In re Hapag-Lloyd Aktiengesellschaft
| Decision Date | 29 November 2021 |
| Docket Number | 1:19-cv-5731-GHW-RWL |
| Parties | In the MATTER OF the Complaint of HAPAG-LLOYD AKTIENGESELLSCHAFT a/k/a Hapag-Lloyd AG, Petitioner, As Owners and Operators of the M/V Yantian Express |
| Court | U.S. District Court — Southern District of New York |
Randolph Donatelli, Lyons & Flood, LLP, New York, NY for Ocean Network Express Pte. Ltd.
Charles E. Schmidt, Kennedy Lillis Schmidt & English, New York, NY for Apex Maritime Co., Inc.
John J. Sullivan, Justin M. Heilig, and James A. Saville, Jr., Hill Rivkins LLP, New York, NY, for Claimants/Third-Party Plaintiffs.
On January 3, 2019, a fire broke out on board a container ship owned by Petitioner Hapag-Lloyd Aktiengesellschaft a/k/a Hapag-Lloyd AG ("Hapag"). Hapag's ship, the M/V Yantian Express (the "Vessel"), was in transit from Sri Lanka to Halifax, Nova Scotia and ports along the U.S. East Coast, including the Port of New York. Following the blaze, Hapag commenced this action seeking exoneration from, or limitation of, liability pursuant to the Limitation of Liability Act of 1851, 46 U.S.C. §§ 30501 et seq. (the "Limitation Act"), and Rule F of the Supplemental Rules For Admiralty Or Maritime Claims And Asset Forfeiture Actions, Federal Rules Of Civil Procedure ("Rule F"). Dkt. No. 1. Hapag's filing sparked numerous third-party claims and counterclaims from the owners and insurers of the destroyed and damaged cargo (the "cargo claimants") and non-vessel-operating common carriers ("NVOCCs") who were responsible to their customers for shipping certain containers on board the Vessel. Those parties filed claims for damages, indemnity, and/or contribution against Hapag and third-party defendants Ocean Network Express Pte. Ltd. ("ONE") and Yang Ming Marine Transport Corporation ("Yang Ming").
On June 30, 2021, Magistrate Judge Robert W. Lehrburger issued a Report and Recommendation (the "R&R") denying ONE's bellwether motion to dismiss four test claims based on a forum selection clause in ONE's bill of lading terms. Dkt. No. 707. Because the Court agrees with and adopts the R&R in its entirety, ONE's motion to dismiss is DENIED.
The Court refers to the R&R for a comprehensive description of the facts and procedural history of the case but will briefly review the procedural history relevant to this motion.
Certain cargo claimants represented by Hill Rivkins LLP (the "Hill Rivkins Claimants") filed their initial Third-Party Complaint against ONE and others on December 24, 2019. Dkt. No. 160. The Hill Rivkins Claimants then filed an Amended Third-Party Complaint on January 3, 2020 (Dkt. No. 168) and the operative Second Amended Third-Party Complaint on January 7, 2020 (Dkt. No. 1691 ). On March 5, 2020, Zurich American Insurance Company filed a Third-Party Complaint against claimant Apex and others. Dkt. No. 239. Apex answered and crossclaimed against ONE on July 6, 2020. Dkt. No. 435.
On June 1, 2020, ONE requested a pre-motion conference with the Court to discuss its anticipated motion to dismiss claims governed by a forum selection clause in its standard bill of lading (the "Clause"). The Court referred the parties to Judge Lehrburger for dispositive motions on June 2, 2020. Dkt. No. 335. Judge Lehrburger held a pre-motion conference on June 11, 2020 and ordered the relevant parties—ONE and all parties who had claims against ONE stemming from cargo moving under ONE bills of lading—to meet and confer to discuss a bellwether approach to for addressing ONE's anticipated motion to dismiss. Dkt. No. 385.
On August 20, 2020, the parties filed a letter proposing a briefing schedule and procedure for ONE's bellwether motion, proposed four test claims, and set forth the parties’ "basic understanding ... [that a] decision by the Court on the test claims would not be binding as to any other claims, but ... that the purpose of a test claim approach is to obtain a decision from the Court that will provide guidance as to the many other claims." Dkt. No. 532. Judge Lehrburger endorsed the parties’ proposal on August 21, 2020. Dkt. No. 533. ONE filed its bellwether motion on September 21, 2020. Dkt. No. 570. The parties completed briefing on December 7, 2020, and Judge Lehrburger held oral argument on June 23, 2021.
