Opinion
Case No. CV 02-3230-MLG.
April 8, 2004
MEMORANDUM OPINION GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
I. Background
Plaintiff Maersk-Sealand is an ocean common carrier, engaged in the business of operating cargo vessels in international trade. Defendant Eurocargo Express is, in the parlance of the Shipping Act of 1984, 46 U.S.C. §§ 1701 et seq., a non-vessel operating common carrier ["NVOCC"]. As its appellation suggests, an NVOCC is "a common carrier that does not operate the vessels by which the ocean transportation is provided, and is a shipper in its relationship with an ocean common carrier." 46 U.S.C. § 1702(17) (B). Defendants Miltonian and Fridman were officers of Defendant Eurocargo Express at all times relevant to the events giving rise to this lawsuit.
In 2000, Defendant Eurocargo Express began shipping containers to Eastern Europe on Plaintiff's ships and continued to do so through 2001. These shipments were made pursuant to a written service agreement entered into by the parties in April 2000 and which governed the shipments from that time forward. Defendants shipped approximately 80 containers on Plaintiff's vessels during the course of the business relationship.
At some point in 2001, Plaintiff billed Eurocargo for certain charges it claimed that Defendants owed under the service agreement. Defendants disputed what it characterized as "unspecified, special charges" which, it alleged, were not part of the service agreement. (Def's Statement of Genuine Issues at 6). In April or May, 2001, due to Defendants' failure to pay these disputed charges, Plaintiff asserted a "general lien" on at least 50 containers that it was transporting for Defendants. Plaintiff "refused to release any containers until Eurocargo's account was settled in full", even those containers upon which no balance was owing. (Id.). Defendants again disputed many of the charges as well as the validity of the general lien. Nevertheless, Plaintiff continued to delay delivery of Defendants' containers, leading to complaints from Defendants' customers and, it is alleged, an eventual loss of business resulting in lost profits of not less than $250,000. (First Amended Counterclaim at 5).
On April 19, 2002, Plaintiff filed a complaint in this Court seeking to recover the amounts that Defendants allegedly failed to pay under the applicable tariff and contract for the shipment of the goods. Defendants filed an Answer, denying each of Plaintiff's claims, and set forth counterclaims in which they seek compensation for the business lost as a result of the general lien asserted by Plaintiff and the consequential delayed deliveries on behalf of their shippers. As part of this counterclaim, Defendants contend that the agreements entered into between the parties did not authorize Plaintiff to place a general lien on its shipments.
As this lawsuit arises under 46 U.S.C. §§ 1701 et seq., 46 U.S.C. §§ 1300 et seq., and 49 U.S.C. §§ 80101 et seq., federal jurisdiction is proper under 28 U.S.C. §§ 1331 and 1333.
The case was initially assigned to Chief United States District Judge Consuelo B. Marshall. On April 17, 2003, the parties consented to the jurisdiction of this court for final resolution of the suit.
Additional counter-claims are alleged, none of which is relevant to this motion.
On February 27, 2004, Plaintiff filed this motion for partial summary judgment. Plaintiff seeks summary adjudication of Defendants' Third, Fourth, and Fifth counterclaims, which are premised on the argument that Plaintiff wrongfully asserted a general lien on Defendants' shipments. In Plaintiff's view, the assertion of a general lien was lawful and valid under the terms and conditions of the bills of lading issued by Plaintiff to Defendant; under the express provisions of the service agreement signed by both parties, which incorporated by reference the general lien provision in the bills of lading; and under Plaintiff's Tariff No. 200, which incorporates the terms and conditions of the bills of lading.
On March 5, 2004, Defendants filed an Opposition to the summary judgment motion. Defendants agree that the resolution of this motion hinges on whether the general lien provision is valid under the agreements between the parties. They contend, however, that no general lien provision was agreed upon by the parties, and that neither the bills of lading, the service agreement, nor the Tariff permitted Plaintiff to assert a general lien on Defendants' shipments.
II. Summary of Undisputed Facts
The underlying facts are uncontroverted. As noted, Defendants began shipping containers of cargo with Plaintiff in 2000 and continued doing so throughout 2001. Upon receiving the containers for shipment, Plaintiff issued pre-printed negotiable bills of lading to Defendants. Each of the bills of lading contained the same terms and conditions.
