903 F.2d 675 (9th Cir. 1990), 88-15529, Complaint of Damodar Bulk Carriers, Ltd.

Docket Nº:88-15529, 88-15530 and 88-15559.
Citation:903 F.2d 675
Party Name:In the Matter of the Complaint of Petitioner DAMODAR BULK CARRIERS, LTD., as Owner and Operator of the M/V DAMODAR TANABE for exoneration from or limitation of liability. PEOPLE'S INSURANCE COMPANY OF CHINA; China National Light Industrial Products Import and Export Corporation, Plaintiffs/Appellants/Cross-Appellees, v. M/V DAMODAR TANABE, her engi
Case Date:May 10, 1990
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 675

903 F.2d 675 (9th Cir. 1990)

In the Matter of the Complaint of Petitioner DAMODAR BULK

CARRIERS, LTD., as Owner and Operator of the M/V

DAMODAR TANABE for exoneration from or

limitation of liability.

PEOPLE'S INSURANCE COMPANY OF CHINA; China National Light

Industrial Products Import and Export Corporation,

Plaintiffs/Appellants/Cross-Appellees,

v.

M/V DAMODAR TANABE, her engines, tackle, equipment, apparel,

etc., in rem; Damodar Bulk Carriers, Ltd., Gerrard

Chartering Co. A/S, Celulosa Arauco y Constitucion, S.A.,

Cia. Chilena de Navegacion Interoceanica, S.A., Atlas

Shipping Co., Defendants/Appellees/Cross-Appellants.

Nos. 88-15529, 88-15530 and 88-15559.

United States Court of Appeals, Ninth Circuit

May 10, 1990

Argued and Submitted Nov. 2, 1989.

Page 676

Donald P. Swisher, Garvey, Schubert & Barer, Seattle, Washington, for plaintiffs/appellants/cross-appellees.

Eugene J. O'Connor, Peter J. Gutowski, Freehill, Hogan & Mahar, New York City, David W. Proudfoot, Nenad Krek, Case & Lynch, Honolulu, Hawaii, for defendants/appellees/cross-appellants.

Appeal from the United States District Court for the District of Hawaii.

Before SNEED, KOZINSKI and THOMPSON, Circuit Judges.

SNEED, Circuit Judge:

A fire aboard the bulk carrier M/V DAMODAR TANABE sparked this litigation between an insurer of cargo and carriers of the goods. People's Insurance Company of China ("PICC"), subrogated to appellant China National Light Industrial Products Import and Export Corporation ("China Light"), brought suit in admiralty against Cia. Chilena de Navegacion Interoceanica, S.A. ("CCNI"), Atlas Shipping Co. ("Atlas"), Damodar Bulk Carriers, Ltd. ("DBC"), and Celulosa Arauco y Constitucion, S.A. ("Celulosa"). Representing the cargo interests, PICC sued the vessel, its owner, and its sub-charterers for damages to the wood pulp cargo damaged by the fire. The district court found that the pulp as loaded constituted a high risk cargo, and that the ship was unseaworthy to carry the wood pulp without a fixed carbon dioxide (CO2 ) firefighting system in the cargo holds to control the fire. The court imposed on the cargo plaintiffs the burden of proving that a CO2 system would have prevented the need to flood the hold to control the fire. Unable to resolve this fact question, the court held the defendants not liable and ruled in favor of DBC's counterclaim for

Page 677

general average contribution from the cargo plaintiffs. PICC, DBC, and CCNI/Atlas appeal this decision.

I.

FACTS AND PROCEEDINGS BELOW

Appellant China Light 1 was the purchaser and consignee of 25,000 metric tons of wood pulp from Celulosa, a Chilean corporation. The purchase contracts required Celulosa to arrange ocean transportation from Chile to China and to inform China Light of the transshipment details. Celulosa contracted with CCNI, a Chilean shipping line, which chartered space on board the DAMODAR TANABE under an agreement with appellee Atlas. Atlas in turn sub-chartered the ship under a time charter for this voyage from Gerrard Chartering Company ("Gerrard"), which had previously time chartered the vessel from appellee DBC. The head charter agreement between DBC and Gerrard stated that the vessel was not CO2 -fitted, but this provision, omitted from the Gerrard-Atlas sub-charter, was never communicated to China Light.

The DAMODAR TANABE, a bulk carrier chartered to carry wood pulp in six of its seven holds from Lirquen, Chile, to China via Hawaii and Japan, issued clean bills of lading acknowledging receipt of the cargo in apparent good condition prior to sailing on December 18, 1984. Receipts of the ship's mate, however, noted that stowage of the wood pulp was improper, and the problem was never corrected. Pressed into sheets, the wood pulp was packed in bales, which in turn were lashed together and stacked in the holds. Stowage of the bales left gaps between stacks, permitting the cargo to shift and chafe. This rubbing and slippage produced tinder-like flock in the holds.

