Opinion
02 Civ. 100 (HB)
December 18, 2003
OPINION
Plaintiff National Shipping Company of Saudi Arabia ("NSCSA" or "plaintiff') sued defendant Diversified Freight Logistics ("DFL" or "defendant") for damages arising from an alleged breach of an oral shipping contract of affreightment. On June 16-18, 2003, the case was tried to the Court. The following are the findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52. I conclude that NSCSA is entitled to recover damages resulting from defendant's breach of an oral contract.
I. INTRODUCTION
MB Petroleum Services ("MB Petroleum"), a provider of oil-field services based in the Republic of Oman, purchased an oil rig from Dreco Rig Technology ("Dreco"), a manufacturer of such rigs based in Edmonton, Canada. In late February 2001, MB Petroleum contacted defendant DFL, a freight forwarder, about the rig and invited DFL to submit a proposal for arranging and overseeing the shipment of the oil rig from Edmonton to Oman. For this project, the freight forwarder's responsibilities included the coordination of the packaging of the rig, trucking it to a seaport, and shipping it to Oman. DFL was to submit a bid for this work. With respect to the shipping component, DFL contacted plaintiff NSCSA, a ship owner operating ocean-going vessels, in late February about its rates for the shipment of the rig from Houston, Texas, to Muscat, Oman, and over the next few months DFL and NSCS A continued to communicate about this shipment. In the instant lawsuit, NSCS A claims that in July 2001 NSCS A and DFL entered into a binding oral contract of affreightment, which DFL then breached when it cancelled the booking a few weeks before NSCSA's ship was scheduled to load the rig. DFL, on the other hand, contends that there was no valid contract and that in any event DFL was MB Petroleum's agent and thus not liable for any breach.
A leading maritime treatise describes freight forwarders as follows:
Freight forwarders are intermediaries usually employed by a shipper or exporter to facilitate and handle the details of shipment of goods. Ocean freight forwarders are licensed and regulated by the Federal Maritime Commission. The role of the ocean freight forwarder has been described as follows:
A freight forwarder acts as an intermediary between the shipper and the ocean carrier. The freight forwarder arranges for the ocean transportation by locating available space, handles various documentation for the shipper's goods, including preparation of bills of lading, and performs such other services as arranging for the transport of the goods to dockside. The intermediary role of the freight forwarder is well-recognized in the ocean shipping industry and benefits both the shipper and the carrier. The freight forwarder receives compensation for its services from both the shipper and from the carrier.
The freight forwarder, who receives compensation from both shippers and carriers, may be either an agent or an independent contractor with respect to both parties.
2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 10-7, at 46-47 (3d ed. 2001) (quoting In re Black Geddes, Inc., 35 B.R. 830, 832 (Bankr. S.D.N.Y. 1984)); see also Taub, Hummel Schnall, Inc. v. Atlantic Container Line, Ltd., 894 F.2d 526, 527 (2d Cir. 1990) ("Freight forwarders provide various services in connection with the water transportation of cargo, such as moving cargo from a shipper to the pier and preparing and processing bills of lading, dock receipts, and other shipping documents. Freight forwarders are paid for their services by both the shipper and the carrier. The carrier's payments, known as brokerage, customarily are calculated as a percentage of the carrier's transportation charge.").
NSCS A did not sue MB Petroleum — nor did DFL implead it — perhaps in the belief that there was no personal jurisdiction over MB Petroleum.
II. FACTS
On February 27, 2001, Gary Thomson, a project manager for MB Petroleum, sent an e-mail message to Gary Cockrell, vice president of Houston operations for DFL, and requested the freight costs for the shipment of an oil rig, similar to the one here, that MB Petroleum had purchased from Dreco in December 1999. (Def. Ex. A) Hellmann, another freight forwarder, had shipped that rig from Houston to Muscat, Oman aboard one of NSCSA's vessels. (Def. Ex. A) On February 28, 2001, at Cockrell's request, James Hopkins of DFL contacted Jorgen Jorgensen and Tai Tien Ma at Biehl, NSCSA's agent, to obtain pricing on this prospective shipment. Ma responded that the rate for the rig it shipped in 1999 was $60 "weight or measure." In an email on February 28, 2001, Jorgensen informed Suzan Eckert of NSCSA that he had offered DFL the $60 price, based on his understanding that the oil rig was similar to the one shipped in 1999. On March 2, 2001, Hopkins sent Jorgensen an email message to which he attached a computer file entitled "MB_PETRO_RIG_MUSCAT.xls" which detailed the specifications for the rig shipped in 1999. Ma made handwritten notations on the 1999 bill of lading about MB Petroleum, Hopkins, DFL and DFL's telephone number.
DFL frequently handled air and ocean freight on behalf of MB Petroleum. Cockrell testified that "We were doing 20 or 30 airfreight shipments and one or two ocean freight shipments a month for [MB Petroleum] since January of 2000." Tr. 325. On June 18, 2000, MB Petroleum executed an umbrella "power of attorney for customs and export forwarding agent" which appointed DFL as an agent for MB Petroleum. Tr. 324; Def. Ex. II.
Hopkins, DFL's ocean export manager, had approximately 40 years' experience in the business but had been with DFL only about six months. Tr. 211, 231.
This refers to the standard industry practice whereby the cargo is measured by either its weight or its dimensions, whichever creates the most revenue for the carrier.
