Opinion
No. 99-1668, SECTION "K"(5).
July 7, 2000.
ORDER AND REASONS
Before the court is a Motion to Dismiss filed by Samsun Shipping Corporation ("Samsun") pursuant to Rule 12(b)(1) and (3) of the Federal Rules of Civil Procedure. For the reasons that follow, the court finds that the defendant's motion has merit and should be granted.
1. Background
This case arises from the transportation of 2,802 pieces of seamless stainless steel tubing from Kinuura, Japan to New Orleans. The cargo was transported onboard the M/V PRETTY PROSPERITY ("the PRETTY PROSPERITY"), which was owned by defendant Samsun and chartered to Tokai Shipping Company, Ltd. ("Tokai"). Tokai shipped the cargo to the order of Kanematsu USA, Inc. ("Kanematsu"). Tokai and its cargo insurer, Tokio Fire and Marine Insurance Company, Ltd. ("Tokio Fire Marine"), are both Japanese corporations licensed to do business in the United States.
On April 30, 1998, after inspecting the tubing, Tokai issued clean onboard bills of lading for carriage to New Orleans. Upon arrival in New Orleans on May 31, 1998, the cargo was discharged, and plaintiffs allege that the tubing sustained rust damage during the voyage.
Consequently, Tokio Fire and Marine paid damages to Kanematsu and became subrogated to its claims against defendants. Tokio Fire Marine then brought this action against the PRETTY PROSPERITY, in rem, Tokai and Samsun. Samsun now moves the court to dismiss plaintiffs' complaint, arguing that the foreign forum selection clause in the bills of lading deprives this court of jurisdiction.
2. Legal Analysis
At the outset, the court notes that the facts of this case are virtually identical to those before it in its recent decision of Nippon Fire Marine Ins. Co. v. M/V CORAL HALO, 2000 WL 174894 (E.D.La. 2000). In that case, the court traced the jurisprudence of enforcing foreign forum selection and arbitration clauses in bills of lading, which need not be reiterated at length.
In short, forum selection clauses are entitled to a presumption of validity. To overcome the presumption of validity, the party challenging enforcement must demonstrate that the clause is "unreasonable under the circumstances." M/S BREMEN v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). A forum selection clause may be unreasonable if; 1) it was incorporated into the agreement through fraud or overreaching; 2) the opponent to the clause will for all practical purposes be deprived of his day in court because of grave inconvenience or unfairness; 3) the chosen law is unfair and will deprive plaintiff of a remedy; or 4) enforcement of the forum selection clause would contravene a strong public policy. Haynesworth v. The Corporation, 121 F.3d 956, 963 (5th Cir. 1997). Where, as in this case, the forum selection clause is incorporated into a bill of lading, the clause is "null and void and of no effect" if it relieves the carrier of liability or lessens its liability. 46 U.S.C. § 1303 (8).
In this case, the foreign forum selection clause at issue reads, "The contract evidenced by this Bill of Lading shall be governed by the law of Japan except as otherwise provided in this Bill of Lading. Any action concerning custody or carriage under this Bill of Lading shall be brought before the Tokyo District Court in Japan." Bill of Lading, clause 3. The burden is on the plaintiff to overcome the presumption of validity. The court must now consider whether Tokio Fire Marine has demonstrated that the carrier's liability will be lessened in Japan, or has shown that enforcement of the forum selection clause would be unreasonable for some other reason.
Tokio Fire Marine argues that dismissal is improper because the forum selection clause is unreasonable under the circumstances. Although Japan has enacted its own version of COGSA, plaintiff argues that a Japanese court might interpret the bill of lading in such a way as to limit the carrier's liability in violation of § 1308(8). To bolster its opposition, Tokio Fire Marine has supplied the court with the affidavit of Akira Nakada ("Nakada"), who opines that i) Samsun would not be liable as a carrier under Japanese COGSA; ii) the action against Tokai and Samsun would be time-barred; and in) a Japanese court would refuse to assert jurisdiction over U.S. based subcontractors. Lastly, plaintiff argues that because the claim is only valued at less than $15,000, enforcement of the clause is unreasonable under the circumstances.
