INTERNATIONAL TRANSPORT MANAGEMENT CORPORATION et al v. BROOKS FITCH APPAREL GROUP, LLC
Filing
190
OPINION. Signed by Chief Judge Jose L. Linares on 4/26/18. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
INTERNATIONAL TRANSPORT
MANAGEMENT COROPORATION, and
OCEAN NAVIGATOR EXPRESS LINE,
Civil Action No.: 11-1921 (JLL)
OPINION
Plaintiffs,
v.
BROOKS FITCH APPAREL GROUP, LLC
and JOSEPH E. SAfDIEH,
Defendants.
LINARES, Chief District Judge.
This case involves issues of breach of contract and indemnification arising out of the
purchase of goods by Defendant Brooks Fitch Apparel Group, LLC (“Brooks Fitch”) from various
Chinese manufacturers and the delivery of those goods to Brooks Fitch in New York. Plaintiffs
tntemational Transport Management Corporation (“IIMC”) and Ocean Navigator Express Line
(“ONEL”) filed the instant lawsuit against Brooks Fitch on April 5, 2011.’ (ECF No. 1). Plaintiffs
filed an Amended Complaint on September 16, 2014, adding Joseph E. Safdieh, the principal of
Brooks Fitch. (ECF No. 89). Plaintiffs alleged two counts of fraud against Defendants Brooks
Fitch and Safdieh, counts of conversion, breach of contract, embezzlement, replevin, imposition
of a constructive trust, exoneration, attachment, and indemnity against Brooks Fitch, and that
Brooks Fitch is the alter-ego of Safdieh. (ECF No. 89
¶J
579—665). This case has a long and
complicated history, explained in more detail below, which culminated in a one-day bench trial
The parties mutually agreed that ITMC should be dismissed from the case for the purposes of the October 23, 2017
bench trial. (Trial Tr. 30:7—15).
held on October 23, 2017. (ECF No. 182). What follows is the relevant background and the
Court’s findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).
I.
BACKGROUND2
A. The Parties
Plaintiff ONEL is a corporation incorporated under the laws of Hong Kong, Special
Administrative Region of the People’s Republic of China. (ECF No. 189 (Pl.’s Proposed Findings
of Fact (“PFOF”)) ¶ 20). ONEL is a wholly-owned subsidiary of Cargo Services Far East Limited
and functions as an ocean transport intermediary operating as a non-vessel operating common
carrier (“NVOCC”). (ECF No. 185 (“Trial Tr.”) 39:23—40:9, 41:8—9; ECF No. 131 (“Pls. 56.1”)
¶‘jJ 11—12; ECF No. 138 (“Def. 56.1”)
¶
11—12). An NVOCC is a common carrier that does not
operate the vessel on which it provides ocean transportation. (Pis. 56.1
¶
14; Def. 56.1
¶
14).
ONEL’s primary business is to transport goods from Asia to the United States, and does so by
operating through a network of agents. (Trial Tr. 40:3—9, 41:16—20).
Cargo Services far East Limited is a corporation incorporated under the laws of Hong
Kong, Special Administrative Region of the People’s Republic of China. (Exs. 3002, 3006).
Cargo Services Far East Limited provides logistics, supply chain, and international freight
forwarding services for air and ocean cargo. (Trial Tr. 35:16—19).
Cargo Services Far East
Limited has another wholly-owned subsidiary called Cargo Services (China) Ltd. (“Cargo Services
China”). (Trial Tr. 36:9—11). Cargo Services China carries on the same business as Cargo Services
far East Limited, but in mainland China. (Trial Tr. 36:7—37:10, 38:23—39:6). These businesses
also have Chinese names, where Cargo Services translates to Jiahong. (Trial Tr. 10 1:20—22).
Brooks Fitch is a limited liability company organized under the laws of New York. (Pls.
2
The facts set forth herein are the Court’s findings of fact, which are based on the Court’s observations and credibility
determinations of the witnesses who testified and a thorough review of all the evidence admitted at trial.
2
56.1
¶
17; Def. 56.1
¶
17). Brooks Fitch designed, merchandised, and bought products overseas
and sold them to mass retailers in the United States. (Pls. 56.1
¶ 1$; Def. 56.1 ¶ 1$).
Most of these
products were infant and children’s clothing and other textiles from Asia. (PIs. 56.1
56.1
¶ 18).
¶
18; Def.
