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ATLANTIC CONTAINER LINE AB v. AREF HASSAN ABUL

August 26, 2003

ATLANTIC CONTAINER LINE AB; APL CO. PTE LTD.; COSCO CONTAINER LINES COMPANY LIMITED; HAPAG-LLOYD CONTAINER LINE GMBH; LYKES LINES LIMITED KKC; MITSUI O.S.K. LINES LTD.; AND YANG MING MARINE TRANSPORT CORPORATION, PLAINTIFFS, VS. AREF HASSAN ABUL, INC.; ABUL SABAH; REDNIHOM, INC.; MOHINDER SINGH; AND CASINGS, INC., DEFENDANTS


The opinion of the court was delivered by: David Hurd, District Judge

MEMORANDUM-DECISION and ORDER

I. INTRODUCTION

The plaintiffs are ocean-going common carriers ("plaintiffs" or "carriers") which commenced the instant action against defendants seeking to recover the costs that they incurred in shipping and disposing of waste tires transported from defendant Casings, Inc.'s [ Page 2]

("Casings") facilities. As is relevant hereto, plaintiffs assert causes of action against Casings for fraud (Seventeenth Cause of Action), negligent hiring (Eighteenth Cause of Action), breach of contract (Nineteenth Cause of Action), and trespass to chattels (Twentieth Cause of Action). Plaintiffs and Casings have elected to submit a joint record for review and a determination of the relevant facts and legal issues of liability on plaintiffs' causes of action. The equivalent of a bench trial conducted on the basis of the joint record which has been reviewed together with all submissions by the parties. The following are the Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52.

II. FINDINGS OF FACT

The pertinent facts are fairly simple and straightforward. Casings is a New York corporation in the business of collecting and sorting used tires for re-sale. (Def.'s Proposed Findings of Fact and Conclusions of Law at ¶ 1.)*fn1 Casings sells approximately twenty percent of its tires as used tires. (Pl.'s PFFCL at ¶ 18.) The remaining tires are disposed of as waste tires by taking them to a tire disposal facility or paying outside vendors to remove them from its facilities. (Id. at ¶ 20.)

In April 2001, the individual defendant Abul Sabah ("Sabah") contacted Casings claiming that he could dispose of Casings waste tires for a fee of $450 per forty foot [ Page 3]

container.*fn2 (J.R., Ex. J, p. 56-57.)*fn3 Sabah claimed that there was a substantial market for the tires in India. (Id.) After checking the taxpayer identification number of corporate defendant Aref Hassan Abul, Inc. ("AHA"), the company with whom Sabah claimed to be affiliated, Casings accepted his offer. (Id. at pp. 57, 69.) In fact, Sabah was the sole and principal shareholder of AHA and operated it as his alter ego. (Pl.'s PFFCL at ¶ 13; Def.'s PFFCL at ¶ 10) According to the terms of the agreement, Sabah would arrange with a carrier for the containers to be shipped to a foreign destination; the carriers (or trucking companies hired by the carriers) would provide empty containers to Casings; Casings would fill the containers with waste tires and either call Sabah or the trucking companies to advise that the containers were ready for pickup; the carriers or trucking companies would then remove the filled containers from Casings facilities and deposit new empty containers at Casings facilities. (Id. at 58, 69, 72; Def.'s PFFCL at ¶¶ 24-26.) This process was repeated a number of times. The carriers would then load the filled containers onto their vessels and ship the waste tires to the foreign consignees identified by Sabah. (J.R. at Ex. E.)

On various occasions, AHA contracted with the carriers to ship the containers to consignees at various foreign destinations. (Def.'s PPFCL at ¶¶ 33, 42, 50, 60, 68; Pl.'s PPFCL at ¶¶ 75, 81, 87, 93, 98.). AHA's name was listed as the shipper and/or owner of the goods on the bills of lading with the carriers. (Id.; J.R. at Ex. E.) Sabah did not advise Casings of the identities of the overseas consignees of the waste tires. (J.R. at Ex. J, p. 79.) Sabah similarly did not advise Casings of his agreements with the carriers. (Id.) [ Page 4]

When Casings released the containers to the carriers or the trucking companies, it would issue some sort of receipt or bill of lading. (Id. at 80.) The carriers or trucking companies did not provide Casings with any bills of lading. (Id.) AHA did not provide Casings with invoices. (Id. at 86.) Casing paid AHA on approximately twenty occasions for the removal of filled containers. (Pl.'s PPFCL at ¶ 44.)

During the course of shipment, plaintiffs learned that the consignees listed on the bills of lading either would not accept delivery of the waste tires, had no knowledge of the transaction, or could not be found. (Pl.'s PPFCL at ¶¶ 78, 84, 90, 96; Def.'s PPFCL at ¶¶ 40, 48, 59, 67.) Plaintiffs were never reimbursed for their freight charges or the costs they incurred in shipping and disposing of the waste tires. Being unable to recoup their losses from either Sabah or AHA, the plaintiffs commenced the instant action.

III. CONCLUSIONS OF LAW

The sole issue presented is whether Casings is liable for plaintiffs' damages under a theory of: (1) fraud; (2) negligent hiring; (3) breach of contract; or (4) trespass to chattels.*fn4

A. Fraud

Plaintiffs set forth two alternative bases for relief on their fraud claim: (1) that Sabah acted as Casings' agent when he defrauded plaintiffs; and (2) Casings should be held for the misdeeds of its independent contractors. [ Page 5]

1. Agency

Plaintiffs seek to hold Casings liable for Sabah's fraud under principles of agency. Plaintiffs contend that Casings owned the waste tires and paid Sabah to arrange for their disposal. It is plaintiffs' position that Sabah acted as Casings' agent in making those arrangements. Casings responds that Sabah was not an agent because he was not authorized to act on behalf of Casings, but rather, provided a service to Casings to remove the waste tires for a fee.

a. Actual Authority

An agent is "a person who consents to a fiduciary relationship resulting from another person's consent to allow the person to act on the other's behalf and subject to the other's control." 2A N.Y.Jur.2d Agency § 1. The Second Circuit has similarly stated that "[u]nder general principles of agency, the authority of an agent is the power of the agent to do an act or to conduct a transaction on account of the principal which, with respect to the principal, he is privileged to do because of the principal's manifestations to him." Green Door Realty Corp. v. TIG Ins. Co., 329 F.3d 282, 289 (2d Cir. 2003) (internal quotations and citations omitted) (emphasis added).

Here, the evidence in the record demonstrates that Casings paid Sabah to dispose of the waste tires. (J.R. at Ex. J, pp. 56-59, 73 ("I told [the managers of Casings' facilities] we have a new customer for the tires, they will be supplying containers and they just needed to load them."), 81-82 (Casings issued a bill of lading to AHA without any reference to plaintiffs); Ex. J, Dep. Ex. 9.) Casings did not retain Sabah to act on its behalf, or on its account, to negotiate for the disposal of waste tires, and he was not ...


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