On March 13, 2001, Cockrell sent Gary Thomson of MB Petroleum an email which suggested a rate for the job of $375,000 to $380,000 — which included trucking from Dreco to Houston, packing in Houston, sea freight to Muscat, Port of Houston wharfage, and other miscellaneous charges including "DFL handling/coordination/documentation." Ex. G. This message noted that the dimensions of the cargo on Dreco's spec sheet did not match the dimensions as DFL calculated them and thus that its bid was subject to change. Gary Thomson at MB Petroleum notified Cockrell by e-mail dated March 15, 2001 that MB Petroleum accepted this bid, even though the pricing could not be finalized due to a discrepancy between the dimensions estimated by Dreco and those calculated by DFL. See Ex. H. This email requested that Cockrell confirm receipt and acceptance, which Cockrell promptly did.
It appears that Dreco estimated that the project would be 2,700 cubic meters but DFL arrived at a figure of 3,274 cubic meters when it calculated the dimensions based on Dreco's "rough notes for the wts dims of the previous shipment for MB Rig 4 (Dec 99)." See Ex. D.
On June 4, 2001, Jorgensen met with Cockrell to discuss and negotiate the timetable for the shipment of the rig on one of NSCSA's ships. The two agreed on a tentative booking for shipment on the Saudi Diriyah, Voyage 110, which was scheduled to be in Houston on July 18, 2001. Jorgensen also informed Cockrell in this meeting that it was possible to alter the arrival date in Oman by a few days by changing the rotation of the ports. Tr. 43; Ex 23. Although tentative — because Cockrell was not sure when the oil rig which was being built in Canada by Dreco would be ready — Jorgensen entered the booking into NSCSA's computer system as booking number SDIH 65338. Tr. 41-42; Exs. 2, K, and L. Cockrell in an email on June 4 to Thomson stated that he met with Jorgensen and that NSCSA's Diriyah "was set for loading on 7/16-17 and departure on 7/18" and that "the estimated arrival in Muscat would be around 8/24." Ex K. (This message also notes that "if we are cutting it close by a few days (1, 2, or 3) they will either lay over or call New Orleans first and then do Houston on or around the 7/21." This message also states: "Jorgen has made a tentative booking for this vessel subject to my confirmation on or around 6/20-21." Also it lists NSCSA's next two vessels, the Saudi Riyadh, a smaller vessel likely unable to accommodate the cargo and the Saudi Tabuk, the next "full-size" vessel, which was scheduled to sail from Houston on August 15 and estimated to arrive in Muscat on September 22.
Jorgensen testified that the booking note is rarely provided to the shipper and he did not provide it to DFL in this case. Tr. 89, 144.
Jorgensen also emailed Cockrell a message on June 4 which essentially repeated these same details. Ex. L. In this email, Jorgensen states:
As per our agreement today, I have tentative[ly] booked the rig on the M/V "Saudi Diriyah" Voyage 110, ETS Houston, July 18, Booking Number SDIH-65338. You will advise final confirmation of the booking upon your return from Edmonton, Canada on or about June 22, 2001. The ETA to Muscat is expected to be around August 20/22. I will confirm in due course.
The rig has been booked at $60.00 w/m, all in, plus wharfage, full linerterms, plus receiving and unloading, (to be loaded at Barbours Cut, Shipper Stevedore) with 2-1/2% freight forwarders commission to Diversified from NSCSA upon payment of freight.
All weights and dim[ension]s are to be confirmed in due course, but are expected not to be significantly different from the similar rig carried back in December, 1999. However, there will be some bundled 3-1/2 inch OD pipe and this will be carried at the same rate."
In late June 2001, Cockrell visited Dreco in Edmonton to assess the status of the rig. He determined that the rig would be ready for shipment in late July or early August and thus would not be ready for the Saudi Diriyah on July 18. Tr. 49. In early July, after Cockrell returned from Edmonton, he spoke with Jorgensen, who, after being informed that the rig was behind schedule, offered another ship, the Saudi Tabuk, which was scheduled to arrive in Houston on or about August 12 and unload in Muscat on or about September 18, 2001. All other conditions, such as the freight rate, were to remain the same.
After this conversation, Jorgensen sent Cockrell an email that reviewed the details of their conversation.
On July 3, Cockrell sent Thomson an email message which reviewed several options for shipping the oil rig: His "best bet" was to load as much of the rig as possible on the Diriyah before she departed Houston on July 24 and the balance, if any, onto the ship when she called on Halifax on August 6. Cockrell noted: "This still puts the time frame into Muscat well in advance of the required date. If we slip to the next vessel we probably will not need Halifax, but the arrival date in Muscat is about a week or so later than the required arrival time frame." This email then listed an option through UASC but noted what was originally a sailing date of August 4 was now August 12."
The message referred to the vessel departing Houston on July 24, rather than to the Diriyah specifically.
During this time, DFL continued to consider other options for the ocean freight. For example, on April 10, 2001, Hopkins sent the specs of the rig to United Arab Agencies, Inc. for a price quote for ocean freight. On June 26, Hopkins forwarded to Cockrell a message about an offer by the Strachan Shipping Agency for several ships bound for the Middle East with free cargo space. Hopkins' message says: "Gary, you never know; we may need a back up for the Muscat Rig." Ex M. A July 3, 2001 email from Cockrell to Thomson listed the sailing schedules for NSCSA and for United Arab Shipping Company, and noted that there "is one additional line who has entered the picture."
Despite Jorgensen's contacts with DFL and its attempt to secure this project for NSCSA, Jorgensen realized as late as mid-July that DFL was considering other options besides NSCSA. On July 16, Jorgensen sent Eckert a message which stated:
As you recall, initially they booked it early as a tentative booking, based on everything remaining the same, ie.: Rig-down, cargo availability and vessel position.
