United States District Court for the Southern District of Texas, Houston Division

July 12, 2022, Decided; July 12, 2022, Filed, Entered

CIVIL ACTION NO. 4:20-cv-03565

Reporter

2022 U.S. Dist. LEXIS 122600 *

PATRIOT LOGISTICS, Plaintiff, vs. TRAVELERS PROPERTY & CASUALTY COMPANY OF AMERICA, Defendant.

Core Terms

summary judgment, accrues, parties, insurance policy, duty to defend, claim for breach, cause of action, breach of duty, fair dealing, good faith, indemnify, insured

Counsel:  [*1] For Patriot Logistics, Plaintiff: David Wayne Prasifka, LEAD ATTORNEY, Lorance Thompson, Houston, TX.

For Travelers Property & Casualty Company of America, Defendant: Greg C Wilkins, Wilkins Gire PLLC, Beaumont, TX.

Judges: Hon. Charles Eskridge, United States District Judge.

Opinion by: Charles Eskridge

Opinion

Opinion And Order Granting Summary Judgment In Part

The motion for summary judgment by Defendant Travelers Property & Casualty Company of America is granted in part and denied in part. Dkt 13.

1. Background

This is an insurance dispute between Plaintiff Patriot Logistics and its insurer, Defendant Travelers Property & Casualty Company of America. Travelers issued a commercial inland marine policy to Patriot Logistics covering the 2017 calendar year. See Dkt 13-1 at 5-6 (policy).

Patriot Logistics operates a cargo handling, trucking, and freight hauling business. Another company named Wheels Clipper hired Patriot Logistics to move a shipment of alcohol from Illinois to Houston. Patriot Logistics had an agreement for storage space at a drop yard in Houston, along with security and a gate agent. And so, a trailer containing the Wheels Clipper shipment was parked at the drop yard around midnight on December 8, 2017. [*2]  Dkt 1-3 at 5. Patriot Logistics asserts that the trailer and its contents were then stolen from the drop yard in the early morning hours of December 9th. It alleges that security camera footage proves that the trailer and its contents were in fact stolen from that location, and that the trailer was secured, sealed, and had been parked at the yard less than twenty-four hours when the theft occurred. Id.

Patriot Logistics filed a claim with Travelers for loss of cargo under its policy. Travelers denied that claim on January 25, 2018. Patriot Logistics began negotiations with Travelers and Wheels Clipper and attempted unsuccessfully to settle the claim. Dkt 1-3 at 5-6. Wheels Clipper filed a lawsuit against Patriot Logistics on April 17, 2020. See Dkt 14-2 at 4-8. Patriot Logistics retained counsel when Travelers refused to defend and/or indemnify it in that action. It was ultimately successful in settling with Wheels Clipper for the full amount of its claim. Dkt 1-3 at 6.

Patriot Logistics then brought action against Travelers in state court on September 18, 2020. It asserts claims for breach of contract, breach of the duty of good faith and fair dealing, and violations of Chapters 541 [*3]  and 542 of the Texas Insurance Code. Id at 9-11. Travelers removed here on assertion of diversity jurisdiction. Dkt 1. It now moves for summary judgment after the close of discovery. Dkt 13.

2. Legal standard

Rule 56(a) of the Federal Rules of Civil Procedure requires a court to enter summary judgment when the movant establishes that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” A fact is material if it “might affect the outcome of the suit under the governing law.” Sulzer Carbomedics Inc v Oregon Cardio-Devices Inc, 257 F3d 449, 456 (5th Cir 2001), quoting Anderson v Liberty Lobby Inc, 477 US 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). And a dispute is genuine if the “evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Royal v CCC & R Tres Arboles LLC, 736 F3d 396, 400 (5th Cir 2013), quoting Anderson, 477 US at 248.

The summary judgment stage doesn’t involve weighing the evidence or determining the truth of the matter. The task is solely to determine whether a genuine issue exists that would allow a reasonable jury to return a verdict for the nonmoving party. Smith v Harris County, 956 F3d 311, 316 (5th Cir 2010), quoting Anderson, 477 US at 248. Disputed factual issues must be resolved in favor of the nonmoving party. Little v Liquid Air Corp, 37 F3d 1069, 1075 (5th Cir 1994). All reasonable inferences must also be drawn in the light most favorable to the nonmoving party. Connors v Graves, 538 F3d 373, 376 (5th Cir 2008), citing Ballard v Burton, 444 F3d 391, 396 (5th Cir 2006).

