United States District Court, S.D. New York
June 1, 2004.
AMERICAN HOME ASSURANCE COMPANY a/s/o STANEEY DOOR SYSTEMS, Plaintiff, -against- M/V HANJIN MARSEILLES, her engines, boilers, tackles, etc., VANAVANA SHIPPING, SENATOR EINES & EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., Defendants
The opinion of the court was delivered by: ANDREW PECK, Magistrate Judge
REPORT AND RECOMMENDATION
Presently before the Court is defendant Senator Lines' motion to
dismiss on the basis of a forum selection clause in the Bill of Lading
between Senator Lines and Expediters International. (Dkt. Nos. 12 &
For the reasons discussed below, Senator Lines' motion to dismiss
should be GRANTED as against co-defendant Expediters and as
against plaintiff American Home Assurance ("AHA"), the subrogated cargo
underwriter of Stanley Door Systems.
The facts are not in dispute. On or before November 21, 2002, Stanley delivered to defendant
Expeditors a shipment of 260 boxes of goods. (Dkt. No. 15: McDermott
Decl. ¶ 4.) Expeditors and Stanley were parties to bill of lading
number 6430071357, which does not contain a forum selection clause.
(McDermott Decl. ¶ 5 & Ex. 1: Bill of Eading 6430071357.)
Expeditors subcontracted with defendant Senator Eines to carry the
shipment; Expeditors and Senator Eines were parties to bill of lading
number SENUPUSD05802105, which contains a forum selection clause stating:
"Any disputes arising under and in connection with this Sea Waybill shall
be governed by German Law and determined by the courts of Bremen."
(McDermott Decl. ¶ 5 & Ex. 2: Bill of Eading number
SENUPUSD05802105.) AHA alleges that during shipment some of Stanley's
goods were lost at sea through the fault of defendants, causing damages
of $58,768.60. (Dkt. No. 1: Compl. ¶ 9 & Sched. A.) AHA brought
suit in this Court against, inter alia. Senator Eines and
Expeditors. (Compl.) Expeditors' answer asserted a cross-claim against
Senator Eines for indemnity and/or contribution. (Dkt. No. 8: Expeditors
Answer ¶¶ 23-24.)
Senator Lines' Motion to Dismiss
On January 22, 2004, Senator Eines filed a motion to dismiss AHA's
complaint and defendant Expeditors' cross-claim on the basis of a Bremen,
Germany forum selection clause contained in the bill of lading between
Expeditors and Senator Eines. (Dkt. Nos. 12 & 13.) Senator Eines
argues that: (1) foreign forum selection clauses are presumptively
enforceable (Dkt. No. 13: Senator Eines Br. at 2); (2) courts routinely
enforce German forum clauses in bills of lading (Id. at 4); and
(3) Expeditors' cross-claim is subject to the forum selection clause,
even for a tort claim, because they are a party to the waybill
(Id. at 5). AHA opposed the motion (Dkt. Nos. 15 & 16), and Expeditors joined in AHA's opposition to the motion to dismiss via
a letter to Judge Daniels. (Dkt. No. 17: Senator Lines Reply Br., Att.
Expeditors 2/13/04 Eetter.)
I. PRINCIPLES GOVERNING THE VALIDITY OF FORUM SELECTION
CLAUSES UNDER FEDERAL LAW
A. Forum Selection Clauses Generally Are Upheld,
Including in Contracts Governed by COGSA
The Supreme Court has repeatedly upheld the validity of forum selection
clauses between contracting parties. E.g., Carnival Cruise Lines,
Inc. v. Shute, 499 U.S. 585, 589-95, 111 S.Ct. 1522, 1525-28
(1991); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14,
105S. Ct. 2174, 2182 n.14 (1985); M/S Bremen v. Zapata Off-Shore
Co., 407 U.S. 1, 8-18, 92 S.Ct. 1907, 1912-17 (1972).*fn1 In
Bremen, the Supreme Court held that forum selection clauses
"are prima facie valid and should be enforced unless enforcement is shown
by the resisting party to be `unreasonable' under the circumstances."
