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CARBOTRADE SPA v. BUREAU VERITAS

October 18, 1995

CARBOTRADE SpA, on its own behalf and as an assignee of Essex Cement Co., Plaintiff, against BUREAU VERITAS, Defendant. BUREAU VERITAS, Third-Party Plaintiff, -against- TITAN CEMENT COMPANY, S.A., Third-Party Defendant.


The opinion of the court was delivered by: KOELTL

 John G. Koeltl, U.S.D.J.:

 This admiralty action arises from the loss of cargo that occurred when the vessel M/V "STAR OF ALEXANDRIA" ("STAR OF ALEXANDRIA" or the "vessel") sank during its April 1989 voyage across the Atlantic. The plaintiff Carbotrade SpA ("Carbotrade"), who had chartered the vessel from her owners, brings this action on its own behalf and as an assignee of Essex Cement Co. ("Essex"), the subcharterer of the vessel and owner of her cargo, seeking damages for the cargo lost as a result of the sinking. The plaintiff alleges that the defendant and third-party plaintiff Bureau Veritas ("B.V."), a classification society, is liable for this loss because B.V. negligently endorsed the vessel's certificate of classification. The plaintiff contends that B.V. failed to detect or failed to act upon perceivable defects in the vessel, and that this failure was the proximate cause of the vessel's sinking. B.V. now moves for summary judgment pursuant to Fed. R. Civ. P. 56(c) on the basis that it owed no legal duty to the plaintiff, and that even if B.V. did have such a duty, the plaintiff neither actually nor reasonably relied on B.V.'s classification of the vessel. For the reasons explained below, the defendant's motion is granted.

 I.

 The STAR OF ALEXANDRIA was a British flag bulk carrier registered in the United Kingdom ("U.K.") dependency of Gibraltar. Kende Aff., Exh. 13 (Certificate of British Registry). The vessel broke in two amidships and sank on April 17, 1989 in international waters while on a voyage from Eleusius, Greece, to Newark, New Jersey. Its owner was Caribene Investments, Ltd. ("Caribene") a corporation organized under the laws of Gibraltar. Id.; Exh. 2 (Tisdale 5/26/92 Aff.) at P 6. Pursuant to a charter dated February 28, 1989 ("head charter"), Caribene chartered the STAR OF ALEXANDRIA to the plaintiff Carbotrade, an Italian corporation with its principle place of business in Italy. Tisdale Aff., Exh. 10 ("head charter"); Kende Aff., Exh. 1 (First Amended Complaint) at P 2. On the same day, Carbotrade subchartered the vessel to Essex, a New Jersey partnership and affiliate of the third-party defendant Titan Cement Company ("Titan"), a Greek corporation and owner of the cement cargo aboard the STAR OF ALEXANDRIA when it sank. Tisdale Aff., Exh. 7 (voyage subcharter); Tisdale Aff., Exh. 1 (Tsanglis Dep.); Kende Aff., Exh. 22 (Essex-Titan Term Cement Supply Agreement); Kende Aff., Exh. 25 (Bill of Lading). Essex is not a party to this action. Carbotrade's insurer, The Standard of London, has settled with Essex for $ 1.25 million and currently owns Essex's claim to causes of action to recover damages for the lost cargo. Kende Aff., Exh. 38A (Ravano Dep.). Essex is to receive a portion of any recovery Carbotrade obtains from any third-party actions connected to the sinking of the STAR OF ALEXANDRIA. Kende Aff., Exh. 29 (settlement, release, and assignment agreement between Carbotrade and Essex).

