Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, Her Engines, Etc., and M.H. Maritima, S.A., 29 F.3d 727, 1st Cir. (1994)
Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, Her Engines, Etc., and M.H. Maritima, S.A., 29 F.3d 727, 1st Cir. (1994)
Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, Her Engines, Etc., and M.H. Maritima, S.A., 29 F.3d 727, 1st Cir. (1994)
3d 727
1994 A.M.C. 2513, 63 USLW 2060
Stanley McDermott, III with whom Sharyn Bernstein, Varet & Fink, P.C.,
Alexander Peltz, and Peltz Walker & Dubinsky, New York City, were on
brief, for appellants.
John J. Finn with whom Thomas H. Walsh, Jr., Jeffrey S. King, and
Bingham, Dana & Gould, Boston, MA, were on brief, for appellees.
Before BREYER* , Chief Judge, BOWNES, Senior Circuit Judge, and
STAHL, Circuit Judge.
BOWNES, Senior Circuit Judge.
I.
BACKGROUND
2
The oranges were shipped under a bill of lading issued in Morocco by Nichiro.
The bill of lading constitutes the contract of carriage between Bacchus and
Maritima. En route to New Bedford, numerous boxes of oranges were crushed.
Bacchus filed an action in the United States District Court for the District of
Massachusetts, in rem against the SKY REEFER, and in personam against
Maritima, seeking to recover approximately $1 million in damages.
Maritima moved to stay the action and compel arbitration in Tokyo pursuant to
a clause in the bill of lading:
The district court held that the arbitration clause contained in subsection (2)
was enforceable, granted Maritima's motion for a stay pending arbitration, and
certified the following question for interlocutory appeal pursuant to 28 U.S.C.
Sec. 1292(b): "[W]hether 46 U.S.C. Sec. 1303(8) [Sec. 3(8) of COGSA]
nullifies an arbitration clause contained in a bill of lading governed by
COGSA." With this question in mind, we begin our journey through unsettled
statutory waters.
II.
DISCUSSION
COGSA was passed in 1936 as the American enactment of the Hague Rules,
and was part of an international effort to achieve uniformity and simplicity in
bills of lading used in foreign trade. Union Ins. Soc'y of Canton, Ltd. v. S.S.
Elikon, 642 F.2d 721, 723 (4th Cir.1981). COGSA was also intended to reduce
uncertainty concerning the responsibilities and liabilities of carriers,
responsibilities and rights of shippers, and liabilities of insurers. State
Establishment for Agric. Prod. Trading v. M/V Wesermunde, 838 F.2d 1576,
1580 (11th Cir.), cert. denied, 488 U.S. 916, 109 S.Ct. 273, 102 L.Ed.2d 262
(1988) ("Wesermunde"); S.S. Elikon, 642 F.2d at 723; see generally Grant
Gilmore & Charles L. Black, The Law of Admiralty Sec. 3-25 at 145 (2d ed.
1975).
COGSA applies to "[e]very bill of lading ... which is evidence of a contract for
the carriage of goods by sea to or from parts of the United States, in foreign
trade...." 46 U.S.C. Sec. 1300. The parties agree that the bill of lading at issue
here is covered by COGSA ex proprio vigore, in other words, as a matter of
law. The bill of lading also contains the following provision:
Local Law
10 case this Bill of Lading covers the Goods moving to or from the U.S.A. and it
In
shall be adjudged that the Japanese Law does not govern this Bill of Lading, then the
provisions of the U.S. Carriage of Goods at Sea Act 1936 shall govern before the
Goods are loaded on and after they are discharged from the vessel and throughout
the entire time during which the Goods are in the actual custody of the carrier.
