Opinion
Civil Action 00-3094 Section "T"(4)
August 21, 2001
Before the Court are two pending motions filed on behalf of the plaintiff, Great White Fleet (US), Ltd. In the first motion, which was set for hearing on January 31, 2001, the plaintiff seeks summary judgment against the defendant for unpaid freight allegedly owed in the amount of $415,250.00 together with interest, attorneys fees, and costs. The second is a Motion for Partial Summary Judgment, which was set for hearing on February 28, 2001, whereby the plaintiff seeks a partial dismissal of defendant, DSCV Transport, Ltd.'s Counterclaims and Affirmative Defenses. The parties waived oral argument on these motions which were submitted for consideration by the Court on the briefs alone on their respective hearing dates. The Court, having considered the arguments of counsel, the evidence submitted, the record, the law and applicable jurisprudence, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
This suit involves a maritime and admiralty cause of action brought to recover unpaid freight for shipments of automobiles by sea from the United States of America to Central America. The action was originally filed in the United States District Court for the Southern District of New York but subsequently transferred on the motion of defendant, DSCV Transport, Ltd. ("DSCV"). DSCV, a non-vessel owning shipper, contracted with the plaintiff, Great White Fleet (US) Ltd. ("Great White"), a common carrier, for weekly shipments on Great White's vessels. Great White contends DSCV owes $415,250.00 for unpaid freights which were shipped and delivered, plus interest, attorney's fees, and costs. DSCV, in response, filed an answer asserting affirmative defenses and counterclaims against Great White. DSCV alleges in Counts One and Two of the Counterclaim Great White breached the service contracts by failing to provide the minimum number of containers and refusing to use its "best efforts" in obtaining additional containers beyond the minimum requirements of the contract. In Counts Three, Four, and Five, DSCV alleges violations of the Shipping Act of 1984. Furthermore, in Paragraph 17 of the Answer DSCV alleges three recoupment defenses based on Great White's performance under the service contract which forms the basis of the Shipping Act violations. The plaintiff seeks the dismissal of paragraphs 17(b) and 17(c) of DSCV's Affirmative Defenses and Counts Three, Four, and Five of DSCV's Counterclaim in the Motion for Partial Summary Judgment.
MOTION FOR SUMMARY JUDGMENT FOR UNPAID FREIGHT OWED BY THE DEFENDANT
II. ARGUMENTS OF GREAT WHITE IN SUPPORT OF SUMMARY JUDGMENT:
First, Great White argues that DSCV has an unconditional obligation to pay the agreed upon charges upon delivery of the goods to Great White. In this matter, the parties contracted to have freight due and payable not upon delivery of the goods at destination by the carrier, but rather, upon delivery of the goods to the carrier at the port of loading. Rule 8-L of the Great White Tariff FMC-003 and clause 12 of the Great White bill of lading, each entitled "Freight and Charges; Lien" provide:
All freight, additional freight and charges due hereunder are earned and payable in full without discount, offset or deduction upon delivery of the Shipment to the Carrier, Vessel and/or Shipment lost or not lost, damaged or delayed, and whether or not the transport is broken up or abandoned.
In failing to remit full payment in a timely manner, DSCV has breached the contract and its obligation. Moreover, this provision makes clear DSCV is not entitled to offset the freight due and owed to Great White. The Tariff and bill of lading preclude any discount, offset or deduction on freight properly due and payable.
Next, Great White contends it is entitled to attorney's fees incurred in collecting these freight fees from DSCV. The Tariff FMC-003 (Rule 8-L) and the bill of lading unambiguously provide that the carrier, Great White, is entitled to recover its attorney's fees in any action commenced to recover unpaid freight charges.
Finally, the plaintiff asserts it is entitled to prejudgment interest on the freight owed. Allowance of prejudgment interest in admiralty is the rule absent peculiar or exceptional circumstances. The rate at which it is awarded, however, is within the discretion of the Court. Great White submits six percent (6%) should be applied in this case because it represents the average 52 week T-Bill rate for the period in question.