In April 2013, Brooks Fitch entered liquidation and is no longer in business. (Pls. 56.1
¶J2l—22; Def. 56.1 ¶2l—22).
B. Procedural History
When Plaintiffs filed their initial Complaint on April 5, 2011, (ECF No. 1), this case was
before Judge Dennis Cavanaugh. Concurrent with the Complaint, ITMC filed a request for a
Temporary Restraining Order seeking a permanent injunction against Brooks Fitch. (ECF No. 13). Judge Cavanaugh denied ITMC’s request for a permanent injunction. (ECF No. 16). Plaintiffs
twice moved to amend the Complaint; however those motions were denied. (ECF Nos. 36, 44).
On May 17, 2013, this matter was reassigned to Judge Faith Hochberg. (ECF No. 58). Then, on
October 10, 2013, this Court took over these proceedings. (ECF No. 72).
On November 22, 2013, Plaintiffs moved to amend the Complaint once more. (ECF No.
73). On September 10, 2014, Magistrate Judge Joseph A. Dickson granted Plaintiffs’ motion to
amend, (ECF No. 88), and on September 16, 2014, Plaintiffs filed the operative Amended
Complaint, (ECF No. 89), adding a direct claim against Safdieh by seeking to pierce Brooks Fitch’s
corporate veil. Over two years passed before this case reached the summary judgment stage,
during which the Court and the parties negotiated various scheduling orders and conducted status
conferences. On November 1, 2016, the parties filed simultaneous briefing on two motions for
summary judgment.
(ECF Nos. 129—146). The Court heard oral argument on the summary
judgment motions on March 16, 2017. (ECF No. 150). The Court denied Plaintiffs’ summary
judgment motions. (ECF No. 151). The Court set this matter for a bench trial date of October 23,
3
2017. The parties submitted pretrial briefs, (ECf Nos. 180—81), and the Court conducted a one
day bench trial on October 23. The trial pertained solely to issues of liability regarding Brooks
Fitch and did not concern Plaintiffs’ veil piercing and alter-ego arguments as to Safdieh. Following
the trial, the Court directed the parties to submit their proposed findings of fact and conclusions of
law. (ECF No. 183). They did so on December 15, 2017. (ECF Nos. 188, 189). Below are the
Court’s findings of fact and conclusions of law.
II.
FINDINGS Of FACT
The Court has considered the testimony and assessed the credibility of all the witnesses
who testified and has also considered the documentary evidence presented at trial, and finds as
follows.
from 2009 to 2011, Brooks Fitch purchased shipments of apparel from various Chinese
manufacturers. (ECF No. 167 (Joint Statement of Stipulated Facts (“JSSf”)) ¶ 31). The contracts
between Brooks Fitch and these Chinese manufacturers were free on Board or “F.O.B.” contracts,
meaning that the Chinese manufacturers perfonried under the contract once they delivered the
purchased goods to the vessel or vessels in China that Brooks Fitch nominated for carriage to the
United States. (JSSF
¶ B3).
To get the goods to the United States, Brooks Fitch contracted with
ITMC such that ITMC acted as Brooks Fitch’s freight forwarding agent. (JSSF ¶ B4). The purpose
of an international freight forwarding agent is to arrange shipments to and from the United States
in international trade. (Trial Tr. at 111:22—112:3). ITMC then entered into an agreement with
ONEL under which ONEL acted as the NVOCC for the shipments of the goods to the United
States. (JSSF ¶ 34). The parties agree that ITMC was acting as an agent for ONEL in this capacity.
(PFOF
¶ 59;
ECF No. 188 (Defendant’s Findings of Fact (“DFOF”))
¶ 53).
for the transportation of the goods from China to the United States. (JSSF
4
ONEL thus arranged
¶ B5).
Once ONEL received each shipment from the Chinese manufacturers, it issued an “on
board” bill of lading for each shipment. (JSSF
¶ 85). ONEL was listed as the “Carrier” on each
bill of lading at issue here. (Exs. 2001, 2006, 2009, 2012, 2015, 2021, 2024, 2027, 2032, 2041,
2050, 2061,2065,2069,2072,2075,2081,2085,2088,2091,2102,2106,2111,21 13, 2121, 2123,
ONEL then gave the ocean bill of lading to the respective Chinese
2131, 2141, 2151).
manufacturer as a receipt and document of title. (JSSF
¶ B5).
