LYKES LINES LIMITED LLC, Plaintiff,
v.
BRINGER CORPORATION, Brasif Duty Free Shop Ltda., Axa Seguros Brasil S/A, Eurotrade Ltd. and Parbel of Florida, Defendants.
March 12, 2007.
DECISION AND ORDER
BERMAN, J.
I. Background
On or about June 15, 2004, Lykes Lines Limited LLC (“Plaintiff” or “Lykes”) filed a complaint (“Complaint”) against Bringer Corporation (“Bringer”), Brasif Duty Free Shop Ltda. (“Brasif”), Axa Seguros Brasil S/A (“Axa”), Eurotrade Ltd. (“Eurotrade”) and Parbel of Florida (“Parbel”) (together, “Defendants”), alleging, among other things, that by commencing a lawsuit in Brazil (“Brazil Action”) relating to damage to a shipment of certain toiletries in July, 2003, Defendants (i.e., Axa) “deprived plaintiff of its right to be sued only in this district and of the limitation of liability provided by U.S. law and by contract.” (Complaint ¶ 16.) Among other things, Plaintiff seeks a declaration that the Carriage of Goods by Sea Act, 46 U.S.C. § 1300 et seq. (“COGSA”) “limit[s] its liability … to no more than $18,500” (“Declaratory Judgment Claim”); an “injunction prohibiting defendants from maintaining any suit relating to damage or loss of cargo … in any forum other than the United States District Court for the Southern District of New York” (“Injunction Claim”); and “judgment against [Defendants] in an amount which reflects the difference between the judgment [$184,602.34] awarded against plaintiff by [the] Brazilian Court [“Brazil Judgment”] and $18,500” (“Offset Claim”). (Complaint ¶ ¶ 18-22.) None of the Defendants has filed an Answer to the Complaint, and only Axa and Brasif have participated in the instant motion practice.
This case involves the shipment (“Shipment”), on or about July 31, 2003, of a 20-foot container holding 14 pallets and 23 loose cartons-or a total of 37 “packages”-of toiletries which had been loaded in Miami, Florida by Bringer, the “shipper/exporter.” (Complaint ¶ 7.) Upon receiving the container from Bringer, Lykes “issued [a] non-negotiable bill of lading [dated July 31, 2003] to Bringer … for the carriage of the container from Miami, Florida to Santos, Brazil aboard M/V CSAV NEW YORK.” (Complaint ¶ 7; see also Bill of Lading, dated July 31, 2003 (“Bill of Lading”), attached as Exhibit (“Ex.”) A to Declaration of Patrick L. Jones, dated August 24, 2006.) “When the container arrived in … Brazil, various contents of various cartons of perfumery were missing.” (Declaration of Nilo Dias De Carvalho Filho, dated August 10, 2006 (“Filho Dec.”), ¶ 3.)
Brasif was named in the Bill of Lading as consignee of the Shipment, and the contents of the container were owned by Eurotrade and Parbel. (Complaint ¶ ¶ 6-8, 10.) Axa had issued a marine cargo insurance policy to Brasif, dated January 1, 2003 (“Policy”), which “insured the contents of the container for marine risks, (Complaint ¶ 9), and Eurotrade was the designated beneficiary under the Policy. “Brasif … made a claim as the assured under the policy for the shortage” (Filho Dec. ¶ 3), and on November 14, 2003, Axa paid Eurotrade $184,602.34 (as beneficiary) and Axa became “subrogated to the rights of Brasif” against Lykes under the Bill of Lading. (Complaint ¶ 9; Filho Dec. ¶ 3.)
The Bill of Lading provides, among other things, that: (i) “[COGSA] shall be compulsorily applicable” (Bill of Lading § 5(a)(2)); (ii) any claim regarding shipments to and from the United States “shall be subject to the exclusive jurisdiction of the U.S. District Court of the Southern District of New York which shall apply U.S. Law” (Bill of Lading § 3(b)); and (iii) “[i]n no event shall the carrier be liable for loss or damage in connection with the goods in an amount exceeding … U.S. $500 per package.” (Bill of Lading § 18(b).)