III. ARGUMENTS OF DSCV IN OPPOSITION TO SUMMARY JUDGMENT:
The affirmative defenses and counterclaims asserted by DSCV allege Great White breached its service contracts, as well as violated the Shipping Act. First, DSCV contends Great White failed to provide the minimum number of containers required under the service contracts and further refused to use its "best efforts" to obtain additional containers beyond the minimum. Secondly, DSCV argues Great White charged DSCV higher rates than its competitors and improperly refused to provide DSCV with the minimum number of containers required in retaliation for DSCV successfully "me-too-ing" the service contract between Great White and a DSCV competitor, Cartainer. in violation of the Shipping Act of 1984. Next, DSCV alleges an unreasonable refusal to deal claim under the Shipping Act of 1984, maintaining Great White refused to enter into any further service contracts with DSCV again in retaliation. Finally, DSCV asserts that Great White engaged in discriminatory pricing under the service contracts by charging DSCV significantly higher rates than competitors, Cartainer or Port-to-Port, in violation of the Shipping Act of 1984.
DSCV argues their recoupment defense precludes summary judgment. First, the policy underlying the cases cited by the plaintiff holding that a court may enter judgment on a carrier's claim for freight charges despite the existence of a counterclaim is inapplicable to the present matter. The policy is to protect "tramp" ships by promoting the commercial viability of a shipping enterprise by allowing a shipper to collect his freight immediately rather than after a lengthy litigation. This is not a concern for Great White who is a "liner" carrier, owned by Chiquita Banana International, with its primary business to transport bananas from Central America to the United States. As a complement to this business, Great White carries freight when they make their southbound voyage back to Central and South America to pick up bananas. As such, the policy considerations are not a concern in this instance.
Secondly, DSCV contends the recoupment defenses preclude summary judgment as the majority of the DSCV breach of contract and Shipping Act claims are affirmative defenses and not counterclaims. Fifth Circuit case law indicates recoupment may be available to reduce a carrier's claim for unpaid freight. It is well-established the existence of an affirmative defense may raise genuine issues of material fact and questions as to whether the movant is entitled to judgment as a matter of law, thereby precluding summary judgment.
Additionally, DSCV argues the "filed rate doctrine" does not preclude DSCV's recoupment claims as Great White cannot shield itself from its misconduct based on that doctrine. Moreover, Great White's contention in its memorandum that "additional freight charges" have accrued since the filing of the complaint cannot be raised for the first time in a motion for summary judgment. If Great White believes additional charges have become due and owed, the proper course is to amend the complaint.
Finally, DSCV contends Great White is not entitled to attorneys' fees. DSCV argues that the provision in the tariff and bill of lading is "unreasonable and unjust" as the right to recover these fees and costs is vested in the carrier alone. However, if the Court were to award such fees, it is submitted that such fees should not include any amounts expended to defendant against the Motion to Dismiss filed in New York.
MOTION FOR PARTIAL SUMMARY JUDGMENT SEEKING DISMISSAL OF COUNTERCLAIMS AND AFFIRMATIVE DEFENSES OF THE DEFENDANT
IV. ARGUMENTS OF GREAT WHITE IN SUPPORT:
The plaintiff argues Counts Three, Four, and Five of the Counterclaim and Paragraphs 17(2) and 17(3) are subject to the primary jurisdiction of the Federal Maritime Commission ("FMC"). It is well established law that the FMC has primary jurisdiction over all disputes involving the Shipping Act. Moreover, the Shipping Act specifically bars private lawsuits, providing instead for an administrative complaint and review process before the FMC, which has exclusive jurisdiction over all such matters. Counts Three, Four, and Five of DSCV's Counterclaim, along with Paragraphs 17(2) and 17(3) of DSCV's Affirmative Defenses assert breaches of the Shipping Act. These claims are within the sole province of the FMC and as such the claims should be dismissed as a matter of law.