The provision at the heart of the current dispute, Clause 15 of Plaintiff's bill of lading, provided:
15. LIEN
1. The Carrier shall have a lien on the Goods and any documents relating thereto for all sums payable to the Carrier under this contract and/or any other contract and for general average contributions to whomsoever due and for the cost of recovering the same, and for that purpose shall have the right to sell the Goods by public auction or private treaty without notice to the Merchant.
It is also undisputed that the relationship between the parties was governed by a separate service agreement entered into and signed by them in April 2000 and amended thereafter. Term 100 of that agreement, entitled "Governing Tariffs", states in full: "Tariff of General Applicability: No.(s) TATL065, MAEU 226."
Tariff Rule TATL-065, (attached as Exhibit F to Messkoub Supp. Decl.), states: "Refer to Governing Tariff 012851 Eastbound Governing Rules Tariff, FMC No. 60". That rule, Tariff Rule TATL-060, (attached as Exhibit D to Messkoub Decl.), states in relevant part:
The rates and conditions of this Tariff are subject to all the conditions and stipulations expressed in the Bills of Lading of the Carrier which are on file with the Federal Maritime Commission, Washington.
Carrier Bills of Lading Tariffs:
. . .
A.P. Moller-Maersk Sealand
Bill of Lading Tariff FMC No. 200.
Finally, Tariff No. 200, (attached as Exhibit E to Messkoub Decl.), on file with the Federal Maritime Commission, sets forth all of the terms and conditions of Plaintiff's Bill of Lading, including the general lien provision found at Clause No. 15.
III. Standard of Review on Summary Judgment
Summary judgment is appropriate when "there is no genuine issue as to any material fact" and when the evidence, viewed in the light most favorable to the non-moving party entitles the movant to a ruling as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505 (1986).
Here, the material underlying facts are not contested. The critical issue is whether, as a matter of law, the general lien provision contained in Plaintiff's bill of lading and in Tariff No. 200, which Plaintiff claims was incorporated into the service agreement between the parties, is enforceable. Where, as here, the "only disputes relate to the legal significance of undisputed facts, the controversy collapses into a question of law suitable to disposition on summary judgment". Thrifty Oil Co. v. Bank of Am. Nat'l Trust and Sav. Ass'n, 322 F.3d 1039, 1046 (9th Cir. 2002). Likewise, summary judgment is particularly appropriate when a contract is before the court and the issue is its interpretation. Connick v. Teachers Ins. Annuity Ass'n, 784 F.2d 1018, 1019 (9th Cir. 1986).
IV. Discussion
Plaintiff contends that its general lien provision is enforceable on any one of three alternative grounds: first, under Clause 15 of its bill of lading; second, under the express incorporation by reference of that provision in the service agreement signed by the parties; and third, under Plaintiff's Tariff No. 200, the terms of which Plaintiff claims are enforceable against Defendants.
A. The General Lien Provision Contained in Plaintiff's Bills of Lading is Enforceable
As noted above, Clause 15 of the terms and conditions of Plaintiff's Bill of Lading purports to authorize a general lien on goods being shipped by Plaintiff for another party for all "sums payable . . . under this contract and/or any other contract" between Plaintiff and that other party. In its pleadings, Plaintiff claims that this provision is valid under either of two theories. First, Plaintiff contends that the terms of a bill of lading, as a "contract of carriage", are presumptively enforceable. Alternatively, Plaintiff asserts that the general lien provision would be enforceable under a course of dealing analysis because the receipt by Defendants of bills of lading for least some of the 80 shipments should have put Defendant on notice of the terms and conditions contained in the bills. (Pl's Reply Brief at 4-5).
It is well-established that a bill of lading is a contract of carriage. See, e.g., Logistics Management, Inc. v. One (1) Pyramid Tent Arena, 86 F.3d 908, 914 (9th Cir. 1996) (stating "[c]ontractual provisions regarding liens on cargo for freight are enforceable in admiralty" in upholding such provision contained in bill of lading); see also Vimar Seguros v. M/V Sky Reefer, 515 U.S. 528, 115 S.Ct. 2322 (1995) (holding that arbitration and choice-of-law clauses in standard form bill of lading were valid contractual terms that did not violate COGSA liability provision). A bill of lading is both a receipt and "the basic transportation contract between the shipper and the carrier, and its terms and conditions are binding". EF Operating Corp. v. Am. Buildings, 993 F.2d 1046, 1050 (3d Cir. 1993).
