Moore-McCormack Lines v. INTERN. TERMINAL OPERATING

• Decision Date: 16 October 1985
• Docket Number: No. 80 Civ. 4349 (CLB).,80 Civ. 4349 (CLB).
• Parties: MOORE-McCORMACK LINES, INC., Plaintiff, v. INTERNATIONAL TERMINAL OPERATING COMPANY, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

619 F. Supp. 1406

MOORE-McCORMACK LINES, INC., Plaintiff, v. INTERNATIONAL TERMINAL OPERATING COMPANY, INC., Defendant.

No. 80 Civ. 4349 (CLB).

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

October 16, 1985.

Vincent J. Barra, Dougherty, Ryan, Mahoney, Pellegrino, Giuffra & Zambito, New York City, for plaintiff.

Vincent J. Ryan, William T. Curran, Hill, Rivkins, Carey, Loesberg, O'Brien & Mulroy, New York City, for defendant.

MEMORANDUM AND ORDER

BRIEANT, District Judge.

The Plaintiff, Moore-McCormack Lines, Inc. ("MORMAC"), filed a claim in indemnity against defendant, International Terminal Operating Company, Inc. ("I.T.O."). MORMAC, an ocean carrier, seeks to recover for amounts it paid to cargo claimants as reimbursement for the loss or non-delivery of various goods at the 23rd Street Terminal in Brooklyn, New York. By consent, pursuant to 28 U.S.C. § 636(c), and after representing to this Court that the case involved a factual dispute only, the parties tried the case before Hon. Joel J. Tyler, United States Magistrate, on November 15-16, 1982. The parties agreed to take any appeal to this court in accordance with 28 U.S.C. § 636(c)(4).

In an opinion dated December 13, 1984 Magistrate Tyler dismissed MORMAC's complaint on the merits.^* He found that MORMAC had failed to satisfy its burdens of proof on its contract and negligence claims under New York State law. The familiarity of the reader with the opinion of the Magistrate is assumed.

Although we reach that result by a different route, we find that Magistrate Tyler's ultimate conclusion holding I.T.O. not liable to MORMAC was correct. The learned Magistrate ruled that MORMAC's claims did not arise within our admiralty and maritime jurisdiction, and resolved the issue between the parties in accordance with New York law, based on his analysis of the evidence.

The contract at issue does relate entirely to a maritime subject, however, and this Court on review concludes that the claims arising under it should have been adjudicated within our admiralty and maritime jurisdiction, rather than as pendent claims arising under state law. Even with the benefit of federal law, we find that MORMAC has failed to satisfy its burden of proof with respect to its claims.

MORMAC asserted its claims against I.T.O. under a contract entered into on October 1, 1976. By that contract I.T.O. agreed to act as a stevedore and terminal operator at the 23rd Street Terminal in Brooklyn. I.T.O. agreed to load and discharge cargoes for MORMAC's vessels, as well as other ocean vessels and lighters, and to receive and deliver those cargoes. MORMAC leases the terminal or pier from the City of New York and owns all the appurtenances. I.T.O. employees perform all the customary terminal operating and stevedoring functions. However, MORMAC furnishes the guards and maintains all security at the premises. Pursuant to the contract, I.T.O. employees all longshoremen, and does the tally. After discharge, I.T.O. sorts and stacks the shipments in a shed on the pier, awaiting delivery to the consignees' truckmen or lighterage. I.T.O. also places outbound cargo in this shed after it receives it from a shipper; then it prepares the cargo for shipping and loads it on board the appropriate vessel. That confusion, misdelivery, non-delivery and pilferage would result from this activity is hardly surprising.

In this action MORMAC alleges that I.T.O. is responsible for the loss of eight separate items of cargo, seven "incoming" shipments which it discharged, and one "outgoing" shipment it had the responsibility to load aboard a MORMAC vessel. MORMAC had previously compensated the shippers and/or consignees for these losses or shortages. At trial Magistrate Tyler found as a fact that the goods were lost after discharge in the case of the incoming items, and prior to loading in the case of the lost outbound goods. In making this determination he relied upon the "sort sheet," upon which I.T.O. accounted for the receipt of the cargo. This record showed that I.T.O. had unloaded and received each of the seven incoming shipments and had received the full complement of outbound items to be loaded.

Magistrate Tyler also determined that the contract was separable into two agreements; first, a stevedoring contract, and second, a terminal operating contract. Opinion at 1420. He held that the former was a maritime contract, but that the latter was not. Having found that the cargo was lost during the course of performance under the non-maritime portion of the contract, the Magistrate declined to exercise admiralty and maritime subject matter jurisdiction. Instead, he regarded the claims as arising under New York law and within our pendent jurisdiction.