V. ARGUMENTS OF DSCV IN OPPOSITION:
The doctrine of primary jurisdiction does not divest the federal courts of its jurisdictional power over a claim. Rather, the doctrine merely allows a court to exercise its discretion to determine whether the case is best referred to an agency where the issues involve matters within the special expertise of that agency. The doctrine is not applicable in cases where the questions are legal and not factually complicated. The claims and defenses asserted in this case by DSCV present issues that are predominantly factual in nature not requiring specialized expertise of the FMC to be resolved. The analysis in resolving the issues presented are basic, relating primarily to whether the rates charged to DSCV were discriminatory when compared to the rates of its competitors, Cartainer and Port-to-Port. As such, it is appropriate for this Court to retain the claims in this Court.
Furthermore, it is asserted by DSCV that a referral of the Shipping Act claims to the FMC could result in inconsistent and conflicting decisions regarding the legal effect of the same facts by the FMC and this Court. Clearly, Counts One, Two, and Paragraph 17(1) are breach of service contract claims that fall within the exclusive jurisdiction of the Court. However, the failure of Great White to provide the required number of containers is the basis for the Shipping Act retaliation claim in Count Three and affirmative defense Paragraph 17(2). Thus, a referral of the Shipping Act claims to the FMC would result in two forums resolving separate claims that are inextricably intertwined, but the FMC could also determine that Great White satisfied its obligations while this Court could reach an opposite conclusion based on the same facts.
Even if this Court would conclude the FMC has primary jurisdiction over the Shipping Act claims, summary judgment would still be inappropriate. Upon a finding that an agency has primary jurisdiction over a claim, a court should merely refer the case to the appropriate agency and suspend the remaining proceedings before it pending resolution of the issues by the administrative body.
VI. LAW AND ANALYSIS:
A. Law on Summary Judgment:
The Federal Rules of Civil Procedure provide that summary judgment should be granted only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED, R. CIV. P. 56(c). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact. Stults v. Conoco. Inc., 76 F.3d 651, 655-56 (5th Cir. 1996) (citing Skotak v. Tenneco Resins. Inc., 953 F.2d 909, 912-13 (5th Cir.) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)), cert. denied 506 U.S. 832 (1992)). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis supplied); Tubacex. Inc. v. M/V RISAN, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonnioving party, there is no "genuine issue for trial." Matsushita Elec. Indus. Co., 475 U.S. at 588. Finally, the Court notes that substantive law determines the materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986).
B. The Court's Analysis relative to the Unpaid Freight Claim:
Term 12 of the Service Contract entered into by the parties to this suit states:
Refer to Rule 100 of Carrier's Service Contract Tariff — FMC 005 and the subterms thereof, and the Rules and Regulations of the Carrier's FMC Tariff of General Applicability FMC UBCU-003 for any terms of the service contract not otherwise specifically provided for in this section.
Clark Exhibit A. The Great White FMC Tariff of General Applicability FMC — 003 contains a clause, Rule 8-L, entitled "B/L: Freight and Charges; Lien" which provides:
All freight, additional freight and charges due hereunder are earned and payable in full without discount, offset or deduction upon delivery of the Shipment to the Carrier. Vessel and/or Shipment lost or not lost, damaged or delayed, and whether or not the transport is broken up or abandoned.
The Merchant hereby irrevocably agrees that any legal action or administrative proceeding in any way connected with the Shipment or transport may be brought by Carrier in a state or federal court in the State of New York or before the United States Federal Maritime Commission, and with respect to such action or proceeding, the Merchant; submits to the non-exclusive jurisdiction of each of the named forums; waives any objection thereto on the basis of venue, forum non conveniens and/or other grounds; and agrees that attorney's fees and costs incurred by the Carrier to collect such freight, charges, costs, losses, damages and/or indemnity are recoverable in such action or proceeding.
Clark Exhibit E. Likewise, the bills of lading issued to DSCV for each separate shipment, provide on the reverse side in Clause 12 entitled "Freight and Charges; Lien" the same language contained in the Tariff FMC-003 set forth above.