While Defendants concede that a bill of lading is a contract, they maintain, nevertheless, that because "a general lien provision is not an expected or standard term", (Def's Memo of Points Authorities at 9), it cannot be "added to the contract without the mutual agreement of the parties". (Id. at 7, citing In re CFLC, Inc., 166 F.3d 1012, 1018 (9th Cir. 1999)). However, the cases that Defendants rely upon in support of this argument, In re CFLC, supra and Ins. Co. of N. Am. v. NNR Aircargo Services, 201 F.3d 1111 (9th Cir. 2000), are factually distinguishable in that they do not address the enforceability of a provision in a bill of lading, but rather discuss whether a provision in an invoice can be deemed binding on the parties under a course of dealing analysis.
In CFLC, the plaintiff contended that a general lien provision, like that at issue in this case, contained on the back side of a preprinted invoice was enforceable under a course of dealing analysis. The United States Court of Appeals for the Ninth Circuit rejected that argument because the parties had not explicitly bargained for the provision, which was "not normally within the scope of a carrier agreement". CFLC, 166 F.3d at 1018. The Court stated that it "decline[d] to apply course of dealing analysis to . . . transactions in which there has been only a tacit acceptance of a contract term sent repeatedly to the offeree on a preprinted form." Id.
In Aircargo, on the other hand, the Ninth Circuit employed a course of dealing analysis in finding that a limitation of liability provision contained in a preprinted invoice was binding on the parties. In doing so, the court relied upon Royal Ins. Co. v. Sea-Land Serv. Inc., 50 F.3d 723 (9th Cir. 1995), which, the Aircargo court found, had applied a course of dealing analysis to find a limitation of liability provision in a bill of lading binding on the parties. 201 F.3d at 1114. The Aircargo court thus concluded that a course of dealing analysis could be utilized in determining whether terms contained in either invoices or bills of lading could validly create a limitation of liability on behalf of a carrier. Id.
It is not clear that the Ninth Circuit in Sea-Land actually relied upon a course of dealing theory to uphold the bill of lading limitation on liability provision at issue in that case. The court stated that "actual possession of the bill of lading with the . . . liability limit is not required before a party . . . can be held to the limitation", Royal Ins. Co. v. Sea-Land Serv. Inc., 50 F.3d 723, 727 (9th Cir. 1995). The court further noted that the rule was "especially appropriate when . . . there has been a course of dealing between the parties using identical bills of lading". Id.
Although there is language in Aircargo that suggests that a bill of lading should be treated the same as an invoice in a course of dealing analysis, the basis for decision in Aircargo and CFLC is simply too narrow to support Defendants' broad claim that the general lien provision in this case is unenforceable. The issue presented in both CFLC and Aircargo was whether a provision contained in a preprinted invoice could be deemed contractually binding through a course of dealing analysis. A course of dealing analysis is simply not necessary to resolve this dispute. Neither CFLC nor Aircargo made any determination regarding the validity of a general lien term contained in a bill of lading. Because the terms of a bill of lading are presumptively binding, the general lien provision at issue here is enforceable, absent some other showing of invalidity.
In this regard, there does not appear to be any statutory provision or precedential decision which suggests that a general lien clause contained in a bill of lading is presumptively invalid unless specifically bargained for. "[B]ills of lading involving ocean transport to or from United States ports" are governed by the provisions of the Carriage of Goods by Sea Act ["COGSA"], 46 U.S.C. §§ 1300 et seq. Underwood Cotton Co. v. Hyundai Merch. Marine, 288 F.3d 405, 407 n. 5 (9th Cir. 2002). COGSA provides, in relevant part:
Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods . . . or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect.
46 U.S.C. § 1303(8).
The United States Supreme Court has noted that § 1303(8) was "designed to correct specific abuses by carriers . . . [which were] to insert clauses in bills of lading exempting themselves from liability for damage or loss, limiting the period in which plaintiffs had to present their notice of claim or bring suit, and capping any damages awards per package". Vimar, 515 U.S. at 534-35. The Court thus construed this clause as preserving the responsibilities and liabilities of the carrier as set forth in § 1303(1)-(3): "These are the substantive obligations and particular procedures that [§ 1303] (8) prohibits a carrier from altering to its advantage in a bill of lading." Id. at 535. Nothing in § 1303(8) or elsewhere in the statute prevents a carrier from including a general lien provision, since such provision does not seek to exempt a carrier's liability, limit the period for bringing suit, or cap any damage award.