Then things started to change (as they normally do). We kept in close contact with the Fwdr and have kept you informed, too, about all developments. It has always been NSCSA as the primary carrier, and I have received no information to the contrary.
However, when the "rig-down" dates fell back, the cargo availability dates in Houston fell back and NSCSA vessel-spread increased (to 23 days), the Fwdr apparently considered the alternatives.
However it appears that NSCSA is still the carrier as the cargo availability dates fell back.
Three hours later, Jorgensen sent a second message to Eckert of NSCSA which stated: "I am very pleased to advise you that Mr. Gary Cockrell w/Diversified Freight, Houston, Texas just called and confirmed that the rig is booked firm on the Tabuk/108 from Houston on Aug 12/13." DFL does not dispute the occurrence of the telephone conversation, but does dispute the content of the conversation — i.e., that Cockrell assented to a binding contract. On July 18, Cockrell sent Jorgensen an email message with additional items to be shipped,see Ex. 4, and on July 23 he faxed a preliminary spec sheet for the rig and again listed additional items to be shipped. On July 24, Cockrell sent to Jorgensen a credit application for Royal Cargo Line, Inc., a non-vessel operating common carrier ("NVOCC") affiliated with DFL, as well as a reference and detail sheet. See Ex O. (Cockrell's cover note, which was on DFL stationary, indicated that any questions should be directed to him.)
On July 25, Hopkins called Biehl for a booking number and spoke with a clerk, Liz Namink, who informed him that the Tabuk had "slipped" a few days and would arrive in Muscat four or five days later than previously estimated. Hopkins forwarded this information to Cockrell who then spoke to Gary Thomson of MB Petroleum on July 27 or 28 to determine what course of action to take. Michael Huseby, President of DFL, testified that Cockrell telephoned on July 30 to inform him about the situation with the Tabuk and Mar-Tex. Tr. 362. Huseby testified that he then asked Cockrell whether there was a signed contract with NSCSA, whether any cargo had been tendered, and the status of the relationship with NSCSA and Biehl. Tr. 362-64. Hopkins, at Cockrell's direction, called Jorgensen on July 31 to cancel the booking. Tr. 235. At some point during these events, Cockrell told Hopkins to sign a contract with Mar-Tex Shipping Chartering Agency, Inc. ("Mar-Tex"), and apparently on July 30, Hopkins signed a contract on behalf of Royal Cargo, the NVOCC affiliated with DFL, for the shipment of the rig "on the M/V `GLOBAL TEN' v. 111 expected to load Lay/Can AUG 9/13, 2001." Ex. P. Mar-Tex chartered the "Areti" to carry the rig, and estimated that the Areti would arrive about 10 days earlier than the Tabuk. In addition, DFL also received an additional bonus payment of $50,000.
NSCSA notes that the information available to Namink about the position of the Tabuk was NSCSA's most recent sailing schedule, which showed for that week (week 29) an estimated time of sailing from Houston of August 15 and arrival in Muscat of September 23. Ex. 87. However, NSCSA did not call Namink as a witness and DFL contends that it is entitled to the inference that her testimony would have supported its account of this conversation.
The date indicated below Hopkins' signature is "07-July-2001." In the area for "Dt of Contract" it indicates in typewritten 07-26-2001 Revised." Hopkins testified that July 7 was not the date he signed the contract. Tr. 264. He explained that after he wrote "07" to indicate July, he got a phone call and had to pull a file on another shipment and talk to that customer and that when he came back to complete the date he made a mistake and put the month "July" instead of the day "30." Tr. 265.
Hopkins testified that "TEN" — as in the "M/V `Global TEN'" — means "to be named," that is, the vessel has not been nominated yet. Tr. 266.
In an email message to Thomson on August 25, Cockrell calculated DFL's bill for the project as $430,000 (for the original estimate) plus certain additional costs, including "approx. US $50,000.00 premium for chartered vessel offering 7-10 day earlier arrival in Muscat" and other costs that total $43,174.58. Ex. 53. In an email to Thomson on October 24, 2001, Cockrell explained that the price difference between what NSCSA offered and what was actually paid to the operators of the Areti was $50,000 for guaranteed space on the ship and priority loading with direct discharge in Muscat. Ex. 39.
After he was informed by Hopkins on July 31 that DFL cancelled the booking on the Tabuk, Jorgensen undertook to convince DFL to reconsider this decision. On July 31, Jorgensen sent Cockrell an email which stated: "You and I have been discussing the movement of the rig since ealy [sic] March. On June 4th, I issued (with your approval) a temporary booking note/number. And on July 16 you personally called me and booked the rig firm. I had no doubt and relied on your word and proceeded accordingly." On August 1, Jorgensen sent Cockrell and Hopkins another email which stated:
when Gary [Cockrell] confirmed the booking as firm on July 16, NSCSA took action accordingly. In addition, Gary [Cockrell] negotiated with the stevedores regarding receiving/unloading charges (and we assisted in this matter). Also, we received requests for changes in the port of discharge for some of the cargo and proceeded to handle this matter also. In other words, Diversified Freight Logistics acted completely and totally as if this cargo was firmly booked with NSCSA.
