U.S. Suit Time Limitations

June 1999

(Sea Venture Volume 18)

Time-Bar As Result Of Suing In The Wrong Forum

In 1995 in the "Sky Reefer" case, the U.S. Supreme Court upheld the enforceability of a foreign arbitration clause in a bill of lading subject to U.S. COGSA. Subsequent cases relying on "Sky Reefer" have made clear that foreign forum clauses subject to COGSA are also enforceable. Cases which have ruled on foreign forum clauses have been presented with the following issue: If a cargo damage suit is filed in a U.S. court despite an enforceable foreign forum clause in the bill of lading, will the U.S. court require, as a condition of enforcement, that the carrier waive its time bar defense in the foreign forum? The answer is no, as U.S. courts have regularly granted such applications without requiring the carrier to waive its time bar defense in the foreign forum.¹ Such unqualified dismissals have been rendered in forum selection clause cases by U.S. district courts in New York, New Jersey, Florida and California. The U.S. courts which have enforced forum clauses irrespective of time-bar consequences have held that claimants who ignore valid forum selection clauses cannot be heard to complain of any potential timeliness problems that this choice may have created. Despite this clear trend, many claimants who sue in the U.S., despite a foreign forum clause, have not bothered to file protective actions in the place specified in the forum clause. The result is that their claims are often time-barred.

NVOCC’s Indemnity Claim Against Ocean Carrier

Generally, the rule in the U.S. is that the statute of limitations for an indemnity claim does not start to run before judgment on the underlying claim has been entered against the party seeking indemnity or until such party has settled the underlying claim. A question which often arises is whether this general rule applies to an indemnity claim brought by an NVOCC against an ocean carrier. In a typical arrangement, an ocean carrier issues its bill of lading to an NVOCC, who, in turn, issues its bill of lading to the actual shipper of the cargo. (Hence, the NVOCC is at once a carrier and a shipper.) Cargo claimants often sue the NVOCC in addition to the ocean carrier. The NVOCC then invariably brings an indemnity claim against the ocean carrier. The question is whether this indemnity claim is subject to the one year suit time provision of COGSA given that the ocean carrier and the NVOCC have a carrier-shipper relationship under the ocean carrier’s bill of lading. In what appears to be the first reported U.S. case on this precise point, a U.S. district court in Florida recently held that the one year suit time provision does not apply to an indemnity claim brought by an NVOCC against an ocean carrier.² The court reasoned that the one year suit time provision governs cargo liability suits, not indemnity suits between carriers.

Ocean Carrier’s Indemnity Claim Against Railroad

In a recent case involving rail carriage in the U.S. under a through bill of lading issued by an ocean carrier, a U.S. District Court in California held that the ocean carrier’s cross-claim for indemnity against the railroad was not subject to the one year suit time limitation contained in the railroad’s circular.³

When Does COGSA’s One Year Suit Time Period Begin To Run?

The one year suit time provision under COGSA runs from the date of delivery of the cargo or, in the case of loss of cargo, the date that the cargo should have been delivered. The date of delivery is not always clear and is not necessarily the date of discharge of the cargo from the vessel. In a recent Fifth Circuit case (purporting to be the first U.S. appellate court case to expressly decide when delivery occurs for purposes of COGSA’s suit time provision) it was held that delivery occurs when the carrier places the cargo into the custody of whoever is legally entitled to receive it from the carrier.⁴ Thus, when the custom of the particular discharge port required ocean carriers to deliver cargo to an authorized customs warehouse pending clearance, the carrier’s delivery obligations werecompleted upon delivery of the cargo to such warehouse.

 

With thanks to Randolph Donatelli, Cichanowicz, Callan, Keane, Vengrow & Textor, LLP, New York, for preparing this article.

¹ New York Marine v. M/V ADMIRALENGRACHT, 97 Civ. 7402 (New York 1999); Chiyoda Fire & Marine v. M/V HYUNDAI FREEDOM, 98 Civ. 8474 (New York 1999); Street Sound Around v. M/V ROYAL CONTAINER, 30 F. Supp. 2d 661 (New York 1999); Union Steel America v. M/V SANKO SPRUCE, 14 F. Supp. 2d 682 (New Jersey 1998); Vigilant Ins. Co. v. NYK Line, 97 Civ. 7517 (New York 1998); Seven Seas Ins. Co. v. Danzas S.A., 1997 AMC 961 (Florida 1996); Great American Ins. Co. v. M/V KAPITAN BYANKIN, 1996 AMC 1754 (California 1996).

² American Home Assurance Co. v. Internaves Shipping Corp., 985 F. Supp. 1154 (Florida 1997).

³ Tokio Marine & Fire Ins. Co. v. NYK Line, 1998 AMC 1558 (California 1997). There is, however, an earlier New York case to the opposite effect, Sankyo Siki (America) Inc. v. S.S. KOREAN LEADER, 556 F. Supp. 337 (New York 1982), affirmed, 723 F. 2d 895 (2d Cir. 1983).

⁴ Servicios - Expoarma v. Industrial Maritime Carriers, 135 F. 3d 984 (5^th Cir. 1998).