The Service Contract, which incorporates the provisions of the Tariff of General Applicability FMC-003, forms the agreement entered into between the parties. As such, the parties agreed payment would be due in full at the time the shipment was delivered to the carrier, Great White, without any discount, offset, or deduction. The Court is therefore satisfied that the clear, unambiguous intent of the parties with respect to payment of freight, as provided for in the Service Contract and set forth in the Tariff and bill of lading, is that the unpaid freight charges in the amount of $415,250.00 became due by DSCV at the time the freight was delivered to Great White for shipment. By express agreement among the parties, this amount is not subject to discount, offset, or deduction.
"Recoupment is a defense that goes to the foundation of plaintiff's claim by deducting from plaintiffs recovery all just allowances or demands accruing to the defendants with respect to the same contracts or transactions." Distribution Services, Ltd. v. Eddie Parker Interests, Inc., 897 F.2d 811, 812 (5th Cir. 1990) (citing to Pennsylvania R. Co. v. Miller, 124 F.2d 160, 162 (5th Cir. 1941). The defense of recoupment goes to the existence of the plaintiffs claim, and is limited to the amount thereof. See, Miller, supra.
DSCV argues Great White refused to reduce the rates agreed to in the 99-171 Service Contract to levels comparable to those entered into with one competitor and instead increased the rates it had previously charged in prior service contracts. Subsequently, Great White entered into a service contract with another DSCV competitor, again with rates substantially lower than those of DSCV's Service Contract 99-171. DSCV thus contends it was unable to make a profit against these competitors and was forced to operate at a loss on each shipment. Furthermore, DSCV argues Great White failed to provide it with the minimum containers required by the service contract while at other times refused to provide containers above the minimum. While DSCV was denied containers, its competitors were provided with containers meeting and/or exceeding the minimums required under their respective service contracts. As a result, DSCV withheld freight charges in an attempt to recoup the damages its alleges to have sustained as a result of Great White's wrongful conduct.
Simply, in accordance with our jurisprudence, these are not claims that may adequately be described as recoupment defenses, but instead are more in the nature of a counterclaim. Defenses cannot be tried separately from a plaintiff's claim, while counterclaims may be tried separately. In this case, the plaintiff seeks to recover unpaid freight charges for cargo that was in fact delivered to Great White for shipment, which was then in fact shipped. There is no dispute the freight delivered by DSCV to Great White for shipment, was in fact shipped. Furthermore, there is no allegation DSCV was charged rates in excess of what was agreed upon under the Service Contract, but instead that the contracted rate was not comparable to the rate agreements entered into with DSCV competitors. Accordingly, the freight charges are due and payable regardless of any claims DSCV may have against Great White for breaches under the contract in failing to provide the proper amount of cargo space required and in discriminatory contracting with rates higher than that of its competitors. These sorts of damages would not be limited to the claim of the plaintiff and further could be tried separately.
The Court finds the situation presented in this case where Great White is a "liner ship" owned by Chiquita Banana for the primary purpose of shipping bananas from Central and South America to the United States does not remove it entirely from the policy reasons for the long-standing maritime rule of requiring immediate payment not subject to setoff. The rule protects and promotes the commercial viability of shipping enterprises by allowing a shipper to collect his freight immediately upon delivery rather than after lengthy delay and litigation. See, Greenstone Shipping Co. v. Transworld Oil. Ltd. of Hamilton, Bermuda, 588 F. Supp. 574 (D.Del. 1984). This policy may be applied under the circumstances of this case.
The Fifth Circuit in Pennsylvania R. Co. v. Miller, allowed a consignor to assert by way of recoupment, damage to the shipments caused by the negligence of the carrier in a suit to collect unpaid freight charges. In that case, the consignor was barred from bringing the suit pursuant to the limitations placed in the bill of lading; however, the court found the limitations did not affect a defense byway of recoupment.Pennsylvania R. Co. v. Miller, supra. In this case, the claim asserted is not for damage to the shipment caused by the negligence of the carrier; instead, DSCV's allegations involve failure to provide sufficient cargo space, loss of profits, and discriminatory rate charges. Moreover, there is no limitations problem presented in the current litigation. As such, the present case bears little relationship to the situation presented inMiller.