The moving party typically bears the entire burden to demonstrate the absence of a genuine issue of material fact. Nola Spice Designs LLC v Haydel Enterprises Inc, 783 F3d 527, 536 (5th Cir 2015) (quotation omitted); see also Celotex Corp v Catrett, 477 US 317, 322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986) (citations [*4]  omitted). But when a motion for summary judgment by a defendant presents a question on which the plaintiff bears the burden of proof at trial, the burden shifts to the plaintiff to proffer summary judgment proof establishing an issue of material fact warranting trial. Nola Spice, 783 F3d at 536 (quotation omitted). To meet this burden of proof, the evidence must be both “competent and admissible at trial.” Bellard v Gautreaux, 675 F3d 454, 460 (5th Cir 2012) (citation omitted).

3. Summary judgment evidence

Travelers contends that the claims by Patriot Logistics are barred by contractual limitations provisions in the policy and applicable statutes of limitations. Dkt 13. Patriot Logistics submitted four exhibits in response that it believes relevant to the disputed issue of accrual. See Dkts 14-1 (excerpt of subject insurance policy), 14-2 (complaint filed by Wheels Clipper and its contract with Patriot Logistics), 14-3 (affidavit of Edwis Selph, the president of Patriot Logistics) & 14-4 (several emails between the parties). Travelers moves to strike all but the insurance policy, contending (among other reasons) that the other exhibits are irrelevant to accrual. See Dkts 16 at 3-5 & 20. Patriot Logistics disagrees. Dkt 19.

On motion for summary judgment, a court [*5]  may consider the pleadings and other evidence unless an objecting party shows it wouldn’t be admissible at trial. Matter of Alabama & Dunlavy Limited, 983 F.3d 766, 774 (5th Cir 2020) (citations omitted). The Fifth Circuit holds, “Generally, the admissibility of evidence on a motion for summary judgment is subject to the usual rules relating to form and admissibility of evidence.” Munoz v International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators of the United States and Canada et al, 563 F2d 205, 213 (5th Cir 1977) (citation omitted).

The ultimate question in this action pertains to whether Travelers had and breached the duty to defend and/or indemnify Patriot Logistics in the underlying action by Wheels Clipper. If it didn’t, none of the claims by Patriot Logistics can go forward on the merits. But the subject motion presents the question of when the claims accrued—and the evidence that may be considered in that respect.

Texas law requires courts to apply the “eight corners doctrine” for determination as to whether a duty to defend exists. Lincoln General Insurance Co v Reyna, 401 F3d 347, 350 (5th Cir 2005) (citation omitted). That doctrine requires a court to determine whether the facts alleged within the “four-corners” of the complaint in the underlying action—liberally construed in favor of the insured— potentially assert a claim within the “four corners” of the insurance policy. Lyda Swinerton Builders Inc v Oklahoma Surety Co, 903 F3d 435, 446 (5th Cir 2018) (citation omitted) (emphasis in original).

The parties agree that the [*6]  insurance policy must of course be considered. It imposes on Travelers a duty to defend Patriot Logistics “against any ‘suit'” based on “loss of or damage to Covered Property to which this insurance applies are alleged.” Dkt 14-1 at 2, 6. The policy also obligates it to “pay those sums [Patriot Logistics] become[s] legally obligated to pay as damages for direct physical loss of or damage to Covered Property caused by or resulting from a Covered Cause of Loss.” Id at 2. What must be paired for consideration with this language is the complaint in the underlying Wheels Clipper lawsuit—and nothing more.

Objections by Travelers to exhibits submitted by Patriot Logistics will be sustained in part. Its objections to the Wheels Clipper contract, the Selph affidavit, and the emails between the parties are sustained. None of these were attached to the underlying complaint or are part of the appropriate record in that respect, and so they will be disregarded. Its objection to the complaint filed by Wheels Clipper against Patriot Logistics is overruled.

4. Analysis

Patriot Logistics argues in this action that its insurance policy required Travelers to defend and indemnify it in the Wheels Clipper [*7]  action. Travelers moves for summary judgment, asserting that the various claims are each barred by either the policy’s contractual limitations provision or the applicable statute of limitations. Dkt 13 at 8-18.

The Fifth Circuit holds that under Texas law the statute of limitations begins to run when the particular cause of action generally accrues—being ‘”when facts come into existence that authorize a party to seek a judicial remedy . . . regardless of when the plaintiff learns of the injury.”‘ De Jongh v State Farm Lloyds, 664 F Appx 405, 408 (5th Cir 2016, per curiam), quoting Provident Life & Accident Insurance Co v Knott, 128 SW3d 211, 221 (Tex 2003).

