Carbotrade S.p.A. v. Bureau Veritas

• Decision Date: 31 October 1996
• Docket Number: No. 1601,D,1601
• Citation: 99 F.3d 86
• Parties: CARBOTRADE S.p.A., on its own behalf and as assignee of Essex Cement Company, Plaintiff-Appellant, v. BUREAU VERITAS, Defendant-Third-Party Plaintiff-Appellee, v. TITAN CEMENT CO., S.A., Third-Party Defendant. ocket 95-9155.
• Court: U.S. Court of Appeals — Second Circuit

Page 86

99 F.3d 86

1997 A.M.C. 98

CARBOTRADE S.p.A., on its own behalf and as assignee of

Essex Cement Company, Plaintiff-Appellant, v. BUREAU VERITAS, Defendant-Third-Party Plaintiff-Appellee, v. TITAN CEMENT CO., S.A., Third-Party Defendant.

No. 1601, Docket 95-9155.

United States Court of Appeals Second Circuit.

Argued May 28, 1996.

Decided Oct. 31, 1996.

Thomas L. Tisdale, New York City (Patrick F. Lennon, Christopher M. Hanrahan, Tisdale & Associates, New York City, on the brief), for Plaintiff-Appellant.

Christopher B. Kende, New York City (Bradley F. Gandrup, Jr., Wise & Shepard, LLP, New York City, on the brief), for Defendant-Third-Party Plaintiff-Appellee.

(Kenneth E. Gordon, Gordon & Gordon, P.C., New York City, on the brief), for Amicus Curiae International Association of Classification Societies.

Before: VAN GRAAFEILAND, WALKER, and LEVAL, Circuit Judges.

WALKER, Circuit Judge:

Plaintiff Carbotrade S.p.A. ("Carbotrade") appeals from an opinion and order of the United States District Court for the Southern District of New York (John G. Koeltl, District Judge ) that granted the motion of defendant Bureau Veritas ("BV") for summary judgment pursuant to Fed.R.Civ.P. 56(c). Carbotrade's suit followed the sinking of a vessel, the Star of Alexandria, which had been classified by BV--negligently in the view of Carbotrade--as complying both with international conventions and with BV's own rules and regulations. The district court, applying United Kingdom law, concluded that no duty was owed by a classification society, such as BV, to a third-party, such as Carbotrade. On appeal, Carbotrade argues that the district court erred in applying United Kingdom law; that Greek law, or alternatively, United States admiralty law, governs this dispute; and that under either Greek or United States law BV may be held liable by Carbotrade for negligent misrepresentation. Carbotrade further argues that the district court erred in concluding that Carbotrade could not establish that it relied on the alleged negligent misrepresentations, BV owed Carbotrade a duty. We vacate and remand.

BACKGROUND

This controversy originated when the Star of Alexandria, a ship registered in the United Kingdom dependency of Gibraltar, sank on April 17, 1989, in international waters while en route to New Jersey from Greece. The facts surrounding the incident are fully set forth in the opinion of the district court, reported at Carbotrade SpA v. Bureau Veritas, 901 F.Supp. 737 (S.D.N.Y.1995), familiarity with which is presumed. We summarize only those facts that are pertinent to this appeal.

The Star of Alexandria was owned by Caribene Investments, Ltd., a corporation organized under the laws of Gibraltar. Caribene had contracted with Palm Navigation, a company with offices in Greece, to manage the vessel. On February 28, 1989, less than two months before the Star of Alexandria sank, Caribene chartered the vessel to Carbotrade, an Italian corporation with its principal place of business in Italy. Carbotrade subchartered the vessel to Essex Cement Company, a New Jersey partnership and affiliate of third-party defendant Titan Cement Company the owner of the cement cargo that went down with the Star of Alexandria.

After the vessel sank, Carbotrade sued BV. BV is a French classification society with its principal place of business in France and offices in ports throughout the world. A classification society sets standards for the quality and integrity of vessels and performs surveys to determine whether vessels are in compliance with the classification society's rules and regulations, national laws, and international conventions. If a vessel passes inspection, the classification society either issues a certificate attesting to the vessel's conformity with the applicable rules, regulations, laws, and conventions or endorses an existing certificate with a visa reflecting the survey. If the vessel fails to pass the inspection, the classification society either does not issue the certificate or withdraws the existing certificate.

