M3 MIDSTREAM LLC v. SOUTH JERSEY PORT CORPORATION et al
Filing
78
OPINION. Signed by Chief Judge Jerome B. Simandle on 2/26/2014. (tf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
M3 MIDSTREAM LLC,
Plaintiff,
HONORABLE JEROME B. SIMANDLE
Civil No. 13-2631 (JBS/AMD)
v.
OPINION
SOUTH JERSEY PORT CORPORATION,
et al.,
Defendants.
APPEARANCES:
Mark A. Rosen, Esq.
Michael R. Morano, Esq.
McELROY, DEUTSCH, MULVANEY & CARPENTER, LLP
1300 Mount Kemble Avenue
P.O. Box 2075
Morristown, NJ 07962
Attorneys for Plaintiff
Ronald Betancourt, Esq.
BETANCOURT, VAN HEMMEN & GRECO
114 Maple Avenue
Red Bank, NJ 07701
Attorney for Defendant South Jersey Port Corp.
Richard B. Wickersham, Jr., Esq.
POST & SCHELL, PC
Four Penn Center
1600 JFK Boulevard, 13th Floor
Philadelphia, PA 19103
Attorney for Delaware River Stevedores, Inc.
Albert M. Belmont, III, Esq.
BOCHETTO & LENTZ, PC
1524 Locust Street
Philadelphia, PA 19102
Attorney for Defendants Calibre Pipe & Tube, LLC, and Shaun
& Michele C. Brock
SIMANDLE, Chief Judge:
I. Introduction
This matter is before the Court sua sponte to determine whether
subject matter jurisdiction exists over this action.1 The key
question for the Court is whether a provision in a bill of lading
extending the protections of the Carriage of Goods by Sea Act
(“COGSA”), 46 U.S.C. § 30701, et seq., to servants and agents of the
cargo carrier for the period after discharge from the carrier may
be the basis for removal of a suit for negligent damage to cargo
brought by a plaintiff which was not a party to the bill of lading.
Because the Court concludes it cannot, for the reasons explained
below, it follows that subject matter jurisdiction is lacking, and
this action will be remanded to Superior Court of New Jersey in Camden
County for further proceedings.
II. Background
The case arises out of alleged damage to approximately 79,000
feet of pipe, ordered by Plaintiff M3 Midstream, LLC, from Defendant
1
Fed. R. Civ. P. 12(h)(3) provides that “[i]f the court
determines at any time that it lacks subject-matter jurisdiction,
the court must dismiss the action.” Federal courts “have an
independent obligation to ensure they do not exceed the scope of their
jurisdiction, and therefore they must raise and decide
jurisdictional questions that the parties either overlook or elect
not to press.” Henderson ex rel. Henderson v. Shinseki, 131 S. Ct.
1197, 1202 (2011).
2
Calibre Pipe & Tube, LLC in April 2011.2
The pipe shipped on three vessels -- Varesia, Greta and Mariana
-- from China, India and Korea, and was imported through the Camden,
N.J., terminal of Defendant South Jersey Port Corporation (“SJPC”)
between September 16 and 19, 2011. An inspector examined the pipe
and determined it was in “generally good condition,” subject to some
noted exceptions. (Second Amended Complaint (“SAC”) [Docket Item 16]
¶ 25.) For approximately one month, the pipe remained at the Port
of Camden, where “SJPC had physical possession of the pipe” and
“during which time the pipe was handled by SJPC . . . .” (Id. ¶ 26).
Plaintiff asserts that SJPC had “possession and primary control over
the pipe” during that month. (Id. ¶ 37.) Between October 14 and 25,
2011, the Defendant Delaware River Stevedores, Inc. (“DRS”) loaded
the pipe onto trucks to be shipped to a Dura-Bond pipe-coating
facility. (Id. ¶ 27.)
Plaintiff asserts that the damage to the pipe occurred after
the pipe was unloaded from the vessels and before the pipe was loaded
onto the trucks by the DRS, while in possession of SJPC and the DRS.
(Id. ¶ 29.) Plaintiff also alleges that DRS was negligent in
“transporting the pipe to the delivery trucks to be delivered to
2
Plaintiff asserts that Defendants Shaun and Michele C. Brock
are managers of Calibre. Michele Brock replies that she is a “passive
member,” not a managing member, of Calibre. (Brocks’ Reply [Docket
Item 62] at 5.)
