GmbH ("Teco"), who booked the cargo for carriage through defendant Ocean World Lines, Inc. ("Ocean World"), a Non-Vessel Operating Carrier ("NVOCC"). Ocean World issued its bill of lading to Teco, which listed Teco as the shipper and Schneider as the consignee. Ocean World arranged for defendant Cho Yang Shipping Co., Ltd. ("Cho Yang") to carry the cargo. Cho Yang issued its bill of lading to Ocean World, and carried the cargo from England to Long Beach, California, aboard the vessel Cho Yang Giant. The shipper on the Cho Yang bill of lading is Ocean World Lines Europe Gmbh, and the consignee is the defendant Ocean World.
An NVOCC is an intermediary between the shipper of goods and the operator of the vessel that will carry the goods. Generally, an NVOCC combines the goods of various shippers into a single shipment, contracts with a vessel for the transportation of the goods, and delivers the goods to the vessel, usually in a sealed container. See National Labor Relations Bd. v. International Longshoremen's Ass'n, 447 U.S. 490, 496 n. 8 (1980). NVOCCs perform a function similar to overland freight forwarders, consolidating small shipments from multiple shippers into large, standard-sized reusable containers that can be quickly loaded on and off ships and onto trucks or other types of transportation. 883 F.2d 93, 101 (D.C. Cir. 1989).
As defined by statute, an NVOCC is a "common carrier that does not operate the vessels by which the ocean transportation is provided, and is a shipper in its relationship with an ocean common carrier." 46 App. U.S.C. § 1702 (17) (B). Conversely, an NVOCC is considered a carrier in its relationship with the shipper of the goods. National Customs Brokers, 883 F.2d at 101.
The original shipper of the cargo receives a bill of lading from the NVOCC upon delivery of the cargo to the NVOCC. The NVOCC receives an entirely separate bill of lading from the actual carrier, on which the owner of the cargo may or may not be named. In this case, the cargo's owner, American Tissue, was not named on the Cho Yang bill of lading.
A bill of lading acts as a receipt, a contract of carriage, and a document of title. See William Tetley, Marine Cargo Claims 6 (2d ed. 1978). At issue here is the bill of lading's function as a contract of carriage. The Cho Yang bill of lading contains the following language:
The contract evidenced by or contained in this Bill of Lading is governed by the law of Korea and any claim or dispute arising hereunder or in connection herewith shall be determined by the courts in Seoul and no other courts.
(4/24 Decl. J.J. Kim, Ex. A.)
After it was discharged from the Cho Yang Giant, the embosser was damaged when it fell from a flat rack trailer at the Total Terminal facility in Long Beach. Plaintiff Indemnity Insurance Co. of North America ("Indemnity Insurance") insured the cargo for American Tissue. Pursuant to the terms of the policy, Indemnity Insurance paid American Tissue $296,000 for the damage to the paper embosser, took subrogation rights, and filed suit against the defendants. Indemnity Insurance's complaint alleges causes of action for breach of contract, damage to cargo under the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1300 et seq., damage to cargo under the Harter Act, 46 U.S.C. § 190 et seq., bailee liability, negligence in arranging safe transport, and negligence in the handling of the cargo after discharge from the vessel.
DISCUSSION
The defendants seek an order from this Court dismissing the plaintiffs' complaint based on a forum selection clause contained in the Cho Yang bill of lading. In the alternative, defendants Marine Terminals and Total Terminals seek orders limiting their liability under the terms of the bill of lading.
