Apl Co. Pte. Ltd. v. Blue Water Shipping U.S. Inc.

• Citation: 779 F.Supp.2d 358,2011 A.M.C. 1396
• Decision Date: 22 April 2011
• Docket Number: No. 05 Civ. 3454(JLC).,05 Civ. 3454(JLC).
• Parties: APL CO. PTE. LTD. and American; President Lines, Ltd., Plaintiffs,v.BLUE WATER SHIPPING U.S. INC., Defendant.
• Court: U.S. District Court — Southern District of New York

779 F.Supp.2d 358

2011 A.M.C. 1396

APL CO. PTE. LTD. and American; President Lines, Ltd., Plaintiffs,

v.BLUE WATER SHIPPING U.S. INC., Defendant.

No. 05 Civ. 3454(JLC).

United States District Court, S.D. New York.

April 22, 2011.

James H. Hohenstein, Wayne Allen Parker, Haight, Gardner, Holland & Knight, LLP, New York, NY, for Plaintiffs.David K. Monroe, Galland, Kharasch, Greenberg, Fellman & Swirsky, P.C., Washington, DC, for Defendant.

MEMORANDUM AND ORDER

JAMES L. COTT, United States Magistrate Judge.

This admiralty action, which arises out of the breach of an agreement between plaintiffs APL Co. Pte. Ltd. and American President Lines, Ltd. (together “APL”) and defendant Blue Water Shipping U.S. Inc. (“Blue Water”) concerning the transport of fresh garlic containers, is before the Court on remand from the United States Court of Appeals for the Second Circuit. On February 28, 2008, after a bench trial, Magistrate Judge Douglas F. Eaton found Blue Water liable in contract but concluded that APL failed to mitigate its damages reasonably and accordingly awarded APL damages in the amount of $184,910.00—substantially less than the $474,072.18 in damages APL had originally sought. By decision dated January 8, 2010, the Second Circuit vacated the portion of the judgment that reduced the amount of damages awarded to APL for failure to mitigate its loss and remanded the action for a re-assessment of the reasonableness of APL's mitigation efforts.

For the reasons set forth below, I conclude that APL's mitigation efforts were within the range of reason and award APL additional damages of $288,337.18 plus pre-judgment interest to be calculated by the Clerk of the Court as set forth in Part II.E. infra.

I. BACKGROUND

The factual background to this action is set out more fully in Judge Eaton's February 28, 2008 decision, APL Co. PTE Ltd. v. Blue Water Shipping U.S. Inc., No. 05 Civ. 3454(DFE), 2008 WL 539927 (S.D.N.Y. Feb. 28, 2008) (hereinafter “ APL I ”), and the Second Circuit's January 8, 2010 decision, APL Co. PTE Ltd. v. Blue Water Shipping U.S. Inc., 592 F.3d 108 (2d Cir.2010) (hereinafter “ APL II ”), familiarity with which is assumed. The Circuit did not disturb the factual findings in APL I, and accordingly the Court incorporates them here. See In re M/V DG Harmony, No. 98 Civ. 8394(DC), 2009 WL 3170301, at *1 (S.D.N.Y. Sept. 30, 2009) (incorporating factual findings of first opinion on remand where findings undisturbed by Second Circuit); BrandAid Mktg. Corp. v. Biss, No. 03 Civ. 5088(WHP), 2008 WL 190494, at *1 (S.D.N.Y. Jan. 22, 2008) (same). The following constitutes the Court's additional findings of fact and conclusions of law pursuant Fed.R.Civ.P. 52(a), with certain prior findings and conclusions repeated for context.

A. Factual Background

1. The Garlic Shipments

In March and April 2003, APL served as the ocean carrier for 29 refrigerated containers (“reefers”) of fresh garlic that were shipped from China to the United States in four separate shipments. APL I, 2008 WL 539927, at *11 ¶¶ 45–46. Blue Water was the non-vessel operating common carrier (the “NVOCC”) with respect to the shipments, and Akata Food Trading, Inc. (“Akata”) was its ultimate consignee. Id. at *12 ¶¶ 47–48.¹ Both a House bill of lading (“HBL”) and a Master bill of lading (“MBL”) were generated for each shipment of garlic. Id. ¶ 49. Every HBL—which was issued by Blue Water and governed its relationship with Akata—listed Akata as the Consignee and Notify Party. Id. Every MBL—which was issued by APL and governed its relationship with Blue Water—listed Blue Water as the Consignee and Notify Party. Id. ¶ 50.²

The standard terms and conditions of each of the MBLs provide, in relevant part, as follows:

The Merchant shall comply with all regulations or requirements of customs, port and other authorities, and shall bear and pay all duties, taxes, fines, imposts, expenses or losses....

All charges due hereunder together with Freight ... shall be due from and payable on demand by the Merchant (who shall be jointly and severally liable to the Carrier therefore) at such port or place as the Carrier may require, Vessel or cargo lost or not lost from any cause whatsoever....

If the delivery of the Goods is not taken by the Merchant when and where the Carrier is entitled to call upon the Merchant to take delivery thereof, the Carrier shall be entitled ... to ... store the Goods ... and the costs of such storage ... shall forthwith upon demand be paid by the Merchant to the Carrier....

