Mazda Motors of America, Inc. v. M/V Cougar Ace

• Decision Date: 08 May 2009
• Docket Number: No. 07-35787.,07-35787.
• Citation: 565 F.3d 573
• Parties: MAZDA MOTORS OF AMERICA, INC. and Indemnity Insurance Company of North America, Plaintiffs-Appellants, v. M/V COUGAR ACE, her engines, tackle and appurtenances, in rem, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

565 F.3d 573

MAZDA MOTORS OF AMERICA, INC. and Indemnity Insurance Company of North America, Plaintiffs-Appellants, v. M/V COUGAR ACE, her engines, tackle and appurtenances, in rem, Defendant-Appellee.

No. 07-35787.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 5, 2009.

Filed May 8, 2009.

Charles S. Jordan and Michelle Buhler (argued), Danielson Harrigan Leyh & Tollefson LLP, Seattle, WA, for the plaintiffs-appellants.

Herbert H. Ray, Jr., Phillip R. Lempriere (argued) and Catharine M. Morisset, Keesal, Young & Logan, Seattle, WA, for the defendant-appellee.

Appeal from the United States District Court for the District of Oregon, Garr M. King, District Judge, Presiding. D.C. No. CV-07-00062-KI/HU.

Before: SUSAN P. GRABER, RAYMOND C. FISHER and MILAN D. SMITH, JR., Circuit Judges.

FISHER, Circuit Judge:

This in rem admiralty action requires us to decide whether the defendant ocean vessel may invoke a forum selection clause in the bills of lading governing ocean carriage on that vessel. The ocean carrier that issued the bills of lading indisputably could have invoked the forum selection clause. Further, the bills of lading include a "Himalaya clause," whereby anyone assisting in performing the carriage also benefits from any contract provision designed to benefit the carrier.¹ We hold that, because the vessel assisted in performing the carriage, it is a Himalaya beneficiary that may invoke the forum selection clause. The district court dismissed this case for improper venue; we have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I. Background

A shipment of automobiles bound for U.S. ports allegedly sustained more than $40 million in water damage while crossing the Pacific Ocean aboard the defendant vessel, the M/V COUGAR ACE. Plaintiff Mazda Motors of America, Inc., consignee of the cargo, and its subrogated insurer, plaintiff Indemnity Insurance Company of North America (collectively "Mazda"), brought this admiralty action to recover for that damage. The shipment was governed by six identical bills of lading, which established the contract between Mazda's affiliates in Asia and ocean carrier Mitsui O.S.K. Lines ("Mitsui") for transportation of the automobile cargo from Japan to various U.S. ports. As carrier, Mitsui issued the bills of lading and operated the defendant vessel, but the vessel's owner is MOB Cougar (Pte) Ltd. ("MOB Cougar"). Neither Mitsui nor MOB Cougar is a party to this lawsuit, however, because Mazda's complaint names only the M/V COUGAR ACE in rem.

Mazda filed its action in federal district court in Oregon, where the defendant vessel had been towed after it took on water. MOB Cougar made a restricted appearance to claim the vessel and defend the suit under Supplemental Rule E(8) of the Federal Rules of Civil Procedure. MOB Cougar then moved to dismiss under Federal Rule of Civil Procedure 12(b)(3) for improper venue based on the bills of lading's forum selection clause, which requires suits to be brought in Tokyo, Japan. Mazda opposed the motion, arguing that the forum selection clause, by its terms, allows only the carrier, Mitsui, to invoke its protections. In other words, the forum selection clause was intended to apply only to in personam suits, not to in rem suits like this one. The district court rejected Mazda's contract construction arguments and dismissed the suit on two alternate grounds. First, the court applied the ratification doctrine, concluding that the vessel had ratified the bills of lading by transporting the cargo, entitling it to contractual defenses in the bills of lading, including the forum selection clause. Second, the court concluded that the vessel could invoke the forum selection clause by virtue of the Himalaya clause, which extends contractual defenses to third parties whose services contribute to performing the contract.

Mazda appeals. We review the district court's dismissal de novo because its interpretation of the forum selection clause "d[id] not turn on the credibility of extrinsic evidence but on an application of the principles of contract interpretation." Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir.2009) (per curiam). We affirm the district court's dismissal under Rule 12(b)(3) because we agree that the Himalaya clause extends to the vessel the benefit of the forum selection clause. We do not reach MOB Cougar's alternative argument that the vessel may invoke the forum selection clause under the ratification doctrine.