The main point in contention between the parties is a legal one. When did each cause of action accrue? Detailed analysis is only necessary as to the claim for breach of contract. The parties don’t vary their arguments much as to the others.

As to breach of contract, such claims under Texas law are generally subject to a four-year limitations period. For example, see Smith v Travelers Casualty Insurance Company of America, 932 F3d 302, 311 (5th Cir 2019), citing Texas Civil Practices & Remedies § 16.004(a). But contracting parties may “modify the four-year default period so long as it remains at least two years.” Id, citing Texas Civil Practices & Remedies § 16.070(a). Here, the parties did so, with the policy stating that any legal action for breach of any duty under that policy be brought “within two-years and one day from the date that the cause of action [*8]  first accrues.” Dkt 13-1 at 23, 27, and 37. And in this regard, the policy expressly provides, “A cause of action accrues on the date of the initial breach of our contractual duties as alleged in the action.” Dkt 13-1 at 37.

Travelers notes that it denied coverage on January 25, 2018. It contends that any and all causes of action for breach of contract accrued on that date, thus meaning that Patriot Logistics was required to bring action by January 26, 2020—and Patriot Logistics didn’t initiate this action until September 18, 2020. See Dkt 13 at 12-16.

To the contrary, the earliest contractual breach for which Patriot Logistics here sues relates to an alleged duty of Travelers to defend it in the action initiated by Wheels Clipper. That suit didn’t commence until April 17, 2020. Dkt 14 at 8-11. Prior to that date, there was nothing for Travelers to either defend or indemnify. See Lyda Swinerton Builders Inc, 903 F3d at 447 (duty to defend arises upon filing of suit alleging facts sufficient to create potential liability); ACE American Insurance Co v Freeport Welding & Fabricating Inc, 699 F3d 832, 840, 844 (5th Cir 2012) (existence of facts sufficient to establish coverage in underlying litigation trigger duty to indemnify even when underlying suit resolved by settlement).

Initiation of this lawsuit was thus timely on September [*9]  18, 2020. Summary judgment on the claim for breach of contract will be denied.

As to breach of the duty of good faith and fair dealing, any claim must be brought within two years of the date the cause of action accrues, if at all. Castillo v State Farm Lloyds, 210 F Appx 390, 395 n 8 (5th Cir 2006, per curiam). Such claim accrues when “facts come into existence which authorize a claimant to seek a judicial remedy.” Trevino v State Farm Lloyds, 207 Fed. Appx. 422, 2006 WL 3420064, *3 (5th Cir, per curiam) (quotation marks and citation omitted).

As with breach of contract, Travelers urges that any cause of action for breach of the duty of good faith and fair dealing accrued when it denied coverage on January 25, 2018. Dkt 13 at 18. It’s just been determined above that the cause of action regarding the duty to defend accrued on the date that Wheels Clipper sued Patriot Logistics.

Summary judgment on the claim for breach of the duty of good faith and fair dealing will be denied.

As to Chapter 542 of the Texas Insurance Code, it’s commonly referred to as the Texas Prompt Payment of Claims Act. It doesn’t specify a limitations period. This would make it appear appropriate to apply the residual limitations period of four years set out in Section 16.051 of the Texas Civil Practices & Remedies Code. Silo Restaurant Inc v Allied Property and Casualty Insurance Company, 420 F Supp 3d 562, 573 (WD Tex 2019). But Chapter 542 is recognized as a “contract-based remedy,” so claims [*10]  pursuant to it are “subject to appropriate limitation [set] by the insurance policy.” For example, see Chapa v Allstate Texas Lloyds, 2015 U.S. Dist. LEXIS 80300, 2015 WL 3833074, *3 & n 45 (SD Tex).

This means that the above conclusion as to the breach-of-contract claim pertains equally here. What’s more, the Texas Supreme Court holds, “Defense costs incurred by an insured as a result of an insurer’s breach of its duty to defend are a ‘claim’ within the meaning” of Chapter 542. Lyda Swinerton Builders Inc, 903 F3d at 450, citing Lamar Homes Inc v Mid-Continent Casualty Co, 242 SW3d 1, 20 (Tex 2007). This means that the penalty and attorney fees provision contained in that chapter “appl[y] to an insured’s claims for the cost of defending against a suit filed by a third-party claimant.” Nautilus Insurance Company v International House of Pancakes Inc, 2009 U.S. Dist. LEXIS 116429, 2009 WL 5061767 (SD Tex) (citation omitted). A claim for recovery of the costs incurred by Patriot Logistics to defend in the Wheels Clipper action are thus necessarily included in its claim for violation of Chapter 542—and thus arose from and relate to the date on which Wheels Clipper brought action.

