United States District Court, S.D. New York
January 12, 2005.
STEMCOR USA, Plaintiff,
HYUNDAI MERCHANT MARINE CO., LTD., STEVEDORES, INC., RESERVE MARINE TERMINALS, INC., and the M/V DIMITRA, her engine, boilers, tackle, etc., in rem, Defendants. HYUNDAI MERCHANT MARINE CO., LTD., Cross-claimant, v. STEVEDORES, INC. and RESERVE MARINE TERMINALS, INC., Cross-defendants.
The opinion of the court was delivered by: GEORGE DANIELS, District Judge
OPINION AND ORDER
Plaintiff Stemcor USA, Inc. ("Stemcor") sues defendants Hyundai
Merchant Marine Co., Ltd. ("Hyundai"), Stevedores, Inc.
("Stevedores"), and Reserve Marine Terminals, Inc. ("Reserve")
for damages arising from alleged mishandling of cargo shipped
aboard the vessel M/V Dimitra ("Dimitra").*fn1 Hyundai moves
to dismiss the complaint based on the forum selection clause
contained in the carriage contract between Stemcor and Hyundai.
Stevedores and Reserve move to dismiss the complaint for lack of
personal jurisdiction. For the reasons set forth below,
defendants' motions are granted.
On June 20, 1998, Stemcor, a Delaware corporation, shipped
aboard the Dimitra approximately 13,094 metric tons of hot rolled
steel plates from Kemaman, Malaysia to New Orleans. (Am. Compl. ¶
9) The Dimitra was owned, chartered, and operated by Hyundai.
(Id. ¶ 7) Stemcor was the consignee or owner of this shipment
of steel plates (Id. ¶ 11), which were in good order and
condition before shipment from Malaysia. (Id. ¶ 10) They were
shipped pursuant to Hyundai's bills of lading. (Ex. 1 to
Affidavit of Elizabeth Smith ("Smith Aff.")) Once the cargo reached New Orleans on September 7, 1998, it was discharged by
Stevedores, a Louisiana provider of cargo loading services for
vessels in the Port of New Orleans. (Am. Compl. ¶¶ 10, 14) A
portion of the cargo was then loaded by Stevedores on barges for
shipment to the Chicago warehouse of Reserve, an Ohio provider of
cargo loading and storage services. (Id. ¶¶ 15, 22) The cargo
arrived "seriously contaminated, damaged, impaired in value, and
short in quantity." (Id. ¶ 10) Stemcor commenced this action
for $30,000 in damages against Hyundai and the Dimitra in rem on
August 25, 1999. On January 5, 2000, Stemcor amended the
complaint to include Stevedores and Reserve as defendants.
This court has subject matter jurisdiction pursuant to
28 U.S.C. § 1333 (maritime and admiralty jurisdiction). On a motion
to dismiss for lack of personal jurisdiction, see Fed.R. Civ.
P. 12(b) (2), "the plaintiff bears the burden of showing that the
court has jurisdiction over the defendants." Metro. Life Ins.
Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996).
At the motion to dismiss stage, "all allegations are construed in
the light most favorable to the plaintiff and doubts are resolved
in the plaintiff's favor. . . ." A.I. Trade Fin. Inc. v. Petra
Bank, 989 F.2d 76, 79-80 (2d Cir. 1993). III.
Each of Hyundai's bills of lading contain the following clause:
25. Governing Law and Jurisdiction The claims arising
from or in connection with or relating to this Bill
of Lading shall be exclusively governed by the law of
Korea except otherwise provided in this Bill of
Lading. Any and all action concerning custody or
carriage under this Bill of Lading whether based on
breach of contract, tort or otherwise shall be
brought before the Seoul Civil District Court in
(Ex. 2 to Smith Aff.) Stemcor does not dispute that these bills
are the contracts of carriage for the shipments at issue. Hyundai
moves to dismiss, contending that this clause requires Stemcor to
bring the instant action in Korea.