 In this action, Carbotrade sues the classification society Bureau Veritas ("B.V."), a French corporation with its principal place of business in France and offices in ports throughout the world, including New York. Kende Aff., Exh. 6 (Godefroi Decl.) at PP 2,4. B.V. promulgates standards for the quality and integrity of ocean-going vessels to determine their conformity with B.V.'s published standards by "classing" vessels in accordance with its rules. Id. at P 3. All of B.V.'s agreements to class a vessel are entered into with the vessel's owner and are approved by personnel in B.V.'s headquarters in Courbevoie, France. Id. at P 4. B.V. classes vessels for terms of three to five years, depending upon the vessel's age. Tisdale Aff., Exh. 18 (B.V.'s "Rules and Regulations for the Classification of Steel Ships 1988"), Art. 2-12.1. During the term, B.V. conducts surveys "for the maintenance, renewal or confirmation of their class." Id., Art. 2-11.1. After a survey, the B.V. surveyor issues a classification certificate or endorses the classification certificate with a visa reflecting the survey. Id., Art. 2-11.1. The certificate and visas represent "the only authentic information about the class of the ship; they may be made available by the Owner to all interested parties." Id., Art. 2-11.1. In addition, a ship's classification is valid only if the vessel is "loaded and operated in a proper manner by competent and qualified crew or operating personnel according to the environmental, loading operating and other criteria on which classification is based." Id., Art. 1-12.2.23. Here, the STAR OF ALEXANDRIA, a Gibraltar-registered vessel, was subject to U.K. manning laws. Kende Aff., Exh. 28 (Holmes Decl.) at PP 7-11.

 Under the head charter, the owner of the STAR OF ALEXANDRIA warranted to the plaintiff that the owner would maintain the vessel in class. Tisdale Aff., Exh. 10. B.V. was not a party to this charter. The charter also provided that Carbotrade's surveyor and master would conduct an on-hire survey "for the purpose of ascertaining the vessel's condition," and that "before Notice of Readiness is tendered at loading port, the vessel is to be inspected and passed by Charterer's surveyor." Id.1 The charterer had the option of cancelling the charter up to the day of the vessel's readiness. Id. If anything prevented "the full working of the vessel," Carbotrade could cease paying the daily hire for the vessel until the situation was corrected. Id. In addition, the charter provided that any dispute between Caribene and Carbotrade would be settled through arbitration in London. Id.

 Unlike the head charter, the subcharter between Carbotrade and Essex contained no express provision that the owner would maintain the vessel's class. See Tisdale Aff., Exh. 2 (Fjeldberg Dep.) (noting that subcharter does not mention vessel's classification). The plaintiff contends, however, that one of the clauses of the subcharter, which stated that the ship was "warranted tight, staunch, and strong, and in every way fitted for the voyage," implied a guarantee that the ship would be in class. Tisdale Aff., Exh. 7; Exh. 2 (Fjeldberg Dep.). Like the head charter, the subcharter required that before the Notice of Readiness to load cargo was tendered, the vessel was to be inspected and passed by the charterer's surveyor. Tisdale Aff., Exh. 7. This surveyor could fail the vessel for inspection if he found repairs were necessary, and if the vessel did not pass inspection within 48 hours of the surveyor's first inspection, the charterers had the option to cancel the charter party. Tisdale Aff., Exh. 7; Kende Aff., Exh. 34 (Fjeldberg Dep.). In addition, the subcharter provided that any disputes between Carbotrade and Essex would be settled through arbitration in New York. Tisdale Aff., Exh. 7.

 Beginning in 1985, B.V. conducted various surveys of the STAR OF ALEXANDRIA. Kende Aff., Exh. 10 (classification certificates); Exh. 6 (Godefroi Decl.) at P 8. The last inspection of the ship before it sank took place from March 6, 1989 to March 28, 1989. Kende Aff., Exh. 6 (Godefroi Decl.) at P 8. At this time, B.V. issued two certificates required by international convention: a loadline certificate, which concerns the method of loading cargo, and a safety equipment certificate. Id.; Kende Aff., Exh. 10 (classification certificates). In addition, B.V. performed other surveys, including a bottom survey, which is an inspection of the ship's hull in dry dock, and an intermediate survey, which is an internal examination of compartments in the interior of the ship. Kende Aff., Exh. 6 (Godefroi Decl.) at P 9; Kende Aff., Exh. 10 (hull certificate, Visa No. 7); Tisdale Aff., Exh. 11 (Stavropoulos Dep.); Tisdale Aff., Exh. 18, Art. 2-41 (outlining procedures for bottom surveys), Art. 2-44 (intermediate surveys). The plaintiff alleges that B.V. negligently endorsed the ship's classification on the basis of the intermediate and bottom surveys.