Summary judgment on the claim for violation of Chapter 542 of the Texas Insurance Code will be denied.

As to Chapter 541 of the Texas Insurance Code, it establishes a cause of action for unfair methods of competition and unfair or deceptive acts or practices. By express provision, such claims must be brought within two years from the [*11]  date on which such act or practice occurred or was by reasonable diligence discovered or should have been discovered. Texas Insurance Code § 541.162(a)(1) & (a)(2). And where an insured “establishes that [the insurer’s] alleged misrepresentations caused it to be deprived of that benefit, [the insured] can recover the resulting defense costs it incurred as actual damages under Chapter 541.” Lyda Swinerton Builders Inc, 903 F3d at 453.

The Fifth Circuit has long held under Texas law that Chapter 541 claims accrue upon issuance of a denial letter. Castillo v State Farm Lloyds, 210 F Appx 390, 394 (5th Cir 2006, per curiam) (collecting cases). The unfair act alleged by Patriot Logistics is thus the date on which Travelers denied coverage, being January 25, 2018. See Dkt 1-3. That is the appropriate marker for accrual here, thus placing the filing of this suit in September 2020 beyond the two-year limitations period.

Summary judgment on the claim for violation of Chapter 541 of the Texas Insurance Code will be granted.

5. Conclusion

The objections by Defendant Travelers Property & Casualty Company of America to exhibits by Plaintiff Patriot Logistics are SUSTAINED IN PART and OVERRULED IN PART as stated above. Dkt 16.

The motion by Travelers for summary judgment as to limitations is GRANTED IN PART AND DENIED IN PART. Dkt [*12]  13.

The motion is GRANTED as to the claim for violation of Chapter 541 of the Texas Insurance Code. That claim is DISMISSED WITH PREJUDICE.

The motion is DENIED as to the claims for breach of contract, breach of the duty of good faith and fair dealing, and violation of Chapter 542 of the Texas Insurance Code.

So Ordered.

Signed on July 12, 2022, at Houston, Texas.

/s/ Charles Eskridge

Hon. Charles Eskridge

United States District Judge

End of Document

United States District Court for the District of New Jersey

July 19, 2022, Decided; July 19, 2022, Filed

Civ. No. 2:22-cv-02715 (WJM)

Reporter

2022 U.S. Dist. LEXIS 127632 *; 2022 WL 2816945

GARY BEAUMONT, Plaintiff, v. VANGUARD LOGISTICS SERVICES (USA), INC. and JOHN DOES 1-10 (Fictitious Name) and ABC COMPANIES 1-10 (Fictitious Name), Defendants.

Core Terms

forum selection clause, transport, maritime, admiralty, adhesion contract, district court, cargo, contracted, carriage, bill of lading, factors

Counsel:  [*1] For GARY BEAUMONT, Plaintiff: STEVEN D. ROTHBLATT, LEAD ATTORNEY, LAW OFFICES OF ROTHBLATT LAW, LLC, ISELIN, NJ.

For VANGUARD LOGISTICS SERVICES (USA), INC., Defendant: GEORGE N. STYLIADES, LAW OFFICES OF GEORGE N. STYLIADES, MOORESTOWN, NJ.

Judges: WILLIAM J. MARTINI, UNITED STATES DISTRICT JUDGE.

Opinion by: WILLIAM J. MARTINI

Opinion

In this action for property losses and damages to a container shipment transported from Sydney, Australia to Ballston Spa, New York, Defendant Vanguard Logistics Services (USA), Inc. (“VLS” or “Defendant”) moves for transfer of venue pursuant to 28 U.S.C. § 1404(a) to the District Court for the Southern District of New York. ECF No. 6. The Court decides the matter without oral argument. Fed, R. Civ. P. 78(b). For the reasons stated below, Defendant’s motion to transfer venue is granted.

