Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc., No. 826

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Writing for the Court: McLAUGHLIN
• Citation: 109 F.3d 105
• Decision Date: 13 March 1997
• Docket Number: D,No. 826
• Parties: , 37 Fed.R.Serv.3d 531 TRANSATLANTIC MARINE CLAIMS AGENCY, INC., a/s/o Daewoo Automotive Components, Ltd., Plaintiff-Appellee, M/V Hyundai Emperor, etc. her engines, boilers, etc., Defendant, Hyundai Merchant Marine, Defendant, Burlington Northern Railroad, Defendant, Conrail, Defendant, v. ACE SHIPPING CORP., DIVISION OF ACE YOUNG INC., Defendant-Appellant. ocket 96-7583.

Page 105

109 F.3d 105 1997 A.M.C. 1772, 37 Fed.R.Serv.3d 531 TRANSATLANTIC MARINE CLAIMS AGENCY, INC., a/s/o Daewoo
Automotive Components, Ltd., Plaintiff-Appellee,
M/V Hyundai Emperor, etc. her engines, boilers, etc., Defendant,
Hyundai Merchant Marine, Defendant,
Burlington Northern Railroad, Defendant,
Conrail, Defendant,
v.
ACE SHIPPING CORP., DIVISION OF ACE YOUNG INC., Defendant-Appellant. No. 826, Docket 96-7583. United States Court of Appeals,
Second Circuit. Argued Jan. 8, 1997.
Decided March 13, 1997.

Page 106

James F. Campise, Marcigliano & Campise, New York City, for Plaintiff-Appellee.

Stephen A. Frank, Badiak Will & Maloof, New York City, for Defendant-Appellant.

Before NEWMAN, Chief Judge, McLAUGHLIN, Circuit Judge; and SAND, District Judge ^*

McLAUGHLIN, Circuit Judge:

Background

In March 1994, Daewoo Automotive Components, Ltd. ("Daewoo") hired defendant-appellant Ace Shipping Corp. ("Ace") to transport automobile parts from New York to Pusan, Korea. Daewoo and Ace executed six bills of lading (which are simply contracts of carriage) calling for transportation of the parts from New York, through Seattle, to Pusan.

Ace is a non-vessel-owning common carrier ("NVOCC"), which means that it arranges for the shipment of cargo, but does not itself own a ship. Ace accepted Daewoo's relatively small cargo, consolidated it with cargo from other customers, and placed the whole load in a "container"--a boxcar-sized storage unit that can be carried by trucks, trains or ships. Ace delivered the container to Hyundai Intermodal, Inc. ("Hyundai"), which, in turn, conveyed it to Burlington Northern

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Railroad Co. ("Burlington Northern") for transport by rail from New York to Seattle. The train carrying the cargo derailed in Montana. Most of Daewoo's automobile parts were damaged; some were totally destroyed.

The loss was covered by insurance and the cargo underwriter paid Daewoo. On March 21, 1995, plaintiff-appellee Transatlantic Marine Claims Agency ("Transatlantic"), an agent for the cargo underwriter, brought this action as a subrogee of Daewoo, naming Ace, Hyundai, Burlington Northern, and Conrail as defendants. On April 10, 1995, Ace signed a waiver of service, acknowledging that it had received a copy of Transatlantic's complaint, and that it recognized its obligation to file an answer or a motion. Ace, however, failed to file an answer or a motion, failed to attend an initial pre-trial conference on July 21, 1995, and ignored a letter (apparently sent as a professional courtesy) from Transatlantic warning Ace that it would be subject to a default judgment if it did not appear in the action.

On August 18, 1995, Transatlantic filed a motion--on notice to Ace--to enter a default judgment against Ace. Ace again failed to respond, and on October 25, 1995, the District Court entered a default judgment for $51,753.86 (the amount Transatlantic sought in its complaint--$45,976.83--plus interest and costs). Transatlantic entered into a stipulation with the remaining defendants, discontinuing its case against them.

