Summary
reciting that the voyage charterer, Cementia, negotiated bills of lading to Lafarge, and citing GOLDEN CHARIOT for the proposition that "[w]hen a negotiable bill of lading has been transferred to a third party, such a bill of lading constitutes a contract of carriage independent of the terms of any underlying charter party, except for the provisions of any charter party that have been incorporated into the bill."
Summary of this case from Cargill Ferrous Int'l v. Sea Phx. MVOpinion
Civil Action No. 99-2648 Section "K"(5).
October 23, 2000.
Before the Court is a Motion for Judgment and Sanctions (Doc. # 39) filed by plaintiff Lafarge Corporation against Worldwide Ocean Chartering S.A. ("Worldwide") and other owners of the M/V MACEDONIA HELLAS which came for hearing on September 7, 2000. The Court has reviewed the pleadings, memoranda, exhibits and relevant law and finds that the assessment. of sanctions will be determined at the appropriate time in accordance with the following order.
Plaintiff has also identified Spyvag Shipping Co., Ltd. and Worldwide Ocean Chartering GmbH as additional entities with an ownership interest in the MACEDONIA HELLAS.
Factual Background
On January 1, 1999 Lefarge Corporation ("Lefarge") entered into a one year Cement Sale/Purchase Agreement with Cementia Trading A.G., Pursuant to the agreement, Lefarge contracted to purchase 200,000 metric tons of portland cement from Cementia. The cement was to be transported to Louisiana in five separate shipments. Cementia was to arrange the deliveries by chartering highly classed bulk carriers, which vessels Cementia warranted were in full compliance with all regulations of the U.S. Coast Guard and other authorities. Consequently, Cementia chartered the M/V MACEDONIA HELLAS to transport approximately 40,000 metric tons of cement from Thailand to Louisiana. The MACEDONIA HELLAS departed from Thailand on June 6, 1999, reached the Mississippi River Southwest Pass on August 18, 1999 and began discharging operations in New Orleans on August 25, 1999.
Lafarge contended that Worldwide breached the terms of the contract of carriage by knowingly furnishing an unseaworthy vessel to transport Lafarge's cement. Plaintiff alleged that the shipment arrived more than thirty days delinquent, causing plaintiff to pay higher charges for barges and other equipment. To protect its interests, Lefarge caused the arrest and attachment of the vessel on August 30, 1999 for damages sustained as a result of the alleged delay. The parties came to an agreement whereby Lefarge accepted a letter of undertaking in lieu of a bond and allowed the vessel to sail. Lefarge claims that it permitted the vessel to sail in consideration of the vessel owner's promise to make available ship members for depositions and documents production pertaining to the ship's performance during the voyage. Specifically requested by Lefarge were the following: (1) smooth and rough deck logs; (2) smooth and rough engine logs; (3) certain pre-voyage smooth and rough engine logs; (4) engine hour forms, main engine hour forms, or other documents memorializing maintenance or repairs to the engines and/or generators; (5) fuel oil receipts; (6) any statement of facts completed during the voyage; (7) any letters of protest prepared by the Captain; (8) copies of any documents memorializing radio communications emitted by or received from the vessel; (9) a complete copy of the Bill of Lading; (10) all survey reports prepared during the voyage; (11) all daily reports/sheets; (12) all other documents not previously produced. (Plaintiff Exhibit "A").
This informal discovery agreement became the genesis of the dispute that is before the Court today. The plaintiff alleges that defendant Worldwide has caused its agents to avoid discovery, violate court orders, and lie under oath. As a sanction, plaintiff requests that judgment on the merits be entered in its favor. Additionally, plaintiff requests attorney fees and expenses associated with this motion.
Plaintiff has made allegations of two broad species of sanctionable conduct: spoliation of the evidence, including perjury, and failure to follow the Court's discovery orders. For purposes of clarity, each type of conduct will be discussed separately. Plaintiff asks this Court to grant it judgment on the merits as part of its inherent power as well as under Federal Rule of Civil Procedure 37.
Spoliation
Plaintiff makes three allegations against Worldwide S/A. First, Lefarge claims that Worldwide forced officers of the vessel, under threat of dismissal, to lie under oath during depositions taken by plaintiff. Second, Lefarge states that Worldwide purposefully and intentionally erased entries in the vessel's logs, altered and possibly falsified entries and tore pages out of log books. Third, Lefarge makes the accusation that Worldwide purposefully and intentionally destroyed faxes, telexes, and other written correspondence and falsified documents. Plaintiff claims that these acts were all committed with the intent to conceal the vessel's unseaworthiness and reasons for its delay in reaching New Orleans. Although Lefarge offered no testimony in support of these accusations, plaintiff claims that independent documents support the claims of perjury and destruction of evidence.