Stemcor argues first that the clause is "unreasonable" in "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." New Moon Shipping Co., Ltd. v. Man B&W
Diesel AG, 121 F.3d 24, 33 (2d Cir. 1997) (quoting M/S Bremen
v. Zapata Off-Shore Co., 407 U.S. 1, 18 (1972)). Foreign forum
selection clauses are presumptively valid and "should be enforced
unless enforcement is shown by the resisting party to be
`unreasonable' under the circumstances." Bremen,
407 U.S. at 10. In order to overcome this presumption of enforceability, a
party which seeks to bring a suit in a forum other than the one designated by the forum selection clause must
prove that: (1) the forum selection clause is invalid for fraud
or overreaching; (2) the forum selection clause will deprive
plaintiff of its day in court due to grave inconvenience or
unfairness of the selected forum; (3) the fundamental unfairness
of the chosen law will deprive plaintiff of a remedy; or (4)
enforcement would contravene a strong public policy of the forum
in which the action was brought. See Bremen,
407 U.S. at 15-17.
At this stage, Stemcor must allege facts to support a prima
facie showing that the clause is unreasonable under the "heav"
standard of Bremen. New Moon, 121 F.3d at 28-29. However,
Stemcor has made no allegation beyond reciting the grounds for
"unreasonableness" set forth by the Supreme Court in Bremen.
Nor does Stemcor present any disputed factual issues regarding
the difficulty of litigating in a Korean court or any of the
other factors in Bremen. New Moon, 121 F.3d at 29 ("A
disputed fact may be resolved in a manner adverse to the
plaintiff only after an evidentiary hearing."). Hence, Stemcor
fails to make a prima facie showing that the forum selection
clause in Hyundai's bills of lading is "unreasonable" or
In what appears to be a separate argument, Stemcor contends
also that under the clause, it loses the protection of Section
3(8) of the Carriage of Goods by Sea Act ("COGSA"), which governs the liability of shippers and carriers:
Any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from
liability for loss or damage to or in connection with
the goods, arising from negligence, fault, or failure
in the duties and obligations provided in this
section, or lessening such liability shall be null
and void and of no effect.
46 U.S.C. App. § 1303(8).
In Vimar Seguros v. Reaseguros, S.A. v. M/V Sky Reefer,
515 U.S. 528 (1995), the Supreme Court held that a foreign
arbitration clause in a bill of lading was enforceable and was
not prohibited by Section 3(8) of COGSA. Noting that COGSA
protects the fact and extent of liability, not the means and
costs of enforcing that liability, the Court concluded that
"nothing suggests that [Section 3(8) of COGSA] prevents the
parties from agreeing to enforce these obligations in a
particular forum. . . . By its terms, [Section 3(8)] establishes
certain duties and obligations, separate and apart from the
mechanisms for their enforcement."). Id. at 535. Put another
way, "procedural impediments that make a plaintiff's recovery in
a foreign forum more difficult to achieve do not constitute the
`lessening [of] liability' sufficient under Section 3(8) to
invalidate a choice of law or choice of forum clause." Int'l
Marine Underwriters v. M/V Kasif Kalkavan, 989 F. Supp. 498,
499 (S.D.N.Y. 1998) (quoting Sky Reefer, 515 U.S. at 534).
Courts have applied Sky Reefer to foreign forum selection clauses as well. See, e.g., Kalkavan,
989 F. Supp. at 499 (Sky Reefer "also applies to the enforceability of
foreign forum selection clauses because the Supreme Court stated
`[w]e cannot endorse the reasoning or the conclusion of the [rule
in Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (2d Cir.
1967),' which holds] that [a] foreign forum selection clause in
[a] bill of lading violates § 1303(8) of COGSA"); Hyundai Corp.