Applying this $500 per package limitation to the 37 packages, Plaintiff alleges that its liability should be limited to $18,500. (See Complaint ¶ 15.)
On or about July 8, 2004, Axa “filed a complaint in Civil District Court in Brazil against Lykes … seeking recovery for damage to [the contents of the container] insured by Axa.” (Defendants’ Rule 56.1 Statement, dated Jan. 5, 2007 (“Def.56.1”) ¶ 1.) Lykes (unsuccessfully) moved to dismiss the complaint based upon the Bill of Lading forum selection clause. (See Filho Dec. ¶ ¶ 3-4 (“[Lykes] filed an appearance and answer … raising affirmatively the defense that the court in Brasil lacked jurisdiction because [the Bill of Lading] contains a forum selection clause which requires all cargo claims to be prosecuted in the United States District Court for the Southern District of New York. At the time the motion was filed, [it was] understood that it was likely that the motion would be denied”).); see also Declaration of Cintia Malfatti Massoni, dated Dec. 29, 2006, ¶ 4 (“[Lykes] specifically alleged that the Southern District of New York was the proper venue for this action”).) Lykes’s motion to dismiss was denied by the Brazilian court on or about July 26, 2005. (Filho Dec. ¶ 4.) On May 31, 2006, “after a trial on all the merits … the District Court for Santos-SP, Brazil, held in favor of Axa, ordering … Lykes to pay Axa the sum of 532,227.01 Brazilian Reales” or approximately $184,602.34. (Def. 56.1 ¶ 4; Filho Dec. ¶ 4.)
On or about January 5, 2007, Axa and Brasif moved in this Court, pursuant to Federal Rules of Civil Procedure (“Fed. R. Civ.P.”) 12(b)(2), 12(b)(3) and 56, to dismiss the Complaint and for summary judgment (and opposed Plaintiff’s motion for a default judgment and partial summary judgment which had been filed on or about September 5, 2006) arguing, among other things, that: (1) “[s]ince Brazilian law requires that a Brazilian Defendant be served with a letter rogatory through [the] Brazilian [ ] central authority, adequate service on Defendant Axa … has not been accomplished”; and Lykes’s “purported service upon Brasif in Miami” was improper because Lykes “failed to properly serve Brasif’s registered agent”; (2) because “Lykes’ full participation in the Brazil Action waived Lykes’ right to enforce the New York forum selection clause” the Court should “enforce the [Brazilian Judgment] under [New York’s Uniform Foreign Judgment Recognition Act, N.Y. C.P.L.R. § 5302]”; and (3) in light of their jurisdictional defenses, “Axa and Brasif cannot be held in default.” (See Notice of Cross Motion, dated Jan. 5, 2007 (“Cross Motion”); Defendant’s Memorandum of Law, dated Jan. 5, 2007 (“Def.Mem.”); see also Defendants’ Memorandum of Law in Reply to Plaintiff’s Opposition to Defendants’ Cross-Motion, dated Feb. 12, 2007.)
As noted, on or about September 5, 2006, Plaintiff moved, pursuant to Fed.R.Civ.P. 55(b)(2), 56 and 57, against Axa, Brasif and Eurotrade-but not against Bringer or Parbel-for a default judgment and for partial summary judgment. Plaintiff argues, among other things, that: (1) “[Axa] cannot … argue that it did not have actual notice of this legal action” but “even if the Court lacks jurisdiction over [Axa], the Court should grant plaintiff the relief sought against Brasif”; (2) “Lykes did not … implicitly or explicitly relinquish its right to enforce the forum sleection clause” by participating in the Brazil Action and “the proceeding in [Brazil] was contrary to an agreement between the parties”; and (3) default judgment is warranted because Eurotrade, Axa, and Brasif have not “appeared in the action or otherwise answered.” (See Notice of Motion for Default Judgment, Injunction, Declaratory Judgment and Partial Summary Judgment, dated Sept. 5, 2006 (“Motion”); Memorandum of Law in Support of Plaintiff’s Motion, dated Sept. 6, 2006 (“Pl.Mem.”); Reply Memorandum of Law in Support of Plaintiff’s Motion, dated Jan. 31, 2007 (“Reply”).)
