Vimar Seguros Y Reaseguros, S.A. v. M/V SKY REEFER, Her Engines, M.H. Maritima, S.A.

• Decision Date: 08 April 1994
• Docket Number: No. 93-2179,93-2179
• Citation: 29 F.3d 727
• Parties: , 63 USLW 2060 VIMAR SEGUROS Y REASEGUROS, S.A., Plaintiffs, Appellants, v. M/V SKY REEFER, Her Engines, etc., and M.H. Maritima, S.A., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 727

29 F.3d 727

1994 A.M.C. 2513, 63 USLW 2060

VIMAR SEGUROS Y REASEGUROS, S.A., Plaintiffs, Appellants, v. M/V SKY REEFER, Her Engines, etc., and M.H. Maritima, S.A.,

Defendants, Appellees.

No. 93-2179.

United States Court of Appeals, First Circuit.

Heard April 8, 1994.

Decided July 7, 1994.

Stanley McDermott, III with whom Sharyn Bernstein, Varet & Fink, P.C., Alexander John J. Finn with whom Thomas H. Walsh, Jr., Jeffrey S. King, and Bingham, Dana & Gould, Boston, MA, were on brief, for appellees.

Peltz, and Peltz Walker & Dubinsky, New York City, were on brief, for appellants.

Before BREYER ^*, Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.

BOWNES, Senior Circuit Judge.

This appeal asks us to decide whether a foreign arbitration clause in a maritime bill of lading governed by the Carriage of Goods by Sea Act, 46 U.S.C. Sec. 1300 et seq. (COGSA), is invalid under that statute, or whether such a clause is enforceable under the Federal Arbitration Act, 9 U.S.C. Sec. 1 et seq. (FAA). We conclude that the FAA controls, and that the arbitration clause is valid. Accordingly, the order of the district court staying this action pending arbitration in Tokyo is affirmed.

I. BACKGROUND

Plaintiff-appellant Bacchus Associates is a wholesale fruit distributor in the Northeast United States. Bacchus was the owner of a shipment of oranges travelling from Agadir, Morocco to New Bedford, Massachusetts, in February 1991 aboard the SKY REEFER, ¹ a vessel owned by M.H. Maritima, S.A. Maritima had time-chartered the vessel to Honma Senpaku Co., Ltd., who in turn time-chartered it to Nichiro Corp. Bacchus entered into a voyage charter with Nichiro for the February 1991 voyage.

The oranges were shipped under a bill of lading issued in Morocco by Nichiro. The bill of lading constitutes the contract of carriage between Bacchus and Maritima. En route to New Bedford, numerous boxes of oranges were crushed. Bacchus filed an action in the United States District Court for the District of Massachusetts, in rem against the SKY REEFER, and in personam against Maritima, seeking to recover approximately $1 million in damages.

Maritima moved to stay the action and compel arbitration in Tokyo pursuant to a clause in the bill of lading:

Governing Law and Arbitration

(1) The contract evidenced by or contained in this Bill of Lading shall be governed by Japanese Law.

(2) Any dispute arising from this Bill of Lading shall be referred to arbitration in Tokyo by the Tokyo Maritime Arbitration Commission (TOMAC) at the Japan Shipping Exchange, Inc., in accordance with the Rules of TOMAC and any agreement thereto, and the award given by the arbitrators shall be final and binding on both parties.

The district court held that the arbitration clause contained in subsection (2) was enforceable, granted Maritima's motion for a stay pending arbitration, and certified the following question for interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b): "[W]hether 46 U.S.C. Sec. 1303(8) [Sec. 3(8) of COGSA] nullifies an arbitration clause contained in a bill of lading governed by COGSA." With this question in mind, we begin our journey through unsettled statutory waters.

II. DISCUSSION

COGSA was passed in 1936 as the American enactment of the Hague Rules, and was part of an international effort to achieve uniformity and simplicity in bills of lading used in foreign trade. Union Ins. Soc'y of Canton, Ltd. v. S.S. Elikon, 642 F.2d 721, 723 (4th Cir.1981). COGSA was also intended to reduce uncertainty concerning the responsibilities and liabilities of carriers, responsibilities and rights of shippers, and liabilities of insurers. State Establishment for Agric. Prod. Trading v. M/V Wesermunde 838 F.2d 1576, 1580 (11th Cir.), cert. denied, 488 U.S. 916, 109 S.Ct. 273, 102 L.Ed.2d 262 (1988) ("Wesermunde"); S.S. Elikon, 642 F.2d at 723; see generally Grant Gilmore & Charles L. Black, The Law of Admiralty Sec. 3-25 at 145 (2d ed. 1975).

COGSA applies to "[e]very bill of lading ... which is evidence of a contract for the carriage of goods by sea to or from parts of the United States, in foreign trade...." 46 U.S.C. Sec. 1300. The parties agree that the bill of lading at issue here is covered by COGSA ex proprio vigore, in other words, as a matter of law. The bill of lading also contains the following provision:

Local Law

In case this Bill of Lading covers the Goods moving to or from the U.S.A. and it shall be adjudged that the Japanese Law does not govern this Bill of Lading, then the provisions of the U.S. Carriage of Goods at Sea Act 1936 shall govern before the Goods are loaded on and after they are discharged from the vessel and throughout the entire time during which the Goods are in the actual custody of the carrier.