I. THE FORUM SELECTION CLAUSE
A. Legal Standard
The Ninth Circuit has held that a motion to dismiss premised on the enforcement of a forum selection clause should be treated as a Federal Rule of Civil Procedure 12(b)(3) motion. See Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996) (reviewing conflicting case law and rejecting position that such a motion should be treated as a 12(b)(6) motion); see also Offshore Sportswear, Inc. v. Vuarnet Int'l, B.V., 114 F.3d 848, 851 (9th Cir. 1997) (holding that "[w]e treat dismissal based on a forum selection clause like a dismissal for improper venue under Rule 12(b)(3)."). In reaching this decision, the Argueta court noted that unlike a Rule 12(b)(6) analysis, "[a]nalysis under Rule 12(b)(3) . . . permits the district court to consider facts outside of the pleadings, and is consistent with the Supreme Court standard for resolving forum selection clause cases." 87 F.3d at 324. Accordingly, in reviewing a motion to dismiss based on the enforcement of a forum selection clause, the court need not accept the pleadings as true, and the court is permitted to consider facts outside of the pleadings. Id.
Interpretation and enforcement of contractual forum selection clauses are procedural issues to be decided under federal law. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir. 1988). Under federal law, a forum selection clause is presumptively valid and should not be set aside unless the party challenging the clause shows that enforcement would be unreasonable and unjust, or that the clause is invalid for such reasons as fraud or overreaching. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Argueta, 87 F.3d at 325.
B. Analysis
In 1995, the Supreme Court held that a forum selection clause contained in a bill of lading is enforceable. Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995). In Sky Reefer, the foreign arbitration clause contained in the bill of lading stated that the contract would be governed by Japanese law and any dispute arising from the bill of lading must be referred to arbitration in Tokyo. Id. at 530. Although Sky Reefer concerned a foreign arbitration clause as opposed to a foreign judicial forum selection clause, the Court made clear that "foreign arbitration clauses are but a subset of foreign forum selection clauses in general." Id. at 534. Federal courts have therefore applied Sky Reefer not only to arbitration clauses but to foreign forum selection clauses in bills of lading.
The Ninth Circuit, in Fireman's Fund Ins. Co. v. M.V. DSR Atlantic, 131 F.3d 1336 (9th Cir. 1998), enforced the same forum selection clause contained in the Cho Yang bill of lading at issue here. The clause contained the following language:
"The contract evidenced by or contained in this Bill of Lading is governed by the law of Korea and any claim or dispute arising hereunder or in connection herewith shall be determined by the courts in Seoul and no other courts."
Id. at 1337. The forum selection clause was contained in a bill of lading covering a shipment of wine, cognac, and armagnac from France to California. Fireman's Fund Insurance Company insured the cargo, which suffered freeze damage en route. Fireman's Fund paid its insured and filed suit against Cho Yang Shipping Co., Ltd., and in rem, against the DSR Atlantic.
The District Court for the Northern District of California, in DSR Atlantic, held that because Korean law did not allow suit against a vessel in rem, the plaintiff would be denied a right to pursue its statutory remedies. Therefore, the district court refused to enforce the forum selection clause in the bill of lading and denied the defendants' motion to dismiss. In reversing the trial court, the Ninth Circuit held that "the mere unavailability of in rem proceedings does not constitute a `lessening of the specific liability imposed by [COGSA],' . . .; rather it presents a `question of the means . . . of enforcing that liability.'" Id. at 1139-40 (alteration and omission in original) (quoting Sky Reefer, 515 U.S. at 537). The court concluded that Korean law would not "`reduce the carrier's obligations . . . below what COGSA guarantees.'" Id. at 1340 (quoting Sky Reefer, 515 U.S. at 538). In this case, the Court is presented with the identical bill of lading and forum selection clause that the Ninth Circuit held to be valid and enforceable in DSR Atlantic.
1. Indemnity Insurance's Contentions Re: Cho Yang
Here, Indemnity Insurance has not challenged the enforcement of the forum selection clause by claiming that the applicable substantive law reduces the obligations of the defendants below what COGSA guarantees. Rather, Indemnity Insurance contends that the Court should not enforce the forum selection clause because: no agency relationship has been established such that the terms of the Cho Yang bill of lading may be imputed against American Tissue; American Tissue did not ratify the Cho Yang bill of lading; and the forum selection provision is only applicable to through bills of lading.
