Chem One, Ltd. v. M/V Rickmers Genoa et al

Filing 217

AMENDED MEMORANDUM AND OPINION: Because the Court did not assume jurisdiction "contrary to Clause 25," Clause 7(2) does not apply. Therefore, COGSA does not govern the Rickmers interests' limitation of liability of the claims for loss or damage of cargo here. The Hague-Visby Rules limit the Rickmers interests' liability. ESM Group's cross-motion for partial summary judgment [dkt. no. 201 in 05 Civ. 4261] is GRANTED, and the Rickmers interests' motion for partial summary judgment [dkt. no. 194 in 05 Civ. 4261] is DENIED. This memorandum opinion replaces and supersedes the memorandum opinion filed on May 25, 2011. [dkt. no. 216 in 05 Civ. 4261]. (Signed by Judge Loretta A. Preska on 5/26/2011) (jar)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------X
In re M/V RICKMERS GENOA
:
LITIGATION
:
------------------------------X
THIS DOCUMENT RELATES TO:
:
ALL ACTIONS
:
------------------------------X

05
05
05
05

Civ.
Civ.
Civ.
Civ.

4261
6226
8841
9472

(LAP)
(LAP)
(LAP)
(LAP)

Amended Memorandum & Order

LORETTA A. PRESKA, Chief United States District Judge:
This order resolves a dispute about the terms of a
bill of lading that provides for the limitation of liability of
a carrier engaged to transport goods.

The case arises out of a

maritime casualty resulting from a collision and explosion on a
New Jersey-bound vessel transporting, among other things,
granulated magnesium ordered by Defendant ESM Group, Inc. (“ESM
Group”) from its subsidiary in China, ESM (Tianjin) Co. Ltd.
(“ESMT”).

The goods were shipped on the M/V RICKMERS GENOA,

which is a defendant along with her owners, a group hereinafter
referred to as the “Rickmers interests.”

For a fuller

description of the facts, readers can look to prior opinions
describing the casualty.

E.g., In re M/V Rickmers Genoa Litig.

(Rickmers I), 622 F. Supp. 2d 56, 59 (S.D.N.Y. 2009).
The casualty engendered suits against the Rickmers
interests by parties unrelated to ESM Group with cargo aboard
the vessel (the “cargo interests”).

The Rickmers interests also

sued ESM Group and ESMT, as consignee and shipper, respectively,
in a third-party action, alleging that they were liable because

magnesium can explode when put in contact with water.

Cross-

claims and counterclaims abounded.1
Prior to this motion, the Court decided motions for
summary judgment regarding claims that ESM Group was liable for
the casualty and, separately, that ESM Group or its subsidiary
(whichever was the “shipper”) insufficiently informed the
vessel’s owners about the nature of the cargo.

With certain

exceptions not relevant here, the Court rejected these claims.
In re M/V Rickmers Genoa Litig. (Rickmers III), No. 05 Civ.
4261, 2010 WL 4446080, at *15 (S.D.N.Y. Nov. 4, 2010) (nature of
cargo); Rickmers I, 622 F. Supp. 2d at 59 (ESM not liable
except, potentially, as alter-ego of subsidiary), amended by In
re M/V Rickmers Genoa Litig. (Rickmers II), 643 F. Supp. 2d 554,
555 (S.D.N.Y. 2009) (stating that federal maritime law governs
actions but adhering to holding).
on appeal.

These decisions are pending

See 28 U.S.C. § 1292(a)(3) (providing for piecemeal

interlocutory appeals in certain admiralty cases).

As a result

of the travel of the case, and as the parties have apprised the
Court by letter (dkt. no. 188 in No. 05 Civ. 4261), the claims
by those parties who had cargo on board the vessel against the

1

In one action, No 05 Civ. 6226, ESM Group was sued as an
original defendant, against which the Rickmers interests filed a
cross-claim. That action has since been dismissed.

2

vessel and its owners (and presumably among one another) are,
essentially, all that remain.
Now, the Rickmers interests and ESM Group (along with
ESMT) have cross-moved for partial summary judgment2 on the issue
of what provision of the bill of lading governs the Rickmers
interests’ limitation of liability on claims for loss or damage
of cargo.