On June 30, 2021, Judge Lehrburger issued the R&R—denying ONE's bellwether motion in its entirety. Dkt. No. 707. ONE filed timely objections to the R&R on July 14, 2021. ONE's Objs. to the R&R ("ONE Objs."), Dkt. No. 712. Apex and the Hill Rivkins Claimants also filed objections. Apex's Objs. to the R&R ("Apex Objs."), Dkt. No. 713; Hill Rivkins Claimants Objs. to the R&R ("Hill Rivkins Objs."), Dkt. No. 714. ONE, Apex, and the Hill Rivkins Claimants filed responses to the objections on July 28, 2021. Dkt. Nos. 716, 717, and 718.
A district court reviewing a magistrate judge's report and recommendation "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1). Parties may raise specific, written objections to the report and recommendation within fourteen days of receiving a copy of the report. Id.; see also Fed. R. Civ. P. 72(b)(2).
123 When a party timely objects to a magistrate's report and recommendation, a district court reviews de novo "those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1). But where "the party makes only frivolous, conclusory or general objections, or simply reiterates her original arguments, the Court reviews the report and recommendation only for clear error." Chen v. New Trend Apparel, Inc., 8 F. Supp. 3d 406, 416 (S.D.N.Y. 2014) (quoting Silva v. Peninsula Hotel, 509 F. Supp. 2d 364, 366 (S.D.N.Y. 2007) ). "Further, the objections ‘must be specific and clearly aimed at particular findings in the magistrate judge's proposal.’ " McDonaugh v. Astrue, 672 F. Supp. 2d 542, 547 (S.D.N.Y. 2009) (quoting Molefe v. KLM Royal Dutch Airlines, 602 F. Supp. 2d 485, 487 (S.D.N.Y. 2009) ). The Court also reviews for clear error those parts of the report and recommendation to which no party has timely objected. 28 U.S.C. § 636(b)(1)(A) ; Lewis v. Zon, 573 F. Supp. 2d 804, 811 (S.D.N.Y. 2008).
In the R&R, Judge Lehrburger found that the Clause, which would have required the parties to litigate in the Singapore High Court, was unenforceable "because it is rendered null and void by the Carriage Of Goods By Sea Act (‘COGSA’)" and that "the public interest weighs against its enforcement ...." R&R at 13. Judge Lehrburger's conclusion rests on an analysis of Section 3(8) of COGSA, which voids contractual provisions that limit liability beyond the limitations set by Section 4 of COGSA. Id. at 23–24. Judge Lehrburger found that the Singapore High Court would apply its own law, which would limit defendants’ liability to a greater extent than that permitted by COGSA. Id. at 21–23. Because the Clause effectively imposed a limitation on liability greater than that permitted by COGSA, Judge Lehrburger reasoned, COGSA mandated that Clause be treated as null and void.
ONE objects to the R&R's conclusion that the Clause violates COGSA, arguing that in Vimar Seguros y Reaseguros v. M/V Sky Reefer, 515 U.S. 528, 115 S.Ct. 2322, 132 L.Ed.2d 462 (1995), the Supreme Court held that purely procedural provisions of contracts that limit recovery are not rendered void by COGSA. ONE also objects to the conclusion of the R&R by arguing that the R&R improperly considered private interest factors, as opposed to public policy factors, in violation of the Supreme Court's holding in Atlantic Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013).
The Court appreciates the serious concerns raised by these objections. The law recognizes the significant value in permitting parties to a contract to litigate in their contractually preselected forum. See Atlantic Marine, 571 U.S. at 63, 134 S.Ct. 568 () (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) ). And certainty is beneficial in commercial contracts. The conclusion in this case—in which a privately negotiated forum selection clause is voided by a court—is in tension with those important principles. But, as described in the R&R and outlined below, the result in this unusual situation is mandated by federal statute and clear Supreme Court precedent. Accordingly, the Court adopts the R&R and its analysis in full.
In the R&R, Judge Lehrburger found that "the bill of lading's forum selection clause is unenforceable in this action because it is rendered null and void by [COGSA] and the public interest weighs against its enforcement." R&R at 13. In so finding, Judge Lehrburger acknowledged that, under the Supreme Court's holdings in Atlantic Marine, 571 U.S. at 63, 134 S.Ct. 568 and M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 17, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), "a valid forum selection clause is given ‘controlling weight in all but the most exceptional cases.’ " R&R at 11–12 (quoting Atlantic Marine, 571 U.S. at 63, 134 S.Ct. 568 ). Judge Lehrburger then applied Phillips v. Audio Active, Ltd., 494 F.3d 378 (2d Cir. 2007), in which the Second Circuit described the framework by which courts should analyze the validity of a forum selection clause following Bremen. R&R at 13–30.
ONE's first objection argues that the R&R misapplied the Supreme Court's ruling in Atlantic Marine and the Second Circuit's ruling in Phillips by "recommend[ing] denial of ONE's motion based on two private interest factors." ONE's Objs. at 4. ONE further argues that, to the extent the R&R was based on public interest...
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