(a) Agency
Indemnity Insurance argues that NVOCC Ocean World was not acting as an agent of American Tissue when it arranged for transport of the embosser on the Cho Yang Giant. According to the plaintiffs, American Tissue's agency and control over Ocean World must be proven — explaining the roles of intermediaries Schneider Freight and Teco GmbH. There is not enough evidence, according to the plaintiffs, that American Tissue had sufficient control over the intermediaries to be bound by the terms of the Cho Yang bill of lading.
The plaintiffs cite language from Constructores Tecnicos v. Sea-Land Serv. Inc., 945 F.2d 841 (5th Cir. 1991). In that case, the plaintiff hired a freight forwarder to arrange for the carriage of a truck and some other equipment from Oklahoma to Honduras. The freight forwarder arranged for Sea-Land to carry the cargo, and Sea-Land issued a clean bill of lading for the cargo. However, the cargo was carried on deck. The plaintiff contended that as the bill of lading was clean, there was a presumption that the cargo was to be carried under deck, and Sea-Land could not rely on the $500 per package limitation of liability under COGSA.
Cho Yang argues, persuasively, that the issue in Constructors Tecnicos was whether, given the unusual fact situation, the freight forwarder was the shipper's agent with respect to agreeing to improper on-deck stowage of the cargo, or whether this was beyond the realm of its authority as an agent. The court held that "[t]he law in this circuit indicates that the question whether a freight forwarder acts as an agent for either party to the contract of carriage tends to turn on the facts of the particular transaction under scrutiny." Id. at 846. That Fifth Circuit case involved uncommon circumstances, which the court held presented an issue of fact to be determined by the district court.
The instant case, in contrast to Constructores Tecnicos appears to contain no unusual questions involving either the scope or chain of the plaintiff's agency. American Tissue hired freight forwarder Schneider, which through shipper Teco contracted with NVOCC Ocean World, which contracted with VOCC Cho Yang. This was envisioned by the plaintiffs when they hired Schneider to arrange the carriage of the cargo through common carriers. (Schweitzer Decl. ¶¶ 3-5.)
Another reason plaintiffs are bound by the forum selection clause stems from the definition of "Merchant" in the Cho Yang bill of lading. The Cho Yang bill of lading defines the term "Merchant" as follows:
"Merchant" includes the shipper, consignee, the receiver of the Goods. The holder of this Bill of Lading, any person owning or entitled to the possession of the Goods or this Bill of Lading[,] any person having a present or future interest in the Goods or any person acting on behalf of any of the above mentioned persons.
(4/24 J.J. Kim Decl. Ex. A.) The Cho Yang bill of lading indicates that the "Merchant" is bound by its terms and conditions. As the owner and consignee of the embosser, American Tissue is a "Merchant" and bound by the terms of the Cho Yang bill of lading.
In All Pacific Trading, Inc. v. Vessel M/V Hanjin Yosu, 7 F.3d 1427 (9th Cir. 1993), the Ninth Circuit assessed a similar situation in a suit brought by cargo owners. In that case the bills of lading did not mention any particular parties. The court thus looked to the definition of "Merchants" contained in the Hanjin bill of lading. The court concluded that the plaintiffs, as cargo owners, were parties to the bill of lading as Merchants. As a result, the cargo owners had an in personam claim against Hanjin. The same conclusion is appropriate in the instant case. American Tissue is a party to the Cho Yang bill of lading as a Merchant.
(b) Ratification
Indemnity Insurance looks to All Pacific for the proposition that there must be an act of ratification before a contract entered into by an agent can be imposed against a principal. Actually, the court noted that, "like all contracts, the bills of lading require some form of acceptance." Id. at 1432. Importantly, the court found, "At the very least, Plaintiffs' initiation of this suit constituted acceptance of the terms of the Hanjin bills of lading." Id.