Plaintiffs proof lies primarily in the conclusions reached by its expert weather and navigational analysts. In essence, plaintiff stated that the deposition testimony and produced log book entries of of the MACEDONIA HELLAS do not comport with the scientific evidence.
The subject matter of the alleged perjured deposition testimony was twofold: the reason for the vessel's delay in reaching New Orleans and the working condition of the vessel's radar and ARPA systems. Plaintiff alleges that defendant's agents supplied inaccurate information and believes that the discrepancies prove the agents acted as they did because of coercive influences by Worldwide.
As to the deposition testimony, plaintiff stated that during a deposition taken on September 1, 1999 Captain Voulgaris testified that the reason for the vessel's delay was bad weather encountered on the voyage (Plaintiff Exhibit "B"). Chief Mate Strorgilos and Chief Engineer Koukis testified similarly as to the delay (Plaintiff Exhibits "KK" "LL"). According to plaintiff, the officers' testimony is in direct contradiction to the analysis of plaintiffs weather expert, who opined that the Indian Ocean did not experience bad weather at the time of the vessel's passage (Plaintiff Exhibit "E").
The second genre of perjured deposition testimony revolves around the functionality of the MACEDONIA HELLAS' radar and ARPA systems. Both Chief Mate Strorgilos and Chief Engineer Koukis testified that the ARPA and radar were working properly during the voyage (Plaintiff Exhibits "KK" and "LL"). Plaintiff maintained that such testimony was in complete contradiction to the reality of the situation as demonstrated by plaintiffs evidence of — communications between Captain Voulgaris and Worldwide. Plaintiffs evidence indicates that the Captain Voulgaris notified Worldwide that the radar and ARPA were not working properly, and received an instruction not write anything about the damage and to report that slight problems arose only 12 hours before arrival (Plaintiff Exhibits "K" "L").
Lefarge supports its allegations of alteration of evidence with similar proof. Lefarge contends that it has acquired independent evidence to demonstrate that defendant instructed its agents on the vessel to alter log book entries. Again, this evidence takes the form of an anomaly between plaintiffs expert information and that provided by Worldwide. In its analysis of the MACEDONIA HELLAS' voyage, plaintiffs expert pointed out discrepancies among defendant's engine logs, deck logs and the reports of other vessel's in the area of the MACEDONIA HELLAS (plaintiff Exhibit E). For instance, on July 14 and 15, defendant's deck and engine logs reported beaufort force 8 winds and "very high' seas. According to plaintiffs expert, nearby vessels reported mostly force 4 to 5 winds and only 1 to 2 meter wave heights (Plaintiff Exhibit "E"). Additionally, plaintiff claims that Captain Voulgaris produced several undated telex messages during his deposition. Plaintiff argues that telex messages always have a time and date of transmission. The absence of such stamps on the produced messages, in plaintiffs view, is evidence that the messages were fabricated after the fact under the direction of Worldwide.
Finally, Lefarge argues that the vessel's Port Captain, Gregos, tore up and erased telexes and telefaxes and fabricated new ones. Plaintiff supports this accusation with its expert navigational reports, which state that the RPM's and speed of the MACEDONIA HELLAS as reported in the smooth logbooks do not comport with independent studies of the vessel. Additionally, Lefarge argues that several important items have yet to be produced, including original smooth logs and any radio logs or rough logs. Plaintiff argues that defendant's assertions that there are no rough logs are disingenuous as the deposition testimony of Chief Mate Strorgilos and Chief Engineer Koukis specifically refer to the rough logs as being in the possession of the Captain. According to plaintiff, these rough logs are critical to corroborate the veracity of the smooth log entries that have thus far been produced.
It is plaintiffs contention that the above evidence supports the proposition that the log books of the M/V MACEDONIA HELLAS were altered to disguise the true reasons for its late arrival in New Orleans. Lefarge argues that the unrebutted evidence that log books have been altered means that it will never truly ascertain the correct information and should therefore be granted judgment on the merits.
