New Moon Shipping Co., Ltd. v. MAN B & W Diesel AG
| Decision Date | 18 June 1997 |
| Docket Number | No. 304,D,304 |
| Citation | 121 F.3d 24 |
| Court | U.S. Court of Appeals — Second Circuit |
| Parties | NEW MOON SHIPPING COMPANY, LIMITED and International Marine Investors and Management Corporation, Plaintiffs-Appellants, v. MAN B & W DIESEL AG, Defendant-Appellee. ocket 96-7289. |
Richard H. Sommer, New York City (Victor P. Corso, Kirlin, Campbell & Keating, New York City, of counsel), for Plaintiffs-Appellants.
Christopher H. Mansuy, New York City, (William E. Lakis, Walker & Corsa, New York City, of counsel), for Defendant-Appellee.
Before NEWMAN, Chief Judge, CARDAMONE and McLAUGHLIN, Circuit Judges.
Plaintiffs ship owner and its agent brought suit in the United States District Court for the Southern District of New York (Griesa, C.J.) against defendant for breach of contract and negligent repair of a ship. Invoking a forum selection clause that made Germany the litigation forum, defendant moved to dismiss plaintiffs' complaint. Relying on the pleadings, affidavits, and other papers before it, the district court granted the motion on the grounds that (1) the forum selection clause was incorporated by reference into a personnel contract and (2) a prior course of dealings between the parties had incorporated the forum selection clause into a parts contract.
The issue to be decided is whether an enforceable forum selection clause is contained in any one of the four separate repair contracts between defendant MAN B & W Diesel (MAN or appellee) and plaintiff ship owner New Moon Shipping Company through its agent V. Ships (New Moon, V. Ships, and collectively owners or appellants). To resolve this issue, we must determine first whether the owners have met their preliminary burden of showing that the forum selection clause is not part of the contracts; and, second, if they have not met this burden, whether the clause should be enforced. The owners bear the ultimate burden of proving the forum selection clause was either not part of the contract or was unenforceable; nonetheless, to preserve the issue for either a hearing or resolution at trial, they need only make a prima facie showing that such was the case.
We deal on this appeal with the first question, that is, whether a forum selection clause governing the place of trial is contained in the contracts. New Moon and MAN each strongly prefer a different place for litigating the dispute between them. While there may be, as the saying goes, a place for everything, where that place is in this case remains to be decided.
In June 1992 MAN undertook to supervise the overhaul of the M/V ELECTRO STAR's starboard engine and to supply the necessary parts related to that repair, including the replacement of the ship's crankshaft. The ELECTRO STAR's owner, New Moon, through its agent V. Ships, approached MAN after the failure of a bottom end main engine bearing caused irreparable damage to the crankshaft. Replacement of a diesel engine crankshaft is a major undertaking and the owners believed that only MAN--which had manufactured the engine--could provide the necessary expertise and parts.
The work was completed in September 1992. The following spring while the ELECTRO STAR was sailing on the high seas her starboard engine failed after being in use for only three weeks. That engine and other parts of the vessel were extensively damaged. Unable to earn freight or function for charter hire, the ship became virtually a total loss, and was subsequently scrapped. The ship's owners sued MAN for over $5 million, alleging that MAN acted negligently in repairing the ELECTRO STAR's starboard engine and in supervising those repairs, breached its implied warranty of workmanlike performance, and furnished parts unfit for their intended use.
The casualty allegedly resulted from the failure of certain crankshaft or bearing cap bolts. These bolts had been removed from the engine and sent to MAN, which determined they were suitable for reuse, reconditioned them, and supervised their reinstallation. Four contracts were entered into between the owners and MAN for the repair work; these agreements provided for: (1) a new crankshaft and related parts; (2) rebuilding the existing counterweights and a damaged bottom end bearing housing; (3) rebuilding the engine's four remaining bottom end bearing housings; and (4) MAN's supervision over the installation of these new and reconditioned parts in Singapore.
