CIVIL ACTION NUMBER 02-1702, SECTION "L" (2).
May 22, 2003.
Before the Court is Defendant Sirhan Compania Maritime S.A.'s motion to dismiss in favor of litigation in Japan. For the following reasons, the motion is DENIED.
This case arises out of a shipment of steel tubing on the M/V OCEAN SUNRISE from Japan to New Orleans, Louisiana and Houston, Texas. When the steel tubing arrived at the ports of New Orleans and Houston, the tubing was allegedly damaged and depreciated in value. Plaintiffs, Kanematsu USA, Inc., and Mitsubishi Corporation, as owners of the cargo, and Tokio Marine Fire Insurance Company, as insurer of the cargo, brought this admiralty action under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 1300, et seq. seeking recovery for the damage to the cargo. Defendant Sirhan Compania Maritime S.A. ("Sirhan"), the vessel owner, filed this motion to dismiss in favor of litigation in Japan, based on a forum selection clause in the bill of lading.
Defendant Daiichi Chuo Kaisha ("Daiichi") originally joined in this motion to dismiss based on the forum selection clause; however, this Court recently granted Defendant Daiichi's separate motion to dismiss for lack of privity, as reflected in this Court's Minute Entry dated April 21, 2003, and dismissed Plaintiffs' claims against Daiichi. Therefore, the motion to dismiss based on the forum selection clause will only be considered as to Defendant Sirhan.
II. LAW AND ANALYSIS
Generally, a foreign forum selection clause in a bill of lading is presumed valid. Mitsui Co. (U.S.A.), Inc. v. Mira M/V, 111 F.3d 33 (5th Cir. 1997) (citing Bremen v. Zapata Offshore Co., 407 U.S. 1, 12-13 (1972)). To overcome the presumption of validity, the party challenging the enforcement, in this case the Plaintiff, must demonstrate that the clause is unreasonable under the circumstances. Id. 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. Kanematsu USA, Inc. v. M/V PRETTY PROSPERITY, et al., No. 99-1668, 2000 WL 943139, *1 (E.D. La. July 7, 2000) (citing Haynesworth v. The Corporation, 121 F.3d 956, 963 (5th Cir. 1997)). When a 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 as established by COGSA. 46 U.S.C. § 1303(8). In this case, the burden is on the plaintiff to overcome the presumption of validity by showing that the carrier's liability will be lessened under Japanese law. Kanematsu, 2000 WL 943139, at *; Nippon Fire Marine Ins. Co. v. The M/V CORAL HALO, No. 99-1242, 2000 WL 174894, at *5 (E.D. La. Feb. 11, 2000).
Section 1303(8) of COGSA provides:
Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect.
Only three decisions could be found in the Fifth Circuit directly addressing the issue of whether a foreign forum selection clause designating Japan as the forum is enforceable or a violation of public policy. First, Judge Barbier was faced with the issue in Nippon Fire Marine Ins. Co. v. M/V Spring Wave, 92 F. Supp.2d 574 (E.D. La. 2000), in which the court held that the foreign forum selection clause in the bill of lading, which called for application of Japanese law, was unenforceable. In M/V Spring Wave, the court refused to enforce the forum selection clause because there were certain clauses in the bill of lading which violated section 1303(8) of U.S. COGSA, and the court held that there was a risk as to whether a Japanese court would enforce these clauses. The Plaintiff in that case provided an affidavit of a Japanese attorney who attested that particular clauses in the bill of lading would be interpreted by a Japanese Court as limiting liability in violation of Section 1303(8) of COGSA. Id. at 576. On the other hand, the Defendant submitted an affidavit of a Japanese attorney who thought differently, and attested that Japan COGSA and U.S. COGSA were similar in all material respects. The Japanese attorney hired by the Defendant pointed to other case law and reasoning for different interpretations of the particular clauses in the bill of lading. The court noted in M/V SPRING WAVE that it was unable to predict how Japanese courts would interpret Japan COGSA and in light of the conflicting opinions by Japanese legal experts, the court concluded that a real risk existed that a Japanese Court would enforce any of the particular clauses at issue that violated U.S. COGSA. Therefore, the court refused to enforce the foreign forum selection clause. Id.