ONEL issued these bills of lading
to the Chinese manufacturers through Cargo Services China (for mainland China manufacturers)
and through Cargo Services Far East Limited (for the Hong Kong manufacturer). (Exs. 2001,
2006,2009,2012,2015,2021,2024,2027,2032, 2041,2050,2061, 2065, 2069, 2072, 2075, 2081,
2085,2088,2091,2102, 2106,2111,2113, 2121, 2123,2131,2141,2151). Thesebillsoflading
are stamped such that they state that either Cargo Services China or Cargo Services Far East
Limited issued the bill of lading “as agent for” either “Carrier” or “Ocean Navigator Express Line.”
(Id.).
This case concerns shipments from 14 different manufacturers with a combined value of
$4,362,113.50. (JSSF
¶ B2). The shipments are broken out in the table below:
Chinese Manufacturer
Dollar Value (USD)
Pearl Touch Industrial Co.
$302,386.20
Wujiang First Import and
Export Co.
Wuxi Hongrui Habit Co.
$39,600.00
$158,100.00
Jiangsu Saintek
$169,620.00
Join Action
$100,248.00
Xiamen Unibest
$229,335.00
Dragonway Garment Ltd.
$1,061,054.58
5
famous Design
Shanghai Win-Wing
$725,155.38
Shiandong Textiles
$335,482.20
Foshan He Jun
$435,536.86
Xiamen Jiasheng
$129,600.00
Jiangyin Weiyu Textile
$45,264.00
Zhangzhou Sin Lane
$70,968.00
TOTAL
(JSFF
$559,763.28
$4,362,113.50
¶ B2).
Under nornial industry practice, Brooks Fitch was supposed to pay the Chinese
manufacturers for the shipments. and in return, Brooks Fitch would receive the original bills of
lading from the Chinese manufacturers. (JSSF
¶ 36).
Brooks Fitch would then present the bills
of lading to ONEL in the United States, which would allow ONEL to release the goods to Brooks
Fitch.
(JSSF
¶
B6). That did not happen here.
With the exception of partial payments of
$40,000.00 to Join Action and $20,000.00 to Xiamen Unibest, Brooks Fitch never paid for those
shipments. (JSSF ¶ B7, B9; PFOF
¶ 85).
Despite never paying for the shipments and thus not having possession of the original bills
of lading, Brooks Fitch was able to obtain possession of the goods. (JSSF
¶ B$).
ITMC released
the goods to Brooks Fitch after Brooks Fitch entered into three indemnity agreements with ITMC
and provided ITMC with numerous collateral checks referencing specific shipments totaling
$3,343,356.26.
(JSSF
¶
Cl—3; PFOF
¶
97 & n.l).
The indemnity agreements covered the
shipments from Pearl Touch Industrial Co., Xiamen Jiasheng. and Shiandong Textiles. (JSSF
6
¶
C 1—3). Each indemnity agreement contained the same operative language. They state:
This indemnification agreement (“Agreement”) is entered into effective [Date]
between Brooks Fitch Apparel Group LLC, 1370 Broadway, Suite 110, New York,
New York 1001$ (“Brooks Fitch”) and International Transport Management Corp.,
129 Washington Street, P.O. Box 1988, Hoboken, New Jersey 07030.
For ten dollars ($10.00) and other good and valuable consideration, receipt of which
is hereby acknowledged, Brooks Fitch and its successors and assigns agree to
indemnify, hold harmless and defend Ocean Navigator Express Line Ltd.,
International Transport Management Corp. and Cargo Services Far East Limited,
and their respective parents, subsidiaries and affiliates, and their respective officers,
directors and employees from and against any actual or alleged claims, liabilities,
losses, demands, causes of action, judgments, settlements and expenses (including
without limitation, settlement costs and legal, accounting and other expenses in
connection therewith), or other damages of any kind or nature arising out of or
connected with the following shipments of apparel
.
(Exs. 2004. 2052, 2116). The indemnity agreements also state that they will be governed by New
York law. (Exs. 2004, 2052, 2116).
With respect to the collateral checks, the table below shows the check number, the amount
of the check, the invoice due to the shipper, and the corresponding shipper for which Brooks Fitch
submitted the check as collateral.
Manufacturer
Invoice Amount
Check Number
Check Amount
Pearl Touch Industrial
Co.
$302,386.20
6439
$58,893.00
659$
$104,940.00
6694
$138,552.60
6931
$6,300.00
7137
$27,971.50
627$
$123,120.00
6925
$6,300.00
7137
$27,971.50
Wujiang First Import
and Export Co.
