United States District Court,

S.D. New York.

AMERICAN HOME ASSURANCE COMPANY a/s/o STANLEY DOOR SYSTEMS, Plaintiff,

v.

M/V HANJIN MARSEILLES, her engines, boilers, tackles, etc., Vanavana Shipping,

Senator Lines & Expeditors International of Washington, Inc., Defendants.

June 1, 2004.

REPORT AND RECOMMENDATION

PECK, Chief Magistrate J.

Presently before the Court is defendant Senator Lines’ motion to dismiss on the basis of a forum selection clause in the Bill of Lading between Senator Lines and Expeditors International. (Dkt. Nos. 12 & 13.)

For the reasons discussed below, Senator Lines’ motion to dismiss should be GRANTED as against co-defendant Expeditors and as against plaintiff American Home Assurance (“AHA”), the subrogated cargo underwriter of Stanley Door Systems.

FACTS

The facts are not in dispute.

On or before November 21, 2002, Stanley delivered to defendant Expeditors a shipment of 260 boxes of goods. (Dkt. No. 15: McDermott Decl. ¶ 4.) Expeditors and Stanley were parties to bill of lading number 6430071357, which does not contain a forum selection clause. (McDermott Decl. ¶ 5 & Ex. 1: Bill of Lading 6430071357.) Expeditors subcontracted with defendant Senator Lines to carry the shipment; Expeditors and Senator Lines were parties to bill of lading number SENUPUSD05802105, which contains a forum selection clause stating: “Any disputes arising under and in connection with this Sea Waybill shall be governed by German Law and determined by the courts of Bremen.” (McDermott Decl. ¶ 5 & Ex. 2: Bill of Lading number SENUPUSD05802105.) AHA alleges that during shipment some of Stanley’s goods were lost at sea through the fault of defendants, causing damages of $58,768.60. (Dkt. No. 1: Compl. ¶ 9 & Sched. A.) AHA brought suit in this Court against, inter alia, Senator Lines and Expeditors. (Compl.) Expeditors’ answer asserted a cross-claim against Senator Lines for indemnity and/or contribution. (Dkt. No. 8: Expeditors Answer ¶ ¶ 23-24.)

Senator Lines’ Motion to Dismiss

On January 22, 2004, Senator Lines filed a motion to dismiss AHA’s complaint and defendant Expeditors’ cross-claim on the basis of a Bremen, Germany forum selection clause contained in the bill of lading between Expeditors and Senator Lines. (Dkt. Nos. 12 & 13.) Senator Lines argues that: (1) foreign forum selection clauses are presumptively enforceable (Dkt. No. 13: Senator Lines Br. at 2); (2) courts routinely enforce German forum clauses in bills of lading (id. at 4); and (3) Expeditors’ cross-claim is subject to the forum selection clause, even for a tort claim, because they are a party to the waybill (id. at 5). AHA opposed the motion (Dkt. Nos. 15 & 16), and Expeditors joined in AHA’s opposition to the motion to dismiss via a letter to Judge Daniels. (Dkt. No. 17: Senator Lines Reply Br., Att. Expeditors 2/13/04 Letter.)

ANALYSIS

I.

PRINCIPLES GOVERNING THE VALIDITY OF FORUM SELECTION CLAUSES UNDER FEDERAL LAW

A. Forum Selection Clauses Generally Are Upheld, Including in Contracts Governed by COGSA

The Supreme Court has repeatedly upheld the validity of forum selection clauses between contracting parties. E.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589-95, 111 S.Ct. 1522, 1525-28 (1991); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n. 14, 105 S.Ct. 2174, 2182 n. 14 (1985); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 8-18, 92 S.Ct. 1907, 1912-17 (1972). [FN1] In Bremen, the Supreme Court held that forum selection clauses “are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 10, 92 S.Ct. at 1913. “[A]bsent some compelling and countervailing reason it should be honored by the parties and enforced by the courts.” Id. at 12, 92 S.Ct. at 1914.

FN1. See also, e.g., Ainsley Skin Care of New York, Inc. v. Elizabeth Grady Face First, Inc., 97 Civ. 6716, 1997 WL 742526 at *2 (S.D.N.Y. Dec. 2, 1997) (Peck, M.J.).