In Greenstone Shipping, the Court granted a motion for summary judgment for unpaid freight. In that case, it was determined the charterer could not deduct from the unpaid freight charges amounts for cargo damage, shortage or contamination. The Court stated it is well settled law that a charterer's liability to pay freight is an independent obligation payable regardless of any claims the charterer may have for cargo damage, shortage, or contamination. Greenstone Shipping, supra. Again, the claims asserted in this case are distinguishable from claims for cargo damage, shortage, or contamination.
In Metallgesellschaft v. MN Capitan Constante, 790 F.2d 280 (2nd Cir. 1985), Metallgesellschaft entered into a charter party agreement with Yacimientos for the carriage of fuel oil. The contract entered into specifically provided payment of freight would be made by the charterer without discount upon delivery of the cargo at destination and no deduction of freight would be made for water and/or sediment contained in the cargo. Metallgesellschaft however filed suit for damages as a result of an alleged short delivery and fuel contamination. In response, Yacimientos counterclaimed for freight earned. The Second Circuit determined the clearly expressed intent of the parties was that the plaintiff would pay its freight bill promptly upon delivery and would not be able to evade the prompt performance of that contractual obligation by asserting a claim in abatement or set-off. Id. In this case, the contract entered into by the parties, likewise, expresses the intent that freight would be due without discount, offset or deduction.
Similarly, in Genetics International v. Cormorant Bulk Carriers, Inc., the plaintiff alleged damage to cargo and the defendant counterclaimed for unpaid freight. The Ninth Circuit granted summary judgment for the unpaid freight finding plaintiff did not have a right to offset the freight charges for damages sustained to the cargo. Furthermore, the court found the damage allegedly sustained was in an entirely different transaction which in no way could be used to set-off the freight charges. As the cross claims were factually unrelated, the claims could be decided independently from one another. Id.
The Fifth Circuit discussed recoupment in the context of the statutes of limitation under the Carriage of Goods by the Sea Act ("COGSA") inDistribution Services, supra. The Court determined in a breach of contract of carriage suit filed by the plaintiff, a defendant can assert a claim for cargo damages by way of recoupment under COGSA even though an affirmative action for damages would be time barred. The Court reasoned because recoupment is in the nature of a defense, it is never barred by the statute of limitations so long as the plaintiffs main action itself is timely. Id. In this case, there is no statutes of limitations problem and furthermore, suit is not tiled pursuant to COGSA.
In Reiter v. Cooper, 507 U.S. 258, 113 S.Ct. 1213, 122 L.Ed.2d 604 (1992), the Supreme Court found when a shipper defends against a motor common carrier's suit to collect tariff rates with the claim the tariff rates were unreasonable, such a claim is a counterclaim rather than a defense which can be adjudicated separately from the plaintiff's claim to which it applies. Id. Some of DSCV's claims involve the charging of unreasonable rates and to that extent, the Reiter case speaks directly to the issue that said claims are not defenses but instead counterclaims.
Accordingly, after a thorough review of the relevant jurisprudence, the Court finds the claims asserted on behalf of DSCV in no way create issues of fact with regard to Great White's entitlement to the unpaid freight charges.
Next, this Court finds Great White is entitled to attorney's fees incurred in the collection of freight from DSCV. The contract entered into by the parties in this case which incorporates Clause 12 of the bills of lading and Rule 8-L of the Tariff FMC-003 provide: "attorneys' fees and costs incurred by the Carrier [Great White] to collect such freight, charges, costs, losses, and to indemnity are recoverable." This provision does not violate public policy and may be awarded. Moreover, plaintiff is entitled to pre-judgment interest at the rate of six percent (6%).
The amount of said attorneys' fees can not be determined based upon the evidence presented at this time; thus, a reasonable award of associated costs and attorney's fees will be determined at a later date upon proper proof.