3
Dura-Bond,” a pipe-coating facility. (Id. ¶ 49.) According to the
Second Amended Complaint, the pipe damage was “indicative of fork
lift tines striking” the pipe and “belled end damage indicative of
pipe being allowed to strike a hard surface.” (Id.) This damage was
different in “character and degree” than the damage noted by the
inspector at the time of unloading, and rendered the pipe “completely
unusable.” (Id. ¶¶ 11, 29.) As a result of the damage, Plaintiff was
unable to fulfill 79,000 feet of its customer’s order. (Id.)
At least one of the shipments -- pipe carried by the Mariana
-- was subject to a “WESTFAL-LARSEN SHIPPING” bill of lading. (See
DRS Response to the Order to Show Cause (“DRS Resp.”) [Docket Item
53] Ex. A at M3_03057, M3_03058.) The bill of lading lists Shanghai
Zhongyou Tipo Steel Pipe Co., Ltd., as the “SHIPPER/EXPORTER,” and
designates the consignee as “TO THE ORDER OF SHIPPER.” (Id. at
M3_03057.) The bill of lading lists Shanghai, China, as the port of
loading and Camden, N.J., as the port of discharge, but leaves two
form fields blank: “FOR ON CARRIAGE TO” and “ONWARD INLAND ROUTING.”
(Id.) The party to be noticed is “Rushmore Enterprises, Inc.” of
Baytown, Texas. (Id.) In other words, the bill of lading provides
for transport of the pipe to its off-loading from the vessel in Camden
with no provision for inland transport.
The bill of lading includes a “Paramount clause” referencing
4
COGSA and a Himalaya clause extending COGSA to servants and agents
of the carrier of the cargo. The Paramount clause provides:
this Bill of Lading . . . shall have effect subject to the
Hague Rules or any legislation making such Rules or the
Hague-Visby Rules compulsorily applicable (such as COGSA
or COGWA) to this Bill of Lading and the provisions of the
Hague Rules shall be deemed incorporated herein. The Hague
Rules (or COGSA or COGWA if this Bill of Lading is subject
to U.S. or Canadian law respectively) shall apply to the
carriage of Goods by inland waterways . . . . If and to
the extent that the provisions of the Harter Act of the
United States of America 1893 would otherwise be
compulsorily applicable to regulate the Carrier’s
responsibility for the Goods during any period prior to
loading on or after discharge from the vessel, the
Carrier’s responsibility shall instead be determined by
the provisions of 4(2) below, but if such provisions are
found to be invalid, such responsibility shall be subject
to COGSA.
(B) The Carrier shall be entitled to . . . the full benefit
of, and rights to, all limitations and exclusions of
liability and all rights contained or authorized by any
applicable law, statute or regulation of any country
(including, but not limited to . . . the Revised Statutes
of the United States of America . . . ) . . . .
(Id. at M3_03058) The Himalaya clause provides:
It is hereby expressly agreed that no servant or agent of
the Carrier (including every independent contractor from
time to time employed by the Carrier) shall in any
circumstances
whatsoever
be
under
any
liability
whatsoever to the Merchant3 for any loss, damage or delay
arising or resulting directly or indirectly from any act,
negligent, or default on his part while acting in the
course of or in connection with his employment and, but
3
The bill of lading defines the term “Merchant” to include “the
Shipper, the Receiver, the Consignee, the Holder of the Bill of Lading
and the Owner of the cargo.” (Id.)
5
without prejudice to the generality of the foregoing
provisions in this clause, every exception, limitation,
condition and liberty herein contained and every right,
exemption from liability, defense, and immunity of
whatsoever nature applicable to the Carrier or to which
the Carrier is entitled hereunder shall also be available
and shall extend to protect every such servant or agent
of the Carrier acting as aforesaid and for the purpose of
all the foregoing provisions of this clause, the Carrier
is or shall be deemed to be acting as agent or trustee on
behalf of and for the benefit of all persons who are or
might be his servants or agents from time to time
(including independent contractors as aforesaid) and all
such persons shall in this extent be or be deemed to be,
parties to the contract evidenced by this Bill of Lading.
(Id.)4
Plaintiff filed a nine-count Complaint in New Jersey Superior
Court, alleging common law claims of bailment, conversion and
negligence against SJPC (Count I–III), conversion and negligence
against the DRS (Counts IV & V), negligence against Calibre and the
Brocks (Count VI), and breach of contract, promissory estoppel, and
unjust enrichment against Calibre (Counts VII-IX).
Defendant Calibre removed this matter, with consent of all
Defendants, pursuant to 28 U.S.C. § 1441(a), asserting that the
4
Defendants assert that Plaintiff has refused to produce any
other bills of lading covering the other shipments. Plaintiff
responds that it “has produced all of the bills of lading in its
possession and under its control.” (Pl. Resp. to OTSC (“Pl. Resp.”)