Worldwide argues that plaintiff has made several accusations but has no supporting evidence. Defendant disputes the sufficiency of plaintiffs expert testimony to prove its allegations of perjured deposition testimony and alteration of evidence. Defendant characterizes the proof as fact issues that go to the seaworthiness of the vessel and insufficient evidentiary proof to support plaintiff's allegations. Additionally, defendant argues that the MACEDONIA HELLAS was in New Orleans for several weeks and should have been able to acquire the requested documents either judicially or extrajudicially during that time period. As to the accusation that Port Captain Gregos destroyed evidence, defendant reasserts its argument that there is no proof of such activity and in rebuttal submitted Gregos' denial of such activity through an unsworn declaration under penalty of perjury pursuant to 28 U.S.C. § 1747 (Defendant Exhibit 2). Defendant provided no explanation for plaintiffs exhibits "K" "L" outside the fact the telexes should go to credibility at trial and not the imposition of sanctions. As to the existence of rough logs, counsel for defendant admitted that he currently did not possess them. However, Worldwide pointed out that Greek law requires only one log and that there is the possibility that rough logs may have been discarded when the smooth log entries were complete.
Failure to Follow Discovery Orders
Second, Lefarge argues that Worldwide failed to produce documents and witnesses in accordance with Magistrate Chasez's September 23, 1999 Minute Entry compelling production of documents and witnesses. Lefarge argues that the information requested pursuant to that order has yet to be provided. Lefarge argues that the intent of the parties and Magistate Chasez was that depositions be taken in Tampa prior to the vessel's departure. However, despite noticing depositions and serving subpeonas on crew members, the MACEDONIA HELLAS sailed in the early morning hours of September 24 before the depositions could be taken. It is worthy of notice that plaintiff filed no additional motions to compel in regard to the September 24 order.
Defendant states that the majority of the production requests were done via letters between lawyers. Worldwide argues that letters, between lawyers are only letters and cannot serve as the basis for Rule 37 sanctions. As to the September 23 order compelling production, it claims that Judge Chasez's order mandated informal compliance, which the defendant tried to do within 24 hours. Defendant also states that it was merely required to identify individuals familiar with documents, not to produce them. Additionally, it argues there was no agreement to take depositions on Sept. 24. According to defendant, the Magistrate agreed there was no outstanding order to take depositions, and that none would be allowed on such short notice.
Overall, Worldwide argues, that at a minimum, it needs to conduct further discovery to get to the core of plaintiffs allegations. Counsel for Worldwide argued that in addition to plaintiffs witnesses, he needed further opportunities to contact the home office and former employees of the Worldwide. With this background, the Court will take up the merits of plaintiffs motion.
Legal Analysis
When parties or their attorneys engage in bad faith conduct, the Court should usually rely on the Federal Rules for sanctions.Natural Gas Pipeline Company of America v. Energy Gathering, Inc., 2 F.3d 1397, 1410 (5th Cir. 1993) (citing Chambers v. NASCO, 111 S.Ct. 2123, 2136 (1991)). Nevertheless, it is clear that the federal courts are vested with the inherent power "to manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Link v. Wabash R. Co., 370 U.S. 626, 630, 82 S.Ct. 1386, 1388-89 (1962). "A district court may order sanctions, including a default judgment, for misconduct . . . pursuant to the court's inherent power to "protect [its] integrity and prevent abuses of the judicial process." Webb v. District of Columbia, 146 F.3d 964, 971 (D.C. Cir. 1998) (quoting Shepard v. American Broadcasting Companies, 62 F.3d 1469, 1474 (D.C. Cir. 1995)). However, courts must act with restraint and discretion when exercising such harsh powers.Gonzalez v. Trinity Marine Group, 117 F.3d 894, 898 (5th Cir. 1997) (citing Chambers v. NASCO, 501 U.S. 32, 44, 111 S.Ct. 2123, 2132 (1991)). "The inherent power is not a broad reservoir of power, ready at an imperial hand, but a limited source; an implied power squeezed from the need to make the court function."Crowe v. Smith, 151 F.3d 217, 226 (5th Cir. 1998) (internal quotations and citations omitted). The United States Fifth Circuit Court of Appeals has held that the sanction of dismissal "should be confined to instances of bad faith or willful abuse of the judicial process." Gonzalez, 117 F.3d at 898 (citing In re United Markets Int'l. Inc., 24 F.3d 650, 654 (5th Cir. 1994) (internal quotations omitted)). Because the inherent ability to grant a default judgment for plaintiff and to grant dismissal for defendant are correlative, the Court will evaluate plaintiffs request for judgment on the merits under the Fifth Circuit's "bad faith or willful abuse" standard that has been applied to dismissals.