Wuxi Hongrui Habit
Co.
$33,600.00
$158,100.00
7
JiangsuSaintek
$169,620.00
6861
$102,600.00
6928
$69,300.00
Join Action
$100,248.00
7412
$96,729.00
Xiarnen Unibest
$229,335.00
No check
No check
Dragonway Garment
Ltd.
$1,061,054.58
$388
$120,326.39
8389
$171,197.50
8394
$367,938.53
8395
$295,084.62
8453
$160,507.54
$393
$110,733.00
J
Famous Design
$559,763.28
$196,804. 6$
4
8390
$126,523.20
$125,702.40
Shanghai Win-Wing
$725,155.68
8578
$564,782.70
Shiandong Textiles
$335,482.20
85 $0
$171,666.00
$579
$93,811.20
foshanHeJun
No check
No check
Xiamen Jiasheng
F
$435,536.86
$129,600.00
7126
$129,600.00
Jiangyin Weiyu
Textile
Zhangzhou Sin Lane
$44,364.00
No check
No check
$70,968.00
No check
No check
(JSSF
¶ C3; PFOF ¶ 97).
The checks served as collateral for ITMC and ONEL to release the goods to Brooks Fitch
in the event that Brooks Fitch did not end up paying the Chinese manufacturers. (Trial Tr. 131:11—
8
20, 133:20—134:8). When it became clear that Brooks Fitch did not pay the Chinese manufacturers,
and ITMC went to cash the checks, the checks bounced. (Trial Tr. 140:7—9).
Because Brooks Fitch never paid the Chinese manufacturers, many initiated lawsuits
against ONEL, Cargo Services Far East Limited, and Cargo Services China in Hong Kong and
mainland China. (Exs. 1000—02, 1010—11, 1016, 1018, 1020, 1022, 1024, 1029, 1031, 1033—37,
1040, 1046—47, 1051, 1055, 1060).
•
Xiamen Unibest filed suit in the Xiamen Maritime Court against Cargo Services China
on June 28, 2010. (Ex. 1031).
•
Wujiang First Import and Export Co. filed two suits in the Shanghai Maritime Court
against Cargo Services China on August 13, 2010. (Exs. 1010—11).
•
Wuxi Hongrui Habit Co. filed three suits in the Shanghai Maritime Court against Cargo
Services China on August 13, 2010. (Exs. 1016, 1018, 1020).
•
Jiangsu Saintek filed two suits in the Shanghai Maritime Court against Cargo Services
China on August 13, 2010. (Exs. 1022, 1024).
•
Pearl Touch Industrial Co. filed three suits in the Shanghai Maritime Court against
Cargo Services China on September 21, 2010. (Exs. 1000—02).
•
Join Action filed suit in the District Court of Hong Kong against Cargo Services Far
East and ONEL on October 15, 2010. (Ex. 1029).
•
Xiamen Jiasheng filed suit in the Shanghai Maritime Court against Cargo Services
China on December 20, 2010. (Ex. 1060).
•
Dragonway Garment Ltd. filed five suits in the Shanghai Maritime Court against Cargo
Services China on May 31, 2011. (Exs. 1033—37).
•
Foshan He Jun filed two suits in the Shanghai Maritime Court against Cargo Services
9
China on June 20, 2011. (Ex. 1055).
Shiandong Textiles filed suit in the Qingdao Maritime Court against Cargo Services
•
China on August 15, 2011. (Ix. 1051).
Shanghai Win-Wing filed two suits in the Shanghai Maritime Court against Cargo
•
Services China on October 10, 2011. (Exs. 1046—47).
Famous Design filed suit in the Shanghai Maritime Court against Cargo Services China
•
onApril 2$, 2012. (Ex. 1040).
Two companies, Jiangyin Weiyu Textile and Zhangzhou Sin Lane, sent letters to Cargo
•
Services China, demanding payment for the goods under the bills of lading.3 (Exs.
1062, 1065).
The following table lays out the amounts paid as a result of these lawsuits and demands for
payment.
Claimant
Amount Paid
Source
Pearl Touch Industrial Co.
$228,697.96
Exs. 1007—09
Wujiang first Import and
Export Co.
Wuxi Hongrui Habit Co.
