Jewel Seafoods Ltd. v. M/V Peace River

• Decision Date: 24 March 1999
• Docket Number: No. 2:98-0723-18.,2:98-0723-18.
• Citation: 39 F.Supp.2d 628
• Parties: JEWEL SEAFOODS LTD., Plaintiff, v. M/V PEACE RIVER, and M/V Wealthy River, their engines, boilers, tackle, furniture, equipment, freights, and apparel, in rem, and China Ocean Shipping (Group) Company, and Atlantic Trucking Company, in personam, Defendants.
• Court: U.S. District Court — District of South Carolina

39 F.Supp.2d 628

JEWEL SEAFOODS LTD., Plaintiff, v. M/V PEACE RIVER, and M/V Wealthy River, their engines, boilers, tackle, furniture, equipment, freights, and apparel, in rem, and China Ocean Shipping (Group) Company, and Atlantic Trucking Company, in personam, Defendants.

No. 2:98-0723-18.

United States District Court, D. South Carolina, Charleston Division.

March 24, 1999.

Rivers T. Jenkins, Charleston, SC, for plaintiff.

Gordon D. Schreck, Charleston, SC, Robert G. Clawson, Jr., Charleston, SC, for defendants.

ORDER

NORTON, District Judge.

This action is before the court on Defendants WEALTHY RIVER and PEACE RIVER's Motion to Dismiss on the grounds of insufficiency of process and insufficiency of service of process. Joined by Defendant China Ocean Shipping (Group) Company (COSCO), these two in rem Defendants also filed a Motion to Dismiss on the grounds that this court lacks subject matter jurisdiction and venue based on the forum selection clauses in the bills of lading.

I. FACTUAL BACKGROUND

This case involves a claim for damage to containerized cargoes of frozen crabs transported from Charleston, South Carolina, to Ningbo, China. The cargo, sold by Jewel Seafoods, was shipped out of Charleston on board the motor vessels, PEACE RIVER and WEALTHY RIVER, under COSCO bills of lading numbers CHN29291 and CHN30021. Both bills of lading contained identical, boiler-plate forum selection clauses. The clause reads as follows:

JURISDICTION. This Bill of Lading is governed by the laws of the People's Republic of China. All disputes arising under or in connection with this bill of lading shall be determined by the laws of the People's Republic of China and any action against the Carrier shall be brought before the Maritime Court in Guangzhou or Shanghai or Tianjin or Qingdao or Dalian where the principal place of business of the relevant company is located.

(Combined Transport Bill of Lading cl. 3)

When the cargo arrived in China, the "notify parties," Zhejiang International Fisheries Corporation and Zhejiang Foreign Economic Relations & Trade Development Corporation, learned that part of the cargo had arrived in a damaged condition.¹ According to Plaintiff, agents from the "notify parties", Messrs. Jun Tang and Wu Xin Xing, met with Mr. Li Jin Shu, the deputy, manager of COSCO's Ningbo office to discuss the status of the cargo damage claims. By affidavit, the two agents of the "notify parties" state that COSCO's agent advised them that the claim would not be received in China and should be pursued in the United States. (Jun Tang Aff. ¶ 6; Wu Xin Xing Aff. ¶ 8) In letters dated February 14 and February 23, 1997, Jun Tang and Wu Xin Xing informed Plaintiff that COSCO in China would not accept their claims and that they should pursue their claims in the United States. (Marshall Aff.Exs. 1, 2, & 3) Indeed, in the letter dated February, 14, 1997, Wu Xin Xing asked Plaintiff to represent him in filing a proper claim with COSCO in the United States. According to the affidavit of Plaintiff's owner and President, Plaintiff acted on this advice to the "notify parties" and pursued litigation in this court. (Marshall Aff. ¶ 7) According to the affidavit of Mr. Li Jin Shu, an agent of COSCO in Ningbo, he did not tell the "notify parties" to pursue their claim in the United States. (Li Jin Shu Aff. ¶ 10) Instead, he told them that COSCO would not compensate them because they could not provide any supporting materials to prove that the cargo had actually suffered damage. (Li Jin Shu Aff. ¶ 7)

II. PROCEDURAL HISTORY

On March 17, 1998, Plaintiff filed a Complaint against Defendants under this court's admiralty jurisdiction. Plaintiff alleged a cause of action under the Carriage of Goods By Sea Act (COGSA), and claims for a violation of the unfair trade practices act, the breach of a bailment contract, the breach of a duty under the Carmack Amendment, and a claim for fraudulent bills of lading. On July 10, 1998, Defendant COSCO filed its Answer, asserting, inter alia, that a forum selection clause in the appropriate bills of lading mandated exclusive jurisdiction for such claims in the People's Republic of China. On January 29, 1999, Defendants WEALTHY RIVER and PEACE RIVER filed a Motion to Dismiss on the grounds of insufficiency of process and insufficiency of service of process. The same day, these two in rem Defendants and Defendant COSCO filed a Motion to Dismiss on the grounds that this court lacked subject matter jurisdiction and venue based on the forum selection clauses in the bills of lading.