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 10, 92 S.Ct.
at 1913. "[A]bsent some compelling and countervailing reason it should be
honored by the parties and enforced by the courts." Id. at 12,
92 S.Ct. at 1914.
In Carnival Cruise Lines, the Supreme Court "refine[d]" its
Bremen analysis and extended the validity of forum selection
clauses to include those not the subject of negotiation and included in a
form contract between a business and a consumer, so long as the parties
had notice of the clause. Carnival Cruise Lines, Inc. v. Shute,
499 U.S. at 593, 111 S.Ct. at 1527. The Supreme Court explained that there are valid business reasons for including
a reasonable forum selection clause in a form contract that is not the
subject of negotiation. Id. at 593-94, 111 S.Ct. at 1527. The
Supreme Court emphasized that "forum-selection clauses contained in form
. . . contracts are subject to judicial scrutiny for fundamental
fairness. . . ." Id. at 595, 111 S.Ct. at 1528. The Supreme
Court noted, however, that the forum state chosen was not a "`remote
alien forum'" but one where one of the parties was located. Id.
at 594, 111 S.Ct. at 1528. Therefore, "because respondents do not claim
lack of notice of the forum clause, . . . they have not satisfied the
`heavy burden of proof,' . . . required to set aside the clause on the
grounds of inconvenience." Id. at 595, 111 S.Ct. at 1528;
see also, e.g., New Moon Shipping Co. v. Man B & W Diesel
AG, 121 F.3d 24, 32 (2d Cir. 1997) (In order to escape a forum
selection clause, a party must show "`that trial in the contractual forum
will be so gravely difficult and inconvenient that he will for all
practical purposes be deprived of his day in court.'"); Ainsley Skin
Care of New York. Inc. v. Elizabeth Grady Face First. Inc., 1997 WL
742526 at *2; National School Reporting Servs., Inc. v. National
Schools of Cal., Ltd., 924 F. Supp. 21, 24 (S.D.N.Y. 1996) ("Forum
selection clauses are regularly enforced. . . . The Second Circuit has
consistently held that, in cases brought under diversity jurisdiction, a
forum selection clause shall be upheld, unless it can be shown that
`enforcement would be unreasonable and unjust or that the clause was
obtained through fraud or over reaching.'"); Bison Pulp & Paper
Ltd. v. M/V Pergamos, 89 Civ. 1392, 1995 WL 880775 at *7-14 &
n.12 (S.D.N.Y. Nov. 29, 1995); Elite Parfums, Ltd. v. Rivera,
872 F. Supp. 1269, 1271-72 (S.D.N.Y. 1995) ("The Second Circuit has a
`strong policy' of enforcing forum selection agreements."): Orix
Credit Alliance. Inc. v. Bell Realty. Inc., 93 Civ. 4949, 1994 WL
86394 at *2 (S.D.N.Y. Mar. 16, 1994) ("In diversity cases, [forum
selection clauses] must be enforced unless it is clear `that enforcement would be
unreasonable and unjust, or that the clause was obtained through fraud or
overreaching.'"): Falconwood Fin. Corp. v. Griffin.
838 F. Supp. 836, 838-41 (S.D.N.Y. 1993) ("Settled law permits parties to a
contract to select in advance the forum for litigation of disputes that
arise under the contract.").
The Carriage of Goods by Sea Act("COGSA"), 46 U.S.C. § 1300-15,
applies to bills of lading for shipments to or from a U.S. port in
foreign trade. Like other contracts, mandatory forum selection clauses in
maritime contracts governed by COGSA are upheld between the parties by
federal courts. In Vimar Seguros Y Reaseguros. S.A. v. M/V Sky
Reefer. 515 U.S. 528, 115 S.Ct. 2322 (1995), the Supreme Court held
that foreign arbitration clauses in bills of lading were not invalid
under COGSA. Since Sky Reefer, courts have consistently held
that forum selection clauses (including foreign arbitration clauses) in
bills of lading are valid under COGSA. See, e.g., Kukje Hwaiae Ins.