$39,964.93
Exs. 1026, 102$, 1029
$160,613.49
Exs. 1026, 102$, 1029
Jiangsu Saintek
$166,718.00
Exs. 1026, 102$, 1029
Join Action
$55,000.00
Ex. 1030
XiamenUnibest
$85,000.00
Ix. 1030
Shanghai Benyi Hongyuan
Clothing Import and Export
Co. (Dragonway Garment
Ltd.; famous Design;
Shanghai Win-Wing)
$2,398,133.66
Exs. 1033—50
Zhangzhou Sin Lane’s letter was also addressed to ONEL.
10
r
Shiandong Textiles
5333.973.72
Ex.1030. 1052—53
Foshan He Jun
5304.541.68
Exs. 1030, 1055—56
Xiarnen Jiasheng
$214,053. $4
Ex.103 0
Jiangyin Weiyu Textile
$N/A
N/A4
Zhangzhou Sin Lane
$151,280.31
Exs. 1030, 1067
Fees allotted to Shanghai
Goodwin law firm
TOTAL
—
$17,028.91
Exs. 1026,1028,1029
$4,155,006.50
ONEL now claims that Brooks Fitch should indemnify it for the losses arising from the
payments in the table above or that it is liable for that amount as a result of its breach of contract.
III.
CONCLUSIONS OF LAW
The legal issue at the center of this trial was whether ONEL actually suffered any
damages. Brooks Fitch argues that ONEL has not suffered any damages, since the judgments and
settlements paid out in the Chinese lawsuits were paid by Cargo Services China or Cargo Services
Far East Limited. (Trial Tr. 25:10—26:7). ONEL contends that it is in fact the real party in interest
and has standing to recover on an indemnity claim in this case because Cargo Services China and
Cargo Services Far East Limited were acting as agents for ONEL. (ECF No. 189 (P1.’s Proposed
Conclusions of Law (“PCOL”)) at 45).
The parties dedicated much time at trial and space in their pre- and post-trial papers to
arguing whether ONEL was in fact in a principal-agent relationship with Cargo Services China
ONEL claims that it settled this claim for $40,000; however, there is no exhibit indicating payment of a settlement
in that amount to Jiangyin Weiyu Textile. The Court notes, however, that on page 30 of Exhibit 1030, there is a
$40,000 payment to a Lin-Lin fashion Int’l Co. with a payment tirneline following the demand letter from Jiangyin
Weiyu’s lawyers. If ONEL can submit additional proof that this is indeed the $40,000 payment to Jiangyin Weiyu,
the Court will amend its judgment.
11
and Cargo Services Far East Limited, with the Cargo Services entities acting as agents for ONEL.
Plaintiffs contention is that, as agents of ONEL, the damages Cargo Services China and Cargo
Services Far East Limited incurred in dealing with the Chinese lawsuits would somehow flow up
to ONEL as principal. (PCOL at 45). After much handwringing and research, the Court was not
able to find any law that stated that the damages paid out by agents in lawsuits with third-parties
are attributable to a principal. However, that is not fatal to Plaintiffs case, nor must the Court
make a finding as to whether ONEL, Cargo Services China and Cargo Services Far East Limited
were in a principal-agent relationship as a matter of law.
In its post-trial brief ONEL argues that it can recover for damages as the real party in
interest under Federal Rule of Civil Procedure 17. The Court agrees with ONEL. The original
Advisory Note to Rule 17 states:
A recurring factual situation in maritime cases may lead to injustice if the
requirement as to real party in interest is rigidly applied. When there are claims to
be asserted on behalf of maritime cargo some or all of the following conditions may
be present: (1) There are numerous lots of cargo and hence numerous potential
claimants. (2) The true owner or other person entitled to sue cannot be readily
determined. This results in part from the employment of diverse commercial
instruments giving rise to problems of the passing of title. These may involve
problems in the conflict of laws, including the laws of foreign countries. Questions
also arise as to when the rights of an insurer as subrogee have been perfected. (3)
The time for filing suit is short, either because of a short limitation period, such as
the one-year period of the Carriage of Goods by Sea Act, or because the only
practicable remedy is arrest or attachment of a vessel whose departure is imminent.
Unilever (Raw Materials) LtcL v. M/T Stolt Rod, 77 F.R.D. 384, 389 (S.D.N.Y. 1977) (quoting 7A
Moore’s Federal Practice P 0.55(3), at 403). Furthermore, under traditional admiralty practice,
“equitable principles rather than technical rules and forms should be the paramount consideration
and.