In Carnival Cruise Lines, the Supreme Court “refine[d]” its Bremen analysis and extended the validity of forum selection clauses to include those not the subject of negotiation and included in a form contract between a business and a consumer, so long as the parties had notice of the clause. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593, 111 S.Ct. at 1527. The Supreme Court explained that there are valid business reasons for including a reasonable forum selection clause in a form contract that is not the subject of negotiation. Id. at 593-94, 111 S.Ct. at 1527. The Supreme Court emphasized that “forum-selection clauses contained in form … contracts are subject to judicial scrutiny for fundamental fairness….” Id. at 595, 111 S.Ct. at 1528. The Supreme Court noted, however, that the forum state chosen was not a ” ‘remote alien forum” ‘ but one where one of the parties was located. Id. at 594, 111 S.Ct. at 1528. Therefore, “because respondents do not claim lack of notice of the forum clause, … they have not satisfied the ‘heavy burden of proof,’ … required to set aside the clause on the grounds of inconvenience.” Id. at 595, 111 S.Ct. at 1528; see also, e.g., New Moon Shipping Co. v. Man B & W Diesel AG, 121 F.3d 24, 32 (2d Cir.1997) (In order to escape a forum selection clause, a party must show ” ‘that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court.” ‘); Ainsley Skin Care of New York, Inc. v. Elizabeth Grady Face First, Inc., 1997 WL 742526 at *2; National School Reporting Servs., Inc. v. National Schools of Cal., Ltd., 924 F.Supp. 21, 24 (S.D.N.Y.1996) (“Forum selection clauses are regularly enforced…. The Second Circuit has consistently held that, in cases brought under diversity jurisdiction, a forum selection clause shall be upheld, unless it can be shown that ‘enforcement would be unreasonable and unjust or that the clause was obtained through fraud or over reaching.” ‘); Bison Pulp & Paper Ltd. v. M/V Pergamos, 89 Civ. 1392, 1995 WL 880775 at *7-14 & n. 12 (S.D.N.Y. Nov. 29, 1995); Elite Parfums, Ltd. v. Rivera, 872 F.Supp. 1269, 1271-72 (S.D.N.Y.1995) (“The Second Circuit has a ‘strong policy’ of enforcing forum selection agreements.”); Orix Credit Alliance, Inc. v. Bell Realty, Inc., 93 Civ. 4949, 1994 WL 86394 at *2 (S.D.N.Y. Mar. 16, 1994) (“In diversity cases, [forum selection clauses] must be enforced unless it is clear ‘that enforcement would be unreasonable and unjust, or that the clause was obtained through fraud or overreaching.” ‘); Falconwood Fin. Corp. v. Griffin, 838 F.Supp. 836, 838-41 (S.D.N.Y.1993) (“Settled law permits parties to a contract to select in advance the forum for litigation of disputes that arise under the contract.”).

The Carriage of Goods by Sea Act(“COGSA”), 46 U.S.C. § § 1300-15, applies to bills of lading for shipments to or from a U.S. port in foreign trade. Like other contracts, mandatory forum selection clauses in maritime contracts governed by COGSA are upheld between the parties by federal courts. In Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 115 S.Ct. 2322 (1995), the Supreme Court held that foreign arbitration clauses in bills of lading were not invalid under COGSA. Since Sky Reefer, courts have consistently held that forum selection clauses (including foreign arbitration clauses) in bills of lading are valid under COGSA. See, e.g., Kukje Hwajae Ins. Co. v. M/V Hyundai Liberty, 294 F.3d 1171, 1175 (9th Cir.2002), pet. for cert. filed, No. 02-81, 71 USLW 3400 (Nov. 22, 2002); Fireman’s Fund Ins. Co. v. M.V. DSR Atlantic, 131 F.3d 1336, 1339 (9th Cir.1997), cert. denied, 525 U.S. 921, 119 S.Ct. 275 (1998); Mitsui & Co. (U.S.A.), Inc. v. Mira M/V, 111 F.3d 33, 36 (5th Cir.1997); Glyphics Media, Inc. v. M.V. Conti Singapore, 02 Civ. 4398, 2003 WL 1484145 at *4-6 (S.D.N.Y. Mar. 21, 2003); Far Eastern Antique Arts v. M/V Cho Yang Success, 01 Civ. 8375, 2002 WL 1313308 at *2 (S.D.N.Y. June 14, 2002); Central National-Gottesman, Inc. v. M.V. Gertrude Oldendorff, 204 F.Supp.2d 675, 679 (S.D.N.Y.2002); Commercial Union Ins. Co. v. M.V. Bremen Express, 16 F.Supp.2d 403, 407 (S.D.N.Y.1998), aff’d, No. 99-9070, 208 F.3d 202 (table) (2d Cir. Mar. 21, 2000); Farrell Lines, Inc. v. Columbus Cello-Poly Corp., 32 F.Supp.2d 118, 125-28 (S.D.N.Y.1997), aff’d, 161 F.3d 115 (2d Cir.1998); International Marine Underwriters CU v. M/V Kasif Kalkavan, 989 F.Supp. 498, 499-500 (S.D.N.Y.1998).

