Underwriters at Lloyd's of London v. M/V STEIR

• Decision Date: 29 August 1991
• Docket Number: Civ. No. 90-1865 (JAF).
• Citation: 773 F. Supp. 523
• Parties: UNDERWRITERS AT LLOYD'S OF LONDON, Plaintiff, v. The M/V "STEIR", her engines, boilers, tackle, apparel, etc., In Rem, and COMPAGNIE BRETONNE DE CARGOS FRIGORIFIQUES, ("COBRECAF"), In Personam, Defendants.
• Court: U.S. District Court — District of Puerto Rico

773 F. Supp. 523

UNDERWRITERS AT LLOYD'S OF LONDON, Plaintiff, v. The M/V "STEIR", her engines, boilers, tackle, apparel, etc., In Rem, and COMPAGNIE BRETONNE DE CARGOS FRIGORIFIQUES, ("COBRECAF"), In Personam, Defendants.

Civ. No. 90-1865 (JAF).

United States District Court, D. Puerto Rico.

August 29, 1991.

José E. Alfaro-Delgado, Calvesbert & Brown, San Juan, P.R., for plaintiff.

J. Ramón Rivera-Morales, Jimenez Graffam & Lausell, San Juan, P.R., for defendants.

OPINION AND ORDER

FUSTE, District Judge.

The consignee's insurers, plaintiffs Underwriters at Lloyd's of London ("Underwriters" or "insurers"), filed this action in rem against defendant vessel THE M/V STEIR and in personam against defendant Compagnie Bretonne de Cargos Frigorifiques ("COBRECAF"), a French maritime carrier. Plaintiffs seek a decree for cargo damage due to the alleged negligence of defendant carrier and the unseaworthiness of the vessel.

Before the court is defendant COBRECAF's motion to dismiss inviting this court, based on recent United States Supreme Court precedent, to give effect to the forum selection clause found in the cargo's bill of lading and to refer the case to the Commercial Court of Quimper, France for resolution.¹ For the reasons stated below, we decline to accept defendant's invitation and deny the motion.

I. Facts

The underlying facts of this case are straightforward and are not in dispute.

Defendant COBRECAF is a corporation organized under the laws of France, who was the vessel's charterer at the time the alleged incident occurred. The vessel is a common carrier engaged in the carriage of fish.

In June 1989, in the port of Cumaná, Venezuela, defendants received over five-hundred short tons of yellowfin and skip jack tuna from another vessel for shipment to Mayaguez, Puerto Rico, where it would be delivered to plaintiffs' insured, Starkist Caribe, Inc. ("Starkist").

The bill of lading, dated June 13, 1989, under which the cargo was shipped, had the following relevant language as to forum selection:

RULE 11. Barring By Limitation and Jurisdiction

* * * * * *

Notwithstanding article 54 of the decree of December 31, 1966, any disputes or difficulties which may arise with respect to the interpretation or the carrying out of this agreement shall be referred, even in the event of a call on guarantors or of the plurality of defenders to the Commercial Court of QUIMPER.

The parties agree that the forum selection clause is standard language found in all of COBRECAF's bills of lading.

Upon arrival in Mayaguez, it was determined that a portion of the cargo was damaged. Starkist claimed against plaintiffs insurance underwriters and was paid $82,639.44. Subrogation ensued. It is this amount which plaintiffs seek from the defendant carrier.

II. Discussion

Defendant's argument as to why this court should enforce the forum selection clause found in the bill of lading is based on its interpretation of a recent United States Supreme Court case, Carnival Cruise Lines, Inc. v. Shute, ___ U.S. ___, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Defendant opines that the Court in Carnival reaffirmed its position enunciated in M/S Bremen v. Zapata Off-Shore Company, 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), that forum selection clauses should normally be given effect except in cases where the clauses are "unreasonable". COBRECAF also argues that, since the Court in Carnival refused to find that the forum selection clause violated the Limitation of Liability Act, as amended, 46 U.S.C.App. § 183c, and this statute is analogous to section 3(8) of the Carriage of Goods by Sea Act, 46 U.S.C.App. § 1303(8)² ("COGSA"), much of the rationale for earlier decisions denying enforcement of forum selection clauses requiring suit in foreign jurisdictions has been eroded. Therefore, defendant invites this court to heed the call of Chief Justice Burger in M/S Bremen to accept modern-day commercial realities and give effect to the forum selection clause in the bill of lading before us, decisions to the contrary notwithstanding. While we find that such general argument can be made, given the facts of this case we decline to "shed the historical provincial attitude" and will not enforce the forum selection clause. Counsel in this case are all aware of the fact that the Bremen-Zapata rationale enforced a forum selection clause negotiated by parties of equal bargaining power. Counsel in this case are aware that such is not the case in bill of lading forum clauses. Insertion of the clause in a bill of lading is the result of a unilateral decision on the part of the carrier. They are equally aware that the proposal, in the context of maritime contracts for transportation of cargo under a bill of lading, is a dangerous proposition that ultimately will affect the balance of remedy availability that both international law and Congress have attained. Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1312.³