[Docket Item 59] at 3 n.2.) Because there is nothing else in the record
to consider, the Court will conduct its analysis based on the
Westfal-Larsen bill of lading.
6
action arises under COGSA, even though Plaintiff did not bring any
claims under that statute. (Petition for Removal [Docket Item 1] at
3.) Calibre asserted that
a portion of the pipe may have been damaged in transit via
shipment over the seas from locations in East and South
Asia to the United States and, therefore, implicates the
provisions of the Act with respect to the liability of the
named Defendants and other as yet unnamed common carrier
Defendants.
(Petition for Removal ¶ 13.) Calibre contended that Plaintiff “has
failed to name or join any of these indispensable parties,” referring
to the carriers that brought the pipe to the Port, and “cannot
artfully plead its Complaint to evade federal jurisdiction.” (Id.
at 14.) Calibre concluded that this action
is therefore a civil suit for damages and arises under and
involves claims subject to the Act, and this Court would
therefore have original jurisdiction of the action,
without regard to the amount in controversy, pursuant to
29 U.S.C.A. § 185. Since this civil action is based on a
claim or right arising under the laws of the United States,
it may be removed to this court pursuant to 28 U.S.C.A.
§ 1441, without regard to the citizenship or residence of
the parties.
(Id. ¶ 15.) Thus, Calibre, as the removing party, portrayed M3
Midstream’s claim as one arising from damage occurring during
shipments by vessel over the seas from Asia to the United States,
despite the fact that M3 Midstream does not sue the vessel and claims
only for damage occurring after the cargo was offloaded and stored
in Camden.
7
The Court entered an Order to Show Cause why the matter should
not be remanded to state court. (Order to Show Cause (“OTSC”) [Docket
Item 48] at 1.) The Court suggested that COGSA was not implicated
by the Complaint, because “Plaintiff has not sued any carrier within
the meaning of COGSA, nor does Plaintiff allege that the damage
occurred at sea or while the pipe was being unloaded.” (Id. at 3.)
The Court continued: “a defendant’s speculation in its answer or
petition for removal, contradicting the pleadings and thereby
implicating a federal statute, cannot be the basis for federal
question jurisdiction.” (Id.) Given the factual allegations in the
Complaint as to the inspection report and timing of the alleged
damage, the Court noted that there was no basis to conclude that the
Complaint had been artfully pleaded to avoid federal jurisdiction.
(Id. at 4.) Furthermore, carriers are “not essential parties to an
action alleging state-law claims arising from conduct that occurred
after the goods were in Port.” (Id.) Finally, the Court noted that
jurisdiction did not appear to exist on the basis of diversity, under
28 U.S.C. § 1332(a), because the parties were not completely diverse.
(Id. at 5.) The SJPC, DRS, and Calibre and the Brocks each filed
responses, asserting that subject matter jurisdiction exists.
[Docket Items 53, 54 & 55.] Plaintiff, which had not moved for remand,
filed a response asserting that jurisdiction is lacking and
8
requesting remand to state court. [Docket Item 59.] The Court heard
oral argument on February 4, 2014, and invited supplemental
submissions to resolve lingering factual questions related to
diversity jurisdiction.
III. Discussion
A. Burden of proof
The “party asserting a federal court’s jurisdiction bears the
burden of proving that jurisdiction exists,” and federal courts “are
presumed not to have jurisdiction without affirmative evidence of
this fact.” Nuveen Mun. Trust ex rel. Nuveen High Yield Mun. Bond
Fund v. WithumSmith Brown, P.C., 692 F.3d 283, 293 (3d Cir. 2012).
The Third Circuit counsels that “all doubts should be resolved in
favor of remand.” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111
(3d Cir. 1990).
B. Subject matter jurisdiction
“Under the well-pleaded complaint rule, there can be no removal
on the basis of federal question unless the federal law under which
the claim arises is a direct and essential element of the plaintiffs
case.” In re Cmty. Bank of N. Va., 418 F.3d 277, at 293 (3d Cir. 2005)
(citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust for S.
Cal., 463 U.S. 1, 10-12 (1983)). However, if federal law completely
preempts state law, “‘any claim purportedly based on that pre-empted
9
state law is considered, from its inception, a federal claim, and
therefore arises under federal law.’” Id. at 294 (quoting Caterpillar
Inc. v. Williams, 482 U.S. 386, 392 (1987)). Complete preemption must
be distinguished from “substantive preemption, which displaces state
law but does not, as a defense, confer federal question
jurisdiction.” Lazorko v. Pa. Hosp., 237 F.3d 242, 248 (3d Cir. 2000).