.
.
the objective is to do substantial justice between the parties.” Id. at 3 89—90 (quoting Esso
Standard (‘Switz.) v. The Steamship Arosa Sun, 184 F. Supp. 124, 127 (S.D.N.Y. 1960)). The
Unilever Court also noted that Rule 17(a) “derives
12
...
from the special needs of the maritime
trade.” Id. at 390.
Unilever involved a delivery of tallow from New York to Bromborough, England. Id. at
386. The plaintiff, Unilever, sued the defendants because the delivery was allegedly short. Id.
According to the bill of lading, the shipper of the tallow was Lever Brothers Company, Inc. and
the consignee was Unilever, the parent corporation of Lever. Id. The complaint was amended to
substitute Unilever as the plaintiff for Lever. Id. The Unilever Court denied the defendants’
motion to dismiss the amended complaint as time barred under the Caniage of Goods by Sea Act
afier the substitution of the plaintiff Id. The Court reasoned that:
The facts of this case simply do not demonstrate prejudice to the defendant accruing
from having to defend against Unilever instead of Lever. In fact, the opposite
conclusion is all but inescapable: there is simply no reason to pennit a windfall for
the defendants because the vagaries of corporate structure and maritime instruments
of title misled the shipper into believing that it sued in behalf of its own loss. One
cargo shortage is at issue; the cargo was shipped in the care of the defendants; there
are only three “parties” in the action the shipper, the carriers and the consignee.
Technical niceties of relationship or lack thereof between the shipper and the
consignee ought not to obscure the facts that the defendant is exposed to only one
kind and amount of liability no matter which plaintiff sues; that a loss plainly has
occurred; and that a party who was no stranger to the business transaction initiated
suit within the time limit in the not unreasonably mistaken belief that it had
sustained the loss.
Id. at 390—91.
Other courts have applied similar reasoning when faced with the scenario where a corporate
plaintiff is suing in place of its affiliate, which actually suffered damages. In Frevor-Mavorsohn
Caribbean, Inc. v. P.R. Marine Mgmt., Inc., the first Circuit addressed a case involving damage
to thirteen trailer loads of produce shipped on vessels owned by the defendant. 620 F.2d 1, 2 (1st
Cir. 1980). During trial, the president of Prevor Mayorsohn Caribbean (“PMC”) testified that
Prevor Mayorsohn International (“PMI”), of which PMC was a wholly-owned subsidiary, actually
owned the produce as principals and that PMC sold the produce as agents for PMI and received a
13
commission. Id. The defendant then immediately moved for dismissal on the grounds that PMC
was not the proper plaintiff. Id. The First Circuit reversed the District Court’s decision to dismiss
the action because PMC failed to show that it was the real party in interest. It reasoned that
In cases like the present involving maritime commerce, Rule 17(a) has been
construed to accommodate the somewhat flexible rules that have developed in the
admiralty practice defining the parties who may properly commence an action for
damage to cargo. See general/v 2A Benedict on Admiralty, § 53 (7th ed. 1977).
Not only has an exclusive interest in the damaged goods not been required in all
cases, but courts have ofien looked to the practicalities of the situation in assessing
the likelihood that a carrier might ultimately be exposed to a double recovery and,
when satisfied that double recovery is not a threat, and that the plaintiff has a proper
interest in maintaining the action, have allowed that plaintiff to maintain the
action. See Elia Satzman Tobacco Co. v. SSMormacwind, 371 f.2d 537, 540 (2d
Cir. 1967) (the fact all other possible claimants to the damages were libelants and
that their libels had been dismissed protected defendant against any possible double
recovery); Levcttino Co. v. M/S Helvig Torm, 295 F.Supp. 725, 72$ n. 4 (S.D.N.Y.
196$) (since shippers were time barred from instituting new and separate action,
possibility of double recovery was eliminated). Here the fact that Prevor and its
parent company are clearly “all part of a single operation,” Salzman, supra at 539,
and further, as PRMM itself urges, that any new proceeding by Prevor International
would be time ban-ed, demonstrate that PRMM is amply protected against the
possibility of exposure to subsequent suit. Where the carrier is thus “protected
against double recovery, (it) has no concern with any equities between the owner
or consignee and others.” Salzman, suprct at 540.
Prevor-Mayorsohn, 620 F.2d at 4—5.
