Forum Selection Clause in Vessel Owner's Bill of Lading Issued to Non-Vessel Operating Common Carrier Enforceable Against Shipper
April, 2003
by Kimbley A. Kearney and
In Kukje Hwajae Ins. Co., Ltd. v. M/V Hyundai Liberty, 2002 A.M.C. 1598, 294 F.3d 1171 (9th Cir.), the Ninth Circuit Court of Appeals held that a shipper was bound by the forum selection clause in a bill of lading issued by the vessel owner to an intermediary non-vessel operating common carrier (NVOCC). Accordingly, the court upheld dismissal of an action for damaged cargo against the vessel brought outside the designated forum.
Facts
Plaintiff Kukje Hwajae insured Doosan Corporation, a Korean machinery manufacturer. Doosan hired Glory Express, Inc., an NVOCC, to ship certain machinery from Korea to Los Angeles. Glory Express issued three bills of lading to cover the shipment. Each bill contained a forum selection clause requiring that all suits relating to the goods be brought in federal court in New York.
Glory Express, through its agent, Streamline Shippers Association, then contracted with Hyundai Merchant Marine Company to ship the cargo on its vessel, the Hyundai Liberty. Hyundai Merchant Marine issued its own bill of lading to Streamline, containing a forum selection clause specifying that any claims relating to the carriage of the goods be brought in Korea.
The cargo was damaged during the sea voyage, causing more than $200,000 in damages. After paying Doosan’s claim, Kukje Hwajae sued Glory Express and the Hyundai Liberty in federal district court in California1. The court found that Glory Express’ liability was limited under the Carriage of Goods by Sea Act (COGSA) and its bills of lading. The court dismissed the action against Hyundai as not complying with Hyundai’s forum selection clause.
Analysis
The Ninth Circuit Court of Appeals affirmed. The court found that Hyundai’s forum selection clause could be enforced against Doosan because Glory Express, consistent with the commercial role of an NVOCC, was acting as Doosan’s agent when it accepted the Hyundai bill of lading. Thus, plaintiff – as Doosan’s subrogee – was bound by Hyundai’s bill of lading, meaning that the district court lacked jurisdiction over the claims against the vessel.
The appellate court also agreed that Glory Express’ liability was limited. The court rejected plaintiff’s argument that Glory Express’ bill of lading did not comply with COGSA’s requirement under § 1304(5) that the shipper be given “fair opportunity” to opt for greater liability by paying a correspondingly greater charge. The bill contained a provision tracking the language of § 1304(5) and clearly informing Doosan that it could opt for higher liability by paying an extra charge.
Learning Point:
Shippers should beware that an intermediary NVOCC can bind them to terms of a contract between the NVOCC and ocean carrier it has hired to transport the shipper’s goods – even if the shipper is not a direct party to the contract and did not accept its terms. ?
1 Glory Express did not seek to enforce its forum selection clause.
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