The Court begins with COGSA, the statute that is the asserted
basis for federal question jurisdiction. COGSA “applies to a carrier
engaged in the carriage of goods to or from any port in the United
States.” 46 U.S.C.A. § 30702(a). A “carrier” is defined as the “owner,
manager, charterer, agent, or master of a vessel.” 46 U.S.C.A. §
30701. A carrier “may not insert in a bill of lading or shipping
document a provision avoiding its liability for loss or damage
arising from negligence or fault in loading, stowage, custody, care,
or proper delivery.” 46 U.S.C.A. § 30704. COGSA applies from “tackle
to tackle,” meaning “the period of time when the goods are loaded
on to the time when they are discharged from the ship.” 46 U.S.C.
app. § 1301(e)5; SPM Corp. v. M/V Ming Moon, 965 F.2d 1297, 1300 (3d
5
The note following 46 U.S.C.A. § 30701, which contains the text of
COGSA, 49 Stat. 1207 (1936), as amended, was classified to former
46 App. U.S.C.A. §§ 1300 to 1315 prior to the general revision and
enactment into positive law of Title 46, Shipping, by Pub. L. 109-304,
Oct. 6, 2006, 120 Stat. 1485, but was not repealed, omitted, or
restated by Pub. L. 109-304.
10
Cir. 1992). According to Section 7 of COGSA:
Nothing contained in this chapter [this note] shall
prevent a carrier or a shipper from entering into any
agreement, stipulation, condition, reservation, or
exemption as to the responsibility and liability of the
carrier or the ship for the loss or damage to or in
connection with the custody and care and handling of goods
prior to the loading on and subsequent to the discharge
from the ship on which the goods are carried by sea.
46 U.S.C.A. § 30701, Sec. 7 (formerly 46 U.S.C. app. § 1307). These
provisions appear in the United States Code in Chapter 307 of Title
46, Subtitle III, which describes “Liability of Water Carriers.”
The Defendants advance three basic arguments in favor of finding
subject matter jurisdiction: (1) the Complaint, on its face,
implicates COGSA, (2) the bill of lading’s Paramount and Himalaya
provisions extend COGSA protection to the DRS and SJPC, thereby
conferring federal question jurisdiction on this matter, and (3) the
Complaint was artfully pleaded to avoid federal jurisdiction. In
other words, Defendants argue that subject matter jurisdiction
arises, in one fashion or another, from COGSA.6 For the reasons
6
At oral argument, the parties discussed whether this action is
maintainable under diversity jurisdiction. It is not. Plaintiff is
a limited liability company, which is treated as a partnership for
purposes of establishing citizenship, meaning that “the citizenship
of an LLC is determined by the citizenship of its members.” Zambelli
Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010).
Plaintiff represents that Russell Brantley Baird, a member and
executive officer of M3 Midstream, is a citizen of Texas. Thus,
Plaintiff is a citizen of Texas. Counsel for Defendants Calibre Pipe
& Tube LLC and the Brocks represented at oral argument that both
11
explained below, based upon Plaintiff’s actual pleadings and the
documentary discovery produced herein, the Court is unpersuaded by
Defendants’ arguments and will remand this matter to Superior Court
in New Jersey. There is more than substantial doubt about the removal
jurisdiction of this case, and such doubt must therefore “be resolved
in favor of remand.” Boyer, 913 F.2d at 111.
1. Whether the Complaint, on its face, implicates COGSA
One of the DRS’s arguments is that the Complaint “does not
foreclose a federal claim even absent a Himalaya clause provision,”
because the Complaint alleges that the DRS “intentionally or
negligently damaged and/or destroyed the pipe while it was in DRS’s
possession.” (SAC ¶ 46; DRS Resp. at 8.) The DRS contends that this
allegation “is worded broadly enough to allow Plaintiff to pursue
a claim that some damage occurred during discharge.” (DRS Resp. at
8.) The DRS asserts that it “was only responsible for discharge of
the pipes to first landing in this matter,” and the “unloading of
goods at port is included in the activity covered by COGSA.” (Id.
at 8-9.) The DRS requests that “if the Court is otherwise inclined
to remand this case . . . , that it require Plaintiff to make a
definitive admission that it is not pursuing any claim for damage
Calibre and Michele Brock are citizens of Texas. (See also Second
Am. Compl. ¶¶ 4-6). Therefore, this action lacks complete diversity,
and this Court may not exercise jurisdiction under 28 U.S.C. §
1332(a).