The parties have waived oral argument.
For the following reasons, Defendants’ motion to dismiss is granted without prejudice with respect to Axa for lack of personal jurisdiction and the Complaint is dismissed without prejudice as against the Defendants other than Axa for lack of subject matter jurisdiction.
II. Legal Standard
“[A] federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the cause (subject-matter jurisdiction) and the parties (personal jurisdiction).” Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping Corp., 127 S.Ct. 1184, 1186 (2007) (citation omitted). “[A] court … will raise lack of subject-matter jurisdiction on its own motion.” Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982).
“Valid service of process is an indispensable prerequisite to the assertion of personal jurisdiction over a defendant.” Ferrostaal, Inc. v. HACI HASSAN YARDIM, No. 03 Civ. 4886, 2006 WL 2819585, at(S.D.N.Y. Sept. 29, 2006). “When the validity of personal jurisdiction or service of process is challenged through a motion pursuant to Fed.R.Civ.P. 12(b)(2) or 12(b)(5), the plaintiff bears the burden of proving that process was properly served.” Id.
“If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so.” DaimlerChrysler Corp. v. Cuno, 126 S.Ct. 1854, 1860-61 (2006).
III. Analysis
(1) Personal Jurisdiction
Defendants argue that “Lykes’ invalid service of process [upon Axa] in Brazil did not confer personal jurisdiction on [the Court],” and that although “the docket sheet does reflect a purported service upon Brasif in Miami … Lykes’s process server failed to properly serve Brasif’s registered agent.” (Def. Mem. at 5; Declaration of John J. Sullivan, dated Jan. 5, 2007 (“Sullivan Dec.”), ¶ 5.) Plaintiff counters that while failure to properly serve Axa “may constitute lack of legally sufficient service depriving this Court of personal jurisdiction, [Axa] cannot and does not argue that it did not have actual notice of this legal action” and “[Axa] has waived the affirmative defense of insufficient process by … assert[ing] a counterclaim” (Reply at 2-3). Plaintiff also argues that “[t]he service of process on [the] general manager of Brasif [in Florida] complied with [Florida law].” (Reply at 2-4.)
Axa
Rule 4(f) of the Federal Rules of Civil Procedure governs service of process upon a foreign defendant and provides, in pertinent part, that service may be effected:
(1) by any internationally agreed means reasonably calculated to give notice, such as those means authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents; or
(2) if there is no internationally agreed means of service … [then as follows]:
(A) in the manner prescribed by the law of the foreign country for service in that country in an action in any of its courts of general jurisdiction….
Fed.R.Civ.P. 4(f). The parties do not dispute that “Brazilian law requires that service of process by a foreign party upon a party domiciled in Brazil must be made by means of letters rogatory.” Alpha Omega Technology, Inc. v. PGM-Comercio E Participacoes Ltda., No. 93 Civ. 6257, 1994 WL 37787, at(S.D.N.Y. Feb. 9, 1994). And, because Plaintiff concedes that “[Axa] was not served in accordance with Inter-American Convention of Letters Rogatory” (Reply at 2), jurisdiction over Axa has not been obtained. See Tucker v. Interarms, 186 F.R.D. 450, 453 (N.D.Ohio 1999) (“[Plaintiff] has not yet obtained sufficient service of process upon [Brazilian defendant]”); see also Weston Funding, LLC v. Consorcio G Grupo Dina, S.A. de C.V., 451 F.Supp.2d 585, 589 (S.D.N.Y.2006) (“Defective service [cannot] be ignored on the mere assertion that a defendant had actual notice”); Zeballos v. Tan, No. 06 Civ. 1268, 2006 WL 1975995, at(S.D.N.Y. July 10, 2006) (“The trend in recent cases … is to hold that no Rule 12(b) defense is waived by the assertion of a counterclaim, whether permissive or compulsory.”) (quotation omitted).