As both parties agree, the seminal case on this point is Indussa Corporation v. S.S. Ranborg, 377 F.2d 200 (2d Cir. (1967)) (en banc). In Indussa, the court overruled an earlier decision, Wm. H. Muller & Co. v. Swedish American Line, Ltd., 224 F.2d 806 (2d Cir.), cert. denied, 350 U.S. 903, 76 S.Ct. 182, 100 L.Ed. 793 (1955), and held that forum-selection clauses in bills of lading requiring suit in foreign jurisdictions are invalid under section 3(8) of COGSA. The court reasoned that the "lessening liability" language of the statute would almost assuredly occur where an American plaintiff was forced to litigate an action in a foreign judicial forum.

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 substantially, particularly when the claim is small. Such a clause puts "a high hurdle" in the way of enforcing liability, citation omitted, and thus is an effective means for carriers to secure settlements lower than if cargo could sue in a convenient forum.

Indussa, 377 F.2d at 203. The court went on to discuss both "certain" and "potential" lessening of liability and found that

Congress meant to invalidate any contractual provision in a bill of lading for a shipment to or from the United States that would prevent cargo able to obtain jurisdiction over a carrier in an American court from having that court entertain the suit and apply the substantive rules Congress had prescribed.

Id. at 204.

After Indussa, the Supreme Court decided the M/S Bremen case and upheld a forum-selection clause found in an international towage contract signed by two parties of equal bargaining power. The Court adopted the position "that such clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." M/S Bremen, 407 U.S. at 10, 92 S.Ct. at 1913. The Court reasoned that, where the "choice of forum was made in an arm's length negotiation by experienced and sophisticated businessmen," the clause should be honored and enforced absent some compelling and countervailing reason. Id. at 12, 92 S.Ct. at 1914. The Court then outlined the compelling reasons why the clause should be given effect in the particular circumstances of this case. First, the contract in question did not involve a routine transaction, but rather dealt with the towing of an expensive piece of equipment from the Gulf of Mexico to the Adriatic Sea. The Court reasoned that the parties, in the contract, contemplated a "neutral forum" for the resolution of any disputes that might arise, given that the tow would traverse so many jurisdictions. Id. at 13, 92 S.Ct. at 1915. The Court, in a footnote, acknowledged the Indussa decision and stated that the applicable provision of COGSA was not applicable to a towage case. Id. at 11 n. 11, 92 S.Ct. at 1913 n. 11.

After M/S Bremen, the rule established in Indussa has continued to be followed by courts. See Hughes Drilling Fluids v. M/V Luo Fu Shan, 852 F.2d 840 (5th Cir. 1988), cert. denied, 489 U.S. 1033, 109 S.Ct. 1171, 103 L.Ed.2d 229 (1989); Union Ins. Soc. v. S.S. Elikon, 642 F.2d 721, 724-25 (4th Cir.1981); C.A. Seguros Orinoco v. Naviera Transpapel, C.A., 677 F.Supp. 675 (D.P.R.1988). In Union Ins. Soc., the Fourth Circuit distinguished Indussa and its own case from M/S Bremen. The court reasoned that the holding of the latter case, that forum selection clauses are presumptively valid, is a valid expression only in the absence of any Congressional policy on the subject. Union Ins. Soc., 642 F.2d at 724. The court noted that where the terms of the bill of lading are not the result of hard bargaining by the parties but rather represent form clauses of adhesion contracts, the specific policy of COGSA, to ameliorate this type of one-sided bargaining, trumps the general policy of upholding forum selection clauses. Id. at 724-25.

It is in this context that we must examine the Carnival decision. In Carnival, the Court enforced the forum-selection clause found on the back of the cruise line's passage contract ticket purchased by plaintiff which required the suit to be brought in a court in the state of Florida (rather than the state of Washington where plaintiff resided and originally filed suit).⁴ The Court extended the reasoning of M/S Bremen from "far from routine" transactions to a "purely routine and doubtless nearly identical to every commercial passage" contract. Carnival, 111 S.Ct. at 1527. The Court went on to analyze the reasonableness of the "routine" forum selection clause and found several permissible reasons for such a clause. Id.⁵ As to the fact that the Court found no violation of the Limitation of Liability Act, 46 U.S.C.App. § 183c, the majority noted that the plain language of the forum selection clause in question does not take away a plaintiff's right to "a trial by a court of competent jurisdiction," since the courts of Florida were competent to decide the...