Co. v. M/V Hyundai Liberty. 294 F.3d 1171, 1175 (9th Cir. 2002),
pet. for cert. filed. No. 02-81, 71 USLW 3400 (Nov. 22, 2002);
Fireman's Fund Ins. Co. v. M.V. DSR Atlantic. 131 F.3d 1336,
1339 (9th Cir. 1997), cert. denied. 525 U.S. 921, 119 S.Ct.
275 (1998); Mitsui & Co. (U.S.A.). Inc. v. Mira M/V.
111 F.3d 33, 36 (5th Cir. 1997); Glyphics Media. Inc. v. M.V. Conti
Singapore. 02 Civ. 4398, 2003 WL 1484145 at *4-6 (S.D.N.Y. Mar. 21,
2003); Far Eastern Antique Arts v. M/V Cho Yang Success. 01
Civ. 8375, 2002 WL 1313308 at *2 (S.D.N.Y. June 14, 2002); Central
National-Gottesman. Inc. v. M.V. Gertrude Oldendorff. 204 F. Supp.2d 675,
679 (S.D.N.Y. 2002); Commercial Union Ins. Co. v. M.V. Bremen
Express. 16 F. Supp.2d 403, 407 (S.D.N.Y. 1998), aff'd.
No. 99-9070, 208 F.3d 202 (table) (2d Cir. Mar. 21, 2000); Farrell
Lines. Inc. v. Columbus Cello-Poly Corp., 32 F. Supp.2d 118,
125-28 (S.D.N.Y. 1997), aff'd. 161 F.3d 115 (2d Cir. 1998); International Marine Underwriters CU v. M/V Kasif
Kalkavan, 989 F. Supp. 498, 499-500 (S.D.N.Y. 1998).
B. Privity of Contract Principles and Forum Selection
Privity of contract usually is needed to bind an entity to a forum
selection clause. In Sparks Tune-Up Ctrs., Inc. v. Strong. No.
92 C 5902, 1994 WL 188211 at *5 (N.D. Ill. May 12, 1994), the defendants
disputed the plaintiff's attempt to bind them to a forum selections
clause which they neither bargained for nor agreed upon. "The thrust of
the plaintiffs' argument is that privity of contract is not necessary to
bind an individual or an entity to a forum selection clause contained in
an agreement. Rather, according to the plaintiffs, a non-party to a
contract should be `subject to' the contract's forum selection clause
when the conduct of the non-party is `closely related' to the contractual
relationship in which the forum selection clause is controlling."
Id., 1994 WL 188211 at *4. The court rejected this argument,
finding that the cases that plaintiff cited in support of this assertion
were distinguishable because the parties see king to avoid the
forum selection clause were parties to the contract. Id., 1994
WL 188211 at *5; see also, e.g., American Specialty Sys., Inc. v.
Chicago Metallic Corp., No. 01 C 4609, 2002 WL 406965 at *5 (N.D.
Ill. Mar. 15, 2002) ("CMC argues that the plaintiff should be bound to
the forum selection clause contained in CMC's General Conditions of Sale.
. . . The problem with this argument is that the plaintiff was not a
party to any contract with CMC and did not agree to the forum selection
clause in CMC's General Conditions of Sale. . . . `A third party . . .
cannot have his rights altered, compromised or redefined by the
provisions of a contract he has not accepted.'. . . Therefore, CMC's
forum selection clause cannot be applied against the plaintiff."):
City of Peru v. Bouvier Hydropwer, Inc., No. 00 C 1179, 2001 WL 59036 at * 1 (N.D. Ill. Jan. 19, 2001) ("Here, the City was not a
party to the contract and thus did not agree to litigate disputes arising
out of it in Pennsylvania. Defendants can point to no case in which a
non-party to a contract was compelled to litigate its claim in a
jurisdiction identified in a forum selection clause, which he did not
agree to or bargain for. I decline to enforce the forum selection clause
against the City.").