On August 10, 2001, Jorgensen sent an email to various NSCSA and Biehl employees explaining that he had visited the port where the Areti was docked and determined that MB Petroleum was DFL's customer and Dreco was the rig's manufacturer. In turn, NSCSA and Biehl attempted to contact MB Petroleum directly to save the shipment. Ultimately, the Areti loaded on August 13 and 14, departed Houston on August 19, and then arrived in Muscat on or around September 30. Tr.67.
The Tabuk sailed from Houston on August 16, Ex. 108, and would have reached Muscat on or about September 27 — the Tabuk did not call at Muscat because Muscat was a "port of inducement" and without the oil rig there was no reason for her to call on Muscat.
III. DISCUSSION
NSCSA contends that there was a valid oral contract between it and DFL, that NSCSA performed in all respects, and that DFL breached the contract when it unilaterally cancelled on July 31. NSCSA contends that freight forwarders can be liable as principals even though they necessarily act on behalf of another party and that DFL in this case acted here as an independent contractor and thus, an actual party to the contract. Alternatively, NSCSA contends that even if DFL acted as MB Petroleum's agent, it is liable here because it never disclosed the identity of the principal. NSCSA also contends that the oral contact is valid, and that the slippage of the date of the Tabuk was not a breach of the contract. On the other hand, DFL notes that all the activities that it performed were those that a freight forwarder ordinarily performs and claims that a freight forwarder is by definition an agent because it acts on behalf of another entity. DFL contends that it sufficiently disclosed the identity of its principal and as an agent for MB Petroleum, it cannot be held liable here. DFL also contends that no binding contract was created because it understood that there was no binding commitment for this "project" cargo until the agreement was reduced to a written contract or booking agreement. Also, DFL contends that the contract was not valid because it omitted certain key terms, such as cancellation, dead freight, or earned freight.
A Liability of DFL
The precise status of a [freight] forwarder is a matter which is not free from doubt. . . ." Koninklijke Nedlloyd BV v. Uniroyal, Inc., 433 F. Supp. 121, 128 (S.D.N.Y. 1977). "Freight forwarders are intermediaries usually employed by a shipper or exporter to facilitate and handle the details of shipment of goods." 2 Thomas J. Schoenbaum, Admiralty and Maritime Law, 46 (3d ed. 2001). A freight forwarder may either be an agent or an independent contractor with respect to either the shipper or the carrier. Id. (citing Strachan Shipping, Co. v. Dresser Indus., Inc., 701 F.2d 483 (5th Cir. 1983)); see also James N. Kirby, Pty Ltd. v. Norfolk Southern Ry. Co., 300 F.3d 1300, 1305 (11th Cir. 2002) ("[F]reight forwarders `may act as agents or as principals, depending on the facts.'" (quoting Stephen G. Wood, Multimodal Transportation: an American Perspective on Carrier Liability and Bill of Lading Issues, 46 Am. J. Comp. L. 403, 413 (1998)). "Even though a person is termed an agent, he may, in fact, act as such in some matters but not in others." In re Shulman Transp. Enter., Inc., 744 F.2d 293, 295 (2d Cir. 1984) (citing Patrick v. Miss. New Mexico-USA Universe Pageant, 490 F. Supp. 833, 839 (W.D. Tex. 1980)). DFL places considerable stress on the fact that it was acting on behalf of another party and that NSCSA knew as much. In essence, DFL contends that because a freight forwarder acts on behalf of another party, a freight forwarder is by definition an agent of that other party; DFL points to statutes and regulations which spell out the relationship between a freight forwarder and other parties and the various functions a freight forwarder commonly perform.
The Code of Federal Regulations provides:
Freight forwarding services refers to the dispatching of shipments on behalf of others, in order to facilitate shipment by a common carrier, which may include, but are not limited to, the following:
(1) Ordering cargo to port;
(2) Preparing and/or processing export declarations; (3) Booking, arranging for or confirming cargo space;
(4) Preparing or processing delivery orders or dock receipts;
(5) Preparing and/or processing ocean bills of lading;
(6) Preparing or processing consular documents or arranging for their certification;
(7) Arranging for warehouse storage;
(8) Arranging for cargo insurance;
(9) Clearing shipments in accordance with United States Government export regulations;
(10) Preparing and/or sending advance notifications of shipments or other documents to banks, shippers, or consignees, as required;
(11) Handling freight or other monies advanced by shippers, or remitting or advancing freight or other monies or credit in connection with the dispatching of shipments;
(12) Coordinating the movement of shipments from origin to vessel; and
(13) Giving expert advice to exporters concerning letters of credit, other documents, licenses or inspections, or on problems germane to the cargoes' dispatch.46 C.F.R. § 515.2.