12
done during the period of discharge to first landing.” (Id. at 9.)
Calibre, likewise, continues to assert that “as originally
pled, and as discovery has demonstrated, some portion of the pipes
were damaged in transit or unloading, subjecting that portion of the
claim to COGSA.” (Calibre Resp. to OTSC (“Calibre Resp.”) [Docket
Item 54] at 1.) Calibre notes that the inspection reports observed
some pipe damage during transit or unloading. (Id. ¶ 14.)
Despite the wording of the Second Amended Complaint quoted by
the DRS, and despite Calibre’s assertion that some pipe was damaged
during carriage, the Complaint cannot reasonably be construed to
bring a claim for damage that occurred at sea or during unloading.
Plaintiff pleads that the damage “occurred after the pipe was
unloaded from the Vessels, and during the time it was in the
possession of and handled by SJPC and DRS, and before the pipe had
been loaded onto trucks to be delivered to Dura-Bond . . . .” (SAC
¶ 29) (emphasis in original). Plaintiff also pleads that the
complained-of damage to the pipe “is of a completely different
character and degree than the exceptions noted by the inspector at
the time of initial unloading from the vessel.” (Id.)
Moreover, Plaintiff has repeatedly and unambiguously
represented to this Court, and to the Defendants, that it does not
seek relief for any damage to the pipes sustained at sea or during
13
unloading. In its response to the Order to Show Cause, Plaintiff
emphasizes that “M3 Midstream’s claims relate to pipe damage that
occurred after the pipe was discharged.” (Pl. Resp. at 1) (emphasis
in original). Plaintiff underscores that it “has not brought any
claim for damage to the pipe while it was at sea or being discharged.
Rather, M3 Midstream’s claims concern pipe damage that occurred
post-discharge.” (Id. at 3.) In a letter submitted after oral
argument, Plaintiff again stated: “we respectfully reiterate that
M3 Midstream is not pursuing any COGSA claims and will not pursue
such claims if this matter is remanded.” [Docket Item 74] (emphasis
in original).
The Court accepts and relies on Plaintiff’s assertions and its
characterizations of its own claims, as well as the language of the
Second Amended Complaint itself, in concluding that the pleadings,
on their face, do not implicate COGSA. Plaintiff does not purport
to seek recovery for damage to the pipe that occurred at sea or during
unloading. COGSA is not a “direct and essential element” of
Plaintiff’s case. In re Cmty. Bank of N. Va., 418 F.3d at 293.
Plaintiff is entitled to pursue relief for some subset of the total
injury allegedly suffered, and therefore Plaintiff may limit the
scope of its allegations, as it clearly has done, and seek relief
for damage that occurred after the discharge of the pipe from the
14
vessels. Plaintiff initiated this case one year ago, discovery on
the merits has not gone forward, and Plaintiff has never varied from
its insistence that its claims do not arise from the bill of lading,
the carriage of the pipe on the vessels in question, or from the
unloading of those vessels in the port of Camden. Neither the
Defendants nor this Court can force Plaintiff to bring possible
claims for damage during the voyage at sea or offloading of the goods
that it has decided not to bring. If damage to the pipe occurred during
the voyage or offloading at Camden, that damage will not be
recoverable herein by Plaintiff.
Defendants’ contention that their liability is limited by
COGSA, as incorporated into the bill of lading, is a federal law
defense, which cannot form the basis for removal, unless COGSA
completely preempts state law in this circumstance, discussed infra,
Part III.B.2. See Aetna Health Inc. v. Davila, 542 U.S. 200, 207
(2004) (“the existence of a federal defense normally does not create
statutory arising under jurisdiction, and a defendant may not
[generally] remove a case to federal court unless the plaintiff’s
complaint establishes that the case arises under federal law”)
(internal quotation marks and citations omitted, emphasis in
original); Lazorko, 237 F.3d at 248 (“If, however, the defendant
merely has a federal law defense, he may not remove the case, although
15
he may assert the federal defense in state court.”) (citing Franchise
Tax Bd., 463 U.S. at 9-12); cf. United Jersey Banks v. Parell, 783
F.2d 360, 365 (3d Cir. 1986) (“An anticipated defense of federal
preemption cannot provide a basis for removal”) (citing Trent Realty
Assocs. v. First Fed. Sav. & Loan Ass’n, 657 F.2d 29, 34-35 (3d Cir.
1981), and Franchise Tax Bd., 463 U.S. at 12 n.11).