I. BACKGROUND

Plaintiff Gary Beaumont (“Beaumont” or “Plaintiff’), a resident of New York, contracted with VLS for the carriage of cargo containing a motorcycle, a bicycle, and other personal items, from Australia to the United States. See Compl., Count One, ¶ 3, ECF No. 1. The contract of carriage between VLS and Beaumont is reflected in a Bill of Lading dated February 5, 2021 issued to Plaintiff (“B/L”) for the transport by ship of one crate [*2]  from Sydney, Australia, to Ballston Spa, New York. See Decl. of George P. Hassapis in Supp. of Mot. to Transfer (“Hassapis Decl.”) at ¶ 6; B/L attached as Ex. 2 to Hassapis Decl., ECF No. 6-3. Plaintiff alleges that the crate was shipped from Sydney to Los Angeles and then transported by rail to Carteret, NJ where it was damaged while in VLS’ custody at its warehouse prior to clearing customs and delivery of the crate to him. See Compl., ¶¶ 5, 7; Pl.’s Opp’n Br. at 4.

On April 7, 2022, Plaintiff filed suit in New Jersey state court claiming negligence and violations of the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2 (“CFA”). Subsequently, Defendant removed the action on the basis of 28 U.S.C. § 1332 diversity jurisdiction and 28 U.S.C. § 1441(b) maritime jurisdiction.

Defendant now seeks transfer of this matter to the Southern District of New York pursuant to a forum selection clause in the B/L that states that unless VLS voluntarily submits to or waives jurisdiction, 141 disputes in any way relating to this Bill of Lading shall be determined by the United States District Court for the Southern District of New York to the exclusion of the jurisdiction of any other courts in the United States or the courts of any other country.” B/L, ¶ 21(b).

In opposing transfer, [*3]  Plaintiff submits that: 1) no admiralty jurisdiction exists because damage to the cargo occurred on land upon rail transport to Carteret, NJ; 2) the standard terms on the back of the B/L, including the forum selection clause, are unenforceable contracts of adhesion; and 3) the forum selection clause and the United States Carriage of Goods by Sea Act (“COGSA“), 46 U.S.C. § 30701 et seq., (effective Oct. 6, 2006), are inapplicable because the cargo was damaged during transport on land by means other than what was expressly provided for in the B/L. These contentions will be addressed in turn.

II. DISCUSSION

A. Admiralty Jurisdiction

At the outset, Plaintiff disputes that admiralty jurisdiction exists because the cargo was damaged on land. However, the determination of admiralty jurisdiction does not turn on where the loss occurred. Rather, the dispositive inquiry rests on “‘the nature and character of the contract,’ and the true criterion is whether it has ‘reference to maritime service or maritime transactions.'” Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 24, 125 S. Ct. 385, 160 L. Ed. 2d 283 (2004) (citing North Pacific S.S. Co. v. Hall Brothers Marine Railway & Shipbuilding Co., 249 U.S. 119, 125, 39 S. Ct. 221, 63 L. Ed. 510 (1919)); Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 611, 111 S. Ct. 2071, 114 L. Ed. 2d 649 (1991) (“[T]he trend in modern admiralty case law … is to focus the jurisdictional inquiry upon whether the nature of the transaction was maritime.”). As explained by the Supreme Court, “so long [*4]  as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce—and thus it is a maritime contract. Its character as a maritime contract is not defeated simply because it also provides for some land carriage.” Kirby, 543 U.S. at 27.

Here, the B/L required performance substantially by sea. That the crate’s transport included some journey on land that was not specifically described in the B/L does not defeat the maritime nature of the contract. See, e.g., id. at 24 (finding contract’s primary objective was transportation of goods by sea from Australia to East Coast of United States and explaining that final leg of journey to Huntsville, AL by rail did not “alter the essentially maritime nature of the contracts.”). Indeed, “the fundamental interest giving rise to maritime jurisdiction is the protection of maritime commerce. … Maritime commerce is often inseparable from some land-based obligations.” Id. at 25 (internal quotes and citation omitted). Thus, as here, “[w]hen a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation.”¹ Kirby, 543 U.S. at 22-23; Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 590, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991) (applying federal law to enforceability of forum selection clause in admiralty [*5]  case).²

B. Motion to Transfer Standard

28 U.S.C. § 1404(a) provides: “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” This section applies to admiralty actions despite the statutory language referring to “civil” actions. Buckeye Pennsauken Terminal LLC v. Dominique Trading Corp., 150 F. Supp. 3d 501, 505 (E.D. Pa. 2015); see, e.g., Cont’l Grain Co. v. Barge FBL-585, 364 U.S. 19, 25-27, 80 S. Ct. 1470, 4 L. Ed. 2d 1540 (1960) (applying § 1404 in admiralty action).³ The district court has wide discretion in this decision. Plum Tree, Inc. v. Stockment, 488 F.2d 754, 756 (3d Cir.1973). “In deciding a § 1404(a) motion, a court is not limited to the pleadings, and may consider affidavits and other evidence.” Roller v. Red Payments L.L.C., No. 18-1834, 2019 U.S. Dist. LEXIS 135911, 2019 WL 3802031, at *4 (E.D. Pa. Aug. 12, 2019); see also Plum Tree, Inc., 488 F.2d at 756-57.