On these facts, it is clear that DFL's relationship with MB Petroleum was not one of agency, which is "the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Id. (quoting Restatement (Second) of Agency § 1(1) (1958)). An essential characteristic of an agency relationship is that the agent acts subject to the principal's direction and control. Id.; Fenton v. Freedman, 748 F.2d 1358, 1362 (9th Cir. 1984) (citing White v. Uniroyal, Inc., 155 Cal.App.3d 1, 25 (1st Dist. 1984)). The Second Circuit has rejected an argument similar to the one DFL advances here, namely that freight forwarders are agents simply because they act on behalf of others. See Orient Mid-East Lines v. Albert E. Bowen, Inc., 458 F.2d 572, 576 (2d Cir. 1972) ("The mere fact that a freight forwarder acts `exclusively for others' is insufficient to impose this duty on the carrier."). Further, several facts strongly suggest that MB Petroleum exercised no control over the means and methods for DFL to accomplish the end result. See Farrel Lines Inc. v. Titan Industrial Corp., 306 F. Supp. 1348, 1350 (S.D.N.Y. 1969) (finding a freight forwarder to be an independent contractor because agency's "critical elements of control and exclusivity" were absent). For one, Cockrell testified that he did not want MB Petroleum to see the pricing and thus did not disclose to it any of the rates it obtained for the bid it submitted, including NSCSA's bid for ocean freight. Tr. 328, 333. Cockrell also testified that he did not show MB Petroleum the contract with Mar-Tex, lest he reveal DFL's potential profit. Tr. 328. Thus, although Cockrell kept Thomson informed of some details of the project, the evidence showed that DFL did not disclose or discuss with MB Petroleum certain important details and that many details were left to DFL. Tr. 327. A second important fact is that there were two bills of lading for the shipment of the oil rig on the Areti, one from Global Container Lines which listed Royal Cargo Line as the shipper and one from Royal Cargo Line which listed MB Petroleum as the shipper. Exs. R S; see James N. Kirby, 300 F.3d at 1305 (concluding that the freight forwarder was not acting as an agent based in part on the structure of the transaction, namely that there were two bills of lading). As the Eleventh Circuit wrote only last year:
The court in Farrel Lines found that the freight forwarder acted as an independent contractor on facts substantially similar to the facts here:
The forwarder would, thereafter, make all preparations necessary for the transportation of the cargo, without direction or instruction from the shipper. The forwarder would select the carrier, book passage for the cargo, arrange for delivery to the carrier's vessels and prepare the bills of lading for the carrier's signature. The forwarder was paid for these services by the carrier, based on a percentage of the freight charges, in addition to a nominal payment by the shipper for clerical services. Neither the shipper nor the carrier, however, had control over the manner in which the forwarder performed these services.Farrel Lines, 306 F. Supp. at 1349-50.
Cockrell testified as follows:
Q: So you are actually negotiating freight rates, quantifying prices with various subcontractors, coming up with a number, and based on that you project out and give this turnkey bid, is that fair to say?
A: That's what was requested to present to them, was a turnkey price, yes.
Q: And you didn't share that $60 weight or measurement rate with MB Petroleum, correct?
A: That's correct.
Tr. 333.
A freight forwarder acts as an agent when its role is merely to arrange a contract between the cargo owner and the ocean carrier. The ocean carrier issues a bill of lading directly to the cargo owner, who is listed as the shipper on the bill, and the cargo owner pays the ocean carrier, not the freight forwarder, for the carriage. A freight forwarder acts as a principal when it takes on the role of carrier itself and issues its own bill to the cargo owner listing the cargo owner as the shipper and itself as the carrier. In this latter scenario, the cargo owner pays the forwarder, not the ocean carrier. The forwarder then subcontracts out to an ocean carrier its responsibility under its bill to carry the goods. The ocean carrier issues to the forwarder a second bill of lading that lists the forwarder as the shipper, that is, as a principal.James N. Kirby, 300 F.3d at 1305 (emphasis added). Given that on July 24 DFL sent to Biehl a credit application for Royal Cargo Line, the NVOCC affiliated with it, it is clear that DFL's affiliate Royal Cargo, rather than MB Petroleum, would have paid NSCSA for the ocean freight had DFL shipped the oil rig on NSCSA's Tabuk.
Finally, DFL cites several "critical events" which purportedly illustrate that MB Petroleum exercised control over DFL. However, the only one of these events of any significance is Cockrell's testimony that it was MB Petroleum's Thomson who, after he was advised that the Tabuk had slipped, instructed Cockrell to cancel the booking with the Tabuk and to sign the contract with Mar-Tex. Tr. 314, 323. There is considerable uncertainty about what transpired with the Mar-Tex contract and whether in fact it was signed at Thomson's direction. For one, the date below Hopkins' signature on this contract is "07-July" and his explanation of why this date is in error is questionable — thus suggesting that in fact the contract with Mar-Tex was not signed at Thomson's direction after news of the Tabuk's slippage, but rather was signed in early July. Even if it is true that Thomson made this decision — a fact which is not corroborated by any documentary evidence — this alone does not establish that the relationship was one of agency. This alone does not overcome the evidence discussed above that showed DFL's independence with respect to how this project was performed. Thus, DFL was not MB Petroleum's agent with respect to this transaction.
Two critical events that DFL points to are that MB Petroleum told Cockrell to keep in contact with Dreco, the manufacturer, and requested that he come to Canada in early June. Tr. 290, 301; Ex. H. However, these reflect no degree of control, but merely the natural interaction between the two parties involved in a transaction of this nature. The fourth thing DFL points to is that MB Petroleum requested and later accepted DFL's bid for the project. This again does not show control over the means and methods — to the contrary, it indicates that DFL was responsible for getting the oil rig from Canada to Oman by any appropriate means it could.
Indeed, in its post-trial brief, DFL indicates that Cockrell spoke with DFL's president Huseby after he spoke with Thomson, and that it was after the conversation with Huseby that Cockrell instructed Hopkins to call Jorgensen.
Because I agree with NSCSA that DFL acted as an independent contractor in this transaction, it is not necessary to reach the issue of whether, if DFL was MB Petroleum's agent, DFL disclosed its principal. Nevertheless, for the completeness of the record, I briefly discuss my conclusion that DFL failed to disclose that MB Petroleum was its customer and thus accepted responsibility for its own actions and destroyed any immunity granted by the law of agency.
