Trans-Tec Asia v. M/V Harmony Container

• Decision Date: 11 March 2008
• Docket Number: No. 06-55355.,No. 06-55397.,06-55355.,06-55397.
• Citation: 518 F.3d 1120
• Parties: TRANS-TEC ASIA, Plaintiff-Appellant, v. M/V HARMONY CONTAINER, its freights engines apparel and tackle; Splendid Shipping Sendirian Berhad; Master of the M/V HARMONY CONTAINER, Defendants-Appellees. Trans-Tec Asia, Plaintiff-Appellee, v. M/V HARMONY CONTAINER, its freights engines apparel and tackle; Splendid Shipping Sendirian Berhad, Defendants-Appellants, and Master of the M/V HARMONY CONTAINER, Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

518 F.3d 1120

TRANS-TEC ASIA, Plaintiff-Appellant, v. M/V HARMONY CONTAINER, its freights engines apparel and tackle; Splendid Shipping Sendirian Berhad; Master of the M/V HARMONY CONTAINER, Defendants-Appellees.

Trans-Tec Asia, Plaintiff-Appellee, v. M/V HARMONY CONTAINER, its freights engines apparel and tackle; Splendid Shipping Sendirian Berhad, Defendants-Appellants, and Master of the M/V HARMONY CONTAINER, Defendant.

No. 06-55355.

No. 06-55397.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 16, 2007.

Filed March 11, 2008.

J. Stephen Simms, Simms Showers LLP, Baltimore, MD, Gary R. Clouse, Isaacs Clouse Crose & Oxford LLP, Santa Monica, CA, for the appellant.

Gerald L. Gorman, Bradley M. Rose, Kaye Rose & Partners, LLP, San Diego, CA, for the appellee.

Appeals from the United States District Court for the Central District of California; Stephen V. Wilson, District Judge, Presiding. D.C. No. CV-04-01160-SVW.

Before: ALEX KOZINSKI, Chief Judge, A. WALLACE TASHIMA and M. MARGARET McKEOWN, Circuit Judges.

McKEOWN, Circuit Judge:

Like many maritime cases, this case involves a foreign-flagged vessel that sailed in and out of United States ports. And, like many maritime cases, because of the geographic scope of the high seas,¹ United States law may, in some cases, be applicable to transactions beyond our country's territorial waters and borders. And, like many maritime cases, the suit here arose against the vessel while it was docked in a United States port. The question we consider is whether a foreign supplier, by supplying fuel to a foreign-flagged vessel in a foreign port under an agreement that United States law applied to the transaction, may obtain a maritime lien under the Federal Maritime Lien Act, 46 U.S.C. § 31301 et seq. ("FMLA"), on the vessel docked in an American port. The district court granted summary judgment in favor of the vessel and its owner and against the fuel provider, holding that the FMLA did not permit a foreign necessaries provider to obtain a maritime lien under the circumstances. Based on the plain language of the statute, coupled with an enforceable choice of law clause, we conclude that a maritime lien arose under the FMLA, and we reverse.

BACKGROUND

Splendid Shipping Sendirian Berhad ("Splendid")² is a Malaysian corporation that owns the M/V Harmony Container ("Harmony"), a Malaysian-flagged vessel. In June 2000, Splendid entered into a charter-party with Kien Hung Shipping Company ("Kien Hung") for a ten-year charter of the Harmony. Kien Hung, a Taiwanese corporation, operated the Harmony in a loop from ports in North and South America to ports in Japan, China, and Korea. In particular, the Harmony made regular stops at Long Beach, California, and Manzanillo, Mexico.

In early February 2003, one of Kien Hung's managers sought a price quote for fuel bunkers. The manager contacted an agent at Yee Foo Marine Industrial Co. Ltd. ("Yee Foo"), who requested a price quote from Trans-Tec Asia ("Trans-Tec"), a Singaporean entity. An employee for Trans-Tec faxed a quote to the Yee Foo agent, who forwarded the quote to Kien Hung. The Kien Hung manager then faxed back an order to the Yee Foo agent, who forwarded the order to Trans-Tec. In response, Trans-Tec sent a one-page email confirmation ("Bunker Confirmation") to Yee Foo for the sale of 1150 metric tons of fuel bunkers to be supplied to the Harmony at a cost of U.S. $251,850. The Yee Foo agent then forwarded the Bunker Confirmation to Kien Hung, which did not respond.

The Bunker Confirmation named "Kien Hung Shipping Co. Ltd." and "The Vsl, Her Master and Owners" as "Buyer," and Trans-Tec as "Seller." It provided that "[t]his confirmation incorporates Seller's standard terms and conditions dated 3 January 2000. Pls inform us if you require a copy." Kien Hung did not request a copy.

Trans-Tec's standard terms and conditions are included in a document entitled "The Trans-Tec Services Group of Companies General Terms and Conditions" ("Terms and Conditions"). The Terms and Conditions state that "the General Terms shall apply to every sale of marine petroleum products ('Products') entered into between a particular Trans-Tec Group company as seller ('Seller') and any buyer of such Products ('Buyer')."