On March 7, 1996, Ace finally reacted by filing a motion to vacate the default judgment. Ace argued that because its principals are Korean, unfamiliar with our legal system, its failure to appear should be deemed "excusable neglect" under Federal Rule of Civil Procedure 60(b)(1). The District Court denied Ace's motion and Ace filed a timely notice of appeal.

On appeal, Ace now abandons its claim of "excusable neglect," and asks us, instead, to vacate the default judgment for lack of subject matter jurisdiction. See Fed.R.Civ.P. 60(b)(4) and 12(h)(3). Transatlantic vigorously disputes this contention.

In its complaint, Transatlantic invoked only admiralty jurisdiction (probably because the $50,000 amount in controversy requirement for diversity jurisdiction was not satisfied). Transatlantic attached to its complaint a document entitled "Schedule B" (purportedly based on the bills of lading themselves) which imparted the following information about the transport of Daewoo's automobile parts:

** This appears to be a peculiarly British spelling of Pusan, a place of unhappy memory to many Americans of a certain age.

 Vessel: HYUNDAI EMPEROR
                 Place to Delivery to First Carrier: NEW YORK
                 Intended Port of Shipment: Seattle
                 Intended Port of Discharge: Pusan,** Korea
                

** This appears to be a peculiarly British spelling of Pusan, a place of unhappy memory to many Americans of a certain age.

On appeal, the parties have submitted copies of the actual bills of lading, listing the following information:

 Pier: NEW YORK
                 Ocean Vessel: HD EMPEROR V. 14
                 Port of Loading: SEATTLE
                 Port of Discharge: PUSAN, KOREA
                 For Transshipment to: [BLANK]
                 Onward Inland Routing: [BLANK]
                 Place of Delivery: CFS PUSAN
                

While it is clear that Daewoo and Ace agreed that the parts would journey from New York to Seattle to Pusan, nothing in the record addresses whether the first leg of the trip, from New York to Seattle, would be by train or by ship. Again, the derailment occurred in Montana, and this appeal requires us to determine whether there is admiralty jurisdiction in this somewhat peculiar situation.

Discussion

A. Papers and Evidence to be Considered.

It is undisputed that the issue of subject matter jurisdiction was never raised before the District Court. This, however, poses no obstacle because "[t]he failure of the parties to contest the district court's authority to hear a case 'does not act to confer [federal] jurisdiction ... since a challenge to subject matter jurisdiction cannot be waived and may be raised [either by motion or] sua sponte ' " at any time. United Food & Commercial Workers Union, Local 919 v. CenterMark

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Properties, 30 F.3d 298, 301 (2d Cir.1994) (quoting Alliance of Am. Insurers v. Cuomo, 854 F.2d 591, 605 (2d Cir.1988)); Fed.R.Civ.P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action."); see generally 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350.

Ace argues that in deciding whether there is subject matter jurisdiction, we must examine only Transatlantic's complaint. Hence, runs the argument, we cannot consider the bills of lading because they were not included in the record before the District Court, and are introduced for the first time on appeal. Ace advances two arguments to support this contention.

First, Ace suggests that its challenge to jurisdiction is a "facial challenge," viz., that the "jurisdictional allegations of the complaint are insufficient on their face to demonstrate the existence of subject-matter jurisdiction." Therefore, Ace concludes, our review is confined to the allegations of the complaint.

Ace relies on an Eighth Circuit case, Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990), which does indeed make a distinction between a "facial attack" on jurisdiction--which challenges only whether jurisdiction is sufficiently pled--and a "factual attack"--which looks beyond the pleadings and challenges the factual basis of jurisdiction. Osborn, however, does not compel us to make a choice between the two approaches.

Even if Ace challenges only the sufficiency of Transatlantic's complaint, we are entitled at any time sua sponte to delve into the issue of whether there is a factual basis to support the District Court's exercise of subject matter jurisdiction. See Maryland Cas. Co. v. W.R. Grace and Co., 23 F.3d 617, 621 (2d Cir.1993); United States v. Burmah Oil Co., Ltd., 558 F.2d 43, 46 (2d...