Berkshire Fashions, Inc. v. M.V. Hakusan II, No. 90-5891

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: Before BECKER, NYGAARD and HIGGINBOTHAM; BECKER
• Citation: 954 F.2d 874
• Docket Number: No. 90-5891
• Decision Date: 23 January 1992
• Parties: , 22 Fed.R.Serv.3d 1180 BERKSHIRE FASHIONS, INC., Plaintiff-Appellant, v. The M.V. HAKUSAN II, her engines boilers etc. in rem Canopus Ship-Holding S.A., Nippon Yusen Kaisha, Showa Kaiun, Air-Sea Transport Inc., Orient Star Shipping (USA) Inc., Y.F.K. Cargo Service, Inc. a/k/a Y.F.K. Air Cargo Service Inc., Global Traffic Systems Inc., and J.O.V. Enterprises, Inc., Defendants-Appellees. GLOBAL TRAFFIC SYSTEMS and Jo-Lin Hauling, Inc., Third-Party Plaintiffs-Appellees, v. CARBRO CONSTRUCTION CORP., and the City of Linden, N.J., Third-Party Defendants-Appellees.

Page 874

954 F.2d 874 1992 A.M.C. 1171, 22 Fed.R.Serv.3d 1180 BERKSHIRE FASHIONS, INC., Plaintiff-Appellant,
v.
The M.V. HAKUSAN II, her engines boilers etc. in rem Canopus
Ship-Holding S.A., Nippon Yusen Kaisha, Showa Kaiun, Air-Sea
Transport Inc., Orient Star Shipping (USA) Inc., Y.F.K.
Cargo Service, Inc. a/k/a Y.F.K. Air Cargo Service Inc.,
Global Traffic Systems Inc., and J.O.V. Enterprises, Inc.,
Defendants-Appellees.
GLOBAL TRAFFIC SYSTEMS and Jo-Lin Hauling, Inc., Third-Party
Plaintiffs-Appellees,
v.
CARBRO CONSTRUCTION CORP., and the City of Linden, N.J.,
Third-Party Defendants-Appellees. No. 90-5891. United States Court of Appeals,
Third Circuit. Argued March 5, 1991.
Decided Jan. 23, 1992.

Page 877

Harry Robinson, III (argued), John Bowens, Gennet and Kallmann, Roseland, N.J., for third-party plaintiff-appellee, Global Traffic Systems.

George W. Wright (argued), Kroll and Tract, Newark, N.J., for plaintiff-appellant Berkshire Fashions.

Before BECKER, NYGAARD and HIGGINBOTHAM, Circuit Judges.

OPINION OF THE COURT

BECKER, Circuit Judge.

This appeal primarily involves questions about the breadth of the federal courts' admiralty jurisdiction. It arises out of a dispute about the loss of a shipment of umbrellas in transport between a Taiwanese manufacturer and an American retailer. The retailer, New York-based plaintiff Berkshire Fashions, Inc. ("Berkshire"), purchased seven hundred and fifty cartons of umbrellas from defendant Jiung Chia Umbrella Enterprises, Inc. ("Jiung Chia"), a Taiwanese manufacturer. Pursuant to the purchase agreement, Jiung Chia obtained a Bill of Lading ("the Bill") from a shipping agent, defendant Air-Sea Transport, Inc. ("ASTI"), to ship the cartons from Taiwan to New York. As is apparently often the case with such agency agreements, the Bill did not specify whether the goods would be transported from Taiwan to New York by both rail and sea or by sea alone, and from that contractual ambiguity this dispute about admiralty jurisdiction arises.

Acting as the agent for Jiung Chia and Berkshire, ASTI apparently contracted with a number of transport and storage companies to ship the goods from Keelung, Taiwan to New York. The parties dispute what happened after ASTI made those arrangements. Defendant Global Traffic Systems, Inc. ("Global") contends that the goods were shipped from Taiwan to Los Angeles and then transported by rail from Los Angeles to New Jersey, where they were stolen from a storage facility. Berkshire contends that the cartons were never shipped from Taiwan, but, whether they were or were not, insists that the Bill implicitly contemplated that the umbrellas would travel by sea alone. The cartons were missing when Berkshire's agents arrived at the New Jersey storage facility of Global to accept delivery.

Alleging theories of breach of contract and tort, Berkshire filed suit in the District Court for the District of New Jersey and named as defendants all of the parties allegedly involved in transporting the goods from Taiwan to New Jersey. As a basis for federal subject matter jurisdiction, Berkshire initially asserted admiralty jurisdiction because, it claimed, the contract that it entered into for transport of the umbrellas was a wholly maritime contract, one that was supposed to involve transport by sea alone. The district court rejected that argument and granted defendant Global's motion to dismiss for lack of subject matter jurisdiction. ¹ The court found that the claim did not give rise to admiralty jurisdiction because, in its view, the contract called for extensive cross-land transport.