In support of its motion, Samsun has provided the court with a copy of the affidavit of Senchi Nakamura ("Nakamura"), which the defendants in the Coral Halo had prepared. The court will address each of the plaintiffs arguments in opposition to the dismissal.
a. Samsun as Carrier
Nakada asserts that a Japanese court, interpreting clause 1 of the Bill of Lading, "would most likely consider Tokai Shipping alone a party to the Bill of Lading contract. Under Japanese COGSA, it is generally considered that there is only one carrier in a Bill of Lading contract. Therefore, shipowner Samsun would not be considered a carrier by the Tokyo court." Nakamura, who has not reviewed the bills of lading in this matter, maintains that under Japanese law, the charterer of the vessel, would be liable in the same capacity as the shipowner. The court need not resolve this dispute, however. Counsel for Samsun has represented to the court that it has no objection to a dismissal conditioned on its waiver of the argument that Samsun is not a carrier under Japanese COGSA.
b. One-Year Time Limitation
Nakada also opines that a Japanese court would also likely uphold the one-year statute of limitations and dismiss the action against Tokai and Samsun as time-barred. Nonetheless, counsel for Samsun has represented to the court that it does not object to this court's dismissal conditioned on a waiver of the statute of limitations defense in a Japanese court.
c. Jurisdiction over U.S. Based Subcontractors
Nakada states that a Japanese court would likely refuse to assert jurisdiction over U.S. Based Subcontractors. However, no U.S. based subcontractors are parties to this litigation.
d. Expense of Litigating in Japan
Plaintiff argues that because the value of the claim is so small, litigation in Japan effectively deprives Kanematsu of its day in court, and is therefore unreasonable under the circumstances. The court has found no cases holding that cost of litigation is grounds for invalidating a forum selection clause. In fact, in a case between two foreign corporations involved in the global transportation of goods, the Fifth Circuit has upheld dismissal because "[t]he international character of the parties and the transaction prohibits American parochialism." Mitsui Co. v. MIRA M/V, 111 F.3d 33, 37 (5th Cir. 1997). "Increased cost and inconvenience are insufficient reasons to invalidate forum, selection or arbitration clauses." Id. ( citing Vimar Segurosy Reaseguros, S.A. v. M/V SKY REEFER, 115 S.Ct. 2322, 2327-28 (1995); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991)). In this case, three of the parties are Japanese corporations, and the other is a Korean corporation. Furthermore, the bills of lading were issued for the international transport of goods. In accordance with the holding in MIRA, the court finds that the increased cost of litigating in Japan does not warrant invalidating the forum selection clause.
e. Dismissal Pursuant to the Forum Selection Clause Will Not Contravene Public Policy So as to Render the Forum Selection Clause "Unreasonable Under the Circumstances."
As discussed above, the plaintiff in this case bears the burden of demonstrating that the carrier's liability in Japan will be lessened in such a way that the forum selection clause becomes "unreasonable under the circumstances." Mira, 111 F.3d at 35. Tokio Fire Marine has not persuaded the court that the carrier's liability will be lessened at all if the matter were adjudicated in Japan. For the foregoing reasons, this court will enforce the forum selection clause and dismiss the complaint of Kanematsu and Tokio Fire Marine against Tokai and Samsun.
Accordingly,
IT IS ORDERED that the motion of Samsun to dismiss the complaint of Tokio Fire Marine and Kanematsu is hereby GRANTED on the condition that the Japanese court accepts defendants' waiver of the carrier and time limitation defenses.
Having determined that there is no just reason for delay,
IT IS FURTHER ORDERED that judgment be entered in accordance with Federal Rule of Civil Procedure 54(b).
IT IS FURTHER ORDERED that the Clerk of Court mark this action closed for statistical purposes pending the outcome of proceedings in the Tokyo District Court or any appeal taken in the Fifth Circuit.
IT IS FURTHER ORDERED that the court shall retain jurisdiction and that any party may motion the court to reopen the matter upon resolution of proceedings in Japan or any appeal taken in the Fifth Circuit. This order shall not prejudice the rights of the parties to this litigation.
IT IS FURTHER ORDERED that the plaintiff shall bring an action in Japan within ninety days following entry of final judgment pursuant to rule 54 (b).