U.S. - Carrier's Agent is entitled to benefit of Foreign Forum Selection Clause in Ocean Bill of Lading

October 2000

Continuing to extend the reach of the Supreme Court’s 1994 Sky Reefer decision, a federal district court in New York has recently held that if an ocean carrier’s local agent is a "subcontractor" within the meaning of a "Himalya Clause" in an ocean bill of lading, the local agent is entitled to the benefit of a foreign forum selection clause in that bill of lading. As a result, claims against a carrier’s local subcontractor must be brought in the forum identified in the bill of lading, not where the local subcontractor can be found or even where the damage allegedly occurred.

In the New York case, plaintiff shipped goods to New York with an Italian NVOCC. The ocean carrier issued a waybill to the NVOCC showing the NVOCC’s New York agent ("Challenger") as the consignee. The NVOCC issued a bill of lading to the shipper showing the shipper’s buyer as the ultimate consignee. Shipper instructed Challenger not to release the shipment to the ultimate consignee until the shipper authorized its release. Challenger in turn allegedly instructed the carrier’s agent in New Jersey not to release the shipment. The shipment was nevertheless released to the ultimate consignee. The shipper was allegedly never paid. The consignee filed for bankruptcy. Thereupon, the shipper filed suit against Challenger in New York for the value of the goods, contending it suffered the loss because Challenger did not follow the shipper’s instructions.

Challenger in turn filed a third-party complaint against the ocean carrier and the carrier’s agent for indemnity in the event it was held liable to the shipper. The waybill called for disputes to be resolved in China.

The carrier and the carrier’s agent filed a motion to enforce the Chinese forum selection clause. As to the New Jersey agent, the contention was made that the carrier had sub-contracted its duty to make a proper delivery to the agent. The "Himalaya Clause" in the bill of lading extended the benefits available to the carrier under the waybill to the carrier’s subcontractors. Accordingly, the benefit of the Chinese forum selection clause ran in favor of the New Jersey agent as well as the carrier.

Challenger contended that the third-party claim was one for indemnity and that an indemnity claim did not "arise under" the bill of lading. As to the New Jersey agent, the shipper’s agent also contended that the foreign forum selection clause was not an "exemption," "defense," or "limitation" under the Himalaya Clause.

Judge Koeltl ruled in favor of the carrier and the carrier’s agent. He held that in these circumstances Challenger’s third-party claim arose under the bill of lading and further held that the Chinese forum selection clause was a "defense" under the Himalaya Clause that ran in favor of the carrier’s agent. LPR, SRL v. Challenger Overseas, LLC, 2000 U.S. Dist LEXIS 9746 (July 7, 2000). Judge Koeltl also enforced a provision in the NVOCC bill of lading calling for disputes between the shipper and the NVOCC, including its agent, Challenger, to be heard in Italy. As a result, plaintiff’s claims were dismissed. Healy & Baillie represented the carrier and the carrier’s agent in that litigation.

Since there is one contract of carriage, a plaintiff should be allowed only one recovery from all parties performing that contract of carriage. Allowing suit in one forum against all relevant parties serves this purpose. As stated by Judge Koeltl, if the carrier’s subcontractors did not have the benefit of the forum selection clause, it "would have the untenable result that different claims arising out of the very same agreement to transport goods would be litigated in different parts of the world."

 

With thanks to LeRoy Lambert of Healy & Baillie, LLP, New York, for preparing this article.