Bacchus argues that the Tokyo arbitration clause is invalid under Sec. 3(8) of COGSA which prohibits the "lessening" of the carrier's obligation as imposed by COGSA's other sections. ²

In Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (2d Cir.1967) (en banc), the Second Circuit held that all foreign forum selection clauses in bills of lading governed by COGSA are necessarily invalid under Sec. 3(8) because they tend to lessen the carrier's liability. Id. at 204. The court reasoned as follows:

From a practical standpoint, to require an American plaintiff to assert his claim only in a distant court lessens the liability of the carrier quite substantially, particularly when the claim is small. Such a clause puts "a high hurdle" in the way of enforcing liability, and thus is an effective means for carriers to secure settlements lower than if cargo [sic] could sue in a convenient forum.

Id. at 203. ³ Moreover, "[a] clause making a claim triable only in a foreign court would almost certainly lessen liability if the law which the court would apply was not [COGSA]." Id. Furthermore,

[e]ven when the foreign court would apply [COGSA], requiring trial abroad might lessen the carrier's liability since there could be no assurance that it would apply [COGSA] in the same way as would an American tribunal subject to the uniform control of the Supreme Court.... We think that Congress meant to invalidate any contractual provision in a bill of lading for a shipment to or from the United States that would prevent cargo [sic] able to obtain jurisdiction over a carrier in an American court from having that court entertain the suit and apply the substantive rules Congress had prescribed.

Id. at 203-04 (emphasis in original) (citations omitted) (footnote omitted).

Since Indussa, Sec. 3(8) has been consistently used by federal courts to invalidate forum selection clauses in bills of lading governed by COGSA. See, e.g., Conklin & Garrett, Ltd. v. M/V Finnrose, 826 F.2d 1441, 1442-44 (5th Cir.1987) (forum selection clause designating Finland invalid even where bill of lading provided for application of COGSA in Finland); Union Soc'y of Canton, Ltd., 642 F.2d at 723-25 (choice of forum clause requiring litigation in Germany invalid under Sec. 3(8)); cf. Fireman's Fund Amer. Ins. Cos. v. Puerto Rican Forwarding Co., 492 F.2d 1294 (1st Cir.1974) (distinguishing Indussa and upholding New York City forum selection clause). Indussa has also been approved by commentators. See Gilmore & Black, supra Sec. 3-25 at 145-46 n. 23; Schoenbaum, supra Sec. 9-18 at 327; Charles L. Black, The Bremen, COGSA and the Problem of Conflicting Interpretation, 6 Vand.J.Trans.L. 365, 368-69 (1973). But see Note, Kenneth M. Klemm, Forum Selection in Maritime Bills of Lading Under COGSA, 12 Fordham Int'l L.J. 459 (1989); Stephen M. Denning, Choice of Forum Clauses in Bills of Lading, 2 J.Mar.L. & Com. 17 (Oct.1970).

While we need not fully explore the issue, we note that the Supreme Court's recent decision in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991), in which the Court held that the Limitation of Vessel Owners' Liability Act did not invalidate forum selection agreements, casts some doubt upon Indussa's continuing viability. See Fabrica De Tejidos La Bellota S.A. v. M/V MAR, 799 F.Supp. 546, 560-61 (D.Virgin Islands 1992); see also Patrick J. Borchers, Forum Selection Agreements in the Federal Courts After Carnival Cruise: A Proposal for Congressional Reform, 67 Wash.L.Rev. 55, 77 (1992) (Carnival Cruise, implicitly overruled Indussa and its progeny). But see Underwriters at Lloyd's of London v. M/V Steir, 773 F.Supp. 523, 526-27 (D.P.R.1991) (invalidating forum selection clause under Sec. 3(8) of COGSA, holding that Indussa survives Carnival Cruise ).

Moreover, in Fireman's Fund we questioned whether Indussa even survived the Supreme Court's decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). In The Bremen, the Supreme Court enforced a foreign forum selection clause in a maritime contract not covered by COGSA. In doing so, the Court focused on whether the clause was "unreasonable" under the circumstances. The Bremen, 407 U.S. at 10, 92 S.Ct. at 1913. We remarked as follows:

Although the Supreme Court has acknowledged the Indussa decision and has not formally rejected it, see The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 n. 11, 92 S.Ct. 1907 [1913 n. 11], 32 L.Ed.2d 513 (1972), several passages in the Bremen opinion cast some doubt on the underlying rationale of Indussa. See, e.g., 407 U.S. at 9, 92 S.Ct. at 1912 ("The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts.")....

Fireman's Fund, 492 F.2d at 1296 n. 2. Because The Bremen is not a COGSA case, however, it is easily distinguishable from Indussa and its progeny. See S.S. Elikon, 642 F.2d at 724-25 (holding that The Bremen did not involve COGSA and therefore did not disturb Indussa ).

Notwithstanding the arguably tremulous ground on which...