The next decision addressing this issue also came out of the Eastern District of Louisiana, decided by Judge Duval. In The Nippon Fire Marine Ins. Co. v. The M/V CORAL HALO, the court enforced a foreign forum selection clause and dismissed the suit in favor of litigation in Japan after finding that the Plaintiff failed to show that the carrier's liability would be lessened if the matter were adjudicated in Japan. No. 99-1242, 2000 WL 174894 (E.D. La. Feb. 11, 2000). Subsequently, Judge Duval again enforced a foreign forum selection clause in Kanematsu USA, Inc. v. M/V PRETTY PROSPERITY, No. 99-1668, 2000 WL 943139, (E.D. La. July 7, 2000). In both cases, the Plaintiffs and Defendants submitted affidavits of Japanese attorneys explaining the application and interpretation of particular clauses in the bill of lading under Japanese law. However, in both M/V CORAL HALO and Kanematsu, the court found that the plaintiffs simply failed to establish that any particular clauses in the bill of lading would be enforced by a Japanese court so as to lessen the carrier's liability under U.S. COGSA.
In this case, the forum selection clause reads as follows:
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.
In order to defeat the motion to dismiss, Plaintiffs must show that application of Japan COGSA would lessen the liability of the carrier in violation of 46 U.S.C. § 1303(8) or that there is a substantial risk that such would occur. See Central National-Gottesman, Inc. v. M. V. "Gertrude Oldendorff," 204 F. Supp.2d 675 (S.D. N.Y. 2002); M/V Spring Wave, 92 F. Supp.2d at 576; Union Steel America Co. v. M/V SANKO SPRUCE, No. 97-5696, 1998 WL 531842 (D. N.J. Aug. 17, 1998).
As an initial matter, Plaintiffs argue that the forum selection clause should not be enforced because U.S. COGSA and the Harter Act must be applied in this case, explaining that COGSA governs bills of lading for cargo shipments carried by sea to or from ports in the United States. Plaintiffs cite to the United States Supreme Court decision in Vimar Suguros Reaseguros S.A. v. M/V SKY REEFER, 515 U.S. 528 (1995), for the proposition that historically courts refused to enforce foreign forum selection clauses or arbitration clauses reasoning that such clauses violated COGSA's minimum protections. In SKY REEFER, the Court enforced a bill of lading clause requiring arbitration in Japan; however, Plaintiffs stress that the Court's decision was based on the premise that the Court would retain jurisdiction to review the foreign arbitration proceedings. The Plaintiffs focus on the language the Court used in its decision, which stated the following: "Were there no subsequent opportunity for review and were we persuaded that the `choice of forum and choice of law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies . . ., we would have little hesitation in condemning the agreement as against public policy." Plaintiffs argue that under the reasoning of SKY REEFER, the forum selection clause in this case should not be enforced because there would be no subsequent opportunity for this Court to review any Japanese court determination and the Japanese Court would apply Japan COGSA, which would deprive Plaintiffs of minimum protections afforded by U.S. COGSA.
Although Plaintiffs make a valid argument, several courts after the SKY REEFER decision, in cases involving bills of lading subject to the law of United States COGSA, have in fact extended the SKY REEFER holding to foreign forum selection clauses finding that the reasoning and language of the SKY REEFER decision do not limit the holding to arbitration clauses. Mitsui Co. (USA), Inc. v. Mira M/V, 111 F.3d 33, 36 (5th Cir. 1997); Fireman's Fund Ins. Co. v. MV DSR Atlantic, 131 F.3d 1336, 1339 (9th Cir. 1997); M.C. Watkins v. M/V London Senator, 112 F. Supp.2d 511, 516 (E.D. Va. 2000). These courts also noted that the concurring and dissenting opinions in Sky Reefer recognize that the holding will apply to forum selection clauses. Id. The weight of authority supports a conclusion that a bill of lading subject to United States COGSA does not in and of itself preclude the application of a foreign forum selection clause. As mentioned above, it may do so only if the plaintiff meets his burden to show that the application of the foreign law will deprive him of rights and protections afforded to him under the law of United States COGSA. In the present case, this determination will require a review of the affidavits of the Japanese attorneys retained by the Plaintiffs and Defendant. Plaintiffs submitted an affidavit of a Japanese attorney, Teishi Aizawa, in support of its opposition to the dismissal, in which Mr. Aizawa addresses several clauses contained in the bill of lading and their legality under Japanese law. Defendant Sirhan also submitted an affidavit of a Japanese lawyer, Seiichi Nakamura, to oppose Mr. Aizawa's affidavit.
