brought to Boston, Massachusetts. Kende Aff., Exh. 26 (B.V.'s casualty report). The United Kingdom Department of Transportation ("DOT") investigated the sinking and concluded that it was caused by the negligence of the owners and crew, improper loading of the cargo, and exceptionally stormy weather conditions. Tisdale Aff., Exh. 9 (DOT report). B.V. representatives from Britain, France, and Greece cooperated with this investigation, but no representatives from the United States were involved. Kende Aff., Exh. 6 (Godefroi Decl.) at P 12.
Pursuant to the arbitration clause contained in the head charter, Carbotrade commenced arbitration against Caribene in London and obtained a default judgment against the shipowner. Kende Aff., Exh. 2 (Tisdale 6/26/95 Aff.) at P 18. This judgment has not been satisfied. Id. at P 19. Caribene's insurers refuse to satisfy the judgment because the owners allegedly violated manning requirements of Gibraltar, the flag state. Id. Thus, Caribene has no known assets, and there is no insurance to compensate Carbotrade on its claims.
In this action, Carbotrade alleges that B.V. is liable for the cargo loss because B.V. breached its duty to Carbotrade by negligently allowing the vessel to remain in class even though it was not seaworthy. Carbotrade claims that B.V. improperly inspected the vessel's wing tanks, and that Carbotrade relied on B.V.'s representation that the vessel was fit and suitable to carry the cargo. Carbotrade alleges that had B.V. refused to extend the hull certificate on March 28, 1989, then neither Carbotrade nor Essex would have allowed the vessel to sail with the cargo aboard. In response, B.V. contends that as a matter of law it owed no duty to the plaintiff, and that even if it did have such a duty, the plaintiff has failed to prove that it actually and reasonably relied on B.V.'s representations that the vessel was in class.
Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Gallo v. Prudential Residential Servs. Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d Cir. 1994).
As a threshold matter, the Court must determine which law governs this case. The defendant asserts that British law applies, while the plaintiff alleges that the controlling law is either the federal maritime common law of the United States or, in the alternative, Greek law.
Federal choice of law principles determine the applicable law in maritime actions. Romero v. International Terminal Operating Co., 358 U.S. 354, 382-83, 3 L. Ed. 2d 368, 79 S. Ct. 468 (1959); Sundance Cruises Corp. v. American Bureau of Shipping, 7 F.3d 1077, 1081-82 (2d Cir. 1993), cert. denied, 114 S. Ct. 1395 (1994). In Lauritzen v. Larsen, 345 U.S. 571, 97 L. Ed. 1254, 73 S. Ct. 921 (1953), the Supreme Court held that conflicts between competing laws should be determined by "ascertaining and valuing points of contact between the transaction and the states or governments whose competing laws are involved." Id. at 582; see also Romero, 358 U.S. at 383 (in applying general federal maritime choice of law principles, the controlling considerations are the interacting interests of the United States and of foreign countries). The Lauritzen Court determined that the following factors are relevant for such a determination: (1) the place of the wrongful act; (2) the law of the ship's flag; (3) the domicile of the injured party; (4) the domicile of the shipowner; (5) the place of contract; (6) the inaccessibility of the foreign forum; and (7) the law of the forum. 345 U.S. at 583-92; Sundance, 7 F.3d at 1081.
In Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 26 L. Ed. 2d 252, 90 S. Ct. 1731 (1970), the Court noted that "the list of seven factors in Lauritzen was not intended as exhaustive," 398 U.S. at 309, and added the shipowner's base of operations as another relevant consideration.
Of all the relevant criteria, the application of the law of the flag to maritime causes of action is "perhaps the most venerable and universal rule of maritime law." Lauritzen, 345 U.S. at 584; see also Hellenic Lines, 398 U.S. at 308 ("the flag that a ship flies may, at times, alone be sufficient") Sundance, 7 F.3d at 1082 (noting that the law of the flag "'overbears most other connecting events in determining applicable law'") (quoting Lauritzen, 345 U.S. at 585). However, the law of the flag is given little weight when it is merely a flag of convenience. See Lauritzen, 345 U.S. at 587 (flag law not as relevant when shipowner's choice of flag appears to be an attempt to avoid stringent shipping laws); Sundance, 7 F.3d at 1082 (noting that it would be inappropriate to apply the law of the flag when the flag country appears to be a sham). As the Court cautioned in Hellenic Lines, 398 U.S. 306, 26 L. Ed. 2d 252, 90 S. Ct. 1731, "the Lauritzen test . . . is not a mechanical one. . . . The significance of one or more factors must be considered in light of the national interest served by the assertion of [that nation's law]." Id. at 309. Accordingly, the Lauritzen factors are of variable importance depending upon the circumstances of the particular case. Lauritzen, 345 U.S. at 582; Romero, 79 S. Ct. at 486.