This is important because what provision governs

dictates what country’s law governs: that of either the United
States or Germany.

Each country’s regime provides for a

different limitation of a carrier’s liability.

United States

law, the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C.
§ 1304(5), provides for a lower limitation of liability than
does German law, which applies the amendments to the Hague Rules
of 1924 (the “Hague-Visby Rules”).

Kreta Shipping, S.A. v.

Preussag Int’l Steel Corp., 192 F.3d 41, 46 & n.5 (2d Cir.
1999).

Thus, application of the Hague-Visby Rules would result

in a larger recovery against the carrier.

See id.

The parties

hope that the resolution of this legal issue will have a domino
effect as they try to settle.
The parties do not dispute any material facts.

ESMT

had arranged for an intermediary (a “Non-Vessel Owning Common
Carrier” or “NVOCC”) to transport the cargo to ESM Group, and
2

Due to this posture, and for ease of exposition, the Court
refers to ESM Group and ESMT together as “ESM Group.”

3

the intermediary issued a bill of lading to ESMT, evidencing the
terms of the contract for carriage of the goods.
Rule 56.1 Statement ¶¶ 2-3.)

(ESM Group

The only relevant fact for

purposes of this motion is the language of the Rickmers-Linie
bill of lading issued to the NVOCC because it governs the
Rickmers interests’ limitation of liability.
issue here.

Two clauses are at

Clause 7(2) of the Rickmers Bill of Lading

provides, in relevant part:3
Notwithstanding any of the foregoing to the contrary,
in the event that suit is brought in a court in the
United States of America and such court, contrary to
Clause 25, accepts jurisdiction, then the Carriage of
Goods by Sea Act (COGSA) shall be compulsorily
applicable to this contract of carriage if this Bill
of Lading covers a shipment to or from the United
States. . . . The Carrier’s maximum liability in
respect to the Goods shall not exceed USD 500 per
package or, where the Goods are not shipped in
packages, USD 500 per customary freight unit unless
the nature and value of the Goods has been declared by
the Merchant and inserted in writing, on the face of
the Bill of Lading and said Merchant shall have paid
the applicable ad valorem freight rate set forth in
Carrier’s Tariff.
(Declaration of Michael A. Teichmann dated Feb. 18, 2011
(“Teichmann Decl.”) Ex. A. Cl. 7(2).)

Clause 25 provides, in

relevant part:
3

Clause 7(2) was “inadvertently misquoted” in certain
submissions, a situation not noticed until briefing was
complete. Letter from counsel to the Court dated Mar. 18, 2011.
The parties agree that their arguments remain the same
notwithstanding this clerical error and that the Court should
decide the motion “based on the actual language in the Bill of
Lading.” Id.

4

Except as otherwise provided specifically herein any
claim or dispute arising under this Bill of Lading
shall be governed by the law of the Federal Republic
of Germany and determined in the Hamburg courts to the
exclusion of the jurisdiction of the courts of any
other place. In case the Carrier intends to sue the
Merchant the Carrier also has the option to file a
suit at the Merchant’s place of business.
(Id. Cl. 25.)

A third clause, which is not in dispute because

the casualty occurred between loading and discharge, provides
that the Hague-Visby Rules govern the carrier’s liability when
“loss or damage has occurred between the time of loading of the
Goods by the Carrier at the Port of Loading and the time of
discharge by the Carrier at the Port of Discharge.”

(Id. Cl.

5(1)(a).)
Given the lack of factual dispute here, the case is
ripe for summary judgment.

“Summary judgment is appropriate

only ‘if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a
matter of law.’”

Kwan v. Schlein, 634 F.3d 224, 228 (2d Cir.

2011) (quoting Fed. R. Civ. P. 56(a)).

In a contract dispute,

summary judgment is appropriate only if the language of the
contract is unambiguous.

Am. Home Assurance Co. v. Hapag-Lloyd

Container Line, GmbH (Hapag-Lloyd), 446 F.3d 313, 316 (2d Cir.
2011).