B. Privity of Contract Principles and Forum Selection Clauses

Privity of contract usually is needed to bind an entity to a forum selection clause. In Sparks Tune-Up Ctrs., Inc. v. Strong, No. 92 C 5902, 1994 WL 188211 at *5 (N.D.Ill. May 12, 1994), the defendants disputed the plaintiff’s attempt to bind them to a forum selections clause which they neither bargained for nor agreed upon. “The thrust of the plaintiffs’ argument is that privity of contract is not necessary to bind an individual or an entity to a forum selection clause contained in an agreement. Rather, according to the plaintiffs, a non-party to a contract should be ‘subject to’ the contract’s forum selection clause when the conduct of the non-party is ‘closely related’ to the contractual relationship in which the forum selection clause is controlling.” Id., 1994 WL 188211 at *4. The court rejected this argument, finding that the cases that plaintiff cited in support of this assertion were distinguishable because the parties seeking to avoid the forum selection clause were parties to the contract. Id., 1994 WL 188211 at *5; see also, e.g., American Specialty Sys., Inc. v. Chicago Metallic Corp., No. 01 C 4609, 2002 WL 406965 at *5 (N.D.Ill. Mar. 15, 2002) (“CMC argues that the plaintiff should be bound to the forum selection clause contained in CMC’s General Conditions of Sale…. The problem with this argument is that the plaintiff was not a party to any contract with CMC and did not agree to the forum selection clause in CMC’s General Conditions of Sale…. ‘A third party … cannot have his rights altered, compromised or redefined by the provisions of a contract he has not accepted.’… Therefore, CMC’s forum selection clause cannot be applied against the plaintiff .”); City of Peru v. Bouvier Hydropwer, Inc., No. 00 C 1179, 2001 WL 59036 at *1 (N.D.Ill. Jan. 19, 2001) (“Here, the City was not a party to the contract and thus did not agree to litigate disputes arising out of it in Pennsylvania. Defendants can point to no case in which a non-party to a contract was compelled to litigate its claim in a jurisdiction identified in a forum selection clause, which he did not agree to or bargain for. I decline to enforce the forum selection clause against the City.”).

C. Mandatory Forum Selection Clauses Are Enforceable

Case law makes a distinction between forum selection clauses that are considered permissive rather than mandatory. ” ‘A mandatory forum selection clause grants exclusive jurisdiction to a selected forum.’ … In contrast, a permissive forum selection clause indicates the contracting parties’ consent to resolve their dispute in a given forum, but does not require the dispute to be resolve in that forum.” Fireman’s Fund McMgee Marine v. M/V Caroline, 02 Civ. 6188, 2004 WL 287663 at *3 (S.D.N.Y. Feb. 11, 2004); see also, e.g., Baosteel America, Inc. v. M/V Ocean Lord, 257 F.Supp.2d 687, 689 (S.D.N.Y.2003). “Court[s] have … drawn a distinction between mandatory forum selection clauses and permissive provisions, which are accorded less weight. A forum selection clause that is ‘permissive in its language (“may be brought”) … [leaves] open the possibility that an action could be brought in any forum where jurisdiction can be obtained.” ‘ Foothill Capital Corp. v. Kidan, 03 Civ. 3976, 2004 WL 434412 at *2 (S.D.N.Y. Mar. 8, 2004) (quoting Blanco v. Banco Indus. de Venezuela, S.A., 997 F.2d 974, 979 (2d Cir.1993)). However, “[m]andatory and exclusive forum selection clauses ‘are presumptively valid and must be enforced unless they are unreasonable or constitute the product of fraud or Overreaching.” ‘ Fireman’s Fund McMgee Marine v. M/V Caroline, 2004 WL 287663 at *3 (citing Asoma Corp. v. M/V Southgate, 98 Civ. 7407, 1999 WL 1115190 at *1 (S.D.N.Y.Dec.7, 1999) (Haight, D.J.)); Jockey Int’l. Inc. v. M/V Leyerkusen Express, 217 F.Supp.2d 447, 451 (S.D.N.Y.2002) (Haight, D.J.).