Although a court “may excuse failure to comply with … service requirement[s] for good cause,” Jonas v. Citibank, N.A., 414 F.Supp.2d 411, 416 (S.D.N.Y.2006), “Plaintiff has not shown good cause for [its] failure to serve,” Cunningham v. City of New York, No. 04 Civ.1998, 2006 WL 1520210, at(S.D.N.Y. June 1, 2006). Accordingly, the Complaint is dismissed without prejudice against Axa. See Astarita v. Urgo Butts & Co., No 96 Civ. 6991, 1997 WL 317028, at(S.D.N.Y. June 10, 1997) (“[P]laintiff offers no explanation or reasonable excuse for her failure to serve, and dismissal is warranted.”).
Brasif
As to Brasif, which is registered with the Florida Secretary of State as a foreign (Brazilian) corporation (Sullivan Dec. Ex. K), Fed.R.Civ.P. 4(h)(1) “provides that service may be made on a corporation in the manner prescribed for individuals in Rule 4(e)(1),” State Farm Mut. Auto. Ins. Co. v. CPT Medical Services, Inc., No. 04 CV 5045, 2005 WL 2465818, at(E.D.N.Y. Oct. 6, 2005), i.e., “pursuant to the law of the state in which … service is effected.” Fed.R.Civ.P. 4(e)(1). Florida law provides that “[p]rocess against any private corporation, domestic or foreign, may be served … on [a corporation’s] cashier, treasurer, secretary, or general manager.” Fla. Stat. Ann. § 48.081(1) (West 2007).
An Affidavit of Service, dated October 25, 2004, indicates that Brasif was served in Miami, Florida via Ernesto Cruz, “as General Manager of the within named corporation, in compliance with Florida Statutes.” (See Affidavit of Service, dated Oct. 25, 2004, attached as Ex. I to Sullivan Dec.) Defendants’ argument that “Brasif had a registered agent for service of process in Florida … but Lykes’s process server failed to properly serve Brasif’s registered agent” (Sullivan Dec. ¶ 5), is unpersuasive because Plaintiff “chose to serve process in accordance with the method prescribed in 48.081(1), rather than serve the registered agent…. That choice was the plaintiff’s to make; it was not required to serve the registered agent.” NTCA Corp. v. Associates Commercial Corp., 812 So.2d 506, 507 (Fla Dist. Ct.App.2002).
(2) The Brazil Action and Judgment
Because the Court lacks jurisdiction over Axa, it is inappropriate to consider Axa’s claim to enforce the Brazilian Judgment against Lykes. See Zeballos, 2006 WL 1975995 at(“[T]he Court views the assertion of counterclaims as contingent on the Court’s rejection of defendant’s defense of improper service. As the Court has not rejected the service-based defense, defendant’s contingent counterclaims remain, for the time being, a legal nullity.”); see also Wafios Machinery Corp. v. Nucoil Industries Co., No. 03 Civ. 9865, 2004 WL 1627168, at(S.D.N.Y. July 21, 2004) (“[W]hen both jurisdictional defenses and counterclaims are included in a single responsive pleading, it is appropriate to treat the counterclaim as conditional: its assertion being hypothecated upon an adverse ruling on Defendant’s jurisdictional defenses.”) (quotation omitted).
Nor is the Court deciding whether “Lykes has waived its right [to limit liability] by willfully defending its interests in Brazil through to unfavorable verdict” (Def. Mem. at 6), because, without Axa, it would be difficult if not impossible to resolve the significant factual and legal issues associated with the Brazilian litigation.
(3) Default Judgment
The Court does not reach the merits of Plaintiff’s Motion for default judgment because, without Axa in the case, there appears to be no case or controversy. See Holt v. Lake County Bd. of Com’rs, 408 F.3d 335, 336-37 (7th Cir.2005) see also Goldman v. Fairbanks Capital Corp., 348 F.Supp.2d 115, 119 (S.D.N.Y.2004). “A claim is not ripe for adjudication if it rests upon ‘contingent future events that may not occur as anticipated, or indeed may not occur at all.” ’ Texas v. U.S., 523 U.S. 296, 300 (1998) (citation omitted). A court “may examine subject matter jurisdiction, sua sponte, at any stage.” F .D.I.C. v. Four Star Holding Co., 178 F.3d 97, 100 n. 2 (2d Cir.1999).