Typically, in a case where there is no forum selection clause, a court balances “the three enumerated factors in §1404(a) (convenience of the parties, convenience of the witnesses, or interests of justice)” along with a non-exhaustive list of various private and public interest factors. Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995). In contrast, where there is a valid and enforceable forum selection clause, the parties’ bargained for agreement as to the most proper forum should be given “controlling weight in all but the most exceptional cases.” [*6]  Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 63, 134 S. Ct. 568, 187 L. Ed. 2d 487 (2013). Additionally, in a § 1404(a) analysis where a valid forum selection clause is present, the plaintiffs choice of forum merits no weight and the parties’ private interests⁴ should be weighed entirely in favor of the preselected forum. Id. at 63-66. In short, only public interest factors⁵ remain to be balanced and “[i]n all but the most unusual cases, therefore, “the interest of justice” is served by holding parties to their bargain,” Id. at 66. Although the party seeking a § 1404(a) transfer usually bears the burden of persuasion, see In re McGraw-Hill Global Educ. Holdings LLC, 909 F.3d 48, 57 (3d Cir. 2018), where there is a valid forum selection clause, the party seeking to avoid the clause bears the burden of showing that public interest factors “overwhelmingly disfavor a transfer.” Atl. Marine Const. Co., 571 U.S. at 66; Jumara, 55 F.3d at 879.

Because the existence of a valid forum selection clause changes the § 1404(a) calculus, the Court must first examine whether the forum selection clause at issue is enforceable. Federal law applies to this inquiry since, as discussed above, the interpretation of a maritime contract is governed by federal law.⁶

C. Forum Selection Clause

a. Contract of Adhesion

Generally, a federal court sitting in admiralty should enforce forum selection clauses as prima facie valid absent a showing by the resisting party that to do so would [*7]  be “unreasonable” under the circumstances. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972); In re: Howmedica Osteonics Corp., 867 F.3d 390, 397 (3d Cir. 2017) (noting courts must honor a valid forum selection clause “in all but the most unusual cases.”). “A forum selection clause is ‘unreasonable’ where the defendant can make a ‘strong showing’ [], either that the forum thus selected is ‘so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court,’ [], or that the clause was procured through ‘fraud or overreaching,’ [].” Foster v. Chesapeake Ins. Co., 933 F.2d 1207, 1219 (3d Cir. 1991) (citing M/S Bremen, 407 U.S. at 15, 18); CBJ, Inc. v. M/V “HANJIN HONG KONG”, No. CIV. 99-4925, 2000 U.S. Dist. LEXIS 20288, 2000 WL 33258660, at *2 (D.N.J. Sept. 22, 2000).

Despite Plaintiffs claims otherwise, a forum selection clause is presumed valid even when it is part of an adhesion contract. See Carnival Cruise, 499 U.S. 585 (upholding non-negotiated forum selection clause in a “form ticket contract”); Fireman’s Fund Ins. Co. v. M.V. DSR Atlantic, 131 F.3d 1336, 1338 (9th Cir.1997) (finding that whether or not the bill of lading was contract of adhesion was “of no relevance” in determining whether forum selection clause should be enforced); Union Steel Am. Co. v. M/V Sanko Spruce, 14 F. Supp. 2d 682, 686-87 (D.N.J. 1998) (collecting cases where courts have rejected argument that there is no presumption of validity because forum selection clause is part of adhesion contract); Vitricon, Inc. v. Midwest Elastomers, Inc., 148 F. Supp. 2d 245, 248 (E.D.N.Y.2001) (“[c]ourts have consistently rejected the argument that forum selection clauses contained in pre-printed contracts are unenforceable.” (citation omitted)).