The Terms and Conditions also contained an incorporation and merger clause ("The Confirmation and the General Terms . . . taken together, shall constitute the full agreement. . . ."), and, particularly pertinent here, a choice of law clause, which stated:

Seller shall be entitled to assert its lien or attachment in any country where it finds the vessel. Each Transaction shall be governed by the laws of the United States and the State of Florida, without reference to any conflict of laws rules. The laws of the United States shall apply with respect to the existence of a maritime lien, regardless of the country in which Seller takes legal action.

Trans-Tec delivered the bunkers to the Harmony in Busan, South Korea, in late February 2003. In May 2003, Kien Hung went bankrupt, and Trans-Tec was left unpaid for the bunkers. Hamburg Sud, a German company, bought Kien Hung's operations, took over the Harmony's charter, and continued sailing the vessel to Long Beach, California. Trans-Tec threatened to arrest the Harmony once it arrived at Long Beach, but the vessel's insurers posted security to avoid taking the ship out of operation.

Trans-Tec filed suit in federal court in Los Angeles, asserting a maritime claim in contract and in tort against the Harmony, a maritime claim in contract against Splendid, a claim for unjust enrichment against Splendid, and maritime attachment and garnishment of the Harmony and its bunkers.³ The district court chose to resolve the dispute in stages. Realizing that the choice of law issue was the foundational building block, the court first invited the parties to brief only this issue with respect to Trans-Tec's claims regarding a maritime lien and unjust enrichment. The court then decided that, under United States law, the choice of law provision was not incorporated as a term of the contract, Splendid was not bound as a party to the contract, and Malaysian law governed the contract.

In a later order granting partial summary judgment to Splendid on its unjust enrichment claim, the district court informed the parties that it would reconsider its prior decision that United States law determined incorporation of the choice of law clause. The court ultimately granted summary judgment against Trans-Tec on the grounds that: (1) Malaysian law, not United States law, governed contract formation; (2) under Malaysian law, the United States choice of law clause was incorporated as a term of the contract; and (3) Trans-Tec could not obtain a maritime lien on the Harmony because United States law denied maritime liens to foreign necessaries providers servicing foreign-flagged ships in foreign ports. Trans-Tec now appeals this decision, and Splendid crossappeals on the basis that the district court should not have applied the United States choice of law provision to the transaction in any respect.

During the back-and-forth flurry of summary judgment motions, Trans-Tec filed an affidavit in which it expressed a need to conduct discovery to establish that Splendid was a party to the contract and that Splendid had participated in the bunker contract. The district court construed Trans-Tec's affidavit as a motion for additional time to conduct discovery under Federal Rule of Civil Procedure 56(f), denied the motion, and later denied Trans-Tec's motion to reconsider its ruling.

ANALYSIS

Trans-Tec's Terms and Conditions included a choice of law provision that designated United States law as governing the existence of a maritime lien. That designation is particularly significant because the United States is one of a handful of countries that recognizes a maritime lien for the provision of necessaries.⁴ 46 U.S.C. § 31342; WILLIAM TETLEY, MARITIME LIENS AND CLAIMS 551 (2d ed. 1998) ("TETLEY"). Splendid's first line of defense is that the choice of law clause was not a part of the contract between Trans-Tec and Kien Hung. Alternatively, Splendid urges that the maritime lien does not apply to the provision of necessaries by a foreign provider. Our resolution of this appeal proceeds in three steps:⁵ (1) we determine the governing law with respect to contract formation; (2) applying the controlling law, we next determine whether the contract incorporates the choice of law provision; and (3) finally, if the choice of law provision is incorporated as a term of the contract, we evaluate whether Trans-Tec acquired a maritime lien for supplying fuel bunkers to the Harmony.

I. DETERMINING THE LAW GOVERNING CONTRACT FORMATION

Before we can determine the validity of the United States choice of law provision in the contract between Trans-Tec and Kien Hung, we need to figure out which country's law controls the issue of contract formation. Because the availability of a maritime lien under United States law is the ultimate question, the temptation is to skip directly to United States law, as urged by Trans-Tec. That approach, however, "put[s] the barge before the tug." See DeNicola v. Cunard Line, Ltd., 642 F.2d 5, 7 n. 2 (1st Cir.1981). Instead, we consider which country's law governs the incorporation issue as if there were no choice of law clause. In other words, we cannot rely on the choice of law provision until we have decided, as a matter of law, that such a provision was a valid contractual term and was legitimately incorporated into the parties' contract.

Both Supreme Court and Ninth Circuit law direct our analysis. We are guided by the principle that "[i]n the absence of a contractual choice-of-law clause, federal courts sitting in admiralty apply federal maritime choice-of-law principles derived from the Supreme Court's decision in Lauritzen v. Larsen, 345 U.S. 571, 73 S.Ct. 921, 97 L.Ed....