Indemnity Insurance contends that at the time of filing suit it carefully avoided suing on, or ratifying the Cho Yang bill of lading. However, Cho Yang points to recent authority that clearly indicates that a plaintiff cannot avoid the application of a forum selection clause by suing only in tort. Kelso Enters., Ltd. v. M/V Wisida Frost, 8 F. Supp.2d 1197 (C.D. Cal. 1998); see also Thyssen Inc. v. M/V Alpha Jupiter, 1997 WL 882595 (S.D.N.Y. 1997). In the instant case, the plaintiffs' causes of action clearly stem from the issuance of the bill of lading. Therefore, Indemnity Insurance cannot avoid enforcement of the forum selection clause merely by couching its claims in tort and contending that it has not ratified the bill of lading.
The plaintiffs argued that their tort claims — negligence (damage to cargo), negligence (deviation), and tortious interference with contractual relations — did not relate to the interpretation of the alleged contract, and thus were not covered by the forum selection clause. The court found:
To the contrary, . . . Plaintiffs' claims directly relate to the bills of lading because Plaintiffs' tort claims stem from the delivery of the bananas, which was the purpose of the contract. Defendants' liability for its alleged deviation and subsequent conduct with regard to Plaintiffs' cargo necessarily relates to the interpretation of rights and duties set forth in the bills of lading and related contracts that govern the agreement between Plaintiffs and Defendants for the stowage and delivery of the bananas.
Kelso Enters. at 1207.
"[A] valid forum selection clause cannot be avoided by asserting that the cargo damage claims based on unseaworthiness or tort arise outside of the bill of lading contract. `Such a reading would . . . yield the untenable result that related — and indeed parallel — claims would be litigated in different parts of the world, a consequence unlikely to have been contemplated either by the drafters or by the signatories of the [b]ills of [l]ading.'" Id. at *8. (citation omitted).
(c) The Ambiguous Asterisk Argument
Indemnity Insurance's final argument for why the forum selection clause is not applicable involves the fantastic contention that the forum selection clause applies only to through bills. This argument appears to be based on the layout of text on the front side of the bill of lading. This argument is without merit.
There is an asterisk at the bottom of the front side of the Cho Yang bill of lading. Under the forum selection clause, separated by a line, the following appears: "*APPLICABLE ONLY WHEN USED AS THROUGH BILL OF LADING". There are corresponding asterisks in three boxes on the bill of lading. They are boxes for: (a) "PRE-CARRIAGE BY*", (b) "PLACE OF RECEIPT*", and (c) "PLACE OF DELIVERY*". There is no asterisk by the forum selection clause. This is sufficiently clear in the bill of lading for the embosser (4/24 Kim Decl. Ex. A) and further clarified in a second Kim Declaration filed on May 14, 2001.
It is true that, "bills of lading constitute `contracts of carriage' between a shipper and carrier and as contracts of adhesion," usually drafted by the carrier, they are "`strictly construed against the carrier.'" C-Art, Ltd. v. Hong Kong Islands Line Am., S.A., 940 F.2d 530, 532 (9th Cir. 1991) (quoting 865 F.2d 699, 703 (5th Cir. 1989)). However, there is no ambiguity here. The "applicable only" language on the Cho Yang bill of lading does not apply to the forum selection clause.
For the reasons discussed above, the plaintiffs are bound by the terms of the forum selection clause.
II. TOTAL TERMINALS AND MARINE TERMINALS' MOTIONS TO DISMISS
Defendants Total Terminals and Marine Terminals claim that as subcontractors they are entitled to all the benefits of the Cho Yang bill of lading and seek to invoke the benefit of the forum selection clause. Total Terminals is a terminal operator. Marine Terminals is a stevedore. They rely on the language in the following "Himalaya Clause," which extends the benefits and protections of the bill of lading to third parties:
5. CERTAIN RIGHTS AND IMMUNITIES FOR THE CARRIER AND OTHER PERSONS ["Himalaya Clause"]
(1) The Carrier shall be entitled to sub-contract on any terms the whole or any part of the Carriage.