U.S.A. v. M/V An Long Jiang, No. 97-3855, 1998 WL 13835, at *1
(S.D.N.Y. Jan. 13, 1998); TradeArbed, Inc. v. M/V Agia Sofia,
No. 96-4930, 1997 WL 769525 Pasztory v. Croatia Line,
918 F. Supp. 961, 966 (E.D. Va. 1996).
Notwithstanding this precedent, Stemcor contends that the
extension of Sky Reefer to foreign forum selection clauses
would cause Stemcor to "lose its COGSA section 3(8) protection
against Hyundai" by "lessening [Hyundai's] liability." (Id. at
7) Stemcor claims that it "would have no guarantees in a Korean
court that its COGSA safeguards would remain intact." (Id.)
However, Stemcor fails to substantiate its claim that it will
lose its COGSA protection in a Korean court. Plaintiffs in other
cases involving the identical clause have asserted (i) the
difficulty under Korean law of effecting service on defendants;
(ii) the unavailability under Korean law of an in rem action against the ship;*fn2 and (iii) the unfairness of a
Korean legal rule that permits a plaintiff to sue only one
carrier.*fn3 See Kalkavan, 989 F. Supp. at 499; see
also Long Jiang, 1998 WL 13835, at *2-3. Stemcor has argued
none of these nor any other circumstance to support its
contention that litigation in a Korean court will reduce
Hyundai's obligations to Stemcor below that which COGSA
guarantees. See Sky Reefer, 515 U.S. at 539; see also
Mitsui & Co. v. M/V Mira, 111 F.3d 33, 35 (5th Cir. 1997)
(forum selection and choice-of-law clauses are presumptively
Accordingly, Hyundai's motion to dismiss is granted. B. Stevedores
In admiralty cases, the law of the forum state coverns whether
a party is subject to personal jurisdiction. See Klinghoffer
v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro
In Amministrazione Straordinara, 937 F. 2d 44, 50 (2d Cir.
1991). Accordingly, New York law governs here.
Stevedores argues that it is not subject to personal
jurisdiction in New York pursuant to the New York general
jurisdiction statute for parties "doing business" in New York,
N.Y. Civ. Prac. L. § 301, and the New York long-arm statute,
id. § 302(a). Stemcor does not dispute the point as to Section
301. However, Stemcor argues that Stevedores' conduct and
relationship with New York satisfies Section 302(a) (3) (ii),
As to a cause of action arising for any of the facts
enumerated in this section, a court may exercise
personal jurisdiction over any non-domiciliary, . . .
who in person or through an agent . . .
3. commits a tortious act without the state causing
injury to person or property within the state, if he
. . .
(ii) expects or should reasonably expect the act to
have consequences in the state and derives
substantial revenue from interstate or international
N.Y. Civ. Prac. L. § 302(a) (3) (ii).
Specifically, Stemcor claims that "the tortious act of
[Stevedores] caused injury to [Stemcor], whose headquarters is in
the State of New York at 350 Fifth Avenue." (Mem. of Law in Opp'n
to Stevedores' Mot. to Dismiss at 4) Furthermore, according to Stemcor, Stevedores "should have expected that its
tort would have consequences to plaintiff in the State of New
York" and that it "has substantial revenue from interstate and
international commerce." In support, Stemcor alleges that
Stevedores has "regularly handled steel movements in New Orleans
for [Stevedores] during the last five to six years." (Declaration
of Herbert B. Halberg, dated Aug. 3, 2000, at 1).
In opposition, Stevedores argues first that the alleged injury
did not cause "injury to person or property within" New York.
determining whether there is injury in New York
sufficient to warrant § 302(a) (3) jurisdiction must
generally apply a situs-of-injury test, which asks
them to locate the `original event which caused the
injury.' This `original event' is, however, generally
distinguished not only from the initial tort but from
the final economic injury and the felt consequences
of the tort.
Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez,
171 F.3d 779
, 791 (2d Cir. 1999); see also Mareno v. Rowe,
910 F.2d 1043
, 1046 (2d Cir. 1990) ("the place of injury is the
location of the original event which caused the injury, not the
location where the resultant damages are subsequently felt by the
plaintiff" (citation omitted)); Cedric Kushner Prods., Ltd. v.
Thobela, No. 93-4592, 1994 WL 163992, at *5 (S.D.N.Y. Apr. 22,
1994) ("In applying New York's long arm statute, courts have held
the place of the injury to be where the defendant conducted the
allegedly improper sale of goods or improperly performed services."). The
Court in Bank Brussels found that the injury occurred in New
York because, under the situs-of-injury test, the "original
event" that caused the economic harm to the plaintiff bank was
the disbursement of funds and that disbursement took place in New
York. 171 F.3d at 792.
Crediting Stemcor's allegations as true, Stevedores' failure to
deliver or reload the cargo as requested by Stemcor, (Am. Compl.
¶ 15) or its recklessness, carelessness, and negligence in
doing so (Id. ¶ 19) constituted the "original event." The
first effect of that "event" was the damage and loss to the
cargo. As to-Stevedores, both the "original event" and the damage
to the cargo occurred in New Orleans, where Stevedores handled
the cargo, or somewhere en route from New Orleans to Chicago. The
only effect of the "original event" to occur in New York was the
economic injury felt by Stemcor as a result of the damaged and
lost cargo. Such consequent economic injury is insufficient to
make New York the situs of the injury under Section 302(a) (3)
(ii). See Hartford Fire Ins. Co. v. M/V MSC INSA, No.
03-2196, 2003 WL 22990090, at *3 (S.D.N.Y. Dec. 18, 2003); Atl.
Mut. Ins. Co. v. CSX Expedition, No. 00-7668, 2002 WL 202195,
at *1 (S.D.N.Y. Feb. 7, 2002).
Moreover, personal jurisdiction cannot be based solely on
Stemcor's residence at 350 Fifth Avenue in Manhattan. See Mareno, 910 F.2d at 1046 (under Section 302(a) (3) (ii), an
injury "does not occur within the state simply because the
plaintiff is a resident"). "The occurrence of financial
consequences in New York due to the fortuitous location of
plaintiffs in New York is not a sufficient basis for jurisdiction
under § 302(a) (3) where the underlying events took place outside
New York." Whitaker v. Am. Telecasting, Inc., 261 F.3d 196,
209 (2d Cir. 2001) (quoting United Bank of Kuwait v. James M.
Bridges, Ltd., 766 F. Supp. 113, 116 (S.D.N.Y. 1991)).
Stemcor has failed to allege the requisite injury under Section
302(a) (3) (ii); hence, the other requirements of the statute
need not be addressed. Accordingly, Stevedores' motion to dismiss
Likewise, Stemcor claims that Reserve is subject to personal
jurisdiction in New York pursuant to Section 302(a) (3) (ii). The
analysis as to Reserve does not differ from the analysis as to
Reserve's alleged failure to "warehouse, store and deliver" the
cargo (Am. Compl. ¶ 24) or its "recklessness, carelessness and
negligence" in doing so (Id. ¶ 27) constitutes the "original
event" according to the situs-of-injury test. The first effect of that alleged wrongdoing was the damage
and loss of cargo. As to Reserve, both the "original event" and
the damage to the cargo occurred in Chicago, where Reserve
handled the cargo. The only effect of this "event" in New York
was Stemcor's economic injury. To reiterate, such injury on its
own does not meet the requirements of Section 302(a) (3) (ii).
See M/V MSC INSA, 2003 WL 22990090, at *3; CSX Expedition,
2002 WL 202195, at *1. Moreover, jurisdiction cannot be premised
solely on Stemcor's New York residency. See Mareno,
910 F.2d at 1046.
The other requirements of Section 302(a) (3) (ii) need not be
addressed. Accordingly, Reserve's motion to dismiss is granted.
* * *
For the reasons set forth above, defendants' motions to dismiss