Siderius, Inc. v. MV Ida Prima

• Decision Date: 12 July 1985
• Docket Number: No. 83 Civ. 9029 (PNL).,83 Civ. 9029 (PNL).
• Citation: 613 F. Supp. 916
• Parties: SIDERIUS, INC., Plaintiff, v. M.V. "IDA PRIMA," her engines, boilers, etc., v. NEWSER NAVIGATION, S.A., Columbia Shipmanagement, Ltd., Wil-Mar Shipping A/S and the Oceanus Mutual Underwriting Association, Defendants.
• Court: U.S. District Court — Southern District of New York

613 F. Supp. 916

SIDERIUS, INC., Plaintiff, v. M.V. "IDA PRIMA," her engines, boilers, etc., v. NEWSER NAVIGATION, S.A., Columbia Shipmanagement, Ltd., Wil-Mar Shipping A/S and the Oceanus Mutual Underwriting Association, Defendants.

No. 83 Civ. 9029 (PNL).

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

July 12, 1985.

Bigham Englar Jones & Houston, New York City, for plaintiff; William R. Connor, III, New York City, of counsel.

Kirlin, Campbell & Keating, New York City, for defendants; Enrico S. Sanfilippo, New York City, of counsel.

MEMORANDUM AND ORDER

LEVAL, District Judge.

Plaintiff Siderius, Inc. seeks to recover under ocean bills of lading for damage to three consignments of steel plate transported aboard defendant vessel, M.V. Ida I. Defendant Newser Navigation S.A. is the owner of the vessel. Defendants Wil-Mar Shipping A/S and Columbia Shipmanagement, Ltd., both Cyprus corporations, appear to be agents of Newser. Newser moves for summary judgment claiming that the action is time barred by the arbitration clause of the charter party which was incorporated by reference in the bills of lading.

The following facts appear to be undisputed. Siderius purchased steel plate on a CIF basis from an Italian steel mill, Nuova Italsider S.p.A. ("Italsider"). The steel was to be delivered to Chicago with payment due 90 days after the date of the bills of lading. Under the terms of the CIF agreement, the cost of insurance was included in the price and the buyer, Siderius, was required to pay Italsider the invoiced amount regardless of any damage during transportation. It appears that Italsider, and not Siderius, arranged for the ocean transportation of the goods.

On August 11, 1982, Wil-Mar, apparently as agent for Newser, entered into an agreement to let the Ida to charterer Sidermar di Navigacione, S.p.A.¹ Clause 26 of the charter party provided that:

Any dispute arising under this Charter Party to be referred to Arbitration in London in the customary manner. The right of both parties to refer a dispute to Arbitration ceases 12 months after date of completion of discharge.... Where this provision is not complied with, claims shall be deemed to be waived and absolutely barred.

In August 1982, the shipment of steel at issue was loaded on the vessel and three bills of lading were issued to Italsider by the master of the vessel consigning the freight to Siderius. On the back of the bills of lading, the conditions of carriage provided that "All terms and conditions, liberties and exceptions of the Charty Party, dated as overleaf, are herewith incorporated."

The vessel completed discharge in Chicago on September 21 or 22, 1982. At the time of discharge, Siderius noticed some salt water leakage in the vessel's holds and concluded that the steel was probably damaged.

On September 24, 1982, Siderius telexed Columbia, the agent of Newser, stating that it intended to seize the vessel to obtain the necessary security and asking for the name of the owner's Protection and Indemnity (P & I) club representative (Plaintiff's Ex. C). Later that day, Lamorte Burns & Co. Inc., the owner's P & I club representative, contacted Siderius by phone. Lamorte Burns agreed to issue a Letter of Guarantee (or Undertaking) of the Oceanus Mutual Underwriting Association in the amount of $250,000 with a New York jurisdiction clause in consideration for Siderius' agreement not to seize the vessel. This agreement was memorialized by exchange of letters — one by plaintiff's attorney dated September 27, 1982 and one by Lamorte Burns dated September 29, 1982. (Plaintiff's Exhibits D & E). A year later on September 22, 1983, just before the expiration of COGSA's one year limitation period, Lamorte Burns confirmed in writing that it had "extended plaintiff's time in which to institute suit and/or arbitration on behalf of the vessel and her owners up to and including December 19, 1983" (Plaintiff's Ex. F).

This action was filed by Siderius on December 13, 1983. After December 19, 1983, defendant raised the contention that the action was barred by reason of failure to demand arbitration. Plaintiff then demanded arbitration.

The earlier promised letter of guarantee was eventually issued by Lamorte Burns on December 29, 1983.