At least as far back as 1985, BV contracted with Caribene to survey the Star of Alexandria. Between March 6 and March 28, 1989, BV conducted several surveys of the Star of Alexandria: a survey to determine whether the vessel was in compliance with certain international conventions; a bottom survey to determine whether the vessel required dry docking; and an intermediate survey to determine the soundness of its interior compartments. After completing the surveys, BV issued certificates indicating that the Star of Alexandria was in compliance with the international conventions and endorsed the existing ship's classification certificate on the basis of the bottom and intermediate surveys.

Carbotrade claims that BV negligently performed the bottom and intermediate surveys and thus negligently endorsed the classification certificate. In particular, Carbotrade alleges that BV's surveyor, Konstantinos Stavropoulos, was negligent in failing to withdraw the classification certificate after he noticed that the vessel's wingtanks were leaking. Carbotrade claims that cracks in the wingtanks reduced the vessel's strength and contributed to the sinking of the Star of Alexandria. Carbotrade further argues that under BV's own rules and regulations, a new visa cannot be issued when the surveyor discovers cracks in the wingtanks. If the visa had not been issued, the Star of Alexandria's previous classification certificate would have lapsed, and the vessel would not have been "in class" for the period of the voyage.

Carbotrade maintains that it relied on BV's representation that the vessel was fit and suitable to carry cargo and that, if BV had refused to extend the hull certificate, Carbotrade would not have allowed the vessel to sail with the cargo on board. BV responds in its brief on appeal that its "Rules [do] not require that the vessel's wing tanks [ ] be absolutely watertight for the vessel to pass the intermediate survey." In addition, BV notes that during March 1989, an independent surveyor hired by Essex also inspected and passed the vessel. The surveyor, Constantine Tsamados, saw some water leaking from the wingtanks, but noted that the wingtanks would not be used during the voyage and, thus, certified the vessel as suitable for the carriage of the cement cargo that was ultimately boarded. Carbotrade dismisses the significance of Tsamados's survey, claiming that the "purpose of [Tsamados'] survey was limited to establishing that the holds were clean, dry, and rust free, and not to assessing the seaworthiness of the vessel."

Because the Star of Alexandria was registered in Gibraltar, the United Kingdom Department of Transportation investigated the sinking. The department concluded that the vessel sank because it "was so overloaded and reduced in structural strength that, having experienced exceptionally stormy weather conditions crossing the Atlantic, [it] broke in two and sank." Carbotrade argues that BV's topside wingtank test was designed to detect the structural weakness that caused the ship to break in two.

Carbotrade first invoked arbitration, and obtained a default judgment, against Caribene in London pursuant to the arbitration clause in the head charter. Caribene has no known assets and the judgment has not been satisfied. Caribene's insurers have refused to satisfy this judgment because they claim that Caribene was in violation of Gibraltar's manning requirements.

In January 1995, BV moved for summary judgment in this action. BV argued that the law of the United Kingdom applied to the dispute and that under United Kingdom law, classification societies do not owe a duty to third parties. See Marc Rich & Co. v. Bishop Rock Marine Co. (The Nicholas H), [1995] 3 All E.R. 307 (H.L.). BV argued further that, in any event, neither Carbotrade nor Essex (which had assigned its claim to Carbotrade) could establish that it had relied on BV's classification certificate. The district court, in an opinion and order filed on October 19, 1995, held that United Kingdom law applies and granted summary judgment to BV. In addition, the district court found that even if United States law applied, BV did not owe a duty to Carbotrade. Finally, the district court agreed with BV that even if such a duty were owed, there was insufficient evidence that Carbotrade or Essex relied on the relevant classification certificates. Carbotrade now appeals.

DISCUSSION

Our review of a grant of a motion for summary judgment is de novo. Schonholz v. Long Island Jewish Medical Ctr., 87 F.3d 72, 77 (2d Cir.1996). A lower court must enter summary judgment in favor of the moving party "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In ruling on a motion for summary judgment,

[a] judge must ask himself not whether he thinks the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the [non-movant] on the evidence presented. The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movant].

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). Furthermore, a district judge must view the evidence in the light most favorable to the non-moving party and must draw all inferences in favor of that party. See Sports Auth., Inc. v. Prime Hospitality Corp., 89 F.3d 955, 960 (2d Cir.1996).

The first and foremost task before us on this appeal is to decide which country's law applies to Carbotrade's cause of action for negligent misrepresentation. The district court concluded that, under the maritime conflicts...