Subject Matter Jurisdiction

The traditional test of admiralty jurisdiction in contract cases derives from the decision of Justice Story on circuit in DeLovio v. Boit, 7 F.Cas. No. 3,776 p. 418 (C.C.D. Mass.1815). The Supreme Court has stated this test as follows:

"While the civil jurisdiction of the admiralty in matters of tort depends upon locality — whether the act was committed upon navigable waters — in matters of contract it depends upon the subject matter— the nature and character of the contract ... as to whether it have reference to maritime service or maritime transactions." North Pacific S.S. Co. v. Hall Bros. Co., 249 U.S. 119, 125, 39 S.Ct. 221, 222, 63 L.Ed. 510 (1919).

Where contracts are mixed and involve distinct subjects, there is authority to the effect that they should be separated, so that the court may consider only the maritime aspect within its admiralty jurisdiction. Berwind-White Coal Mining Co. v. City of New York, 135 F.2d 443, 447 (2d Cir.1943). In this instance, however, the entire contract is maritime and should have been considered within our admiralty and maritime jurisdiction.

It is undisputed that stevedoring is a maritime activity and that such contracts are maritime contracts. American Stevedores v. Porello, 330 U.S. 446, 456, 67 S.Ct. 847, 852, 91 L.Ed. 1011 (1947). I.T.O. claimed, and Magistrate Tyler found, that the maritime commerce concluded once the stevedores had completed unloading the cargo. The terminal services and delivery that followed were considered non-maritime functions. Magistrate Tyler separated the contract because MORMAC's contract administrator testified that the stevedoring and terminal services provisions are "pretty much distinct and apart" with "two separate and distinct rates in the agreement, Exhibit 3, one for stevedoring and one for terminal operators." Opinion at 1420. The Magistrate further found that the terminal services portion was essentially a storage contract, relying on a long line of cases which hold that storage contracts are not maritime, e.g., Colgate Palmolive Company v. S.S. Dart Canada, 724 F.2d 313 (2d Cir.1983), cert. denied, 104 S.Ct. 2181, 80 L.Ed.2d 562 (1984).

The nature and character of the I.T.O. — MORMAC contract is not for storage. I.T. O.'s duties include the following functions traditionally performed by or for an ocean carrier of goods: To supply clerical personnel to record delivery and receipt of cargo; to sort and stack cargo; to make repairs to cooperage, rebag goods, etc.; to receive and tier outbound cargo; to break down cargo according to lot designations; to load and unload trucks and harborcraft; and to perform cleaning and general housekeeping on the piers. (A455-459). The storage that does occur under the contract is incident to the performance of the numerous maritime services undertaken for the ocean carrier by I.T.O. On any pier, outbound goods are likely to arrive before the vessel commences to lift cargo, and inbound goods often await action by the consignees or notify-parties. Usually the latter must receive notice of arrival, obtain the bill of lading through banking channels, and arrange for trucking and customs clearance before the goods may be called for and removed from the pier.

When, as in this case, the element of storage is merely incident to a maritime contract, the entire contract is maritime. Pillsbury Flour Mills Company v. Interlake S.S. Company, 40 F.2d 439, 440 (2d Cir.1930); Marubeni-Iida (American), Inc. v. Nippon Yusen Kaisha, 207 F.Supp. 418, 419 (S.D.N.Y.1962).

That the Magistrate found that the losses occurred during the storage of the cargo, i.e. after discharge and before delivery to the consignee, or prior to loading, for the outbound shipments, is essentially irrelevant. As a claim for breach of contract the jurisdictional inquiry begins and ends with the subject matter of the contract. The references to cases such as Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800 (2d Cir.1971); Colgate Palmolive Co. v. S.S. Dart Canada, 724 F.2d 313 (2d Cir. 1983), cert. denied, ___ U.S. ___, 104 S.Ct. 2181, 80 L.Ed.2d 562 (1984); and Minemet Inc. v. M.V. Mormacdraco, 536 F.Supp. 769 (S.D.N.Y.), aff'd., 714 F.2d 115 (2d Cir. 1982) are inapposite. None of these cases concerned a breach of contract claim between a carrier and its stevedore/terminal operator. All considered claims for negligence by a shipper or consignee against the terminal operator after the court held that the shipper had no contractual claim against the terminal operator under the bill of lading or contract of affreightment. Consequently, those courts were obliged to consider the claims under the relevant state law and within the federal court's pendent or diversity jurisdiction.

The recognition of the claim pleaded here as within our admiralty and maritime jurisdiction is consistent with our longstanding tradition and policy favoring the preservation of our constitutional admiralty and maritime jurisdiction, exemplified by the works of Justice Story.¹ It is also consistent with the principle that jurisdiction should be tailored to its purpose by "dealing with the major concerns of the shipping industry — with all of them, and not just with a few of them...