After a bunkering call at Honolulu, the ship proceeded toward Japan. On January 18, 1985, when the ship was halfway to Miyako, crewmen discovered fire in hold number 3. The crew unsuccessfully fought the blaze at first with hoses inserted through the ventilators before flooding the hold to a depth of 4.5 meters. As the wood pulp swelled from the water, the hatch covers raised up, exposing the pulp to oxygen and ocean spray. The increase in smoke and fire from this exposure necessitated further flooding of the hold, this time to ten to eleven meters.

At 3:45 A.M. on January 19, 1985, the master turned about and set a course for Honolulu as a refuge port. After some seventy-five hours from the first sign of smoke, the crew succeeded in arresting the fire. The ship reached Oahu on January 24, 1985. By one account, the fire damaged the cargo far less (5%) than did the water used to extinguish it (95%). The master discharged a portion of the wood pulp in hold number 3 in Hawaii and sold it for salvage. He discharged the remainder in Japan; none reached China.

The district court, in admiralty, heard this action in rem against the DAMODAR TANABE and in personam against the other defendants. Sitting without a jury, the court found that "hold number 3, as loaded, contained highly combustible cargo." (Emphasis added.) The court concluded that the defendants had not carried their burden of proving that "due diligence was used to make the vessel seaworthy [because] the exercise of due diligence required a fixed CO2 system." Nevertheless, the court could not determine the cause of the fire or whether the unseaworthiness caused the damage to the cargo. Based on the evidence, the court was "unable to determine whether a CO2 system properly installed in the holds would have suppressed or extinguished the fire in time to make it unnecessary to flood number 3." The court thus found "against the party upon whom the law places the burden of proof" and entered judgment in favor of appellees on their counterclaim for general average.

The court determined that the plaintiff cargo interests had the burden of proving that the unseaworthiness (the lack of the CO2 system) caused the damage under the

Page 678

Carriage of Goods By Sea Act, 46 U.S.C.App. Sec. 1304(1) (1982 & Supp. V 1987). "Basing my decision solely upon my allocation of the burden of proof, I find that the plaintiffs failed to prove that the unseaworthiness was the cause of the damage in hold number 3." Plaintiffs also sustained damage to wood pulp caused by wetting in holds numbered 1, 2, 4, 6, and 7. The court determined that defects in the ship itself caused these damages, and held defendants liable for $70,171.89, along with prejudgment interest of seven percent per annum from February 15, 1985.

By requiring the plaintiffs, who were without fault, to contribute to the general average, the court's ruling made the defendants the prevailing parties. Accordingly, the court entered judgment in favor of DBC and against PICC and China Light for $327,499.07, plus interest at seven percent per annum from September 30, 1987, for general average. PICC, DBC, and CCNI/Atlas appeal this judgment.

II.

JURISDICTION

The cargo interests brought this suit in admiralty under 28 U.S.C. Sec. 1333 (1982). On three different occasions, each time before a different judge, CCNI/Atlas unsuccessfully raised personal jurisdiction objections. The last time, however, Judge Smith 2 was more sympathetic to its argument, but nevertheless rejected it. 3

The district court's reservations notwithstanding, the longstanding custom in American admiralty law is that courts have discretion to assert in personam jurisdiction in suits between foreign parties. See, e.g., THE BELGENLAND, 114 U.S. 355, 368-69, 5 S.Ct. 860, 866, 29 L.Ed. 152 (1885); Poseidon Schiffahrt, G.M.B.H. v. M/S NETUNO, 474 F.2d 203, 204 (5th Cir.1973). The tactic employed by the foreign defendants in this suit is somewhat unusual, however, because most such defendants challenge the admiralty court's authority to hear suit under the doctrine of forum non conveniens. 4 Here appellees CCNI/Atlas challenge personal jurisdiction not under the forum non conveniens doctrine, but on due process grounds. Unlike a forum non conveniens attack, which we review for abuse of discretion, we review de novo a personal jurisdiction challenge. Pacific Atlantic Trading Co. v. M/V MAIN EXPRESS, 758 F.2d 1325, 1326 (9th Cir.1985) (citing Cubbage v. Merchent, 744 F.2d 665, 667 (9th Cir.1984), cert. denied, 470 U.S. 1005, 105 S.Ct. 1359, 84 L.Ed.2d 380 (1985)).

A proper exercise of "[p]ersonal jurisdiction requires a two-part showing: (1) that the forum state has an applicable statute conferring jurisdiction on nonresidents, and (2) that the assertion of jurisdiction under the statute comports with constitutional requirements of due process." Jenkins v. Whittaker Corp., 785 F.2d 720, 723

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(9th Cir.), cert. denied, 479 U.S. 918, 107 S.Ct. 324, 93 L.Ed.2d 296 (1986).

Both this court and the Hawaii Supreme Court have held that "Hawaii law gives jurisdiction to the full extent allowed by the Constitution...." Jenkins, 785 F.2d at 723 (citing Cowan v. First Ins. Co. of Haw., 61 Haw. 644, 649, 608 P.2d 394, 399 (1980)). We need thus determine only whether personal jurisdiction over the appellees comports with due process.

We begin our analysis at a familiar starting point. To evaluate a due process challenge to the exercise of personal jurisdiction one must determine whether a defendant has certain "contacts, ties, or relations" in a state for a judgment to be binding. International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945)...

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