11
Bacchus argues that the Tokyo arbitration clause is invalid under Sec. 3(8) of
COGSA which prohibits the "lessening" of the carrier's obligation as imposed
by COGSA's other sections.2
12
In Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (2d Cir.1967) (en banc), the
Second Circuit held that all foreign forum selection clauses in bills of lading
governed by COGSA are necessarily invalid under Sec. 3(8) because they tend
to lessen the carrier's liability. Id. at 204. The court reasoned as follows:
Id. at 203.3 Moreover, "[a] clause making a claim triable only in a foreign court
would almost certainly lessen liability if the law which the court would apply
was not [COGSA]." Id. Furthermore,
15
[e]ven
when the foreign court would apply [COGSA], requiring trial abroad might
lessen the carrier's liability since there could be no assurance that it would apply
[COGSA] in the same way as would an American tribunal subject to the uniform
control of the Supreme Court.... We think that Congress meant to invalidate any
contractual provision in a bill of lading for a shipment to or from the United States
that would prevent cargo [sic] able to obtain jurisdiction over a carrier in an
American court from having that court entertain the suit and apply the substantive
rules Congress had prescribed.
16
17
Since Indussa, Sec. 3(8) has been consistently used by federal courts to
invalidate forum selection clauses in bills of lading governed by COGSA. See,
e.g., Conklin & Garrett, Ltd. v. M/V Finnrose, 826 F.2d 1441, 1442-44 (5th
Cir.1987) (forum selection clause designating Finland invalid even where bill
of lading provided for application of COGSA in Finland); Union Soc'y of
Canton, Ltd., 642 F.2d at 723-25 (choice of forum clause requiring litigation in
Germany invalid under Sec. 3(8)); cf. Fireman's Fund Amer. Ins. Cos. v. Puerto
Rican Forwarding Co., 492 F.2d 1294 (1st Cir.1974) (distinguishing Indussa
and upholding New York City forum selection clause). Indussa has also been
approved by commentators. See Gilmore & Black, supra Sec. 3-25 at 145-46 n.
23; Schoenbaum, supra Sec. 9-18 at 327; Charles L. Black, The Bremen,
COGSA and the Problem of Conflicting Interpretation, 6 Vand.J.Trans.L. 365,
368-69 (1973). But see Note, Kenneth M. Klemm, Forum Selection in Maritime
Bills of Lading Under COGSA, 12 Fordham Int'l L.J. 459 (1989); Stephen M.
Denning, Choice of Forum Clauses in Bills of Lading, 2 J.Mar.L. & Com. 17
(Oct.1970).
18
While we need not fully explore the issue, we note that the Supreme Court's
recent decision in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct.
1522, 113 L.Ed.2d 622 (1991), in which the Court held that the Limitation of
Vessel Owners' Liability Act did not invalidate forum selection agreements,
casts some doubt upon Indussa's continuing viability. See Fabrica De Tejidos
La Bellota S.A. v. M/V MAR, 799 F.Supp. 546, 560-61 (D.Virgin Islands
1992); see also Patrick J. Borchers, Forum Selection Agreements in the Federal
Courts After Carnival Cruise: A Proposal for Congressional Reform, 67
Wash.L.Rev. 55, 77 (1992) (Carnival Cruise, implicitly overruled Indussa and
its progeny). But see Underwriters at Lloyd's of London v. M/V Steir, 773
F.Supp. 523, 526-27 (D.P.R.1991) (invalidating forum selection clause under
20
Although
the Supreme Court has acknowledged the Indussa decision and has not
formally rejected it, see The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 n. 11,
92 S.Ct. 1907 [1913 n. 11], 32 L.Ed.2d 513 (1972), several passages in the Bremen
opinion cast some doubt on the underlying rationale of Indussa. See, e.g., 407 U.S.
at 9, 92 S.Ct. at 1912 ("The expansion of American business and industry will
hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial
concept that all disputes must be resolved under our laws and in our courts.")....
21
Fireman's Fund, 492 F.2d at 1296 n. 2. Because The Bremen is not a COGSA
case, however, it is easily distinguishable from Indussa and its progeny. See
S.S. Elikon, 642 F.2d at 724-25 (holding that The Bremen did not involve
COGSA and therefore did not disturb Indussa ).
