A.P. Moller-Maersk A/S v. Safewater Lines (1) Pvt, Ltd.
Docket: Civ. A. H-13-1726
Court: District Court, S.D. Texas; August 23, 2017; Federal District Court
A.P. Moller-Maersk A/S (Maersk) has filed a motion for summary judgment against Samrat Container Lines, Inc. (Samrat) in an admiralty lawsuit concerning contract claims related to a shipment of hydrochloric acid. This case is based on jurisdiction under 28 U.S.C. 1333(1) and/or 28 U.S.C. 1332(a)(2), involving a Danish corporation (Maersk) and a New Jersey corporation (Samrat). Maersk's claims include contractual indemnity, breach of contract regarding carriage, and contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
The lawsuit originated when improperly packed and stowed hydrochloric acid leaked from containers upon arrival in Houston. Maersk initially sought delivery from all original defendants but has since settled with and dismissed all but Samrat. Maersk aims to recover costs associated with emergency clean-up, freight demurrage, and other expenses from Samrat, arguing that the defendants are jointly and severally liable under various contracts.
The standard for summary judgment under Federal Rule of Civil Procedure 56(c) requires the court to view evidence favorably for the nonmovant, determining if there is a genuine issue of material fact. The burden falls on the movant to demonstrate the absence of evidence for essential elements of the nonmovant's claim. If the movant meets this burden, the nonmovant must provide competent evidence to create a genuine issue of material fact for trial.
The nonmovant in a legal proceeding cannot rely solely on allegations, denials, or unsubstantiated claims to demonstrate a genuine issue of material fact. Specific facts must be presented to support every element of the cause(s) of action, as established in Morris v. Covan World Wide Moving, Inc., and further supported by case law indicating that conclusory allegations without evidence do not prevent summary judgment. A mere factual dispute does not defeat a well-supported motion for summary judgment, and there must be significant probative evidence for the jury to reasonably find in favor of the nonmovant. Evidence that is merely colorable or insufficiently probative can lead to summary judgment being granted. Additionally, allegations in complaints are not considered evidence, and only evidence—not arguments or mere facts in pleadings—can satisfy the burden of the party opposing the summary judgment motion. The nonmovant is required to present specific facts through affidavits, depositions, or other documented evidence to show a genuine issue for trial. The court must view all evidence in the light most favorable to the nonmovant and cannot make credibility determinations.
In the context of Maersk’s Second Amended Complaint, it is noted that prior to the shipment of improperly packaged drums of hydrochloric acid from India to Texas, Maersk and the Safewater entities entered into a Service Contract establishing preferred shipping rates. This contract stipulated that the terms and conditions of the Maersk bills of lading and applicable tariffs governed the shipment. The case involves invoices for the sale of hydrochloric acid, indicating the acid was shipped from India to a final destination in Midland, Texas, with various parties involved, including the manufacturer, exporter, and receiver.
Multichem, acting as an agent for the Defendants, loaded hydrochloric acid into drums placed in Plaintiff-owned containers, which were sealed for ocean transport. The Safewater entities booked these containers for shipment under a Service Contract, issuing corresponding bills of lading that identified them as the shippers and noted specific terms, including the requirement for the shipper to load and stow the cargo correctly. The containers were accepted by Maersk in Pipavav, India, and subsequently loaded onto two vessels bound for Houston.
Upon arrival in Houston, the containers were found leaking hydrochloric acid due to overfilled and inadequate packaging, prompting Maersk to undertake cleanup efforts at significant cost. The Defendants, identified as freight forwarders and carriers, rejected the cargo and refused to cover cleanup and other incurred expenses. Maersk ultimately salvaged the acid for $550.
The Defendants are alleged to have neglected their responsibilities regarding the proper packaging and marking of hazardous materials as mandated by federal regulations, leading to claims of negligence and breach of contract. Damages incurred by Maersk due to these failures amount to at least $243,775.03, attributed to both direct negligence and contractual breaches related to the shipment of the cargo.
Maersk claims that each Defendant is jointly and severally liable for damages totaling at least $243,775.03, resulting from failures related to the transport of hazardous cargo, specifically hydrochloric acid. Under the applicable bills of lading, Maersk asserts that the Defendants must indemnify it for these damages. Multichem, representing itself and the other Defendants, allegedly made a false statutory declaration regarding the proper packaging and transport of the hazardous cargo. This breach of warranty under the contract of carriage has resulted in liability for damages, including emergency spill cleanup and demurrage costs.
Maersk seeks contribution for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) from potentially responsible parties, including Samrat (the consignee), Safewater entities (the shippers), and ATNI, Inc. Maersk specifies that its costs exceed $243,775.03 and includes requests for prejudgment and post-judgment interest, as well as attorney’s fees.
In a Motion for Summary Judgment against Samrat, Maersk questions whether it is entitled to summary judgment on its indemnity and breach of contract claims. Maersk concludes that Samrat, as the consignee and acting as the U.S. Agent for the Safewater Defendants, is liable for all damages incurred due to the hydrochloric acid spillage. Although Samrat acted as an agent for the shippers, the bills of lading do not disclose this agency relationship, making Samrat an undisclosed agent. Consequently, as a "Merchant" defined by the bill of lading terms, Samrat is liable for all related expenses incurred by Maersk, including cleanup, unloading, loading, demurrage, interest, and attorney’s fees.