Moreover, Plaintiff has not demonstrated, [*8]  or even alleged, that litigating in New York would be so gravely difficult and inconvenient as to deprive him of his day in court, or that the forum selection clause was the result of fraud. Instead, Plaintiff argues that the B/L is unenforceable because it is fundamentally unfair. See Carnival Cruise, 499 U.S. at 595 (“forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness”). In Carnival, the Court found no evidence of fraud or overreaching and no indication of bad faith that the cruise ship set Florida as the selected forum to discourage passengers from pursuing legitimate claims given that Florida was the location of petitioner’s principal place of business and the port of departure and return for many of its cruises, Id. at 595. Citing Carnival, Plaintiff suggests that the forum selection of New York is likewise unfair because Defendant’s “head office” is in Long Beach, CA and none of Defendant’s offices are located in New York. Plaintiff, however, provides no evidence to support such assertions. In any event, the Court declines to conclude that the preselection of a New York forum is fundamentally unfair when Plaintiff is a resident of New York and the cargo at issue was [*9]  contracted to be delivered to New York.

Next, Plaintiff also maintains that under Berkson v. Gogo LLC, 97 F. Supp, 3d 359 (E.D.N.Y. 2015), the forum selection clause at issue is a “material alteration” that required specific consent and that a “reasonably prudent person” would not have been aware of the forum selection clause located on the back of the B/L. However, Plaintiffs reliance on Berkon is misplaced. Apart from not being binding on this Court, Berkon is inapposite. At issue was a forum selection clause that was part of an electronic contract of adhesion court that required the consumer to click on a “terms of use” hyperlink and scroll down to the seventh page of the document to find the choice of law and forum selection clause. Id. at 375. In that case, “[w]here the assent to terms of a contract is ‘largely passive,’ as is often the case with electronic contracts of adhesion,” the court noted that “‘the contract-formation question will often turn on whether a reasonably prudent offeree would be on [inquiry] notice of the term[s] at issue.'” Id. at 393 (citation omitted). In contrast, here the B/L here is not an electronic contract of adhesion that raises issues of sufficient notice.⁷ Rather, a copy of the B/L, which contained the forum selection clause [*10]  on the reverse side, was provided to Plaintiff prior to the container’s loading in Sydney. See Hassapis Decl., ¶ 6, 8, 9.

In sum, Plaintiff has failed to show that the forum selection clause should not be enforced as prima facie valid because it is included in a contract of adhesion or unreasonable or unfair.⁸

b. Damage on Land

Plaintiff insists that he is not bound by the forum selection clause because damage to his cargo did not occur during the intermodal carriage from Australia to New York, but on land in Carteret, NJ during a portion of the journey that was not expressly identified in the B/L. Therefore, Plaintiff characterizes his claim as a state law claim for negligent bailment.

The B/L, however, expressly provides for “through” transportation:

When either the Place of Receipt or Place of Delivery set forth herein is an inland point or place other than the Port of Loading (Through Transportation basis), the Carrier will procure transportation to or from the sea terminal and such inland point(s) or place(s)…

B/L, ¶ 5. By its terms, the B/L is a “through” bill of lading, that is, a contract for “transportation across oceans and to [an] inland destination[] in a single transaction.” [*11]  Kirby, 543 U.S. at 25-26. Although Plaintiff complains that the B/L did not specifically identify the land route from the port of entry, the carriage of cargo from Sydney to Ballston invariably had to include transport by land in the final leg because Ballston Spa, NY is an inland point located about 30 miles north of Albany, NY. Hence land transport was necessary to complete performance of the contract. See also B/L, ¶ 12 (permitting Carrier to “use any means of transport (water, land and/or air) or storage” at any time and without notice to consignee). As such, the occurrence of damage while on land does not render the forum selection clause unenforceable.⁹

D. 28 U.S.C. §1404(a) Analysis

Because the B/L contains an enforceable forum selection clause, the Plaintiff’s choice of forum merits no weight and the parties’ private interests weigh entirely in favor of the preselected forum. Furthermore, Plaintiff has not argued that any of the public interest factors that remain to be balanced weigh against transfer, nor has Plaintiff shown that this is such an unusual or exceptional case that the parties’ preselected forum should be disregarded. Thus, the parties’ contracted forum – the Southern District of New York — must [*12]  be given controlling weight as the proper forum.

III. CONCLUSION

For the reasons discussed above, Defendant’s motion to transfer this action to the United States District Court for the Southern District of New York is granted. An appropriate Order follows.

/s/ William J. Martini

WILLIAM J. MARTINI, U.S.D.J.

Date: July 19, 2022

ORDER

WILLIAM J. MARTINI, U.S.D.J.:

This matter comes before the Court on the motion of Defendant Vanguard Logistics Services (USA), Inc. (“VLS”) for transfer of venue pursuant to 28 U.S.C. § 1404(a) to the District Court for the Southern District of New York. ECF No. 6. For the reasons set forth in the accompanying opinion, and for good cause shown,

IT IS on this 19th day of July 2022, ORDERED that Defendant VLS’s motion for transfer of venue is GRANTED; and

IT IS FURTHER ORDERED that this matter is transferred to the United States District Court for the Southern District of New York.