Forum selection clauses that contain the term “shall” generally are held to be mandatory clauses that must be enforced. See, e .g., AVC Nederland B.V. v. Atrium Inv. P’ship, 740 F.2d 148, 155 (2d Cir.1984); Baosteel America, Inc. v. M/V Ocean Lord, 257 F.Supp.2d at 689-90 ( & cases cited theein); Valley Nat’l Bank v. Greenwich Ins. Co., 254 F.Supp.2d 448, 455 (S.D.N.Y.2003); Thyssen, Inc. v. M/V Alpha Jupiter, 96 Civ. 8734, 1997 WL 882595 at *7 (S.D.N.Y. Aug. 15, 1997); Bison Pulp & Paper Ltd. v. M/V Perganos, 89 Civ. 1392, 1995 WL 880775 at *11 (S.D.N.Y. Nov. 29, 1995). On the other hand, forum selection clauses that contain terms such as “have the right”, “may” or “come within” are usually permissive. Baosteel America, Inc. v. M/V Ocean Lord, 257 F.Supp.2d at 690.

II. THE FORUM SELECTION CLAUSE IN SENATOR LINES’ BILL OF LADING IS MANDATORY AND REASONABLE AND SHOULD BE ENFORCED AGAINST EXPEDITORS AND AHA

Plaintiff AHA concedes that forum selection clauses, including in contracts covered by COGSA, generally are enforced. (Dkt. No. 16: AHA Br. at 3: “Plaintiff does not dispute the authority cited by [Senator Lines’] counsel in support of the motion that U.S. Courts do enforce mandatory forum selection clauses for Germany and other countries.”) AHA argues, however, that the forum selection clause in Senator Lines’ bill of lading is permissive, not mandatory. (AHA Br. at 3.) AHA primarily relies on the decision in Hartford Fire Ins. Co. v. Novorango U.S.A. Inc., 156 F.Supp.2d 372 (S.D.N.Y.2001), which held the Senator Lines’ forum selection clause–” ‘Any dispute arising under or in connection with this Bill of Lading shall be governed by German Law and determined by the Courts of Bremen,” ‘ id. at 373-74–to be permissive, not mandatory. Id. at 375. The court in Hartford felt that “the use of the word ‘shall’ only confers jurisdiction in the courts of Bremen, Germany without excluding jurisdiction elsewhere or employing mandatory venue language.” Id.

This Court respectfully disagrees with the Hartford court’s conclusion. First, the cases generally hold that use of the word “shall,” even without more, makes the forum selection clause mandatory, not simply permissive. (See cases cited at page 8 above.) Second, the Senator Lines’ forum selection clause at issue in this case contains additional language that makes clear its mandatory nature. The clause in full has two paragraphs, not just one, and reads as follows:

JURISDICTION AND LAW CLAUSE

a) Any dispute arising under and in connection with this Sea Waybill shall be governed by German Law and determined by the Courts of Bremen.

b) With regard to contracts of carriage concluded in France, or entered into with a French port, the court where the carrier has his principle place of business be also competent in case of “APPEAL ON GUARANTEE” or “PLURALITE DE DEFENDEURS” or “CONNEXITE” the parties to this Sea Waybill expressly deregating from article 100 to 107, 323, 331 to 333, 336 and 337 FRENCH NOUVEAU CODE DE PROCEDURE CIVILE.

(Dkt. No. 15: McDermott Decl. Ex. 2: Senator Bill of Lading SENUPUSDO5802105.) [FN2]

FN2. There is no mention of this second paragraph of the Senator Lines’ bill of lading in the Hartford decision. This Court cannot determine if it was absent from the Senator Lines’ bill of lading at issue in Hartford or rather whether the parties failed to call it to the Hartford court’s attention.

Contracts must be read in their entirety. See, e.g., Jamie Sec. Co. v. The Ltd., Inc., 880 F.2d 1572, 1576 (2d Cir.1989) (“The contract must be examined in its entirety to ensure a valid interpretation.”). “By examining the entire contract, we safeguard against adopting an interpretation that would render any individual provision superfluous.” Sayers v. Rochester Tel. Corp. Supp. Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir.1993).

If the first paragraph of the forum selection clause were permissive, the France carve-out to the forum selection clause in the second paragraph would be superfluous. This further shows that the first paragraph of the forum selection clause is mandatory. The Court finds the forum selection clause to be mandatory.