22
23
The other statute implicated in this case is the FAA. Section 2 of that act
provides:
26
Where there is an agreement to arbitrate, the FAA reflects a strong, wellestablished, and widely recognized federal policy in favor of arbitration.
Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct.
2332, 2337, 96 L.Ed.2d 185 (1987); Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444
(1985); Securities Indus. Ass'n v. Connolly, 883 F.2d 1114, 1118-19 (1st
Cir.1989), cert. denied, 495 U.S. 956, 110 S.Ct. 2559, 109 L.Ed.2d 742 (1990).
Arbitration agreements are unenforceable under Sec. 2 of the FAA only where
the agreement would be revocable under state contract law. Southland Corp. v.
Keating, 465 U.S. 1, 11, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984) (party may
assert general contract defenses, such as fraud and duress, to avoid enforcement
of arbitration agreement); McAllister Bros., Inc. v. A & S Transp. Co., 621 F.2d
519, 524 (2d Cir.1980) (same).4
27
Although this court has never decided whether a foreign arbitration clause in a
bill of lading governed by COGSA is invalid under Sec. 3(8) of that statute,
courts that have reached the question are divided. A handful of courts,
including the Eleventh Circuit, have employed the reasoning articulated in
Indussa to invalidate foreign arbitration clauses. See, e.g., Wesermunde, 838
F.2d at 1580-82; M/J Khalij Frost, 1989 A.M.C. at 1462-66; Siderius v. M.V.
Ida Prima, 613 F.Supp. 916, 920-21 (S.D.N.Y.1985); Star Shipping A/S, 464
F.Supp. at 1314-15; see also Gilmore & Black, supra, Sec. 3-25 at 146 n. 23;
Schoenbaum, supra Sec. 9-19 at 329.
28
29
While
we do not believe that arbitration in and of itself is per se violative of
COGSA's provisions, especially in light of Congress' encouragement of arbitration
by its enactment of the Arbitration Act, 9 U.S.C. Secs. 1-14 (1970) the court does
believe that a provision requiring arbitration in a foreign country that has no
connection with either the performance of the bill of lading contract or the making of
the bill of lading contract is a provision that would conflict with COGSA's general
purpose of not allowing carriers to lessen their risk of liability.
30
Wesermunde, 838 F.2d at 1581 (footnote omitted). Some courts have gone one
step further, holding that foreign arbitration clauses in bills of lading are per se
invalid under COGSA because "[t]he considerations [stated in Indussa ] are
substantially similar where the bill of lading requires the consignee to arbitrate
in a foreign country." Siderius, 613 F.Supp. at 920; accord Khalij Frost, 1989
A.M.C. at 1462 (Indussa rationale "appl[ies] with equal force in the case of a
On the other side of the coin, numerous federal courts have upheld foreign
arbitration clauses in bills of lading subject to COGSA. See, e.g., Nissho Iwai
Amer. Corp. v. M/V Sea Bridge, 1991 A.M.C. 2070, 1991 WL 182117
(D.Md.1991); Citrus Mktg. Bd. v. M/V Ecuadorian Reefer, 754 F.Supp. 229
(D.Mass.1990); Travelers Indem., Co. v. M/V Mediterranean Star, 1988
A.M.C. 2483, 1988 WL 78363 (S.D.N.Y.1988); Mid South Feeds, Inc. v. M/V
Aqua Marine, 1988 A.M.C. 437 (S.D.Ga.1986); Midland Tar Distillers, Inc. v.
M/T Lotos, 362 F.Supp. 1311, 1315 (S.D.N.Y.1973); Mitsubishi Shoji Kaisha
Ltd. v. MS Galini, 323 F.Supp. 79, 83-84 (S.D.Tex.1971); Kurt Orban Co. v.