On cross-motions for summary judgment, the Court applies

the rule that “each party's motion must be examined on its own
merits,” with all reasonable inferences drawn against the

5

movant.

Morales v. Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d

Cir. 2001).
The Rickmers interests argue that the terms of the
bill of lading are unambiguous.

They say that Clause 7(2)

provides for the application of COGSA when a U.S. court hears a
controversy over this agreement.

They maintain that this clause

contemplates Clause 25 (a mandatory forum selection clause) and
provides for the contingency that COGSA applies if Clause 25 is
disregarded.

Although ESM Group also believes the bill of

lading to be unambiguous, it disagrees with this interpretation.
It says that Clause 25, in conjunction with Clause 5(1)(a),
provides the default rule – application of the Hague-Visby Rules
under German law – and that Clause 7(2) applies only when a U.S.
Court assumed jurisdiction “contrary to” Clause 25.
Specifically, it says that Clause 7(2) has a “contrariness”
requirement, meaning that it only applies when the U.S. court
declines to enforce Clause 25 and, in effect, wrests
jurisdiction from a German court over the argument that the
German forum is the appropriate one.

ESM Group says in the

alternative that the language is vague and should be interpreted
against the Rickmers interests, as they drafted it.
The parties agree that whatever the legal regime that
sets the amount of the limitation of liability, that limitation
is applicable to the Rickmers interests’ liability here.

6

See

Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 33, 36 (2004) (cargo
owners’ recovery limited to liability limitation agreed to by
NVOCC and carrier); see also Hawkspere Shipping Co. v. Intamex,
S.A., 330 F.3d 225, 233 (4th Cir. 2003) (“Where the parties
specify in their contractual agreement which law will apply,
admiralty courts will generally give effect to that choice.”
(internal quotation marks and alterations omitted)).

What

regime the parties elected to govern liability is a question of
contract interpretation.
governs this question.

In admiralty, federal common law

See Hapag-Lloyd, 446 F.3d at 316;

Rickmers II, 643 F. Supp. 2d at 555-57.

“If the court

determines that the language of the contract is clear and
unambiguous, the contract is to be given effect according to its
terms, and those terms may be the basis for summary judgment.”
Hapag-Lloyd, 446 F.3d at 316 (internal quotation marks omitted).
Contract language “is ambiguous if it is capable of more than
one meaning when viewed objectively by a reasonably intelligent
person who has examined the context of the entire integrated
agreement and who is cognizant of the customs, practices, usages
and terminology as generally understood in the particular trade
or business.”

Id. (internal quotation marks omitted).

In

short, contracts are construed “by their terms and consistent
with the intent of the parties.”

Id. (quoting Kirby, 543 U.S.

at 31).

7

This contract is unambiguous.

There is no doubt that

the bill of lading contains an enforceable mandatory forum
selection clause requiring resolution of any dispute to be in
Germany applying German law.

Am. Home Assurance Co. v. M/V

JAAMI, No. 06 Civ. 287, 2007 WL 1040347, at *2 (S.D.N.Y. Apr. 4,
2007) (enforcing the same clause at issue here as a mandatory
forum selection clause).

Clause 25 states that “any claim . . .

arising under this bill of lading shall be governed by the law
of the Federal Republic of Germany and determined in the Hamburg
courts to the exclusion of the courts of any other place.”
(Teichmann Decl. Ex. A.)

This clause, along with Clause

5(1)(a), provides for the Hague-Visby Rules to apply unless a
specific exception applies.
Clause 7(2) is a specific exception.

It says that if

“suit is brought in a [U.S. court] and such court, contrary to
Clause 25, accepts jurisdiction, then [COGSA] shall” apply if
the bill of lading covers a shipment to or from the United
States.

(Id.)