None of the parties here addressed an issue that appeared as dicta in Hartford, 150 F.Supp.2d at 376, and that applies to the facts of this case: whether a party that was not a signatory to the bill of lading, like Stanley, can be bound to its terms. As explained by Judge Haight in Jockey Int’l. Inc. v. M/V Leverkusen Express, 217 F.Supp.2d 447 (S.D.N.Y.2002), a non-vessel Operating Common Carier (“NVOCC”), as agent for the cargo owner, binds the owner to the bill of lading signed by the NVOCC:

Courts, including the Second Circuit, have held that provisions of a bill of lading issued to an intermediary like Fritz also bind the consignee on whose behalf the intermediary acted in arranging the shipment. In Stolt Tank Containers, Inc. v. Evergreen Marine Corporation, 962 F.2d 276, 279-80 (2d Cir.1992), the court of appeals held that the owner of damaged containers was subject to the liability limitations contained in a bill of lading issued by the carrier to an intermediary without reference to the owner. The court rejected the owner’s argument that it could not be bound by a contract to which it was not a party, concluding that “where a party is aware that another is shipping its packages aboard a vessel and has at least constructive notice that liability limitations might apply, that party is bound by the liability limitations agreed to by the shipper.” Id. at 280. While the Second Circuit has not addressed the binding nature of forum selection clauses in particular, Stolt’s reasoning would appear to apply to the other provisions of such a contract. Applying similar reasoning the Ninth Circuit has recently held that a forum selection clause in a bill of lading issued to an NVOCC binds the cargo owner. See Kukje Hwajae Ins. Co., Ltd., 294 F.3d at 1177. As the Ninth Circuit explained, “because an NVOCC is considered, in general, to act as an agent for the cargo’s owner when it contracts for carriage on a vessel, and because in this case [the NVOCC] was acting as [the cargo owner’s] agent when it accepted the [shipper’s] bill of lading, [the cargo owner’s subrogated insurer] is bound by that bill.” Id. See also Indemnity Insurance Co. of North America v. Schneider Freight USA, Inc., No. CV 00-08032, 2001 WL 1356247, *4-*5 (C.D.Cal. June 15, 2001) (NVOCC bound owner to forum selection clause in bill of lading).

Jockey Int’l Inc. v. M/V Leverkusen Express, 217 F.Supp.2d at 457; accord, Kukje Hwajae Ins. Co. v. M/V Hyundai Liberty, 294 F.3d 1171, 1177 (9th Cir.2002). The mandatory forum selection clause in the bill of lading between Senator Lines and Expeditors as AHA’s agent therefore is binding upon AHA.

Finally, AHA also argues that if the Court finds that the forum selection clause is mandatory, it nevertheless is not enforceable because it is unreasonable in that it deprives AHA of a remedy. (Dkt. No. 16: AHA Br. at 4-6.) AHA asserts that “in light of the fact that under German maritime law sole title to sue under the Senator Line’s sea waybill is with its contractual partner, Expeditors International of Washington, Inc., plaintiff would be barred from bringing suit against Senator Lines. Thus, Senator Lines’ forum selection clause is unreasonable as it denies plaintiff of its remedy to recover against Senator lines.” (AHA Br. at 6.) Senator Lines has agreed to stipulate that if AHA brings suit against Senator Lines in Bremen, “Senator Lines would waive any defense that plaintiff lacks privity to sue Senator Lines under the waybill.” (Dkt. No. 17: Senator Reply Br. at 7.) Accordingly, dismissal of this action would not deprive AHA of a remedy in Bremen, Germany on the basis of contractual privity.

CONCLUSION & SCHEDULING

For the reasons stated above, Senator Lines’ motion to dismiss should be GRANTED as to both Expeditors and AHA. The only claim that remains before this Court is AHA’s claim against Expeditors. Plaintiff AHA shall inform the Court in writing by June 11, 2004 whether it wishes to proceed in this Court just against Expeditors, or whether it will pursue all of its claims, against Senator Lines and Expeditors, in Germany.

FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION

Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable George B. Daniels, 40 Centre Street, Room 410, and to my chambers, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Daniels. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir.1993), cert. denied, 513 U.S. 822, 115 S.Ct. 86 (1994); Roldan v. Racette, 984 F.2d 85, 89 (2d Cir.1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S.Ct. 825 (1992); Small v. Secretary of Health & Human Servs., 892 F.2d 15, 16 (2d Cir.1989); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir.1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir.1983); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).

END OF DOCUMENT