C. Mandatory Forum Selection Clauses Are
Case law makes a distinction between forum selection clauses that are
considered permissive rather than mandatory. "`A mandatory forum
selection clause grants exclusive jurisdiction to a selected forum.'
. . . In contrast, a permissive forum selection clause indicates the
contracting parties' consent to resolve their dispute in a given forum,
but does not require the dispute to be resolve in that forum."
Fireman's Fund McMgee Marine v. M/V Caroline. 02 Civ. 6188,
2004 WL 287663 at *3 (S.D.N.Y. Feb. 11, 2004); see also, e.g.,
Baosteel America. Inc. v. M/V Ocean Lord. 257 F. Supp.2d 687, 689
(S.D.N.Y. 2003). "Court[s] have . . . drawn a distinction between
mandatory forum selection clauses and permissive provisions, which are
accorded less weight. A forum selection clause that is `permissive in its
language ("may be brought") . . . [leaves] open the possibility that an
action could be brought in any forum where jurisdiction can be
obtained.'" Foothill Capital Corp. v. Kidan. 03 Civ. 3976, 2004
WL 434412 at *2 (S.D.N.Y. Mar. 8, 2004) (quoting Blanco v. Banco
Indus, de Venezuela. S.A., 997 F.2d 974, 979 (2d Cir. 1993)).
However, "[m]andatory and exclusive forum selection clauses `are
presumptively valid and must be enforced unless they are unreasonable or
constitute the product of fraud or Overreaching.'" Fireman's Fund
McMgee Marine v. M/V Caroline. 2004 WL 287663 at *3 (citing
Asoma Corp. v. M/V Southgate. 98 Civ. 7407, 1999 WL 1115190 at * 1 (S.D.N.Y. Dec.7, 1999)
(Haight, D.J.)); Jockey Intl. Inc. v. M/V Leverkusen Express.
217 F. Supp.2d 447, 451 (S.D.N.Y. 2002) (Haight, D.J.).
Forum selection clauses that contain the term "shall" generally are
held to be mandatory clauses that must be enforced. See, e.g., AVC
Nederland B.V. v. Atrium Inv. P'ship. 740 F.2d 148, 155 (2d Cir.
1984); Baosteel America. Inc. v. M/V Ocean Lord. 257 F. Supp.2d
at 689-90 (& cases cited theein): Valley Nat'1 Bank v.
Greenwich Ins. Co., 254 F. Supp.2d 448, 455 (S.D.N.Y. 2003):
Thyssen. Inc. v. M/V Alpha Jupiter. 96 Civ. 8734, 1997 WL
882595 at *7 (S.D.N.Y. Aug. 15, 1997): Bison Pulp & Paper Ltd,
v. M/VPerganos. 89 Civ. 1392, 1995 WL 880775 at * 11 (S.D.N.Y. Nov.
29, 1995). On the other hand, forum selection clauses that contain terms
such as "have the right", "may" or "come within" are usually permissive.
Baosteel America. Inc. v. M/V Ocean Lord. 257 F. Supp.2d at
II. THE FORUM SELECTION CLAUSE IN SENATOR LINES' BILL OF LADING
IS MANDATORY AND REASONABLE AND SHOULD BE ENFORCED AGAINST
EXPEDITORS AND AHA
Plaintiff AHA concedes that forum selection clauses, including in
contracts covered by COGSA, generally are enforced. (Dkt. No. 16: AHA Br.
at 3: "Plaintiff does not dispute the authority cited by [Senator Lines']
counsel in support of the motion that U.S. Courts do enforce mandatory
forum selection clauses for Germany and other countries.") AHA argues,
however, that the forum selection clause in Senator Lines' bill of lading
is permissive, not mandatory. (AHA Br. at 3.) AHA primarily relies on the
decision in Hartford Fire Ins. Co. v. Novorango U.S.A. Inc.,
156 F. Supp.2d 372 (S.D.N.Y. 2001), which held the Senator Lines' forum
selection clause "`Any dispute arising under or in connection
with this Bill of Lading shall be governed by German Law and determined by the Courts of Bremen,'" Id. at 373-74 to
be permissive, not mandatory. Id. at 375. The court in
Hartford felt that "the use of the word `shall' only confers
jurisdiction in the courts of Bremen, Germany without excluding
jurisdiction elsewhere or employing mandatory venue language."