The reasoning applicable here and set forth in Unilever and Prevor-Mayorsohn is not
limited to maritime commerce. See Global Aerospace, Inc. v. Platinum Jet Mgmt., LLC, No. 0960756, 2011 WL 2530943, at *7 (S.D. Fla. June 23, 2011) (stating that, in the context of an
insurance dispute related to a plane crash, an agent can sue on behalf of its injured principal and
citing to the reasoning behind Rule 17); fried, Krupp, GmbfrL Krupp Reederei Und Brennstoff
Handet-Seeschtffarht v. Solidarity Carriers, Inc., 674 F. Supp. 1022, 1026 n.l (S.D.N.Y. 1987)
(noting that there is judicial authority “recognizing the ability of corporate entities to assert their
affiliates’ claims
.
.
.
under a ‘real party in interest’ analysis”); Mitsui & Co. (USA.) v. P.R. Water
14
Res. Auth., 528 F. Supp. 768, 776 (D.P.R. 1981) (“Numerous cases have held under Rule 17(a)
that an agent who has contracted in his own name for a disclosed or undisclosed principal, or who
acted as an agent during the course of the transaction involved in the litigation, may sue for
damages suffered by the principal. Such an agent is a proper ptaintiff even though the damages
were sustained by another, he claims no financial interest in the transaction or litigation, and even
though he did not have title to, or more than a transient possessory or custodial interest in, the
property forming the subject of the dispute.”); Bache & Co. v.
hit
‘1 Controls Corp., 324 F. Supp.
998, 1004—05 (S.D.N.Y. 1971) (pennitting stock broker to sue on behalf of its customers whose
shares it tendered to buyer who refused to pay and arguing that there is no prejudice to defendant
because there is no chance of double recovery).
The Court finds the logic espoused in the aforementioned cases particularly applicable
here. Over the course of the long and tortured history of this case, the Court has made a concerted
effort to streamline the issues and parties before it. That ONEL remains as Plaintiff is of no
prejudice to Defendant and should not result in a windfall for Defendant. This is akin to the
situation in Unilever where “defendant is exposed to only one kind and amount of liability no
matter which plaintiff sues; that a loss plainly has occurred; and that a party who was no stranger
to the business transaction initiated suit within the time limit in the not unreasonably mistaken
belief that it had sustained the loss.” 77 F.R.D. at 391. Nor is Brooks Fitch at risk of being subject
to a double recovery. ITMC was dismissed from this action at trial, (Trial Tr. 30:7—1 5), and even
if either of the Cargo Services entities were not barred by the “special res judicata principles”
associated with Rule 17(a), Prevor-Mayoiohn, 620 F.2d at 4, any contract or fraud claims brought
by the Cargo Services entities would be time barred.
See
Kaufman v. i-Stat Corp., 165 N.J. 94,
127 (2000) (stating that the statute of limitations for common law fraud is six years); Binder v.
15
Price Waterhouse & Co., L.L.P., 393 N.J. Super. 304, 309 (App. Div. 2007) (stating that the statute
of limitations for breach of contract claims is six years); first l1?dem. ofAm. Ins. C’o. v. Kernenash,
328 N.J. Super. 64, 72 (App. Div. 2000) (stating that the statute of limitations for an indemnity
claim is six years). Moreover, it is clear from the testimony of John Lau—the founder and majority
shareholder of Cargo Services Far East Limited—that in this case ONEL, Cargo Services Far East
Limited, and Cargo Services China are “all part of a single operation” and thus Brooks Fitch is
“amply protected against the possibility of exposure to subsequent suit.” Prevor-Mayorsohn, 620
F.2d at 5.
Based on the above, the Court finds that ONEL can properly bring this claim for damages
against Brooks Fitch.
As to the grounds on which the Court finds Brooks Fitch liable, the indemnity agreements
Brooks Fitch signed with respect to Pearl Touch Industrial Co., Xiarnen Jiasheng, and Shiandong
Textiles are broad enough to indemnify ONEL for damages paid out by Cargo Services Far East
Limited. Indemnity agreements are “strictly construed to avoid reading into it a duty which the
parties did not intend to be assumed.” Jeanetti v. Caster Masorny, Inc., 133 A.D.3d 1339, 1340
(N.Y. App. Div. 2015). The language of the indemnity agreement “should not be extended to
include damages which are neither expressly within its terms nor of such character that it is
reasonable to infer that they were intended to be covered under the contract.” Id. (quoting Niagara
frontier Transp. Auth. v. Tn -Delta Constr. Corp., 107 A.D.2d 450, 453 (N.Y. App. Div. 1985)).