2. Whether the Paramount and Himalaya clauses provide a
basis for jurisdiction
Defendants contend that, while COGSA ordinarily applies only
until the time when the goods are discharged from the ship, the
Paramount and Himalaya provisions in the bill of lading extend the
protections of COGSA to agents or servants of the carrier for any
period prior to loading or after discharge from the vessel, and
therefore COGSA applies to the DRS and SJPC. (See, e.g., SJPC Resp.
to OTSC (“SJPC Resp.”) [Docket Item 55] at 6.)
Defendants rely primarily on Norfolk S. Ry. Co. v. Kirby, 543
U.S. 14 (2004), for the proposition that COGSA governs this action
and preempts state law. In Kirby, plaintiff James N. Kirby, Pty Ltd.
(“Kirby”), was an Australian manufacturing company that sold
machinery to General Motors in Huntsville, Ala. Id. at 19. Kirby hired
International Cargo Control (“ICC”) to provide end-to-end
transportation from Australia to Huntsville, and ICC negotiated and
issued a bill of lading to Kirby invoking the default liability rule
16
of COGSA for the sea leg of the journey and limiting liability to
a higher amount for the land leg in a Himalaya clause. Id. at 19-20.
ICC then hired Hamburg Süd, a shipping company, to transport the
containers, and Hamburg Süd issued its own bill of lading to ICC with
a new Himalaya clause that set liability for a land accident lower
than the limitation in the ICC bill of lading. Id. at 21, 32. Hamburg
Süd then hired Norfolk Southern Railway Co. to transport the
machinery from a port in Savannah, Ga., to Huntsville by rail. Id.
at 21. The train derailed en route to Huntsville, damaging the goods,
and Kirby and its insurer sued Norfolk on tort and contract claims.
Id.
The district court in Kirby properly exercised diversity
jurisdiction, but the U.S. Supreme Court stated that the suit “could
also be sustained under the admiralty jurisdiction by virtue of the
maritime contracts involved.” Id. at 23. The Court determined that
the bills of lading were maritime contracts and were not “inherently
local,” before interpreting the contracts under federal law. Id. at
25-27. On the merits of the claims, the Court determined that the
land carrier, Norfolk, was an intended beneficiary of the ICC bill
of lading and Norfolk’s liability was limited by the terms of the
ICC bill of lading, which Kirby had negotiated. Id. at 32. The Court
also held that “an intermediary binds a cargo owner to the liability
17
limitations it negotiates with downstream carriers,” because the
Court wanted to “ensure the reliability of downstream contracts for
liability limitations.” Id. at 34. Thus, Kirby was bound by the
limitations in the bill of lading, including the Himalaya clause,
that Kirby’s intermediary, ICC, had negotiated on Kirby’s behalf,
covering the inland leg of the journey. Norfolk was entitled to the
protections of the liability limitations in the Hamburg Süd bill of
lading as well. Id. at 36. The Supreme Court later summarized its
holding: “Kirby held that bill of lading provisions permissible under
COGSA can be invoked by a domestic rail carrier, despite contrary
state law.” Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130
S. Ct. 2433, 2438-39 (2010).
M3 Midstream distinguishes Kirby because, there, the
manufacturer sued a carrier with which it had negotiated an
end-to-end bill of lading to the inland destination in Alabama,
whereas here Plaintiff is the purchaser of the goods who did not
negotiate any bill of lading with any party, and the bill of lading
did not by its terms provide for carriage of these goods beyond their
offloading at Port Camden. Plaintiff argues that the Westfal-Larsen
bill of lading is inapplicable because “M3 Midstream was not a party
to the bill of lading (or to any other supposed bill of lading relating
to the damaged pipe at issue). Further, M3 Midstream is not suing
18
on the Westfal BOL or any other bill of lading.” (Pl. Resp. at 3.)
Plaintiff argues that Defendants have not produced any citations to
authority that would bind Plaintiff to a bill of lading to which it
was not a party. (Pl. Resp. at 4.) Because Plaintiff did not negotiate
and was not a party to a bill of lading, Plaintiff concludes that
it is not bound by the terms of the bill of lading and therefore COGSA
does not apply to this action.