If the Merchant fails to take delivery of the Goods ... or if in the opinion of the Carrier they are likely to deteriorate, decay, become worthless or incur charges ..., the Carrier may ... at the sole risk and expense of the Merchant, sell, destroy or dispose of the Goods....

Id. at *1 ¶ 4 (citing MBL terms and conditions Clauses 13(iii), 14(iii), 21(iv)). The MBLs also define the term “Merchant” as including:

the Shipper, Consignee, Receiver, Holder of the Bill of Lading, Owner of the cargo or Person entitled to the possession of the cargo or having a present or future interest in the Goods and the servants and agents of any of these, all of whom shall be jointly and severally liable to the Carrier for the payment of all Freight, and for the performance of the obligations of any of them under this Bill of Lading.

Id. (citing MBL terms and conditions Clause 1).

The four shipments of garlic arrived in California on March 31, 2003, April 1, 2003, April 16, 2003, and April 22, 2003, respectively. Id. at *12 ¶ 51. After the garlic shipments arrived in the United States, the United States Customs and Border Protection Agency (“Customs”) assessed Anti–Dumping Duties of 376.76% of the value of the garlic—duties that the consignee, Akata, would have had to pay in order to claim the garlic. Id. ¶ 53. Akata did not claim the garlic, and, accordingly, demurrage charges began to accrue. Id. ¶ 52. Demurrage “is intended to cover the fixed costs incurred by the terminal (APL) for upkeep of the containers, including monitoring, maintenance and electricity costs.” Id. Demurrage was charged at the rate of $100 per container per day for the first four days and $120 per container per day thereafter. Id. at *18 ¶ 76.

2. The Transfer into General Order

After the garlic shipments failed to clear Customs within 15 days from the date of each of the four vessels' arrival into the United States, APL's Customs Compliance Clerk, Mark Porter, began the General Order (“G.O.”) process. Id. at *13 ¶ 55. “Once in G.O., the cargo is under the custody and control of U.S. Customs. If the G.O. merchandise is perishable, the customs regulations provide that it can be auctioned by a quick sale.” Id. at *18 ¶ 78 (internal citations omitted).³ Under a quick sale procedure, perishable cargo that has been inspected by the appropriate governmental agency—for example, the FDA or the USDA—and determined to be “saleable,” can be sold in a public sale. Id. at *19 ¶ 79. If the goods are saleable, then the G.O. Warehouse prepares the CF 5251 form, which notifies the involved parties that the goods are scheduled for sale or destruction on a specific date. Id. ¶ 79. After the involved parties receive the notice, there is a three day public notice of sale and EG & G, the company under contract with Customs to dispose of all goods under Customs' jurisdiction and control, carries out the sale. Id. ¶ 79.

Beginning in late April 2003, Mr. Porter sent certain required G.O. notifications to Customs and to Crescent Warehouse Company, Ltd. (“Crescent”), a G.O. warehouse, along with a letter requesting a constructive G.O. number. Id. at *13 ¶ 55. He made this request because the containers contained fresh garlic requiring refrigeration and no G.O. warehouse in the area had cold storage. Id. ¶ 55. In response to this request, Customs placed the cargo in constructive G.O., and the garlic remained in APL's reefers and under Customs' control. Id. ¶ 56.

3. Communications Between APL and Blue Water

APL and Blue Water had numerous communications regarding the disposition of the garlic. On April 21, 2003, a Blue Water employee, Frank Xu, sent a fax to APL acknowledging that the first five containers (which had arrived in the United States on March 31, 2003) were “on demurrage” and reporting that Akata intended to take delivery of the cargo: “We are informed by our customer [Akata] and their broker ... that they are trying to clear it ASAP now. And it is expected to be done early this week.” Id. ¶ 57.

On May 7, 2003, an APL employee, Liam Powers, emailed Mr. Xu regarding the demurrage charges that were accruing on the containers. Id. ¶ 58. He wrote as follows:

The problem with the containers on the west coast is getting worse.

The [26 containers associated with 12 bills of lading listed] below have been sitting for over 30 days and have nearly $75,000 in demurrage due.

This is to inform you that we are about to start the process of sending the containers to G.O. for auctioning of the product.

Please advise if you or your customer is going to pay for these and pick them up by Friday....

Id. ¶ 58. Mr Xu replied that he had finally been “in touch with AKATA, and was told that their lawyer is working on this case now. [Their lawyer] asked whether we can give him some extra time for finishing the mess.” Id. ¶ 58. Mr. Powers responded that he didn't think APL could give Akata any more time to pick up the cargo than two more days, that is, until May 9, 2003. Id. ¶ 58. Mr. Xu “agree[d] with [this] idea,” stating that “Frida[y, May 9, 2003,] is the last day.” Id. ¶ 58.

4. APL's Communications with Customs

Ten days later, on May 19, 2003, Mr. Porter called Customs Inspector Rachel S. Ybarra to see how APL could dispose of the cargo within Customs regulations. Id. at *14 ¶ 59. Having spoken with Inspector Ybarra, Mr. Porter emailed Mr. Powers and stated that “she advises [that the] cargo must remain intact w/seals for the 6 mos...