Parties' Contentions:

The owner Newser contends that the action is barred under the charter party's arbitration clause since no demand for arbitration was made within 12 months after discharge or within the extension granted by the owner's representative. It argues that since the charter party was incorporated into the bills of lading, Siderius, as assignee of the bills of lading, was bound by the arbitration clause in the charter party. Newser points to two provisions in the bills of lading which refer to the charter party. On the back of the bills of lading is the small print condition of carriage mentioned above stating: "All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf are herewith incorporated." On the front of the bills a clause states "Freight payable as per charter-party dated 11/8/1982." Newser points to various decisions in this circuit, e.g., Son Shipping Co. v. DeFosse & Tanghe, 199 F.2d 687, 688 (2d Cir.1952); Midland Tar Distillers, Inc. v. M/T Lotos, 362 F.Supp. 1311, 1312-13 (S.D.N.Y.1973), in support of its argument that an arbitration clause in the charter party is incorporated in the bill of lading by the use of language similar to this.

In response, Siderius argues that the charter party was insufficiently incorporated into the bills of lading. It relies on English law, quoting an opinion of Lord Denning, The Annefeld (1971), holding that an arbitration clause is not incorporated into the bill of lading, absent express reference to the clause as incorporated.

Alternatively, Siderius contends that defendant waived its rights under the London arbitration clause by authorizing its agent to agree to a Letter of Guarantee with a New York jurisdiction clause. Newser argues in answer that the Letter of Guarantee stated it was binding only on the P & I Club and "is written without prejudice as to any defenses which the vessel or owners may have under the Bills of Lading and/or Charter Parties...."

Discussion

Long standing decisions in this circuit favor defendant's interpretation of the bill of lading. A charter party is deemed incorporated into a bill of lading and binding as against an assignee, even though the assignee is a stranger to the charter party if the bill of lading states that it is governed by the charter party and identifies it with sufficient specificity. See State Trading Corp. of India v. Grunstad Shipping, 582 F.Supp. 1523, 1524 (S.D.N. Y.), aff'd without op., 751 F.2d 371 (2d Cir.1984); Amoco Overseas Co. v. S.S. Avenger, 387 F.Supp. 589, 593 (S.D.N.Y. 1975); Lowry & Co. v. S.S. Le Moyne D'Iberville, 253 F.Supp. 396, 397-98 (S.D. N.Y.1966), appeal dismissed, 372 F.2d 123 (2d Cir.1967); compare United States Barite Co. v. M.V. Haris, 534 F.Supp. 328, 329, 330 (S.D.N.Y.1982) (charter party not incorporated where reference to charter party in bill of lading did not specifically identify a particular charter party); Cia. Platamon de Navegacion, S.A. v. Empresa Colombiana de Petroleos, 478 F.Supp. 66, 68 (S.D. N.Y.1979) (no incorporation where charter party date is left out of bill of lading). Where a bill of lading so states that it incorporates a charter party, an arbitration clause in the charter party is held to bind the assignee of the bill of lading if the arbitration clause is not limited by its terms to disputes between the shipowners and the charterers. See Amoco Overseas, 387 F.Supp. at 593; Midland Tar Distillers, Inc. v. M/T Lotos, 362 F.Supp. 1311, 1314 (S.D.N.Y.1973); Lowry & Co., 253 F.Supp. at 398; compare Production Steel Co. of Illinois v. S.S. Francois L.D., 294 F.Supp. 200, 201-02 (S.D.N.Y.1968) (arbitration clause not binding on cargo owner where clause specifically limited to disputes between shipowner and charterer). Charter party arbitration clauses providing for arbitration of "any dispute arising under this Charter Party" have been held sufficiently broad to encompass a dispute between the carrier and the assignee of the bills of lading. E.g., Amstar Corp. (American Sugar Div.) v. S.S. Union Australia, 445 F.Supp. 940, 941 (S.D.N.Y.1978); Lowry & Co., 253 F.Supp. at 398.

Notwithstanding these decisions, I believe there are at least three forceful arguments to be made against the carrier's position.

First, in my view, despite contrary authority, e.g., Amstar Corp. (American Sugar Div.), supra, 445 F.Supp. at 941-42; Kurt Orban Co. v. S.S. Clymenia, 318 F.Supp. 1387, 1390 (S.D.N.Y.1970), to oblige a U.S. consignee of freight under a bill of lading to proceed by foreign arbitration seems at odds with the well-recognized requirements of the Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300 et seq.² That statute was designed to void overreaching clauses inserted by carriers in bills of lading, unreasonably limiting the carriers' liability or obstructing the freight claimants' ability to secure redress. See Encyclopaedia Britannica, Inc. v. S.S. Hong Kong Producer, 422 F.2d 7, 11-12 (2d Cir.1969), cert. denied, 397 U.S. 964, 90 S.Ct. 998, 25 L.Ed.2d 255 (1970). The Act establishes a variety of norms and in Section 1303(8), Title 46 U.S.C., expressly prohibits "any clause, covenant or agreement in a contract of carriage lessening the carrier's liability otherwise than as provided in this Act." This provision has been held to void a clause of a bill of lading requiring the consignee to litigate claims against the carrier in a foreign forum under foreign law. The Court of Appeals stated in Indussa Corp. v. S.S. Ranborg, 377 F.2d 200, 203-04 (2d Cir.1967) (en banc) that "from a practical standpoint, to require an American plaintiff to assert his claim only in a distant court lessens the liability of the carrier quite...