Under a contractual agency arrangement, the Safewater Defendants operated as a Non-Vessel Operating Common Carrier (NVOCC), issuing bills of lading directly to customers and arranging for ocean transport with Maersk, which issued its own bills of lading identifying Safewater as the shipper and Samrat as the consignee. The Safewater Defendants had a Service Contract with Maersk that established preferred freight rates and designated them as an NVOCC under regulatory provisions. In January 2012, Safewater booked five containers for shipment from India to Houston, with the transactions recorded under specific booking numbers. The containers were loaded by a third party and tendered to Maersk, which issued bills of lading subject to its Terms and Conditions, naming Safewater as the shipper.
On February 28 and March 7, 2012, the containers were loaded onto vessels in India for transport to Houston, where they later arrived at the APM Terminal. Upon arrival, several containers were found leaking hydrochloric acid, prompting a response from the U.S. Coast Guard and local fire officials. Maersk notified interested parties about the leakage and cleanup efforts, demanding payment and cargo retrieval, but these offers were rejected, leading to the abandonment of the cargo by Samrat and others. Maersk subsequently issued a Notice of Abandonment and sold the cargo at a salvage sale for $550.00. Maersk is now seeking summary judgment against Samrat for damages resulting from the acid spillage, asserting rights under the bill of lading contract that outlines the terms governing their relationship.
Maersk issued three bills of lading (MAEU MAEU863338433, MAEU 843444274, and MAEU863494073) naming Samrat as the consignee and notifying party, identifying him as a 'Merchant' under Clause 1. As a consignee, Samrat is bound to the terms of the bills, including joint and several liability for costs related to an acid spill cleanup, demurrage, and attorney's fees, as per clauses 3, 11, 15, 16.7, 21, and 22. The bills of lading are classified as maritime contracts, aimed at transporting goods by sea from a foreign port to the U.S., and are interpreted according to common law principles. The language of the contracts clearly establishes Samrat's liability to indemnify Maersk for any losses or expenses arising from breaches of the bill. Legal precedents support binding a named consignee to the bill if he accepted it or if an agency relationship exists. Under agency law, an agent for an undisclosed principal may be held liable for contract breaches, and an agent must disclose their principal's identity before concluding the contract to avoid liability. Maersk is not required to investigate the identity of the undisclosed principal, as established in prior cases, including FIL Lines, where summary judgment was granted to the ocean carrier against a named consignee for breach of contract.
The consignee, defined as a Merchant under the bill of lading terms, is jointly and severally liable to the carrier, Maersk, for all freight charges and related obligations. The court rejected FIL's claim of acting as an agent, citing a lack of evidence in the bills of lading to support this assertion. According to agency law, if agency is not explicitly stated in an integrated contract, the agent cannot present extrinsic evidence to contest their liability. Consequently, Samrat, as the named consignee, is legally bound to the terms of the bills of lading and is jointly and severally liable for Maersk's claims.
Samrat is responsible for indemnifying Maersk for any losses, damages, or expenses incurred due to improper packing of dangerous goods, specifically hydrochloric acid, which was not packaged adequately. Samrat’s liabilities include unpaid demurrage and indemnification for all claims stemming from breaches of warranties in the bills of lading. Additionally, Samrat breached the contract by failing to take possession of the goods, leading Maersk to repackage and ultimately sell the acid for salvage, netting $550. Maersk seeks to recover $194,325.03 in damages from Samrat, who remains jointly and severally liable as a Merchant under the terms of the bill of lading.
Damages claimed by Maersk against Samrat are based on several contract clauses indicating Samrat's liability for losses related to leaking hydrochloric acid containers. This includes costs associated with damages, delays, demurrage, and attorney fees. Under the bill of lading, Samrat, along with ATNI and the Safewater Defendants, is jointly and severally liable to Maersk. Maersk has already settled with ATNI and the Safewater Defendants for $60,000, leaving a remaining claim against Samrat for $133,775.03, which includes pre- and post-judgment interest and costs.
Samrat disputes this claim, arguing that it was not a party to any contract with Maersk and acted solely as an agent for the Safewater Defendants. Samrat asserts it did not load, handle, or enter into any agreements regarding the cargo, despite being named as consignee. Samrat contends that the bills of lading do not establish a contractual relationship with Maersk and cite case law suggesting that a bill of lading primarily serves as a receipt for cargo rather than a contract. Samrat also received a default judgment on its crossclaim against the Safewater Defendants. Maersk is required to file for costs and attorney's fees within fourteen days of the final judgment as per Local Rule 54.2.
The bill of lading serves as the primary transportation document and contract between the shipper and the carrier. The liability of the consignee, while potentially linked to the bill of lading, is more complex and not automatically governed by it. Samrat acknowledges that a consignee can be bound to the bill of lading's terms through acceptance or an agency relationship. Two primary methods for binding an intended beneficiary are showing a third party's agreement to be bound or establishing an agency relationship. Without evidence of these, contractual obligations cannot be imposed.