Telexes were exchanged respecting each contract. With respect to contract (1) the owners by telex dated February 20, 1992 asked MAN to furnish price and availability information on a new crankshaft and necessary parts. MAN responded on February 25 with its "original offer," which was "based on our known conditions of delivery." On February 27 New Moon confirmed its order for the new crankshaft. On March 11 MAN forwarded an "original order confirmation" dated March 3, 1992 confirming the order "on the basic terms and conditions of supply for spare parts known to you." (emphasis supplied). On June 5 the owners confirmed their order for the remaining parts listed in MAN's original offer, and MAN replied with a second order confirmation, dated June 15, 1992, using the same language as the March 3 confirmation.
Contract (2) arose after MAN advised New Moon that the existing crankshaft counterweights could be reconditioned for use on the new crankshaft. In a telex of March 5, 1992 MAN offered to remill and match the parts on condition that the existing counterweights and attachment bolts could be used without major reworking. In this telex MAN stated All the damaged parts were off loaded from the ship that same day and returned to the Hamburg Werks.
Contract (3) progressed in this fashion: after having already sent the damaged housing to MAN for repair, the owners advised MAN on July 10, 1992 that they were sending the four remaining bottom end bearing housings to Hamburg for repair. Ten days later MAN told the owners that overhaul of the four housings had begun. On July 23 MAN sent the owners "repair proposals" for the work it had already undertaken.
The final contract (4) involved a series of nine communications between the parties from May 20 to June 26, 1992. On three occasions MAN confirmed it would send an engineer to supervise the engine repair work. MAN says that, on July 2, 1992, it mailed an order confirmation from Germany that included the forum selection clause for Augsburg, Germany. V. Ships, New Moon's agent, says it never received an order confirmation.
Because the existence of the forum selection clause is a threshold issue we set forth the facts regarding MAN's contract procedures in some detail. Up until December 1989 excerpts of MAN's conditions were printed on the reverse side of the offer (or bid) and order confirmation in four languages--German, English, French and Spanish. The excerpts contained no reference to a forum selection clause. They did advise the customer to ask for the unabridged conditions which are set forth in MAN's long forms, "Conditions of Delivery of Spare Parts" and "Conditions for Specialist Personnel Services." In paragraphs XVI and XVII of the respective long forms, jurisdiction of all disputes under the contract is designated as Augsburg, Germany.
In January 1990 MAN changed its procedure for offers and order confirmations. It began using new forms printed by a laser printer which was able to print only the front side of a sheet. No excerpts could be printed on the reverse side and, as a result, the terms and conditions are no longer included on the offer (bid) or confirmation documents. The cover sheet of the order confirmation states: "We thank you for your order which we confirm on the basic terms and conditions for the supply of spare parts known to you." Only when a new client orders parts does MAN forward excerpts of terms and conditions.
MAN says that because it had been doing business with New Moon's agent V. Ships for years--and for three years with regard to the M/V ELECTRO STAR--the basic conditions of the spare parts and personnel services agreements were known to V. Ships. Further, MAN notes, V. Ships never requested a fuller explanation of the basic terms and conditions of the contract.
The owners aver that an invitation to ask for the unabridged conditions does not put it, as a purchaser, on notice of those conditions not noted in the excerpts and which adversely affect it. New Moon and its agent insist they had no knowledge of the existence of the documents entitled "Conditions of Delivery of Spare Parts" and "INST. 91 Conditions" and that they never agreed to the terms set forth in those documents.
The district court found a forum selection clause had been incorporated by reference into contracts (1) and (4) between New Moon and MAN. Therefore, it dismissed plaintiffs' complaint for lack of subject matter jurisdiction. From this dismissal, owners appeal.
The question of whether to enforce the forum selection clause arose in the context of MAN's 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. We observe at the outset that the 12(b)(1) procedural context is somewhat misleading. There is no question that the district court has subject matter jurisdiction over this case. A claim arising out of a contract to repair a ship falls squarely within a federal court's admiralty jurisdiction under 28 U.S.C. § 1333. New Bedford Dry Dock Co. v. Purdy, 258 U.S. 96, 42 S.Ct. 243, 66 L.Ed. 482 (1922); see also Sundance Cruises Corp. v. American Bureau of Shipping, 7 F.3d 1077, 1080-81 (2d Cir.1993) ().
Moreover, we have long recognized that parties have no power...
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