 The plaintiff alleges that the proximate cause of the vessel's sinking was the negligent inspection of the vessel's topside wing tanks during the intermediate survey of the ship. As the B.V. rules for intermediate surveys provide, Mr. Stavropoulos, the B.V. Senior surveyor of the STAR OF ALEXANDRIA, visually inspected and tested all of the vessel's top side wing tanks. Kende Aff., Exh. 19 (survey report); Kende Aff., Exh. 39 (Stavropoulos Dep.); Tisdale Aff, Exh. 18, Art. 2-44.1.11 (an intermediate surveyor must investigate, among other things, "one or several cargo holds, ballast tanks or other compartments, as deemed necessary by the Surveyor"); Tisdale Aff., Exh. 18, Art. 2-44.2.22 (in an intermediate survey, the ballast tanks to be surveyed "should include at least two top wing tanks"). In testing the wing tanks, Stavropoulos noticed some minor leakage. Kende Aff., Exh. 39 (Stavropoulos Dep.). Despite this leakage, Stavropoulos passed the tanks as satisfactory on March 28, 1989, thereby permitting the vessel to remain in class. Tisdale Aff., Exh. 11 (Stavropoulos Dep.); Kende Aff., Exh. 10 (hull certificate, Visa No. 8). The plaintiff alleges that under B.V. rules, there is an implicit understanding that if there is any leakage from these tanks, a vessel will not be certified. See Tisdale Aff., Exh. 19 (Pennaneach Dep.). The plaintiff contends that cracks in the wing tanks reduced the vessel's structural strength and thereby contributed to the sinking of the ship. Tisdale Aff., Exh. 32 (Couling Dep.).

 During March 1989, an independent surveyor hired by Essex also inspected the vessel. The surveyor, Constantine Tsamados, boarded the ship to conduct this survey four times: March 18, March 21, March 23, and a fourth time between the commencement of the loading and its completion. Kende Aff., Exh. 40 (Tsamados Dep.). Under the terms of the subcharter, the surveyor could fail the vessel for inspection if he found repairs were necessary. Kende Aff., Exh. 34 (Fjeldberg). Like the B.V. surveyor Stavropoulos, Tsamados observed some water leaking from the wing tanks, but noted in his report that they would not be used during the voyage. Kende Aff., Exh. 21 (Tsamados survey report). He certified the vessel as "passed" for carriage of the cement cargo that was ultimately loaded on board. Tisdale Aff., Exh. 26 (Tsamados certificate).

 The plaintiff alleges the classification certificate together with the visa from the periodic survey was on board the vessel on March 28, 1995, and that Mr. Tsamados inspected this certificate when surveying the vessel in order to confirm that the certificate had been extended. Tisdale Aff., Exh. 25 (Tsamados Aff.) at P 2; Kende Aff., Exh. 21 (Tsamados survey report) (noting the validity of the classification certificate). The plaintiff concedes, however, that there was never any direct correspondence or communication between the defendant B.V. and Carbotrade or Essex regarding the STAR OF ALEXANDRIA.

 In addition, it is undisputed that the Notice of Readiness was issued by the ship's master and accepted by the cargo interests on March 21, 1989, several days before the independent surveyor completed his inspection of the vessel. Kende Aff., Exh. 33 (Eleftheriou Dep.). Loading operations began on March 23, 1989, five days before B.V. renewed the vessel's classification; by March 28, 32,000 of the 33,389 tons of cargo had been loaded onto the vessel. Kende Aff., Exh. 33 (Eleftheriou Dep.); Exh. 25 (Bill of Lading).

 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.

 II.

 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 ...


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