This Court respectfully disagrees with the Hartford court's
conclusion. First, the cases generally hold that use of the word "shall,"
even without more, makes the forum selection clause mandatory, not simply
permissive. (See cases cited at page 8 above.) Second, the Senator Lines'
forum selection clause at issue in this case contains additional language
that makes clear its mandatory nature. The clause in full has two
paragraphs, not just one, and reads as follows:
JURISDICTION AND LAW CLAUSE
a) Any dispute arising under and in connection
with this Sea Waybill shall be governed by German
Law and determined by the Courts of Bremen.
b) With regard to contracts of carriage concluded
in France, or entered into with a French port, the
court where the carrier has his principle place of
business be also competent in case of "APPEAL ON
GUARANTEE" or "PLURALITE DE DEFENDEURS" or
"CONNEXITE" the parties to this Sea Waybill
expressly deregating from article 100 to 107, 323,
331 to 333, 336 and 337 FRENCH NOUVEAU CODE DE
(Dkt. No. 15: McDermott Decl. Ex. 2: Senator Bill of Lading
Contracts must be read in their entirety. See, e.g., Jamie Sec.
Co. v. The Ltd. Inc., 880 F.2d 1572, 1576(2d Cir. 1989) ("The
contract must be examined in its entirety to ensure a valid interpretation."). "By examining the entire contract, we safeguard
against adopting an interpretation that would render any individual
provision superfluous." Savers v. Rochester Tel. Corp. Supp. Mgmt.
Pension Plan. 7 F.3d 1091, 1095 (2d Cir. 1993).
If the first paragraph of the forum selection clause were permissive,
the France carve-out to the forum selection clause in the second
paragraph would be superfluous. This further shows that the first
paragraph of the forum selection clause is mandatory. The Court finds the
forum selection clause to be mandatory.
None of the parties here addressed an issue that appeared as dicta in
Hartford, 150 F. Supp.2d at 376, and that applies to the facts
of this case: whether a party that was not a signatory to the bill of
lading, like Stanley, can be bound to its terms. As explained by Judge
Haight in Jockey Intl. Inc. v. M/V Leverkusen Express,
217 F. Supp.2d 447 (S.D.N.Y. 2002), a non-vessel Operating Common Carier
("NVOCC"), as agent for the cargo owner, binds the owner to the bill of
lading signed by the NVOCC:
Courts, including the Second Circuit, have held
that provisions of a bill of lading issued to an
intermediary like Fritz also bind the consignee on
whose behalf the intermediary acted in arranging
the shipment. In Stolt Tank Containers. Inc.
v. Evergreen Marine Corporation.
962 F.2d 276, 279-80 (2d Cir. 1992), the court of appeals
held that the owner of damaged containers was
subject to the liability limitations contained in
a bill of lading issued by the carrier to an
intermediary without reference to the owner. The
court rejected the owner's argument that it could
not be bound by a contract to which it was not a
party, concluding that "where a party is aware
that another is shipping its packages aboard a
vessel and has at least constructive notice that
liability limitations might apply, that party is
bound by the liability limitations agreed to by
the shipper." Id. at 280. While the
Second Circuit has not addressed the binding
nature of forum selection clauses in particular,
Stolt's reasoning would appear to apply to the
other provisions of such a contract. Applying
similar reasoning the Ninth Circuit has recently
held that a forum selection clause in a bill of
lading issued to an NVOCC binds the cargo owner.