In this case, the indemnity agreements at issue for the Pearl Touch Industrial Co., Xiamen
Jiasheng, and Shiandong Textiles agreements clearly cover losses incurred as a result of
settlements or judgments from lawsuits. (Exs. 2004, 2052, 2116 (covering “any actual or alleged
claims, liabilities, losses, demands, causes of action, judgments, settlements and expenses
16
(including without limitation, settlement costs and legal, accounting and other expenses in
connection therewith), or other damages of any kind or nature arising out of or connected with the
following shipments of apparel”). The question then, is whether these agreements indemnify
ONEL against the losses paid out by Cargo Services Far East Limited and Cargo Services China.
This Court finds that they do. The language of the indemnity agreements is quite broad. Those
agreements state:
For ten dollars ($10.00) and other good and valuable consideration, receipt of which
is hereby acknowledged, Brooks Fitch and its successors and assigns agree to
indemnify, hold harmless and defend Ocean Navigator Express Line Ltd.,
International Transport Management Corp. and Cargo Services Far East Limited,
and their respective parents, subsidiaries and affiliates, and their respective officers,
directors and employees from and against any actual or alleged claims, liabilities,
losses, demands, causes of action, judgments, settlements and expenses (including
without limitation, settlement costs and legal, accounting and other expenses in
connection therewith), or other damages of any kind or nature arising out of or
connected with the following shipments of apparel.
.
(Exs. 2004, 2052, 2116). As written, the indemnity agreements indemnify ONEL and its
“respective parents [and] subsidiaries” from losses or damages of any kind “arising out of
or connected with” the shipments of apparel. This language indicates the kind of clear and
unmistakable intent that New York courts require to enforce indemnity agreements. See,
e.g., Bank ofAm. Corp. v. Lemgritber, 385 F. Supp. 2d 200, 227 (S.D.N.Y. 2005) (applying
New York law and upholding indemnity agreement which stated that the indemnitor “will
indemnify [the indemnitees] and their ‘affiliates’
• ,
expense.
.
.
,
.
.
.
for ‘any loss, liability, claim, damage
or diminution of value”). The Court thus reads the indemnity agreements
to indemnify ONEL from losses incurred by Cargo Services Far East Limited and Cargo
Services China in connection with litigation arising out of the shipments of goods from
Pearl Touch Industrial Co., Xiamen Jiasheng, and Shiandong Textiles.
Even if the indemnity agreements do not indemnify ONEL for damages incurred
17
by Cargo Services Far East Limited and Cargo Services China, the agreements clearly
indemnify Cargo Services Far East Limited and Cargo Services China against losses
incurred as a result of litigation, and the Court has determined that ONEL can sue for those
damages under Rule 17. FurthenTlore, Brooks Fitch is liable for the damages arising out
of the shipments under a breach of contract theory. To establish a breach of contract claim,
ONEL must prove that it entered into a contract with Brooks Fitch, ONEL performed under
the terms of the contract while Brooks Fitch did not, and Brooks Fitch’s breach caused
ONEL damages. Pollack v. Quick Quality Rests., Inc., 452 N.J. Super. 174, 188 (App. Div.
2017) (citing Globe Motor Co. v. Igdatey, 225 N.J. 469, 482 (2016)).
Here, the parties entered into an agreement when Brooks Fitch offered ITMC
collateral checks in order to release the goods from the Chinese manufacturers without
providing the bills of lading. ONEL was a party to this agreement as the disclosed principal
of its release agent, ITMC. ITMC, after getting confinnation from ONEL, agreed to release
the goods to Brooks Fitch once it received the collateral. Brooks Fitch did not perform
under this agreement, because the collateral checks were worthless and so did not fulfill
their purpose of providing security to ONEL in the event that Brooks Fitch never paid the
Chinese manufacturers.
As a result of Brooks Fitch’s failure to pay the Chinese
manufacturers and the worthless nature of the collateral provided, ONEL was exposed to
liability across the various lawsuits detailed above.
IV.
CONCLUSION
For the reasons stated above, the Court will enter judgment in favor of Plaintiff in the
amount of $4,155,006.50. An appropriate Order and Judgment accompanies this Opinion.
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__________________
,
DATED: April
ui1
‘1 2018
HO y5SE L. LINARES
Chi fIudge, United States District Court
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