Plaintiffs argue that application of Japan COGSA would lessen the liability of the carrier in violation of 46 U.S.C. § 1303(8). Plaintiffs contend that dismissing this action in favor of litigation in Japan will serve as a waiver of Plaintiffs' rights to pursue statutory remedies under COGSA because the Japanese forum would not apply the minimum protections afforded by this law.
With respect to what law is applicable under the bill of lading, Mr. Aizawa attests that under Clauses two and three of the bill of lading, Japan COGSA would be applicable. Mr. Aizawa also explains that although U.S. COGSA is incorporated under Clause 2 where appropriate, any terms of U.S. COGSA inconsistent with or repugnant to Japanese law, including Japan COGSA, would not be enforced. However, Mr. Aizawa does not specify any particular provisions of U.S. COGSA that are inconsistent with Japan COGSA. In response, the Defendants' Japanese attorney Mr. Nakamura agrees that Japanese COGSA will apply; however, he attests that Japan COGSA and U.S. COGSA are essentially one and the same and that there would not be any terms of U.S. COGSA inconsistent with or repugnant to Japan COGSA. In addition, Mr. Nakamura points out that Clause 2 of the Bill of Lading clearly provides for the application of U.S. COGSA when involving U.S. carriage or when "otherwise compulsorily applicable." This Court accepts the joint finding of the Japanese attorneys that Japan COGSA would be applied by any court in Japan under the terms of the bill of lading.
In an effort to show that their rights under U.S. COGSA would not be protected under Japanese law, Plaintiffs argue that the Japanese Courts would not recognize Plaintiffs' claims against Defendant Sirhan. Plaintiffs claim that under U.S. COGSA, Sirhan is a "carrier" because it is the owner of the vessel; however, Plaintiffs assert that the Japanese courts would not recognize their claims against Sirhan as a "carrier" under the bill of lading. In his affidavit, the Plaintiffs' Japanese attorney Mr. Aizawa states that "Any claim does not lie against [Sirhan] based on a carriage contract evidenced by a bill of lading, including this bill of lading, under Japanese law, including Japan COGSA, because only a tort claim can be made by cargo interests like a bill of lading holder against [it] under Japanese law." Plaintiffs complain that although under U.S. COGSA, Sirhan would qualify as a carrier, Plaintiffs would not have a claim against Sirhan as a carrier under Japan COGSA based on the bill of lading; rather, Plaintiffs' claims under the bill of lading would lie solely against Tokai Shipping, a party previously dismissed from Plaintiffs' suit.
In response, Defendants contend that this is a distinction without a difference because Japanese COGSA would be applicable in a tort claim. The Defendant's Japanese lawyer, Mr. Nakamura, asserts that when there is no contractual relationship between the Plaintiffs and Defendants, the Plaintiffs' claims would have to be based on tort. However, Mr. Nakamura insists that Japan COGSA would be applied to the Plaintiffs' tort claims against Sirhan citing article 20bis of Japan COGSA. No further explanation is given regarding how the tort claim would be treated differently from the contract claim under Japanese law.
Article 20bis of Japan COGSA provides the following:
(1) The provisions of Paragraph (2) of Article 3, Paragraph (4) of Article 11, Articles 12bis to 14 and Paragraph (2) of the preceding article shall apply mutatis mutandis to the carrier's liability for damage to the goods caused by his tort against the shipper, receiver or holder of the bill of lading. In this connection the phrase "the preceding paragraph" in Paragraph 2 of Article 3 shall be read to be the principle part of Paragraph (1) of article 715 of the Civil Code (Law No. 89 of 1896) and article 690 of the Commercial Code (including such case where the lessee of a ship is deemed to have the same rights and owe the same obligations as a shipowner by the application of Paragraph (1) of Article 704).