The question under consideration is whether this

exception applies to the claims against the Rickmers interests
for loss or damage to the cargo.4

4

Although the Rickmers

Prior decisions in this case have not involved the liability of
the Rickmers interests. Instead, they have involved the
liability of ESM Group or ESMT, as third-party defendant. See
Rickmers I, 622 F. Supp. 2d at 64; Rickmers II, 643 F. Supp. 2d
at 554; Rickmers III, 2010 WL 4446080, at *1. Here, the Court
(cont’d . . .)
8

interests argue that Clause 7(2) applies whenever a claim for
damage to cargo shipped to or from the United States is
litigated in a U.S. court, that argument is too broad.

Clause

7(2) applies only to some, not all, claims litigated in a U.S.
court for damage to United States-bound or –shipped cargo.

The

Court explains.
Clause 7(2) provides for the application of COGSA only
when a U.S. court accepts jurisdiction “contrary to Clause 25.”
The Court accepts ESM Group’s proposition that this phrase has
meaning.

The Court must give effect to all of the provisions of

a contract, and an interpretation that renders a term
superfluous or meaningless is avoided if possible.

LaSalle Bank

N.A. v. Nomura Asset Capital Corp., 424 F.3d 195, 206 (2d Cir.
2005).

“Contrary” means “diametrically different,” “opposite in

character or nature,” or “mutually opposed.”

Webster’s Third

New International Dictionary 495 (1986); see 3 Oxford English
Dictionary 844 (2d ed. 1989) (stating that etymology of
“contrary” is from the Latin “contrarius” meaning “opposite,
hostile”).

“Contrary” means that the relationship between the

clauses is more “opposed” than another word, such as
“irrespective” or “regardless,” would imply.

“Contrary”

is reviewing the limitation of liability vis-à-vis the Rickmers
interests, the defendants and carrier, for loss or damage of
cargo claims filed against the Rickmers interests.

9

suggests an “antagonistic” nature between the Court’s taking
jurisdiction over Clause 25.

3 Oxford English Dictionary 844

(stating that contrary is used with the sense of “repugnant” or
“antagonistic”).

Its use here therefore requires a U.S. court

to take jurisdiction in opposition to, or antagonistic to, or
hostile to, Clause 25.

Construing the same language contained

in Clause 7(2) in a bill of lading drafted by another carrier,
this Court stated that this clause “merely provides for a
contingency in the event that some court does not enforce the
forum selection clause.”

M/V JAAMI, 2007 WL 1040347, at *2.5

In

effect, a U.S. court must be presented with an argument that the
forum selection clause, Clause 25, applies, then, for whatever
reason, decline to enforce it.6

After doing so, the U.S. court

would take jurisdiction “contrary to Clause 25.”
Clause 7(2) does not apply more broadly, as the
Rickmers interests urge.

They say that anytime a U.S. court

takes jurisdiction, jurisdiction is “contrary to Clause 25.”
Under the Rickmers interests’ interpretation, “contrary to
Clause 25” is meaningless and can be removed from the contract,

5

In that case, the parties had agreed upon the application of
COGSA.
6

It is important to note that this provision is not a
jurisdictional statute but, rather, a contract term, which the
parties must ask to have applied. Here, no party sought the
application of this forum selection clause.

10

making it read, in effect, “in the event that suit is brought in
a court in the United States of America and such court accepts
jurisdiction, then the Carriage of Goods by Sea Act (COGSA)
shall [apply].”

The Court cannot read a phrase out of the

contract.
The case the Rickmers interests point to as most
supportive of their position involves a very similar mandatory
forum selection and choice-of-law clause; in that case the Court
applied COGSA to the limit the carrier’s liability.

Am. Home

Assurance Co. v. Hapag Lloyd Container Linie, GmbH, No. 04 Civ.
5605, 2004 WL 1616379, at *4 (S.D.N.Y. July 19, 2004), aff’d on
other grounds, 446 F.3d 313 (2d Cir. 2006).

However, the forum

selection clause in that case did not include the word
“contrary.”
difference.7

Id.; Rickmers Reply Br. at 15.