Finally, Comsource Indep. Foodservice Co., Inc. v. Union Pac. R.R. Co., 102 F.3d 438 (9th Cir. 1996), relied upon by Defendants, is inapposite. That decision involved the question of whether a non-mandatory tariff provision, that was purportedly incorporated by reference into a bill of lading but which was not laid out in the bill itself and for which other notice was given, was per se enforceable. In affirming the denial of a motion for summary judgment, the court found that it was not enforceable. The term at issue in Comsource conflicted with the provisions of the governing statute. Id. at 444. Here, the general lien provision appears in the bill of lading, and its provisions do not conflict with COGSA. Therefore, no additional notice was required.
Because no genuine issue of material fact exists as to the terms of the general lien provision of Clause 15 of Plaintiff's bill of lading, and because the provision was not in conflict with the governing statutes or case law, Plaintiff's assertion of a general lien was authorized by the contract of carriage and was therefore valid. Accordingly, Plaintiff is entitled to summary judgment on Defendants' Third, Fourth, and Fifth counterclaims.
B. The General Lien Provision Was Properly Incorporated by Reference Into the Signed Service Agreement and is Valid and Enforceable
Plaintiff contends that even assuming that the general lien provision in the bill of lading is not enforceable in and of itself, the provision is still enforceable because it was validly incorporated by reference into the service agreement signed by the parties. The Court agrees with Plaintiff.
Defendants contend that Plaintiff's attempt to incorporate this provision by reference to various other documents fails because the incorporation was not "clear and unequivocal" under governing law. Defendants thus claim that, although they signed the service agreement, they "never signed any document that expressly provided for a general lien". (Def's Statement of Genuine Issues at 7).
The parties do not dispute the general proposition that a contract may incorporate by reference terms contained in other documents. The critical question is whether the several layers of reference employed by Plaintiff "expressly" incorporated the general lien provision contained in its Tariff No. 200. Nor do Defendants claim that a general lien provision is always unlawful. ( See Def's Points Authorities at 4: "While not forbidden, general lien provisions must be explicit and separately bargained for.")
As an initial matter, the Court must decide which source of law to apply in determining whether the agreement validly incorporated the general lien provision. Although Plaintiff urges that federal maritime law should apply, neither of the decisions it relies upon, Great White Fleet (US) Ltd. v. DSCV Transp., Ltd., 2001 U.S. Dist. LEXIS 13254 (E.D. La. Aug. 22, 2001), and Zim Isr. Navigation Co., Ltd. v. Indonesian Exports Dev. Corp., 1993 U.S. Dist. LEXIS 3513 (S.D.N.Y Mar. 24, 1993), support its contention. Those cases merely apply, without discussion, federal maritime law to issues arising under the Shipping Act. In this case, the Shipping Act does not supply an answer. Nor has the Court found any federal law that addresses this particular issue.
The Court further notes that the district court decision Plaintiff relies upon in support of the proposition that a document may be validly incorporated by reference into a contract, Nahabet v. Chevron U.S.A. Inc., 2001 U.S. Dist. LEXIS 23126 (C.D. Cal. Oct. 25, 2001), itself relies upon California law in its discussion. Id. at *25 (citing Chan v. Drexel Burnham Lambert, Inc., 178 Cal. App. 3d 632 (1986)).
The general rule provides that matters left unaddressed by an "explicit federal statutory provision . . . [or] federal statutory regulation that is comprehensive and detailed" are "left subject to the disposition provided by state law." O'Melveny Myers v. FDIC, 512 U.S. 79, 85, 114 S. Ct. 2048 (1994); see also Ting v. ATT, 319 F.3d 1126, 1146 (9th Cir. 2003) (holding in case arising under Federal Communications Act that state contract and consumer protection laws "form part of framework for determining the rights, obligations, and remedies of the parties" to defendant's consumer services agreement). Consequently, the Court will apply California law to determine whether the service agreement's incorporation by reference of the general lien provision was valid and enforceable against Defendants.
Under California law, a contract may validly incorporate the terms of another document. Shaw v. Regents of University of California, 58 Cal. App. 4th 44, 45 (1997). "The contract need not recite that it incorporates another document so long as it guides the reader to the incorporated document." Id.