Two courts have considered the issue of whether to enforce a foreign forum selection clause when the foreign law to be applied fails to recognize multiple carriers on a bill of lading. In Union Steel America Co. v. M/V SANKO SPRUCE, No. 97-5696, 1998 WL 531842 (D. N.J. Aug. 17, 1998), the court refused to enforce a forum selection clause requiring litigation in Korea because of uncertainty under Korean law as to whether both a ship owner and time charterer could both be considered "carriers." The court explained that the Plaintiff's COGSA rights were diminished in the Korean forum by the very lack of certainty regarding whether or not the Plaintiff would have COGSA rights against the two defendants in that forum. The court also explained the potential problem with a case where the two foreign law experts disagree on how the foreign law will be applied:
This Court cannot claim to understand the contours and potential ramifications of the disputed point of Korean law, let alone predict with any confidence how the Korean court will decide the multiple carrier issue. Nor is it appropriate to make a prediction in these circumstances. This case differs from the normal cases in which a district court must make a prediction on a question of state or foreign law and then apply the rule whose adoption it has predicted. Here this Court is not called upon to apply Korean law. Rather, this Court is asked to dismiss [Plaintiff's] claims based-on a prediction of how the Korean court will settle a disputed issue of Korean law, with the real possibility remaining that the law actually applied by the Korean court will be other than that which this Court predicted.Id. at *3.
Another case which addressed this issue, relied on by Plaintiffs, is Central National-Gottesman, Inc. v. M. V. "Gertrude Oldendorff," 204 F. Supp.2d 675 (S.D. N.Y. 2002). In Central, the court refused to enforce a foreign forum selection clause requiring litigation in London because the Plaintiff submitted an affidavit of an English lawyer who attested that a London court would not adopt a construction of the term "carrier" similar to the one in the district where the litigation was currently pending. The court explained that courts in the Southern District of New York had expansively construed the term "carrier" to include all owners and charterers participating in the carriage of goods. The court reached its decision not to dismiss the case based on the "real danger that a London court may not hold [one defendant], as time charterer, to the same duties that he would be expected to comply with were the action brought in this district under COGSA." Id.
Defendants only response to Plaintiffs' reliance on this case is to distinguish the broad interpretation of "carrier" accepted by the Second Circuit from the Fifth Circuit's narrow interpretation of "carrier," which requires privity of contract. However, this distinction does not change the rule of the two cases discussed above, that is, that a forum selection clause cannot be enforced when there is substantial uncertainty as to whether a foreign court will recognize multiple carriers when such parties would clearly be carriers under U.S. COGSA. It appears to this Court from the affidavits of the Japanese attorneys that Sirhan would not be a "carrier" under Japan COGSA and, thus, any claims against Sirhan would be relegated to tort claim. The parties do not dispute that under U.S. COGSA, Plaintiffs would have a claim against Defendant Sirhan as a carrier based on the bill of lading. Under Japan COGSA, they would not have a claim. Instead, any claim would sound in tort and would deprive Plaintiffs of rights they have under COGSA. On this basis, relying on the cases cited above, the motion to dismiss must be denied because of the uncertainty and risk that Plaintiffs' rights under U.S. COGSA would not be protected under Japan COGSA.
The Court should note that under Japan COGSA, the term "carrier" is defined as "the owner, lessee and charterer of a ship who is engaged in the carriage of goods by ship. . . ." Japan COGSA, article 2. U.S. COGSA defines "carrier" to include "the owner or charterer who enters into a contract of carriage with a shipper." 46 U.S.C. § 1301 (a). Neither the parties nor the Japanese attorneys explain why Sirhan would not be considered a carrier under Japan COGSA.
The Defendant's Japanese attorney, Mr. Nakamura, suggests that Japan COGSA would still apply to Plaintiffs' tort claims against Sirhan. However, again, neither the parties nor the Japanese attorneys explain whether or how the tort claim would be treated differently from a claim based on the bill of lading under Japan COGSA.
For the foregoing reasons, the Defendant Sirhan's motion to dismiss based on the forum selection clause is DENIED.