See Kukje Hwajae Ins. Co., Ltd., 294 F.3d at 1177. As the
Ninth Circuit explained, "because an NVOCC is
considered, in general, to act as an agent for the
cargo's owner when it contracts for carriage on a
vessel, and because in this case [the NVOCC] was
acting as [the cargo owner's] agent when it
accepted the [shipper's] bill of lading, [the
cargo owner's subrogated insurer] is bound by that
bill." Id. See also Indemnity Insurance Co.
of North America v. Schneider Freight USA.
Inc., No. CV 00-08032, 2001 WL 1356247, *4-*5
(C.D.Cal. June 15, 2001) (NVOCC bound owner to
forum selection clause in bill of lading).
Jockey Int'l Inc. v. M/V Leverkusen Express. 217 F. Supp.2d
at 457; accord. Kukje Hwajae Ins. Co. v. M/V Hyundai
Liberty. 294 F.3d 1171
, 1177 (9th Cir. 2002). The mandatory forum
selection clause in the bill of lading between Senator Lines and
Expediters as AHA's agent therefore is binding upon AHA.
Finally, AHA also argues that if the Court finds that the forum
selection clause is mandatory, it nevertheless is not enforceable because
it is unreasonable in that it deprives AHA of a remedy. (Dkt. No. 16: AHA
Br. at 4-6.) AHA asserts that "in light of the fact that under German
maritime law sole title to sue under the Senator Line's sea waybill is
with its contractual partner, Expeditors International of Washington,
Inc., plaintiff would be barred from bringing suit against Senator Lines.
Thus, Senator Lines' forum selection clause is unreasonable as it denies
plaintiff of its remedy to recover against Senator lines." (AHA Br. at
6.) Senator Lines has agreed to stipulate that if AHA brings suit against
Senator Lines in Bremen, "Senator Lines would waive any defense that
plaintiff lacks privity to sue Senator Lines under the waybill." (Dkt.
No. 17: Senator Reply Br. at 7.) Accordingly, dismissal of this action
would not deprive AHA of a remedy in Bremen, Germany on the basis of
contractual privily. CONCLUSION & SCHEDULING
For the reasons stated above, Senator Lines' motion to dismiss should
be GRANTED as to both Lxpeditors and AHA. The only claim that
remains before this Court is AHA's claim against Lxpeditors. Plaintiff
AHA shall inform the Court in writing by June 11, 2004 whether it wishes
to proceed in this Court just against Lxpeditors, or whether it will
pursue all of its claims, against Senator Lines and Expeditors, in
FILING OF OBJECTIONS TO THIS REPORT AND
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal
Rules of Civil Procedure, the parties shall have ten (10) days from
service of this Report to file written objections. See also
Fed.R.Civ.P. 6. Such objections (and any responses to objections)
shall be filed with the Clerk of the Court, with courtesy copies
delivered to the chambers of the Honorable George B. Daniels, 40 Centre
Street, Room 410, and to my chambers, 500 Pearl Street, Room 1370. Any
requests for an extension of time for filing objections must be directed
to Judge Daniels. Failure to file objections will result in a waiver of
those objections for purposes of appeal. Thomas v. Arn,
474 U.S. 140
, 106 S.Ct. 466 (1985): IUL AFL-CIO Pension Fund v.
Herrmann, 9 F.3d 1049. 1054 (2d Cir. 1993), cert. denied,
513 U.S. 822, 115 S.Ct. 86
(1994); Roldan v. Racette,
984 F.2d 85
, 89 (2d Cir. 1993); Frank v. Johnson. 968 F.2d 298
, 300 (2d
Cir.), cert. denied. 506 U.S. 1038, 113 S.Ct. 825
Small v. Secretary of Health & Human Servs., 892 F.2d 15
16 (2d Cir. 1989); Wesolek v. Canadair Ltd., 838 F.2d 55
, 57-59 (2d Cir.
1988); McCarthy v. Manson, 714 F.2d 234
, 237-38 (2d Cir. 1983);
28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).