The basic rules of when an agent may be liable on a contract entered into on behalf of a principal are not in dispute: If NSCSA knew that DFL was acting on behalf of another party but was not notified of the principal's identity, then the principal was a partially disclosed principal, and "a person purporting to make a contract with another for a partially disclosed principal is a party to the contract." Orient Mid-East Lines v. Albert E. Bowen, Inc., 458 F.2d 572, 575 (2d Cir. 1972) (citing Restatement (Second) of Agency §§ 4(2), 321). DFL contends that it. so informed Biehl and NSCSA in its initial contacts in late February when it sought a price quote and referred to the oil rig shipped in 1999 for MB Petroleum. DFL's Hopkins testified that he told Tai Tien Ma of Biehl's on February 28 that "our customer, MB Petroleum, had another rig to ship to Muscat, Oman, and made reference to him of a similar rig that NSCSA handled about a year ago." Tr. 216. He then testified that Ma or Jorgensen — he could not remember who — called back and "told me that they could handle a new rig for Petro, MB Petroleum, at the same rate of $60 weight or measure, plus wharfage, as they did the old rig as it was handled in 1999." Tr. 217. In addition, DFL notes that Cockrell sent Jorgensen and Ma an email which contained specifications of the oil rig which NSCSA shipped in 1999 and which mentioned "MB Petro" in the "subject" and "file attachment" portions of the email. Third, DFL points to Ma's and Jorgensen's notes which reflect that MB Petroleum was mentioned in these conversations. Against this evidence is Hopkins' concession that the only time that MB Petroleum was ever mentioned in any correspondence with Biehl was these communications in late February and early March. Tr. 268-69. Moreover, Hopkins conceded that DFL would not normally disclose the identity of its client lest a carrier such as NSCSA try to contact the client directly. In addition, MB Petroleum's Thompson had asked Cockrell to get the rate for the 1999 rig, for which MB Petroleum had employed a different freight forwarder, as soon as possible. Thus, given DFL's general incentive to keep the identify of its client secret and the fact that it made no further mention of MB Petroleum throughout the negotiations on this project over the next five months, and given Thomson's request for information as soon as possible, Hopkins' reference to MB Petroleum in his early communications with Ma and Jorgensen is far more consistent with his attempt to obtain this information quickly than it is with his disclosure of the identify of the principal. I conclude that DFL did not inform Biehl or NSCSA of the identity of its principal. See Restatement (Second) of Agency § 321 comment a ("The inference of an understanding that the agent is a party to the contract exists unless the agent gives such complete information concerning his principal's identity that he can be readily distinguished."); see also Orient Mid-East Lines, 458 F.2d at 575 n. 4.
C. The Contract
NSCSA contends there was an oral contract between it and DFL because the tentative booking was converted to "firm" at DFL's direction. NSCSA alleges that DFL effectively breached the contract when it cancelled shipment on the Saudi Tabuk. DFL alleges that no oral contract existed here because 1) the elements of a contract were not met and 2) it expected that such a large and uncommon shipment would be memorialized in some written agreement. Furthermore, DFL argues that even if there was a contract, NSCSA breached it first.
1. Expectation of a written contract
In its post-brief memo, DFL concedes that oral bookings are valid, as it must since the evidence at trial and case law on this point is clear. See Great Circle Lines, Ltd. v. Matheson Co., Ltd., 681 F.2d 121, 125 (2d Cir. 1982) ("The binding effect of oral contracts in maritime law is an ancient concept whose roots are deeply embedded in custom."); see also See P.D. Marchessini Co. v. H. W. Robinson Co., 287 F. Supp. 728, 730 (S.D.N.Y. 1967) (upholding an oral contract of affreightment for a shipment of 260 locomotive trucks); Orient Mid-East Lines v. Albert E. Bowen, Inc., 458 F.2d at 572-73 (10 dump trucks); MTO Maritime Transp. Overseas v. McLendon Forwarding Co. et al, 837 F.2d 215, 217 (5th Cir. 1988) (an oil rig). DFL's Huseby conceded that "when you book cargos on liner services, you normally don't have a written agreement," and agreed that "99 percent of the cargo bookings are oral." Tr. 366, 375-76. Instead, DFL contends that for a project of this size — a "project" booking — it expected a written agreement. However, DFL's own testimony undercuts this argument. DFL's president Huseby testified that the decision to memorialize a booking in writing is a decision that the carrier makes:
Q: So you're saying you can have an oral booking contract for a certain size shipment but it has to be in writing for a larger size shipment, is that fair to say?
A: That's typical in the industry with the carriers we have dealt with. With the other carriers that we have dealt with, when it gets to that magnitude, yes, sir.
Q: Where do you draw the line?
A: We don't. That's up to the carrier.
Tr. 366-67. More significantly, this argument is contrary to a basic maxim of contract law, namely that it is the party's objective manifestation of assent that matters, not a party's subjective, uncommunicated intent.
He reiterated this point later in his testimony:
Q: Did DFL ever ask NSCSA for a written contract with respect to the shipment involved in our case?
A: Not to my knowledge. That would be something that I would say almost 100 percent of the time is interjected into the equation by the carrier. Most certainly we are, only at a point in time as an agent can we even consider signing such a thing after consultation with our principal as to whether or not this is really going to happen.
Tr. 377.
DFL admitted that all prior dealings with NSCSA were done orally. Tr. 366.
