29 F.3d 727 (1st Cir. 1994), 93-2179, Vimar Seguros Y Reaseguros, S.A. v. M/V SKY REEFER, Her Engines, M.H. Maritima, S.A.

Docket Nº:93-2179.
Citation:29 F.3d 727
Party Name:VIMAR SEGUROS Y REASEGUROS, S.A., Plaintiffs, Appellants, v. M/V SKY REEFER, Her Engines, etc., and M.H. Maritima, S.A., Defendants, Appellees.
Case Date:July 07, 1994
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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Page 727

29 F.3d 727 (1st Cir. 1994)

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

July 7, 1994

Heard April 8, 1994.

Stanley McDermott, III with whom Sharyn Bernstein, Varet & Fink, P.C., Alexander

Page 728

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

John J. Finn with whom Thomas H. Walsh, Jr., Jeffrey S. King, and Bingham, Dana & Gould, Boston, MA, were on brief, for appellees.

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,

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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...

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