This action involves contacts with several countries. The alleged "wrongful act" occurred in Greece; the vessel flew the British flag and was registered in the U.K. dependency of Gibraltar; the plaintiff's domicile is Italy; the shipowner's domicile is Gibraltar; and the United States provides the forum. This case also has contacts with France, the domicile of the defendant B.V.; however, neither party contends that French law controls this case. The remaining Lauritzen factors are irrelevant in this action: the plaintiff's allegations sound in tort, not contract, and the inaccessibility of a foreign forum is not at issue.
The defendant argues that the significance of the British contacts indicates that British law applies. These contacts include the flag of the ship, the place of incorporation of the shipowner, and the arbitration clause in the main charter. The plaintiff responds that the law of the flag of the ship is irrelevant because it is a flag of convenience only, and the flag state has no real interest in this litigation because the shipowner is not a party to this suit. The plaintiff urges this Court to apply the law of the United States instead because this case has substantial contacts with this country.
When, as here, the Lauritzen factors "point indiscriminately to much of the globe," Sundance, 7 F.3d at 1082 (quoting Sundance Cruises Corp. v. American Bureau of Shipping, 799 F. Supp. 363, 387 (S.D.N.Y. 1992), aff'd, 7 F.3d 1077 (2d Cir 1992), the law of the flag governs absent of proof that another nation has a more significant, countervailing interest. The plaintiff has made no such showing.
Rather than being irrelevant, as the plaintiff argues, the law of the flag is particularly appropriate under the circumstances of this case because it is a unifying factor that can govern the potential liabilities of a classification society to third parties with whom the society has no direct contractual relations. Here, B.V. entered into its contract with the ship's owner, a Gibraltar corporation, and issued its classification certificate for a British flag vessel. B.V. had no direct relationship with any cargo interests who subsequently chartered the vessel from the ship's owner. B.V.'s relations were with the ship's owner and related to its classification of a British flag vessel. In addition, the vessel was subject to British manning laws. Numerous different cargo interests from around the world could potentially enter into charters or subcharters for the vessel. Without the certainty of the law of the flag, the law governing any potential liability to third parties would be indeterminate, requiring classification societies to take into account possible liabilities under an unlimited number of laws. Compare Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 1995 U.S. App. LEXIS 25724, *9, 1995 WL 546238, *4 (2d Cir. 1995) (upholding validity of forum-selection clause in passenger ticket, noting that because passengers hail from all 50 states as well as several foreign countries, the Greek cruise line "has a special interest in limiting the fora in which it potentially could be subject to suit'") (quoting Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94, 113 L. Ed. 2d 622, 111 S. Ct. 1522 (1991)). Although Lauritzen itself involved the law to be applied to a seaman injured on a vessel that sails around the world, its rationale that the law of the flag controls due to the practical difficulties of applying the laws of all the territories into which a ship sails is also true for potential liabilities by the classification society to third parties. Furthermore, this is not a case where the flag country is a "sham." Carbotrade has failed to offer any evidence that the shipowner selected a flag in order to avoid application of the laws of more stringent countries.
The plaintiff's argument that United States law should govern this case is not persuasive. Carbotrade contends that federal maritime law governs because Essex is a New Jersey-based partnership that used a New Jersey chartering broker, the defendant has several branch offices in the United States and conducts classification surveys of vessels at numerous United States ports, the STAR OF ALEXANDRIA was inspected four times at a United States port in the last ten years, the United States Coast guard was involved in rescue operations of the vessel, and the vessel sank in international waters off the coast of Massachusetts. Although it is clear that both the vessel and B.V. have had minimal contacts with the United States, such contacts only justify the exercise of personal jurisdiction over such parties, not the application of United States law. In addition, none of the contacts the plaintiff lists is relevant in this action. Neither party is based in the United States, and none of the significant events relating to the classification and loss of the vessel and the plaintiff's cargo occurred in the United States. This is an action by an Italian corporation against a French corporation alleging reliance on a classification certificate for a British vessel owned by a British company and inspected in Greece, and which sank in international waters. The only significant connection between this action and the United States is that the plaintiff brought the case here. This contact alone does not justify the application of United States law.