/s/ William J. Martini

WILLIAM J. MARTINI, U.S.D.J.

End of Document

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¹ Plaintiff has not argued that this dispute is inherently local. Compare Kirby, 543 U.S. at 28 (applying federal law where no specific Australian or state interest defeated federal interest in uniformity of general maritime law) with Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 313-14, 75 S. Ct. 368, 99 L. Ed. 337 (1955) (applying state law to maritime insurance contract due to state’s broad regulatory power over insurance industry).

² Even absent admiralty jurisdiction, in diversity cases, “the effect to be given a contractual forum selection clause” is determined by federal not state law because questions of venue and the enforcement of a forum selection clause is a procedural, rather than substantive, inquiry. Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir. 1995); Collins On behalf of herself v. Mary Kay, Inc., 874 F.3d 176, 181-82 (3d Cir. 2017) (explaining that enforceability of forum selection clause (whether compelling compliance is unreasonable or clause resulted from fraud or overreaching) is governed by federal law in contrast to the scope or interpretation of a forum selection clause (whether the claims and parties are subject to the clause), which is governed by state law).

³ Section 1404(a) also applies to the venue question in a diversity jurisdiction case. See Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 108 S. Ct. 2239, 101 L. Ed. 2d 22 (1988) (holding that federal law, specifically 28 U.S.C. § 1404(a), rather than substantive contract law, governed whether to grant motion to transfer a diversity case to venue provided in forum selection clause).

⁴ Private interest factors include: plaintiffs forum preference as manifested in the original choice; the defendant’s preference; whether the claim arose elsewhere; the convenience of the parties as indicated by their relative physical and financial condition; the convenience of the witnesses—hut only to the extent that the witnesses may actually be unavailable for trial in one of the fora; and the location of books and records (similarly limited to the extent that the files could not be produced in the alternative forum). Jumara, 55 F.3d at 879.

⁵ Public interest factors have included: the enforceability of the judgment; practical considerations that could make the trial easy, expeditious, or inexpensive; the relative administrative difficulty in the two fora resulting from court congestion; the local interest in deciding local controversies at home; the public policies of the fora; and the familiarity of the trial judge with the applicable state law in diversity cases. Jumara, 55 F.3d at 879-880. “[W]hen a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s choice-of-law rules — a factor that in some circumstances may affect public-interest considerations” given that a court’s familiarity with the applicable law is a potential factor. Atl. Marine, 571 U.S. at 64-65.

⁶ Notably, Plaintiff disputes that admiralty jurisdiction exists, but only cites to federal caselaw.

⁷ In Carnival Cruise, the Court specifically noted that it was not addressing the question of sufficient notice of the forum clause. Carnival Cruise, 499 U.S. at 590.

⁸ Given this ruling, the Court need not address Defendant’s additional contention that Plaintiff has accepted and is bound by the terms of the B/L because he has sued on it even though the Complaint alleges negligence and violations of New Jersey CFA rather than breach of contract.

⁹ Because the cargo was damaged on land, Plaintiff contends that COGSA is inapplicable. However, “[alit cargo shipments carried by sea to or from the United States are subject to COGSA.” Fireman’s Fund, 131 F.3d at 1339. Moreover, the B/L expressly extends the application of COGSA to “the entire time the Carrier is responsible for the Goods,” including “after discharge from the vessel.” B/L, ¶ 4(a). By the B/L’s express terms, COGSA governs the land transport of the goods at issue. See Kirby, 543 U.S. at 29 (recognizing that parties may extend COGSA‘s applicability by contract to the entire period in which goods would be under carrier’s responsibility, including period of inland transport). Accordingly, Defendant argues that COGSA preempts Plaintiff’s state law claims. See Polo Ralph Lauren, L.P. v. Tropical Shipping & Const. Co., Ltd., 215 F.3d 1217, 1220 (11th Cir. 2000) (“COGSA, when it applies, supersedes other laws.”); Amazon Produce Network, LLC v. M/V LYKES OSPREY, 553 F. Supp. 2d 502, 506 (E.D. Pa. 2008) (COGSA “provides an exclusive remedy for damage to cargo incurred during carriage between foreign and United States ports.”). However, the Court need not resolve this dispute to rule on the pending transfer motion.