2. Contract formation
DFL also contends that disputes that a binding contract was ever made — i.e., it disputes that Cockrell confirmed the booking and that all material terms were included. See May Ship Repair Contr. Corp. v. Barge Columbia New York, 160 F. Supp.2d 594, 597 (S.D.N.Y. 2001) ("[U]nder maritime law, a binding oral contract is created when the parties reach agreement on all material terms of a contract and clearly express their intention to be bound by those terms."). On this point about the content of the conversation between Jorgensen and Cockrell on July 16, I find that Jorgensen's account is more credible and more supported by the surrounding circumstances. By mid-July, NSCSA and DFL had been negotiated for the shipment of this rig for several months and had agreed upon a tentative booking which was to be later finalized. Shortly after his conversation with Cockrell, Jorgensen sent a message to Suzan Eckert of NSCSA in which he stated that Cockrell called on July 16 to confirm the booking. In addition, Jorgensen recounted in an email message he sent Hopkins and Cockrell on August 1 additional steps that DFL took that indicated its assent to the contract, such as that DFL sent a credit application for its NVOCC. At trial, Cockrell admitted that as of July 23, before he learned from Liz Namink of the slippage in the Tabuk, it was his understanding that the rig cargo would go forward on the Saudi Tabuk. Tr. 333. He testified that "everything was in place in terms of what the agreement was, assuming there were no problems, for example, the cargo can't make it or the Saudi Tabuk can't make it." Tr. 334. Such an answer suggests that had the tables turned — i.e., had NSCSA told DFL on July 31 that it cancelled the booking — DFL would have claimed that NSCSA had breached a contract.
Cockrell testified: "I think we booked the cargo on the Tabuk, but I draw a distinction between booking it and a booking contract. [Jorgensen] rolled the booking we had for the Diriyah over to the Tabuk, and at that point, I think the discussion was that's the next available vessel that we could probably make if the rig is available in time, and at that point we weren't sure whether it was going to be available in time." Tr. 310.
3. Tabuk Slippage
DFL's argument that the Tabuk's slippage was a material breach is also meritless. DFL introduced no evidence that it ever indicated to Jorgensen at Biehl that time was of the essence and that it included such a requirement in the agreement. In fact, Cockrell admitted that during various communications with Jorgensen, DFL had never advised NSCSA that there was a specific date the cargo needed to be in Muscat. Tr. 320. Moreover, the evidence showed that NSCSA made considerable efforts to accommodate DFL when Dreco was delayed in delivering the rig. Moreover, DFL concedes that it that Biehl and NSCSA were not given a chance to remedy the situation when they learned on July 31 that the reason for the cancellation was that a competitor offered a better estimated time of arrival in Muscat. In shipping deals, especially ones involving ocean carriers, delivery times are estimated and reasonable delays are generally accepted. See Parnass Intern. Trade Oil Corp. v. Sea-Land Serv., Inc., 595 F. Supp. 153, 156 (S.D.N.Y. 1984) ("It is just such a potential for strikes and port congestion which prohibits carriers from making hard and fast promises."); see also Pioko Fashions, Inc. v. Am. President Lines, Ltd., 1993 WL 597151, at *2 (W.D. Wash. June 30, 1993) ("[I]n light of the vagaries of international shipping, a two-week delay in the delivery of cargo traveling almost 10,000 miles does not alter the terms of the carriage contract to an extent sufficient to constitute a deviation from the contractual arrangement."); Anyangwe v. Nedlloyd Lines, 909 F. Supp. 315, 321 (D. Md. 1995) ("19 day delay, in and of itself, did not constitute breach"). This is clearly the law, where, as here, there has been no showing that "time was of the essence."
Furthermore, DFL testified that a contract vessel, such as the Areti, is more likely to have a specified arrival time than a "liner service" such as NSCSA.
Even DFL's own testimony and exhibits demonstrate this fact. Cockrell testified:
Q: From your experience, is it the usual practice for an ocean carrier to guarantee as opposed to giving an estimated arrival date when you are dealing with ships?
A: Well, I think when you are dealing with a regular liner service such as NSCSA, they generally work off of estimated dates and for the most part, based on my experience, they tend to be somewhat close to them.
When you are dealing with a contract vessel such as the Areti that Mar-Tex and Global offered, I think you want a little bit more assurance that the vessel is going to be there when you have the cargo there.
Tr. 318. Furthermore, Cockrell used the terms "ETA" and "ETD" and a "on or about" or "on or around" in the email messages sent to MB Petroleum or to Biehl. See Exs. K, L, N, Q.
4. Damages
NSCSA contends that it is entitled to damages for "dead freight" in the amount of $174,945.29, which represents the total gross revenue loss of $225,420, less loading and discharge expenses it would have incurred of $50,474.71 had it carried the rig on the Tabuk. In addition, NSCSA claims it is entitled to pre-judgment interest of nine percent. DFL on the other hand contends that only 2,851.01 cubic meters and two containers were actually shipped and that the maximum amount that NSCSA can claim for any breach is $132,452.88. (This figure represents $171,064.62 for the shipment of the 2,851.01 cubic meters of cargo less loading and unloading expenses of $38,611.74.) DFL also contends that NSCSA had ample time to mitigate — i.e., replace the cargo, given that the Tabuk called on several other American cities before it called on Halifax, the last port in North America, on September 1.
NSCSA contends that the parties agreed that the shipment would involve 3,717 cubic meters of cargo at $60 per cubic meter plus two containers at $1,200 each. (NSCSA claims that the volume measurement would yield a greater amount of freight revenue.)
NSCSA contends that it would have incurred loading expenses in Houston of $33,397.15 and discharge expenses of $17,077.56, for a total of $50,474.71.