Under such a standard, there remain questions of fact which at this time preclude the Court from flexing its inherent power to grant judgment in favor of plaintiff. A motion for sanctions is a serious matter and this Court can not grant such a motion lightly. In this instance, the Court, although concerned with plaintiffs allegations, cannot grant judgment on the merits based on inferential evidence without buttressing testimony. Without testimony to support plaintiffs position, this Court is not in a position to rule on Worlwide's alleged "bad faith" or "abuse of the judicial process." Plaintiff has provided no direct evidence that Port Captain Gregos willfully destroyed or altered evidence. Neither has it proven that Worldwide instructed Captain Voulgaris to alter shipping logs. Plaintiffs main evidence of the alteration was presented in its Exhibits "K" and "L". However, Exhibit "L" does not bear a time and date stamp, the very defect that plaintiff claims proves that the MACEDONIA HELLAS produced bogus messages during discovery. Without more, the conflicting conclusions seen in the officers testimony regarding the weather conditions and expert reports is not sufficient to grant judgment at this point in time.
Rule 37 Sanctions
"The general scheme of [Rule 37] is that ordinarily sanctions can be applied only for a failure to comply with an order of the court." Wright and Miller, Federal Practice Procedure, § 2282, p. 600 (1994). See also United States v. Vehicle (1) 1989 Cheverolet Caprice, 126 F.3d 1314 (11th Cir. 1997). Rule 37 (b)(2)(C) specifically provides for entry of a default judgment when a party refuses to obey a valid discovery order. In the Fifth Circuit, "[t]he propriety of a default judgment is evaluated by the same standards as the sanction of dismissal."Marshall v. Segona, 621 F.2d 763, 767 FN 9 (5th Cir. 1980) (citing United Artists Corp. v. Freeman, 605 F.2d 854, 856-57 (5th Cir. 1979)). Dismissal with prejudice for a violation of a discovery order is appropriate if I) the refusal to comply results from bad faith or willfulness and is accompanied by delay or contumacious conduct; 2) the violation of the discovery order is attributable to the client instead of the attorney; 3) the violating conduct substantially prejudices the other party; and 4) a less drastic sanction would not achieve the same result.Tabor v. E.J. Patterson, 1999 WL 52144 at *2 (E.D. La. 1999) (citing F.D.I.C. v. Conner, 20 F.3d 1376, 1380 (5th Cir. 1994)).
As stated earlier, since the evidence here is only inferential the Court will defer a finding as to bad faith and shall not grant a default judgment in favor of plaintiff under Rule 37 (b)(2)(C).
As to defendant's prior conduct, the Court does not find that defendant's actions require an imposition of attorney's fees under Rule 37(a)(4). Although it is regrettable that the parties were unable to adhere to their extra-judicial discovery agreements, the disputes in connection with the correspondence requests of Lefarge arose from letters, not court orders. Thus, to the extent that the dispute involves unprofessional and dilatory responses to plaintiffs letter requests, there can be no sanction under Rule 37(a)(4). Furthermore, the facts presented at the hearing, in conjunction with the plaintiffs failure to file additional motions to compel in relation to said order, do not clearly indicate that defendant violated the September 23 order and cannot be the basis for sanctions either. Moreover, they are not appropriately awarded in this instance as the matter before the Court is a motion for judgment on the merits, not a motion to compel.
This is not to say that the Court is not gravely concerned with the allegations contained in plaintiffs motion. That being said, plaintiffs method of presentation would require this Court to award a judgment based on inferential evidence concerning certain matters that are, at best, tangential to the issues of the case. Accordingly,
IT IS ORDERED that plaintiffs Motion for Judgment and Sanctions is DENIED without prejudice and may be re-urged when additional evidence or testimony has been produced and reviewed.
IT IS FURTHER ORDERED that defendant shall produce the following on or before November 3, 2000.
(1) All Immarsat communications generated from, or sent to, the MACEDONIA HELLAS between the vessel's departure from Thailand and its arrival in New Orleans.
(2) Original smooth engine and deck logs accompanied by a statement under penalty of perjury by the Chief Executive Officer of Worldwide Ocean Chartering, S.A. that said smooth logs are factually accurate. Additionally, the CEO of Worldwide is to describe Worldwide's custom's regarding rough logs, especially whether they are discarded when the smooth log entries are completed.
(3) A statement under penalty of perjury by Captain Voulgaris explaining whether or not rough logs were saved, and if so, explicating their current location and why they were not originally produced.
(4) Counsel for plaintiff is to review all smooth logs in defendant's possession to verify if they are the same as those introduced into evidence at this hearing.
IT IS FURTHER ORDERED that all subsequent discovery disputes shall be directed to the Magistrate.