Union Insurance Society v. Elikon

642 F.2d 721
CourtCourt of Appeals for the Fourth Circuit
DecidedMarch 5, 1981
DocketNo. 80-1343
StatusPublished
Cited by1 cases

This text of 642 F.2d 721 (Union Insurance Society v. Elikon) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Union Insurance Society v. Elikon, 642 F.2d 721 (4th Cir. 1981).

Opinion

WINTER, Circuit Judge:

Union Insurance Society of Canton, Ltd., a marine insurer incorporated under the law of a country other than the United States, brings this suit as subrogee to recover damages to cargo it insured carried by the S/S Elikon from the United States to Kuwait. On the basis of a forum selection clause in the bill of lading requiring litigation of the suit in a German court, the district court dismissed the suit for want of jurisdiction. The Society appeals. We reverse, remanding the case for further proceedings in the district court.

I.

This case arose out of a contract to sell American-manufactured air conditioners to a customer in the Middle East. The General Electric Company delivered 2100 cartons of its window-type air conditioners manufactured at its Louisville, Kentucky, plant to the S/S Elikon, a German freighter owned by Deutsche Dampfschiffahrts-Gesellschaft (Hansa), for shipment from Newport News, Virginia, to the Port of Kuwait on the Persian (Arabian) Gulf. Representatives of Hansa executed and delivered two clean bills of lading for the cargo to General Electric. On delivery in Kuwait, the cargo was damaged. The Society, as marine insurer, paid a substantial claim to the Middle Eastern consignee of the cargo, and it sues Hansa to recover its loss.

The bills of lading were preprinted forms supplied by Hansa. Clause 1 provided that the bill was subject to the provisions of the Carriage of Goods by Sea Act (COGSA). Clause 20, however, provided that the laws of the Federal Republic of Germany would apply to actions on the bill, and that such actions were to be brought exclusively in the Court of Bremen in West Germany.1

Notwithstanding forum selection clause 20, but pursuant to COGSA, 46 U.S.C. §§ 1300 et seq. (1976), the Society brought this action in admiralty in the United [723]*723States District Court for the Eastern District of Virginia, the forum in which the cargo and the bills of lading were exchanged for the shipment from the United States to Kuwait. Hansa challenged the jurisdiction of the district court, asserting that the forum selection clause should control. The district court agreed. Relying upon the authority of M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), it ruled that the forum selection clause validly precluded litigation of the case in the Eastern District of Virginia so long as the Society could maintain its action in the German court. The district court added that the fact both parties were foreigners supported its refusal to accept jurisdiction.

II.

In our opinion, the district court accorded insufficient weight to the application of COGSA in reaching its determination. COGSA reflects explicit congressional concerns about bills of lading in foreign trade. In view of those concerns, the forum selection clause in Hansa’s bills of lading cannot alone preclude the district court from entertaining jurisdiction of this case.

The bills of lading that are the subject of this litigation are undisputedly governed by COGSA. The statute provides that “[ejvery bill of lading ... which is evidence of a contract for the carriage of goods by sea to or from the ports of the United States, in foreign trade, shall have effect subject to the provisions of this chapter.” 46 U.S.C. § 1300. Hansa’s bills of lading represented a contract for shipping the air conditioners from Newport News to Kuwait, a transaction unambiguously within the terms of the statute. See id. § 1312. Clause 1 of the bills themselves recites the application and indeed the incorporation by reference of COGSA.

The statute essentially represents the American enactment of the Hague Rules, developed at a series of international maritime conferences in the 1920s. COGSA is thus part of an international effort to achieve uniformity and simplification of bills of lading used in international trade. It was intended to reduce uncertainty concerning the responsibilities and liabilities of carriers, the responsibilities and rights of shippers and the liabilities of underwriters who insure waterborne cargo. By strictly circumscribing the ability of carriers to avoid liability on cargoes in their care, COGSA also greatly enhances the negotiability of bills of lading. Subsequent holders of a bill subject to COGSA can give value for it in confidence that they can ultimately obtain satisfaction thereon without elaborately investigating the circumstances of the shipment. See Uniform Ocean Bills of Lading — Hague Rules, H.R.Rep. No. 2218, 74th Cong., 2d Sess. (1936).

It is against this statutory background that the Court of Appeals for the Second Circuit invalidated the forum selection clause of a bill of lading in Indussa Corp. v. S/S Ranborg, 377 F.2d 200 (1967) (in banc). In that case, a Norwegian carrier’s bill of lading required suit to be brought in Norway for damages to a cargo shipped from Antwerp to San Francisco. The court reversed a denial of jurisdiction by the District Court for the Southern District of New York, holding 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 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.

Id. at 204. The Court of Appeals relied upon the “paramountcy” of COGSA, expressed in 46 U.S.C. § 1312, over contracts for the carriage of goods in foreign trade to or from the ports of the United States, and upon § 3(8) of COGSA, 46 U.S.C. § 1303(8), which provides in part that “any clause .. . in a contract of carriage relieving the carrier or the ship from liability . .. arising from negligence ... or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no [724]*724effect.”2 The court interpreted this prohibition to include forum selection clauses within its ambit, stating:

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 neither the Carriage of Goods by Sea Act nor the Hague Rules. Even when the foreign court would apply one or the other of these regimes, requiring trial abroad might lessen the carrier’s liability since there could be no assurance that it would apply them in the same way as would an American tribunal subject to the uniform control of the Supreme Court, and § 3(8) can well be read as covering a potential and not simply a demonstrable lessening of liability.

377 F.2d at 203-04.

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Related

Union Insurance Society Of Canton v. S.S. Elikon
642 F.2d 721 (Fourth Circuit, 1981)

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Bluebook (online)
642 F.2d 721, Counsel Stack Legal Research, https://law.counselstack.com/opinion/union-insurance-society-v-elikon-ca4-1981.