II. Analysis

A. The Contractual Terms

Under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 30701, Notes Sec. 3(3) (2006) (Responsibilities and liabilities of carrier and ship), any carrier bringing goods to or from the United States in foreign trade must issue a bill of lading to the shipper of those goods. A bill of lading "states the terms of carriage, and serves as evidence of the contract for carriage." Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 18-19, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004). Here, the parties dispute the appropriate construction of several clauses in the bills of lading. Their primary disagreement concerns the scope of the forum selection clause, which states:

LAW AND JURISDICTION

The contract evidenced by or contained in this Bill of Lading shall be governed by Japanese law except as may be otherwise provided for herein.

Unless otherwise agreed, any action against the Carrier thereunder must be brought exclusively before the Tokyo District Court in Japan. Any action by the Carrier to enforce any provision of this Bill of Lading may be brought before any court of competent jurisdiction at the option of the Carrier.

Mazda asserts that this clause applies by its terms only to suits against the "Carrier." Carrier is a defined term under the bills of lading to mean "Mitsui O.S.K. Lines, Ltd., on whose behalf this Bill of Lading has been issued." The bills of lading also define "Vessel" as the vessel named on the face of the bills of lading; here, all six bills of lading name the M/V COUGAR ACE. Mazda argues that because this is an in rem suit against the vessel, not an in personam suit against Mitsui, the plain language of the forum selection clause makes it inapplicable here.

MOB Cougar advances three arguments responding to Mazda's reading of the forum selection clause. First, MOB Cougar emphasizes that public policy favors the enforcement of forum selection clauses in international shipping contracts, even when plaintiffs would be forced to bring their claims overseas. See, e.g., M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) ("The choice of that forum was made in an arm's-length negotiation ..., and absent some compelling and countervailing reason it should be honored by the parties and enforced by the courts."). This argument is premature. Whether the forum selection clause is enforceable on public policy grounds is not before us. Rather, Mazda's argument is that the vessel may not invoke the clause by the plain terms of the bills of lading.

Second, MOB Cougar argues that Mazda's reading of the bills of lading would allow the vessel's separate legal identity to frustrate MOB Cougar's contractual right to the Tokyo forum. Mazda's in rem suit is possible only because of the "long-standing admiralty fiction that a vessel may be assumed to be a person for the purpose of filing a lawsuit and enforcing a judgment." Cont'l Grain Co. v. The Barge FBL-585, 364 U.S. 19, 22-23, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960). The purpose of this legal fiction is "to allow actions against ships where a person owning the ship could not be reached." Id. at 23, 80 S.Ct. 1470. MOB Cougar asserts that it would be perverse to allow Mazda to defeat the forum selection clause by strategically filing suit in rem. See id. ("A fiction born to provide convenient forums should not be transferred into a weapon to defeat that very purpose.").

Third, MOB Cougar asserts the ratification doctrine. The parties agree that, by transporting the cargo, the vessel ratified the bills of lading — otherwise Mazda would have no basis for holding the vessel liable in rem for damage to Mazda's automobiles. See Lykes Lines Ltd. v. M/V BBC Sealand, 398 F.3d 319, 326 (5th Cir.2005)("A contract of carriage was created by the acceptance of the cargo on board the SEALAND for transport and the terms of the bill of lading, even if not authorized by the vessel, set the terms of the agreement."). The parties reach different conclusions from the vessel's ratification, however. MOB Cougar successfully argued to the district court that if the vessel can be liable under the bills of lading, it should also benefit from the defenses therein, particularly the forum selection clause. Mazda counters that the bills of lading were ratified only as they were written, with a forum selection clause that applies only to in personam suits against the carrier.²

We need not decide whether the forum selection clause, operating alone, applies to this in rem suit notwithstanding the absence of the term "Vessel" from that clause, because the bills of lading also contain a broadly worded Himalaya clause. MOB Cougar argues that the Himalaya clause enables the defendant vessel to invoke the forum selection clause, and we agree. Under the Himalaya clause, contractual provisions benefitting the carrier also benefit certain other parties. As we shall explain, the defendant vessel, which is considered a separate legal person for the purposes of this in rem suit, benefits from any provision in favor of the carrier, including the forum selection clause.

The Himalaya clause appears under the heading "SUB-CONTRACTING AND INDEMNITY:"

The Merchant undertakes that no claim or allegation shall be made against any servant, agent or Sub-Contractor of the Carrier which imposes or attempts to impose upon any of them, or upon any vessel owned or operated by any of them, any liability whatsoever in connection...