This is the measurements indicated on the two bills of lading.
DFL contends that the loading expenses in Houston, which are based on the volume, would have been $25,516.54 and that the unloading costs would have been $13,095.20.
"`Deadfreight' is measured by the difference between the freight cost of the cargo not shipped due to the breach, minus the extra expenses the vessel would have incurred in shipping the withheld cargo." Kommanditselskab Supertrans v. Ocean Contract Carriers, Inc., No. 84 Civ. 6877, 1986 U.S. Dist. LEXIS 22717, at *12 (S.D.N.Y. July 16, 1986); Hellenic Lines, Ltd. v. Commodities Bagging Shipping, Process Supply Co., 611 F. Supp. 665, 675 (D. N.J. 1985) ("`Dead freight' is the charge that must be paid to the vessel owner although the cargo contracted to be carried by the vessel is not actually carried. It is a lost opportunity cost. The vessel has set aside so much space for a particular cargo, which, but for that commitment, it could have set aside for another cargo and been paid for carrying. Thus, although the ship sails with empty space — and provides no service to the shipper who has failed to tender its cargo — it has lost money. . . . [T]he dead freight charge is equal to the freight charge."). Neither party cites cases that clearly resolve the issue presented here, namely whether "dead freight" is based on the quantity of cargo actually shipped or the quantity that the parties agreed was going to be shipped where the two values differ. To the extent that the court in Hellenic Lines spoke of a lost-opportunity cost, it follows that NSCSA's interpretation governs. The same conclusion may be inferred from those cases in which a party was liable for dead freight even when other cargo has been secured. See Herr v. Tweedie Trading Co., 181 F. 483, 485 (2d Cir. 1910) (discussing a claim for dead freight for the difference between the tonnage shipped and the tonnage called for by the freight contract). Accordingly, the damages for dead freight is the quantity that the parties agreed to — i.e., 3,717 meters and two containers with a price tag of $174,945.29.
With respect to DFL's contention that NSCSA had ample time to fill the space on the Tabuk after it cancelled the booking, NSCSA contends that DFL had the burden of proving that NSCSA could have mitigated its damages by booking replacement cargo and that DFL failed to meet this burden. See Bosung Industrial Co. v. M/V Aegis Sonic, 590 F. Supp. 908, 915 (S.D.N.Y. 1984) ("The burden of showing that defendants suffered no deadfreight loss is on the plaintiffs. . . ."). NSCSA contends and the record supports the proposition that DFL offered no rebuttal to Eckert's testimony that there was not enough time to re-book such a large quantity of cargo — which would have filled approximately twelve percent of the under deck cargo space — in the short time between when NSCSA was informed of the cancellation and when the Tabuk sailed from Houston on August 16. On cross-examination, Eckert, NSCSA's traffic manager, testified that the Tabuk carried a shipment of creosote poles, which DFL contends should be applied as mitigation of plaintiffs damages. DFL correctly notes that Eckert could not tell me when this shipment was booked — i.e., whether it was booked after DFL cancelled. However, contrary to DFL's assertion, Eckert testified that this cargo, although breakbulk cargo, was stowed on the weather deck (not under deck) given the volatile nature of the cargo.
Eckert testified that there are three types of cargo: 1) rolling stock, which is any cargo that is self-propelled or on wheels and can be towed into a vessel; 2) breakbulk, which is cargo that is fork-lifted into a vessel or handled as non-wheeled cargo; and 3) containers. See Tr. 165-66. Both rolling stock and breakbulk are generally carried under deck, while containers are generally carried on deck. See Tr. 165-66. In this case, the oil rig was to shipped under deck as breakbulk cargo.
Finally, with respect to pre-judgment interest, "[I]t is a well established general principle that courts should grant `pre-judgment interest in admiralty [actions] . . . in the absence of exceptional circumstances.'" OT Afr. Line Ltd. v. First Class Shipping Corp., 124 F. Supp.2d 817, 823 (S.D.N.Y. 2000) (quoting cases). While the interest rate for pre-judgment interest is within the court's discretion under Second Circuit precedent, it is intended to make the plaintiff whole and "most courts in this Circuit have found that the most appropriate rate is the average interest rate paid on United States Treasury Bills over either a six or twelve-month period." OT Afr. Line, 124 F. Supp.2d at 823; see also Transatlantic Marine Claims Agency v. M/V "OOCL Inspiration", 137 F.3d 94, 104 (2d Cir. 1998) (noting that the rate of interest to be used in awarding pre-judgment interest is within the sound discretion of the court and that generally it should be measured by interest on short-term, risk-free obligations); In re Complaint of Potomac Transport, Inc., No. 82 Civ. 0805 (JFK), 1993 U.S. Dist. LEXIS 418, at *1-*2 (S.D.N.Y. Jan. 13, 1993) (vacating an award of pre-judgment interest based on the New York statutory rate of pre-judgment interest and amending the judgment to base the rate on the one-year U.S. Treasury Bills during the applicable period). Here too, the appropriate interest rate is that paid on six-month United States Treasury Bills during the relevant period, namely from August 2001 to the date of entry of final judgment.
III. CONCLUSION
For the foregoing reasons, NSCSA is awarded damages of $174,945.29, plus pre-judgment interest from August 2001 to the date of entry of final judgment, for DFL's breach of an oral shipping contract of affreightment. Submit judgment on notice within 5 days from the date hereof. The Clerk of the Court is instructed to close this case and any open motions.