C. The Court's Analysis relative to DSCV's Counterclaims/Affirmative Defenses:
As stated above, the plaintiff seeks the dismissal of paragraphs 17(b) 17(c) of DSCV's Affirmative Defenses, and Counts Three, Four, and Five of the Counterclaim. Specifically. Count Three alleges Great White charged DSCV higher rates than that of its competitors and improperly refused to provide DSCV with the minimum number of containers required and containers exceeding the minimum on a "best efforts" basis as required by the service contract in retaliation for DSCV successfully "me-too-ing" the Cartainer service contract in violation of section 1709(b)(3) of the Shipping Act. Count Four asserts a claim of unreasonable refusal to deal based upon section 1709(b)(10) of the Shipping Act after Great White refused to enter into any further contracts with DSCV in retaliation for its successful "me-too-ing" of the Cartainer service contract. Finally, Count Five asserts a claim of discriminatory pricing pursuant to section 1709(b)(5) of the Shipping Act as DSCV was charged higher rates than those charged to its competitors. Paragraph 17(2) of the Amended Answer alleges that Great White violated section 1709(b)(3) of the Shipping Act by retaliating against DSCV for "me-too-ing" the Cartainer service contract by imposing higher rates than those charged to competitors and refusing to provide containers as contracted. While Paragraph 17(3) alleges that Great White violated section 1709(b)(5) of the Shipping Act by charging DSCV discriminatory prices.
The Court notes the present motion seeking dismissal of the above-stated claims, as set forth in the Amended Answer and Counterclaim, was filed prior to the Magistrate granting DSCV's motion for leave to file the Amended Answer and Counterclaim. As the motion for leave was granted, this Court will treat the motion as being timely filed.
It is well established in our jurisprudence that the Federal Maritime Commission ("FMC") has primary jurisdiction over all disputes involving the Shipping Act. See, Buchanan v. Fowler, 381 F.2d 7, 8 (5th Cir. 1967); King Ocean Central America v. Angel Food and Fruit Co., 1995 WL 819141, 1996 A.M.C. 146 (S.D. Fla. 1995). As the claims asserted by DSCV allege the violation of the Shipping Act, said claims fall within the province of the FMC and should therefore be determined by said agency with expertise in this area. The Court believes the FMC is in the best position to properly evaluate the allegations regarding retaliation and discriminatory pricing relative to the "me-too-ing" of the Cartainer Service Contract, as well as the allegations of unreasonable refusal to deal as presented in this case. While Counts One and Two along with the allegations of Paragraph 17(1) do not fall within the province of the FMC, said claims do relate to the other claims which will be heard by the FMC; therefore, this Court believes that a suspension of the proceedings on the remaining claims is warranted to allow the administrative body the opportunity to apply its expertise to the issues before the Court.
Accordingly.
IT IS ORDERED that the Motion for Summary Judgment (Doc. #6) filed on behalf of the plaintiff. Great White Fleet (US) Ltd., be and the same is hereby GRANTED.
IT IS FURTHER ORDERED that judgment is hereby rendered in favor of the plaintiff, Great White Fleet (US) Ltd. and against the defendant, DSCV Transport, Ltd., in the amount of Four Hundred Fifteen Thousand Two Hundred Fifty Dollars ($415,250.00) together with prejudgment interest at the rate of six percent (6%), associated costs and attorney's fees, to be determined by the Magistrate Judge upon subsequent motion and proper proof.
IT IS FURTHER ORDERED that the Partial Motion for Summary Judgment filed on behalf of the plaintiff, Great White Fleet (US) Ltd., (Doc. #14) seeking the dismissal of defendant's counterclaims and affirmative defenses be and the same is hereby DENIED.
IT IS FURTHER ORDERED that consistent with the Court's opinion herein the remaining counterclaims and affirmative defenses asserted on behalf of the defendant, DSCV Transport, Ltd., be and the same are hereby DEFERRED pending action by the Federal Maritime Commission. The parties are to report on the status of the FMC proceedings on Tuesday, January 8, 2002 at 11:00 a.m.