This fact makes a

Likewise, the bills of lading in Royal & Sun

Alliance Ins. PLC v. Ocean World Lines, 572 F. Supp. 2d 379, 385
(S.D.N.Y. 2008) and A.P. Moller-Maersk A/S v. Ocean Express
Miami, 590 F. Supp. 2d 526, 531 (S.D.N.Y. 2008) – the two other
cases the Rickmers interests rely upon – did not contain similar

7

Additionally, it appears that no party in American Home raised
the issue raised here, and the Court of Appeals affirmed on the
basis of a “Himalaya” clause, which is not implicated here. See
Hapag-Lloyd, 446 F.3d at 317.

11

“contrary to” language.8

(Second Declaration of Timothy Semenoro

(“Semenoro Decl.”), dated Mar. 16, 2011, Exs. 2-3.)

Given the

differences in the contractual language, the Court must give
“contrary to” some meaning.
Moreover, the Rickmers interests submitted copies of
other bills of lading litigated in these cases.

A review of

those bills of lading shows a more obvious intent to apply COGSA
to limit the carrier’s liability whenever a shipment was to or
from a port in the United States.

For example, another bill of

lading states “Notwithstanding the preceding provision, in the
event that this Bill covers shipments to or from the United
States, then COGSA shall be compulsorily applicable . . . .”
(Id. at Ex. 2, Cl. 7(1).)

It goes on to limit the carrier’s

liability to $500 – the COGSA minimum – in the event that the
bill of lading “covers the goods moving to or from a port of
final destination in the United States.”

(Id. Cl. 23(3).)

There is no requirement that a U.S. court assume jurisdiction
“contrary to” another forum selection clause in order that COGSA
apply.

8

Similarly, the Rickmers interests’ reliance on Stolt Tank
Containers, Inc. v. Evergreen Marine Corp., 962 F.2d 276 (2d
Cir. 1992), is misplaced because that case dealt with whether “a
bill of lading's $500 per package liability limitation provision
was enforceable against a non-party shipper to the bill of
lading.” Rickmers II, 643 F. Supp. 2d at 558.

12

The Court recognizes that the Rickmers interests are
defendants and third-party plaintiffs here, meaning that the
plaintiffs made the initial forum choice.

Thus, for the

Rickmers interests to avail themselves of COGSA under this
interpretation would require them to invoke a forum selection
clause that may disadvantage them.9
the bill of lading.

But the defendant drafted

The principles animating the canon of

contra preforentem have an application here.

See Newman &

Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 663 (2d Cir.
1996) (stating that courts must “construe ambiguous contract
terms against the drafter”); see also Caterpillar, Inc. v. M/V
KARONGA, No. 06 Civ. 8236, 2008 WL 1849771, at *8 (S.D.N.Y. Apr.
23, 2008) (citing cases applying “Hague-Visby Rules in lieu of
COGSA”).

If the Rickmers interests wanted the COGSA limitation

of liability to apply whenever a shipment is bound to the United
States, they could have written the bill of lading that way, as
other carriers appear to have done.10

9

The Court speaks only of the limitation of liability regime and
makes no comment regarding other substantive or procedural rules
that may be more or less favorable.
10

For example, the same clause in a Hapag-Lloyd bill of lading
states, “Notwithstanding the foregoing, where the Carriage is to
or from a port or final destination in the United States, the
Carrier’s limitation of liability in respect of the Goods shall
not exceed U.S. $500.00 per package . . . .” (Semenoro Decl.
Ex. 1, Ex. B.) A parallel clause in an Ocean World Lines bill
of lading states, “Notwithstanding the preceding provision, in
(cont’d . . .)
13

Bringing these principles to bear on this case, the
Court concludes that it did not accept jurisdiction “contrary to
Clause 25” because no party asked this Court to enforce Clause
25.11

The Court therefore did not fail to “enforce the forum

selection clause,” M/V JAAMI, 2007 WL 1040347, at *2, and
trigger the application of COGSA as directed in this bill of
lading.
The bill of lading provides for a default rule: the
Hague-Visby Rules govern unless an exception applies.