The Court agrees with Plaintiff that nothing in Kirby answers
the question of whether parties may confer federal subject matter
jurisdiction on this Court by way of contract for purposes of removal
and then invoke the protections of contractual liability limitations
against a third-party buyer who did not negotiate any bills of lading
and did not consent to any liability limitations with respect to
damage occurring after conclusion of off-loading. Kirby was filed
in federal court on the basis of diversity and presented no removal
questions. Kirby, 543 U.S. at 21. Although subject matter
jurisdiction was not an issue in the case, the Supreme Court stated
that admiralty jurisdiction also existed over “the maritime
contracts involved,” which had been negotiated by the plaintiff with
downstream carriers and contemplated the entire journey of goods from
manufacturer to final destination. Id. at 23. In Kirby, the rail
carrier was able to invoke liability limitations against the
19
manufacturer, who had negotiated an end-to-end bill of lading with
a carrier and sued for breach of that contract. Kirby, 543 U.S. at
36. By contrast, here, the bill of lading does not contemplate “on
carriage to” the final destination, and therefore it is not a maritime
contract that also provides for inland carriage to the final
destination. In addition, Plaintiff does not sue for breach of a
maritime contract it negotiated with downstream carriers.
Moreover, Defendants here do not argue that admiralty
jurisdiction provides a proper basis for removal. Kirby speaks
generally of the federal interest in regulating maritime commerce
but does not address whether federal question jurisdiction arises
when the record contains no end-to-end contract between M3 Midstream
and any Defendant.
To rule on the present record that the bill of lading confers
federal question jurisdiction would be an expansion of COGSA, Kirby,
and federal jurisdiction jurisprudence.7 In general, parties may not
7
The Third Circuit has considered Kirby only twice since the opinion
was issued, and neither discussion is on point. In Ferrostaal, Inc.
v. M/V Sea Phoenix, 447 F.3d 212 (3d Cir. 2006), the panel considered
whether an explanatory parenthetical in Kirby meant that the “fair
opportunity doctrine is binding law.” Ferrostaal, 447 F.3d at 224.
The court concluded that “our survey of precedent reveals no basis
to conclude that the carrier must offer a choice of rates or provide
the shipper with notice of the $500 limit.” Id. at 226.
In re Frescati Shipping Co., Ltd., 718 F.3d 184, 189 (3d Cir.
2013), concerned an oil tanker that had been damaged in the Delaware
River, causing an oil spill. In the suit, the owner of the vessel
20
confer federal question jurisdiction by contract or agreement. See
In re Combustion Eng’g, Inc., 391 F.3d 190 (3d Cir. 2004) (“‘[s]ubject
matter cannot be conferred by consent of the parties’”) (quoting In
re Resorts Int’l, Inc., 372 F.3d 154, 161 (3d Cir. 2004)); Barrett
v. Covert, 354 F. Supp. 446, 450 (E.D. Pa. 1973) (“Federal
jurisdiction cannot be conferred by agreement, consent, or collusion
of the parties”); Pacrim Pizza Co. v. Pirie, 304 F.3d 1291, 1294 (Fed.
Cir. 2002) (“parties may not by contract bestow jurisdiction on a
court”); Chicago Typographical Union No. 16 v. Chicago Sun-Times,
Inc., 935 F.2d 1501, 1505 (7th Cir. 1991) (“federal jurisdiction
cannot be created by contract”). Furthermore, in Kirby, the Supreme
Court did not discuss (1) whether jurisdiction may be conferred by
a Himalaya clause; (2) whether federal jurisdiction exists for a
post-offloading damage claim when the bill of lading provided that
the port was the destination; (3) what rights the agents of the
carrier or subcontractors could assert against General Motors, the
sued the party (“CARCO”) that had requested the oil be shipped and
also owned the marine terminal, alleging that CARCO breached a “safe
port/safe berth warranty” it made to an intermediary responsible for
chartering the vessel. Id. The Third Circuit cited Kirby for the
proposition that when a maritime contract is not inherently local,
“federal law controls the contract interpretation.” Id. at 198
(quotation marks omitted). The court held that the “safe berth
warranty necessarily benefits the vessel, and thus benefits its owner
as a corollary beneficiary.” Id. at 199.
21
buyer of the goods8; or (4) whether an owner of cargo who is not a
party to a bill of lading for the port-to-port carriage of the cargo
is foreclosed from state remedies for post-offloading damage
occurring after the transport of goods by sea has been completed.
Finally, as stated above, even if Defendants are entitled to the
protections of COGSA, the federal statute is not an essential element
of Plaintiff’s case; rather, COGSA is a federal defense, which cannot
be the basis for removal to federal court, unless COGSA completely
preempts state law.
The foregoing analysis does not resolve whether COGSA
completely preempts the state-law claims at issue here, thereby
supplying federal question jurisdiction. In the wake of Kirby, many
federal courts that have concluded that COGSA completely preempts
state law. See UTI, U.S., Inc. v. Bernuth Agencies, Inc., No.