S/S Clymenia, 318 F.Supp. 1387, 1390 (S.D.N.Y.1970).
32
33
34
With respect to the former canon, the FAA must be given priority over COGSA
in light of the FAA's reenactment in 1947, eleven years after COGSA was
passed. Similarly, the latter canon suggests that the FAA be given effect.
Section 3(8) of COGSA, which voids any clause in a bill of lading that
"lessens" the carrier's liability, makes no reference to arbitration, or for that
matter, forum selection clauses.7 Conversely, the FAA specifically validates
arbitration clauses contained in maritime bills of lading. See 9 U.S.C. Secs. 1,
2.
35
Next, and perhaps of paramount importance, we believe that the strong federal
policy favoring arbitration supports the primacy of the FAA over COGSA
37
For the foregoing reasons, the order of the district court is Affirmed.
Chief Judge Stephen Breyer heard oral argument in this matter but did not
participate in the drafting or the issuance of the panel's opinion. The remaining
two panelists therefore issue this opinion pursuant to 28 U.S.C. Sec. 46(d)
The court also concluded that COGSA, wherever it governs a bill of lading,
requires application of American law. Indussa, 377 F.2d at 203; see generally
Thomas J. Schoenbaum, Admiralty & Maritime Law Sec. 9-18 at 326-27 (Pra.
ed. 1987). Bacchus contends that the Japanese choice-of-law clause in its bill of
lading, in addition to the arbitration clause, is null and void under Sec. 3(8) of
COGSA, and, alternatively, that the "Local Law" clause in the bill of lading
requires that COGSA, and not Japanese law, governs, because COGSA applies
ex proprio vigore. Although both of these arguments appear to be substantial,
only the validity of the arbitration clause is at issue on this interlocutory appeal.
In light of our holding, the choice-of-law question must be decided, in the first
instance, by an arbitrator
4
Bacchus argued below that the bill of lading was a contract of adhesion, and
that the arbitration clause was therefore unenforceable. This defense was
rejected by the district court, and that ruling is not before us on the present
appeal. We recognize, however, that maritime bills of lading have been viewed
as contracts of adhesion. See, e.g., Organes Enters., Inc. v. M/J Khalij Frost,
1989 A.M.C. 1460, 1465-66, 1989 WL 37660 (S.D.N.Y.1989); Pacific Lumber
& Shipping Co. v. Star Shipping A/S, 464 F.Supp. 1314, 1315
(W.D.Wash.1979). Accordingly, if the adhesion issue had been a subject of this
interlocutory appeal, it would warrant close scrutiny
We recognize, however, that absent the FAA, COGSA might operate to nullify
foreign arbitration clauses in bills of lading
26577, slip op. at 2, 1986 WL 12534 (S.D.N.Y. Oct. 24, 1986); M/V
Mediterranean Star, 1988 A.M.C. at 2484-85; see also Kaystone Chem., Inc. v.
Bow-Sun, 1989 A.M.C. 2976, 2981-82, 1989 WL 39498 (S.D.N.Y.1989)
(stating that Indussa footnote "probably" requires enforcement of foreign
arbitration clause in COGSA bill of lading). But see Siderius, 613 F.Supp. at
920-21 (holding Aaacon substantially undercuts scope of the Indussa footnote);
Khalij Frost, 1989 A.M.C. at 1463-64 (same). While we agree with the rule of
statutory construction expressed in the footnote, we take no position on the
effect of Aaacon on that note.
7
In fact, up until Indussa, the Second Circuit regularly enforced foreign forum
selection clauses in bills of lading governed by COGSA. See, e.g., William H.
Muller & Co. v. Swedish Amer. Line Ltd., 224 F.2d 806 (2d Cir.), cert. denied,
350 U.S. 903, 76 S.Ct. 182, 100 L.Ed. 793 (1955); Cerro De Pasco Copper
Corp. v. Knut Knutsen, O.A.S., 187 F.2d 990 (2d Cir.1951)