the event that this Bill covers shipments to or from the United
States, then COGSA shall be compulsorily applicable . . . .”
(Id. Ex. 2, Ex. FF.) Likewise, a Maersk Line bill of lading
states, “Notwithstanding anything provided for in clause 6.1 and
subject to clause 18, the liability of the Carrier in respect of
such loss or damage shall be determined: . . . (b) in case of
shipments to or from the United States of America by the
provisions of US COGSA if the loss or damage is known to have
occurred during Carriage by sea to or from the USA . . . .”
(Id. Ex. 3, Ex. B, at 5-6.) Finally, an Evergreen bill of
lading states, ““In the event this Bill covers the goods moving
to or from a port of final destination in the United States, the
Carrier’s limitation of liability in respect to the Goods shall
in no event exceed U.S. Dollars $500 per package . . . .” (Id.
Ex. 5.) None of these other bills of lading contains a
provision hinging the application of COGSA on a U.S. court’s
jurisdiction or whether a U.S court takes jurisdiction “contrary
to” another clause. They select the application of COGSA when a
shipment is to or from the United States.
11

Other cases in this district interpreting the same exact
language have been faced with situations where one party seeks
to enforce the forum selection clause. E.g., M/V JAAMI, 2007 WL
1040347, at *1; Jockey Int’l, Inc. v. M/V LEVERKUSEN EXPRESS,
217 F. Supp. 2d 447, 449 n.1, 455 (S.D.N.Y. 2002); Reed & Barton
Corp. v. M/V Tokio Exp., No. 98 Civ. 1079, 1999 WL 92608, at *23 (S.D.N.Y. Feb. 22, 1999).

14

(Teichmann Decl. Ex. A, Cl. 5(1)(a), 25.)
exception is that in Clause 7(2).

The only relevant

Because that clause does not

apply, the Hague-Visby Rules apply.

Moreover, specifically with

respect to ESM Group, it was arguably included in this
litigation consistent with Clause 25 because it was added as a
third-party defendant by the carrier, which had the option to
sue the “Merchant” (defined to include ESM Group) in its place
of business (here, New York).12

(Id. Ex. A, Cl. 25 (“In case the

Carrier intends to sue the Merchant the Carrier also has the
option to file a suit at the Merchant’s place of business.”);
see id. Ex. A, Cl. 1.)
Nothing in COGSA precludes this result.

“The relevant

question . . . is whether the substantive law to be applied will
reduce the carrier's obligations to the cargo owner below what
COGSA guarantees.”

Vimar Seguros y Reaseguros, S.A. v. M/V Sky

Reefer, 515 U.S. 528, 539 (1995); see M/V JAAMI, 2007 WL
1040347, at *1-2.

The Hague-Visby Rules provide for obligations

12

In letter briefs submitted to the Court, both the Rickmers
interests and ESM Group stated that all of the parties intended
for the Rickmers interests to allege claims against, and thereby
include in this litigation, ESM Group as third-party defendants.
ESM Group Letter Brief dated Apr. 29, 2011, at 4; Rickmers
Letter Brief dated Apr. 29, 2011, at 1-2. Nevertheless, the
relevant claims are for loss of or damage to cargo, which
implicate the Rickmers interests as a defendant, be those claims
ESM Group’s (asserted as counterclaims) or the other shippers’
(asserted as primary claims).

15

to the cargo owner that exceed COGSA's minimum, so nothing in
COGSA precludes the application of those rules.
CONCLUSION
Because the Court did not assume jurisdiction
"contrary to Clause 25," Clause 7(2) does not apply.

Therefore,

COGSA does not govern the Rickmers interests' limitation of
liability of the claims for loss or damage of cargo here.

The

Rules limit the Rickmers interests' liability.

Hague-Vi

Group's cross-motion for part

ESM

summary judgment [dkt. no. 201

05 Civ. 4261] is GRANTED, and the Rickmers interests' motion
for part
DENIED.

summary judgment [dkt. no. 194 in 05 Civ. 4261] is
This memorandum opinion replaces and supersedes the

memorandum opinion filed on May 25, 2011.

[dkt. no. 216 in 05

Civ. 4261]

SO ORDERED.
Dated:

New York, New York
May 26, 2011

~cJ;l£?~

LORETTA A. PRESKA
Chief U.S. Dis
ct Judge

16