12-21965, 2012 WL 4511304, at *5 (S.D. Fla. Oct. 1, 2012) (citing
Polo Ralph Lauren, L.P. v. Tropical Shipping & Const. Co., Ltd., 215
F.3d 1217, 1220 (11th Cir. 2000); Fireman’s Fund Ins. Co. v. Crowley
Liner Servs., Inc., No. 08-1745, 2011 WL 3651804, at *7 (D.P.R. Aug.
17, 2011); Diamond v. State Farm Mut. Auto. Ins. Co., No. 09-1110,
2010 WL 2904640, *5 (E.D. Cal. July 26, 2010), report and
8
General Motors is the analogous party to Plaintiff here. It was not
a party to the Kirby litigation, and the Supreme Court has not
addressed this specific question.
22
recommendation adopted, No. 09-111, 2010 WL 3371213 (E.D. Cal. Aug.
26, 2010) (holding that when the parties extend COGSA to periods
before loading and after discharge, COGSA completely preempts state
law); Cont’l Ins. Co. v. Kawasaki Kisen Kasha, Ltd., 542 F. Supp.
2d 1031, 1034 (N.D. Cal. 2008).
However, while COGSA preempts state law where it applies, COGSA
does not completely preempt state law beyond the tackles for purposes
of federal question jurisdiction. The statutory scheme permits state
causes of action to govern beyond the tackles unless the parties
contract otherwise. Where parties so contract, COGSA substantively
preempts state causes of action, but COGSA cannot be said to
completely preempt state law where, depending on the actions of
individual parties, state law causes of action may lie. Where a
contract extending COGSA exists, a defendant would have a federal
defense (the extension of COGSA liability limitations by contract)
but such a defense would not be the basis for removal. Therefore,
preemption cannot provide federal question jurisdiction here.
Whether a Himalaya clause between the shipper and the carrier
may confer federal question jurisdiction and bind a third-party
buyer/plaintiff is not clear from existing case law. There may be
valid policy arguments in favor of finding federal jurisdiction and
upholding limitations of liability against the third-party buyers
23
of goods. But Defendants have not presented any persuasive arguments,
and Kirby, its progeny, and the opinions within the Third Circuit,
do not compel the conclusion that removal of this action was proper.
The Court must resolve all doubts in favor of remand. Boyer, 913 F.2d
at 111. The Court will order remand.9
3. Whether the Complaint was artfully pleaded
Defendants also argue that the Complaint was artfully pleaded
to avoid federal jurisdiction by failing to reference the bill of
ladings, which Defendants contend invoke COGSA, or by failing to sue
the carrier, which would bring this case within the scope of more
established case law. (See DRS Resp. at 7; Calibre Resp. at 6.) At
oral argument, Defendants speculated that Plaintiff did not sue on
the bill of lading or bring claims against the carrier because
Plaintiff’s suit on the bill of lading would be untimely.10 However,
9
The duties and liabilities of the carrier, its agents and its
servants for the tackle-to-tackle phase of carriage are not the
subject of this ruling. COGSA would apply to any claim by Plaintiff
for damage occurring during the tackle-to-tackle phase under the
terms of the bill of lading, because the carrier and its agents and
servants performed those duties under the terms of the bill of lading.
This opinion holds that where the bill of lading was not negotiated
by or for Plaintiff, and where it covers only the carriage of cargo
to the point of offloading, and where Plaintiff does not sue on the
bill of lading, a suit for damages occurring after offloading,
arising under state law, is not preempted by COGSA.
10
The pipe was damaged in September or October 2011, and this suit
was filed in Superior Court of New Jersey on January 27, 2013; COGSA
has a one-year statute of limitations. See Petroleos Mexicanos
24
Defendants do not substantiate their speculation with any evidence,
and, for the reasons explained above, Plaintiff is entitled to limit
the scope of its own Complaint. There is no basis in the record for
concluding that either the Complaint or Second Amended Complaint was
artfully pleaded to avoid federal jurisdiction. The Court does not
have subject matter jurisdiction over this action on the basis of
artful pleading.
IV. Conclusion
Defendants have failed to meet their burden to prove that
subject matter jurisdiction exists over this action. Therefore, the
Court will remand the action to New Jersey Superior Court, Camden
County, Law Division. An accompanying Order will be entered.
February 26, 2014
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge
Refinacion v. M/T King A, 554 F.3d 99, 105 (3d Cir. 2009); COSGA §
3(6), Historical & Statutory Notes to 46 U.S.C. § 30701.
25
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