III. LAW/ANALYSIS

A. In Rem Actions Against M/V PEACE RIVER and M/V WEALTHY RIVER

Defendants PEACE RIVER and WEALTHY RIVER move this court to dismiss Plaintiff's in rem actions against them because of insufficiency of process, insufficiency of service of process, and the expiration of the 120 day time limit under Federal Rule of Civil Procedure 4(m). Because Plaintiff does not oppose this motion, this court dismisses Plaintiff's claims against Defendants M/V PEACE RIVER and M/V WEALTHY RIVER without prejudice.

B. In Personam Actions Against COSCO²

Defendant COSCO moves this court under Rules 12(b)(1) and 12(b)(3) to dismiss Plaintiff's in personam claims against COSCO because the forum selection clause in both bills of lading divests this court of subject matter jurisdiction and venue. Because this court finds that it lacks subject matter jurisdiction over the claims against COSCO, it need not address the venue issue. "When a Rule 12(b)(1) motion challenge is raised to the factual basis for subject matter jurisdiction, the burden of proving subject matter jurisdiction is on the plaintiff." Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991). The district court may consider evidence outside the pleadings, including affidavits, without converting the motion to one for summary judgment. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir.1999): Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). "The district court should apply the standard applicable to a motion for a summary judgment, under which the nonmoving party must set forth specific facts beyond the pleadings to show that a genuine issue of material fact exists." Richmond, Fredericksburg & Potomac R.R. Co., 945 F.2d at 768. "The moving party should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Id.

Federal law governs a district court's decision to enforce or not enforce a forum selection clause. See Scott v. Guardsmark Security, 874 F.Supp. 117, 120 (D.S.C.1995). Forum selection clauses are prima facie valid and enforceable. See Allen v. Lloyd's of London, 94 F.3d 923, 928 (4th Cir.1996). The forum selection clauses in COSCO's bills of lading will be enforced unless: (1) to do so would violate COGSA; or (2) enforcement would be "unreasonable" under the circumstances; or (3) COSCO should be equitably estopped from enforcing the clause.

1. Validity of Foreign Forum Selection Clauses in Bills of Lading Covered by COGSA

All cargo shipments carried by sea to or from ports in the United States are subject to the provisions of the Carriage of Goods by Sea Act (COGSA). See 46 U.S.C.App. §§ 1300 to-1315 (1994). Section 1303(8) provides that "[a]ny clause ... in a contract of carriage relieving the carrier or the ship from liability for loss or damage to ... the goods ... or lessening such liability ... shall be null and void and of no effect." 46 U.S.C.App. § 1303(8) (1994). Prior to the Supreme Court's landmark decision in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 115 S.Ct. 2322, 132 L.Ed.2d 462 (1995), the majority of courts held that the above-quoted section from COGSA prevented the enforcement of foreign forum selection clauses in bills of lading. See, e.g., Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (2d Cir.1967) (fountainhead case for this proposition). In Indussa, the Second Circuit reasoned that a forum selection clause "could almost certainly lessen liability" if the foreign tribunal did not apply COGSA or the Hague Rules. See id. at 203. Indeed, even if the foreign court applied these rules, there would be no guarantee that it would apply them in a similar manner as would a court in the United States. Id. at 203-04. After Indussa, the courts of appeals "without exception" invalidated foreign forum selection clauses under COGSA. See Sky Reefer, 515 U.S. at 533, 115 S.Ct. 2322.

In Sky Reefer, the Supreme Court rejected both the reasoning and the conclusion of the Indussa court. The Supreme Court analyzed COGSA and found that it did not prevent parties from agreeing to enforce obligations in a particular forum so long as liability for any loss or damage is not lessened through the agreement. See Sky Reefer, 515 U.S. at 534-40, 115 S.Ct. 2322. The Court found that the relevant question was "whether the substantive law to be applied will reduce the carrier's obligations to the cargo owner below what COGSA guarantees." Id. at 539, 115 S.Ct. 2322. The Court concluded that "[w]ere there no subsequent opportunity for review and were we persuaded that `the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies ..., we would have little hesitation in condemning the agreement as against public policy.'" Id. at 540, 115 S.Ct. 2322 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 639 n. 19, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). Although Sky Reefer dealt with an arbitration clause rather than a foreign forum selection clause, the Supreme Court noted that "foreign arbitration clauses are but a subset of foreign forum selection clauses in general." Sky Reefer, 515 U.S. at 534, 115 S.Ct. 2322. Since the Supreme Court enunciated the test for foreign arbitration clauses in Sky Reefer, courts have almost...