A review of the relevant case law demonstrates that California courts have generally approved such incorporation so long as "the reference [is] clear and unequivocal", and "the terms of the incorporated document are known or easily available to the contracting parties". Id. (citing Williams Constr. Co. v. Standard-Pacific Corp., 254 Cal. App. 2d 442, 454 (1967)). See also Wolschlager v. Fidelity Nat'l Title Ins. Co., 111 Cal. App. 4th 784 (2003); Baker v. Aubry, 216 Cal. App. 3d 1259 (1989); King v. Larsen Realty, Inc., 121 Cal. App. 3d 349 (1981).
In King v. Larsen Realty, Inc., 121 Cal. App. 3d 349 (1981), the California Court of Appeal held that a party was bound by various bodies of state and national association rules incorporated into a board of realtors membership agreement where the party had signed the agreement and the relevant rules manual was "available" to the parties. The court stated that "[a]s a general rule, a party is bound by the provisions of an agreement which he signs, even though he does not read them and signs unaware of their existence." Id. at 358 (citing Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699 (1976)).
In Baker v. Aubry, 216 Cal. App. 3d 1259 (1989), the court upheld a double incorporation: an employment agreement that included an "Application for Securities Industry Registration", which in turn provided that the signatory agreed to arbitrate any claims against her employer under the applicable rules of the organization with which she registered was held to validly incorporate by reference those arbitration rules. The court rejected the appellant's claim that the incorporation was not sufficiently clear as to form a binding agreement.
In Wolschlager v. Fidelity Nat'l Title Ins. Co., 111 Cal. App. 4th 784 (2003), the court held that the purchaser of a title insurance policy was validly bound by an arbitration clause found in the policy and incorporated by reference into a preliminary report, even when the purchaser saw neither the policy nor the arbitration clause prior to approving the report. Despite the lack of any reference to arbitration provisions in the report, the court held that it was sufficient that the report referenced the terms and conditions of the policy itself and advised the purchaser where the policy might be obtained. Id. at 787.
Defendants rely upon the California Court of Appeal's decision in Chan v. Drexel Burnham Lambert Inc., 178 Cal. App. 3d 632 (1986), to support their claim that the language of the service agreement was not sufficiently clear and unequivocal to incorporate the general lien provision. However, the facts of Chan are quite different from those presented in this case.
In Chan, the Court of Appeal held that an arbitration provision was not incorporated by reference where the contract did not clearly refer to and identify the incorporated document in which the arbitration clause appeared. 178 Cal. App. 3d at 642. The disputed contract stated that the signatory would "abide by the Statute(s), Constitution(s), Rules(s) and By-Laws [of three separate organizations] as any of the foregoing are amended from time to time". Id. at 636. The court found that this language "did not identify any document or source by title. The reference was amorphous, and did not guide the reader to the incorporated document." Id. at 643. Moreover, the court suggested, without so holding, that the plaintiff lacked actual knowledge of the provision allegedly incorporated into the agreement, and left open the question whether the document was "readily available" to the plaintiff. Id. at 644 n. 5.
Here, the service agreement clearly identified by title each document that it purported to incorporate: TATL-065; TATL-060; FMC No. 200. Defendants have failed to raise a genuine issue of material fact as to whether these documents were known or available to them and it appears from the record that they were all properly filed.
Defendants appear to contend that a higher standard should apply to incorporating a general lien provision into a contract for shipping. ( See Def's Supp. Brief at 7: "For any shipper to agree to a `general lien', it must have legally sufficient notice that this term has been included in the Service Contract.") That, however, is not the standard for incorporation of contractual terms from other documents under California law and Defendants have failed to show the existence of any precedential decision in support of its argument. The holding of CFLC that a general lien is not an inherent term in a shipping contract has no relevance to the incorporation by reference analysis.
Because no genuine issue of material fact exists as to whether the service agreement signed by the parties validly incorporated the general lien provision contained in Plaintiff's Tariff No. 200, and because such incorporation appears to be valid under governing California law, the Court finds that the provision was incorporated into the service agreement between parties. As such, the service agreement between the parties contained a valid general lien provision and any assertion by Plaintiff of a general lien was authorized. Summary judgment is appropriate on this basis also. V. Conclusion
Having determined that summary judgment is appropriate on this basis, the Court does not need to reach Plaintiff's claim that the provisions of its Tariff No. 200 are enforceable against Defendants.
For the reasons stated above, Plaintiff's motion for partial summary judgment is hereby GRANTED. It is ORDERED that judgment be entered DISMISSING Defendant's Counterclaims Three, Four, and Five.