The plaintiff half-heartedly argues in the alternative that Greek law should govern this action based on the theory of lex loci delicti commissi. The Supreme Court has explicitly stated, however, that the choice-of-law principles that govern maritime cases "do not depend upon a mechanical application of a doctrine like that of lex loci delicti commissi." Romero, 358 U.S. at 383. This standard "is so unfitted to an enterprise conducted under many territorial rules and under none that it usually is modified by the more constant law of the flag." Lauritzen, 345 U.S. at 584. In this case, B.V. originally classed and subsequently has conducted surveys to reaffirm the class of the STAR OF ALEXANDRIA in a number of different places, including the United States, Japan, Gibraltar, Malta, and Greece. Tisdale Aff., Exh. 5 (copies of classification reports for the STAR OF ALEXANDRIA). B.V. renewed the classification of the STAR OF ALEXANDRIA for almost 30 years pursuant to surveys conducted in ports all over the world. Accordingly, third parties that charter this vessel may allegedly rely on this certification in any number of countries, exposing B.V. to numerous different laws. Lex loci delicti commissi is therefore clearly inappropriate for this sort of action.
In sum, the plaintiff has failed to demonstrate that the interests of any other country are sufficiently strong to rebut the presumption that the law of the flag applies. See Lauritzen, 345 U.S. at 585 (the law of the flag applies "unless some heavy counterweight appears").
Under British law, the defendant is entitled to summary judgment. The present case falls squarely within the House of Lord's recent decision in Marc Rich & Co. v. Bishop Rock Marine Co., Ltd. (The NICHOLAS H) (July 6, 1995), which held that a classification society does not owe a third-party cargo owner a duty of care capable of giving rise to liability for damages stemming from lost cargo.
Nothing about the current case distinguishes it from NICHOLAS H. If anything, the case for liability in NICHOLAS H. was stronger than in the present case. In NICHOLAS H., a cargo owner sued the defendant classification society Nippon Kaiji Kyokai ("N.K.K.") in tort for the total loss of cargo on board the vessel NICHOLAS H. During its voyage, the NICHOLAS H. developed a crack in her hull. At the request of the United States Coast Guard, the vessel docked off the shore of Puerto Rico, where N.K.K. performed a survey of the damage. NICHOLAS H., slip op. at 17. Although the surveyor recommended that the vessel be dry-docked for repairs, the shipowners persuaded the surveyor to permit temporary repairs instead. Id. After the temporary repairs were completed, the surveyor recommended that the vessel remain in class, thus permitting it to continue its journey across the Atlantic. Id. Soon after, the ship sank and the cargo was completely lost. Id. at 18. The cargo owner alleged that N.K.K. was responsible for the vessel's sinking and thus liable for the cargo loss because N.K.K. negligently permitted the ship to remain in class despite the crack in its hull.
The House of Lords declined to hold the classification liable. The House of Lords explained that in order to impose a duty of care, there must be (1) foreseeability of harm to the plaintiff; (2) an appropriate relationship between the parties; and (3) a situation in which it is "fair, just and reasonable to impose a duty of care." Id. at 21-22.
Lord Steyn points out in his opinion that "in England no classification society, engaged by owners to perform a survey has ever been held liable to cargo owners on the ground of a careless conduct of any survey." Id. at 17. In the course of finding no liability for the classification society in NICHOLAS H., Lord Steyn explained some of the policy reasons that argued against the imposition of such liability.
If a duty of care is held to exist in this case, the potential exposure of classification societies to claims by cargo owners will be large. That greater exposure is likely to lead to an increase in the cost to classification societies of obtaining appropriate liability risks insurance. Given their role in maritime trade classification societies are likely to seek to pass on the higher costs to owners. Moreover, it is readily predicable [sic] that classification societies will require owners to give appropriate indemnities. Ultimately, shipowners will pay.
Id. at 26. Lord Steyn continued:
At present the system of settling cargo claims against shipowners is a relatively simply one. The claims are settled between the two sets of insurers. If the claims are not settled, they are resolved in arbitration or court proceedings. If a duty is held to exist in this case as between the classification society and cargo owners, classification societies would become potential defendants in many cases. An extra layer of insurance would become involved. The settlement process would inevitably become more complicated and expensive. Arbitration proceedings and court proceedings would often involve an additional party. And often similar issues would have to be canvassed in separate proceedings since the classification societies would not be bound by arbitration clauses in the contracts of carriage. If such a duty is recognized, there is a risk that classification societies might be unwilling from time to time to survey the very vessels which most urgently require independent examination. It will also divert men and resources from the prime function of classification societies, namely to save life and ships at sea. These facts are, by themselves, far from decisive. But in an overall assessment of the case they merit consideration.