(2) The Merchant undertakes that no claim or allegation shall be made against any person or vessel whatsoever, other than the Carrier, including, but not limited to the Carrier's servants or agents, any independent contractor and his servants or agents, and all others by whom the whole or any part of the Carriage, whether directly or indirectly, is procured, performed or undertaken, which imposes or attempts to impose upon any such person or vessel any liability whatsoever in connection with the Goods or the Carriage, and if any claim or allegation should nevertheless be made to defend, indemnify and hold harmless the Carrier against all consequences thereof. Without prejudice to the foregoing every such person and vessel shall have the benefit of all provisions herein benefiting the Carrier as if such provisions were expressly for his benefit and in entering into this contract the Carrier, to the extent of these provisions, does so not only on his own behalf but also as agent or trustees for such persons and vessels and such persons and vessels shall to this extent be or be deemed to be parties to this contract.
(4/24 Kim Decl. Ex. A (emphasis added).)
The Bill of Lading contains the following definitions:
"Carrier" means the Cho Yang Shipping Co. Ltd. as being the Carrier and on whose benefit this Bill of Lading has been signed.
"Merchant" includes the shipper, the consignee, the receiver of the Goods. The holder of this Bill of Lading, any person owning or entitled to the possession of the Goods or this Bill of Lading[,] any person having a present or future interest in the Goods or any person acting on behalf of any of the above mentioned persons.
"Carriage" means the whole of the operations and services undertaken or performed by or on behalf of the Carrier in respect of the Goods.
(4/24 Kim Decl. Ex. A.)
By its terms and the applicable case law, the Himalaya Clause covers Total Terminals and Marine Terminals. In the Akiyama Corp. v. M/V Hanjin Marseilles, 162 F.3d 571 (9th Cir. 1998), the Ninth Circuit indicated that when a party seeking protection under a Himalaya Clause is not specifically mentioned in the clause, the party should, at a minimum, be included in a well-defined class of readily identifiable persons to which benefits are extended under the terms of the clause. Id. at 573. The bill of lading in Akiyama — a specifically identified stevedores and terminal operators as subcontractors. Importantly, and what appears to be at issue in the instant case, the court rejected the argument that privity of contract is required in order to benefit from a Himalaya Clause. Id. at 574. "Rather, the proper test is to consider `the nature of the services performed compared to the carrier's responsibility under the carriage contract.'" Id.
A district court reviewing the same Cho Yang bill of lading, recently held that the Himalaya Clause expressly extends Cho Yang's benefits to any agents, servants or independent contractors performing "any part of the Carriage." Watkins v. M/V London Senator, 112 F. Supp.2d 511, 517 (E.D. Va. 2000). Therefore, the stevedore "was covered by the Himalaya Clause as long as it was performing part of the Carriage." Id. Here, Total Terminals and Marine Terminals, as a terminal operator and stevedore respectively, were each performing part of the Carriage as subcontractors. As such they are each entitled to the benefits in the Cho Yang bill of lading, and thus, they can enforce the forum selection clause.
III. COGSA Limitation of Liability
Marine Terminals and Total Terminals seek partial summary judgment limiting liability to each, if any, to $500 per package under the terms of the Cho Yang bill of lading and COGSA. As the Court has determined that the forum selection clause must be enforced, it does not have jurisdiction to rule on this issue.
IV. The Plaintiff's Rule 56(f) Request
Indemnity Insurance requests discovery under Federal Rule of Civil Procedure 56(f). Federal Rule of Civil Procedure 56(f) provides:
When Affidavits are Unavailable. Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.
The Court's ruling on these motions is based on its reading of the undisputed facts. As such, granting the plaintiff's request could not change the outcome of this order. The plaintiff's request is denied.
CONCLUSION
For the reasons set forth above, the Court grants Cho Yang's motion to dismiss, grants Marine Terminals' motion to dismiss, and grants Total Terminals' motion to dismiss. The Court lacks jurisdiction to rule on Marine Terminals' and Total Terminals' motions for partial summary judgment.
IT IS SO ORDERED.