After the district court granted Global's motion to dismiss, Berkshire sought to amend its original complaint to drop a non-diverse defendant from the suit and to assert diversity of citizenship as an alternate ground for subject matter jurisdiction. The district court denied the motion to amend because, among other reasons, it believed that dropping the non-diverse party would not allow for diversity jurisdiction as the amount in controversy was less than $50,000.00. Berkshire now appeals both orders.

The critical consideration on appeal is the travel route required by the Bill of Lading, and, more precisely, whether the district court correctly construed this admittedly

Page 878

ambiguous contract of carriage as a contract for both land and sea transport of the goods or whether the Bill should instead be viewed as requiring sea carriage only. If the former interpretation prevails, then admiralty jurisdiction does not arise; if, however, the latter construction is correct, then admiralty jurisdiction is appropriate regardless of the route actually taken.

For the reasons that follow, we conclude that the district court erred in dismissing the complaint. We reject defendant's contention, accepted by the district court, that the so-called "liberties" clause, which allowed the carrier to use any means of transport it saw fit, defeated admiralty jurisdiction. Because we find an ambiguity in the Bill of Lading that should be clarified by additional evidence and resolved by findings of fact, we will reverse the district court's order dismissing the complaint and remand for further proceedings to determine the contract's meaning.

With respect to the district court's order denying the motion to amend to assert diversity jurisdiction, we find that the district court erred in determining that an amendment was not permissible because the amendment stated a new basis for jurisdiction. The district court also erred in failing to acknowledge that the amendment related back to the original filing of the complaint, at which time the required jurisdictional amount was plainly met. Hence, we will also reverse the district court's denial of the motion for reconsideration and remand so that plaintiff might have leave to amend its complaint in the event that admiralty jurisdiction does not attach.

I. FACTS AND PROCEDURAL HISTORY

In May 1988, plaintiff Berkshire, a New York corporation that sells women's accessories, purchased under a bank letter of credit seven hundred and fifty cartons of umbrellas from Jiung Chia. At Berkshire's request, Jiung Chia arranged to transport the umbrellas from Taiwan to New York. As part of this arrangement, Jiung Chia obtained a Bill of Lading from defendant ASTI, a freight forwarder engaged in the business of arranging such shipments. At some point during or after May 1988, Jiung Chia provided a copy of this Bill of Lading to Berkshire. ²

The Bill of Lading, which listed ASTI as the carrier of the umbrella cartons and named Berkshire as the Bill's "holder," described in general terms how the goods would travel from Taiwan to New York, but not specifically. While the Bill stated that the goods would be loaded onto the ship M.V. Hakusan II ("Hakusan II ") at Keelung, Taiwan on May 17, 1988 and that the place of delivery was New York, it did not specify the means of transporting the containers between those two ports. The Bill neither provided that the Hakusan II would transport the umbrellas all the way to New York, nor did it specifically mention land transport. The Bill did, however, have a general "liberties" clause, Clause 20, which allowed the carrier to use any means of transport it saw fit. The Clause states:

(1) The Carrier may at any time and without notice to the Merchant:

(a) use any means of transport or storage whatsoever.

(b) transfer the goods from one conveyance to another including transshipping or carrying the same on another vessel than the vessel named overleaf.

(c) proceed by any route in his discretion (whether or not the nearest or most direct or customary or advertised route) and proceed to or stay at any place or port whatsoever once or more often and in any order.

This Bill of Lading was the only such bill that Berkshire received concerning its purchase of umbrellas from Jiung Chia.

After executing this initial Bill of Lading, ASTI engaged several transport companies in a series of subcontracts designed to guarantee transport of the umbrellas from

Page 879

Taiwan to New York. The particular details of these arrangements are neither clear nor, at this point, important. However, three aspects of ASTI's dealings with carriers and other subcontractors merit mention.

First, ASTI contracted with defendant Orient Star Consolidating and Forwarding ("Orient Star"), another shipping agent, for transport of the goods aboard the Hakusan II. Orient Star, acting as an agent for ASTI, in turn contacted defendant Nippon Yusen Kaisha ("NYK"), the owner of the Hakusan II, and procured NYK's agreement to transport the umbrellas from Taiwan to Los Angeles aboard the vessel. These bills of lading specified the port of delivery as Los Angeles, but Berkshire never received the bills of lading or, indeed, any of the other subcontracts that ASTI or the other agents and subcontractors executed for transport of the umbrellas.

Second, defendant Global contends that ASTI, or one of its subcontractors or agents, entered into a series of subcontracts for rail transport of the umbrellas from Los Angeles to New York. According to Global, the umbrellas were transported by train from Los Angeles to Kearny, New Jersey.

Finally, according to Global, one of the defendant agents or transporters arranged for the umbrellas' storage in Linden, New Jersey at a facility owned by Global. Global contends that it brought the umbrellas from Kearny to its storage facility in Linden. At some point after Global's transfer of the umbrellas from Kearny to Linden but before Berkshire arrived to accept delivery of the umbrellas, Global claims that someone stole the umbrellas from the container yard where Global was storing the cartons. Global argues that the theft occurred because third-party defendant the City of Linden ("the City" or "Linden"), acting through a contractor, third-party defendant Carbro Construction Corp. ("Carbro"), had cut a hole in the fence...