Plaintiff bears the burden of proving the existence of an actual controversy, i.e., “one that is real and substantial admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” E.R. Squibb & Sons, Inc. v. Lloyd’s & Companies, 241 F.3d 154, 177 (2d Cir.2001).
Plaintiff has not met its burden of proving a “real and substantial” controversy for several reasons. First, because Axa is “subrogated to the rights of Brasif” against Plaintiff (see Complaint ¶ 9), Brasif does not appear to have a claim against Plaintiff-and vice versa. See Allstate Ins. Co. v. Mazzola, 175 F.3d 255, 259 (2d Cir.1999) (“Subrogation is the principle which exists to prevent double recovery by the insured….”). Second, because Axa and Plaintiff appear to have been the (only) parties to the Brazil Action and the Brazil Judgment (Plaintiff’s Response to Defendants’ Rule 56.1 Statement, dated Jan. 31, 2007, ¶ ¶ 1-5), Brasif does not appear to have standing to enforce the Brazil Judgment against Plaintiff. See Sanders v. Republic Services of Kentucky, LLC, 113 Fed. Appx. 648, 650 (6th Cir.2004) (non-parties to judgment lacked standing to enforce its terms). Third, without Axa, Plaintiff’s request that the Court enjoin or limit or reduce the Brazilian Judgment would if granted result in little more than an advisory ruling on a hypothetical set of facts. See Associated Indem. Corp. v. Fairchild Indus., Inc ., 961 F.2d 32, 35 (2d Cir.1992) (where there was no “ ‘practical likelihood that the [relevant] contingencies will occur …” ’) (citation omitted); Josephthal & Co. Inc. v. John Phillips & Co., No. 00 Civ. 3479, 2001 WL 286719, at(S.D.N.Y. March 23, 2001) (“[The] mere apprehension of a future enforcement proceeding does not provide this Court with a justiciable controversy”); see also Bastys v. Rothschild, No. 97 Civ. 5154, 2000 WL 1810107, at (S.D.N.Y. Nov. 21, 2000) (court may not rule upon “hypothetical claims”). Fourth, Plaintiff’s argument that Brasif failed to “instruct[ ] its assignee/subrogee AXA Seguros not to sue Lykes in Brazil because that constituted a breach of the contract of carriage which was binding on Brasif” (Pl. Reply at 5), is not supported by “any colorable legal authority suggesting that Brasif belongs in the financial hotseat on account of the actions of its subrogee, Axa.” (Def. Reply at 1 n. 1); see, e.g., Farrell Lines Inc. v. Columbus Cello-Poly Corp., 32 F.Supp.2d 118, 126 (S.D.N.Y.1997); Multi Video Group, Ltd. v. Canarick, No. 01 Civ. 1753, 2001 WL 1631420, at(S.D.N.Y. Dec. 19, 2001).
Similarly, the “declaration sought will not settle the legal relations in issue at the present juncture nor will it terminate the controversy giving rise to the proceeding.” New York Guardian Mortgagee Corp. v. Cleland, 473 F.Supp. 409, 418 (S.D.N.Y.1979). “[N]o useful purpose would be served by permitting [Plaintiff] to litigate the question” because Axa, “the party with whom [Plaintiff] has the most immediate and concrete controversy, would not be bound by an adverse judgment.” Delpro Co. v. National Mediation Bd. of U.S. A., 509 F.Supp. 468, 476-77 (D.C.Del.1981); accord Meyer Mfg. Co., Ltd. v. Cuisine-Ware, Inc., No. 86 C 8144, 1987 WL 5394, at(N.D.Ill. Jan. 14, 1987) (“[T]he court, in its discretion, can decline to entertain an action for declaratory relief because of the non-joinder of an interested party, regardless of whether the absent party is indispensable.”).
IV. Decision and Order
For the reasons stated herein, the Complaint is dismissed without prejudice with respect to Axa for lack of personal jurisdiction and with respect to the other Defendants for lack of subject matter jurisdiction. The Clerk of the Court is respectfully requested to close this case.