Maersk has not provided evidence that Samrat accepted the bill of lading or that it imposes liability on Samrat for the Safewater Defendants’ obligations. Maersk claims Samrat accepted the bill by controlling and holding the cargo until expenses were paid, citing case law that supports this view. However, Samrat argues that the Safewater Defendants are responsible, as they held the Service Contract with Maersk and handled the cargo.
The bills of lading make all parties classified as 'Merchants' jointly and severally liable for breaches and indemnity clauses. Maersk seeks to enforce these provisions. The Safewater Defendants settled with Maersk before Samrat's cross-claim was filed, allowing Samrat a reduction of its claims by the $60,000 settlement amount. Regarding Maersk's negligence claims, Samrat, as a non-settling tortfeasor, cannot pursue claims against settling defendants under maritime law. Maersk asserts that after settling with all defendants except Samrat for $60,000, Samrat owes it $133,775.03 based on their contractual relationship. Samrat contends the Safewater Defendants should be liable for any damages Maersk seeks to recover, suggesting they should bear responsibility for damages and response costs under CERCLA if applicable.
The Safewater Defendants, not Samrat, are responsible for the transactions with Maersk related to the alleged damages. Samrat acted merely as the consignee in Houston and did not participate in loading or tendering the cargo to Maersk, thus not contributing to the alleged loss. In contrast, the Safewater Defendants provided the containers in India and maintained a direct contractual relationship with Maersk. According to admiralty law, the party responsible for loading, stowing, or discharging cargo holds ultimate responsibility, as established in relevant case law.
If Samrat bears any liability to Maersk, the Safewater Defendants would be liable to Samrat for that amount due to Samrat's crossclaim. Maersk's summary judgment motion focuses solely on breach of contract and contractual indemnity, asserting that other claims, such as negligence, are not pertinent. Maersk contends that Samrat, acting as an agent for the Safewater Defendants and controlling the cargo by instructing Maersk regarding delivery, is bound by the bill of lading terms, making Samrat jointly and severally liable for damages.
Samrat does not dispute the bill of lading terms but claims it is not a party to any contract with Maersk. However, an affidavit from Mr. Satish Anchan indicates that Samrat served as the Safewater Defendants’ agent during the relevant period. Although Samrat argues that the cargo was shipped under a Service Contract with Maersk, it is not named in that contract, which is defined in statutory terms as a written contract between shippers and an ocean common carrier. The Service Contract does not specify terms for the shipments, and it explicitly states that related services are governed by the bill of lading terms, which Samrat misinterprets as the sole governing document.
Maersk asserts that the carriage of goods is governed by the bills of lading it issued, which specify Safewater as the shipper and Samrat as the consignee, without indicating any agency relationship. Samrat's claim of not being liable as an undisclosed agent for the Safewater Defendants is deemed unsupported, as Maersk had received the bills of lading that explicitly named them. Legally, Maersk is not required to identify any undisclosed principal and is not bound to discover the identity of such parties. The law states that if an agent does not disclose the principal's identity at the time of contract finalization, the agent can be held as a party to the contract. Here, Samrat is classified as an agent for an undisclosed principal and a party to the contract since it acted as the U.S. agent for Safewater. The agreement between Samrat and Safewater, established from 2008 to mid-2013, specified that Samrat would manage freight for Safewater's cargo into the U.S. Furthermore, while Samrat labels the bills of lading as mere receipts, Maersk contends they are binding contracts of carriage, distinct from the service contract. Samrat's cited cases, which pertain to private carriage and charter parties, do not apply to the present case, as there is no charter party involved. Only the bills of lading are relevant contracts concerning Samrat's obligations, which differ from the non-maritime case cited by Samrat, as maritime principles govern this matter.
The Court grants Maersk summary judgment against Defendant Samrat for breach of contract and contractual indemnity claims. Samrat is jointly and severally liable for Maersk's attorney’s fees as outlined in the bill of lading terms. The Court orders Maersk to file a motion for attorney’s fees and a proposed final judgment within twenty days, with Samrat required to respond timely. Maersk and Safewater Lines entered into Service Contract No. 516551, establishing joint and several liability for Samrat as the consignee. The definition of "joint and several liability" indicates that each co-obligor can be individually sued for breach. All involved bills of lading share identical terms. The Federal Maritime Commission defines "tariff" as a publication of carrier rates and practices that affect transportation by water. Samrat denies allegations from the Second Amended Complaint that it acted as the freight forwarder, logistics provider, or NVOCC for the cargo. NVOCCs serve as intermediaries between shippers and vessel operators. If Maersk settled tort claims against other parties, Samrat, as a non-settling party, cannot pursue tort claims against those settling parties. For any contract claims Samrat asserts against settling parties, it is entitled only to a reduction corresponding to the settlements received.
Contract damages are offset pro tanto by any settlement received from a co-obligor, reflecting the principle that a contracting party should not gain more than what was agreed upon. This encourages settlements by allowing the first settling defendant to potentially pay less than their fair share, thereby increasing the financial burden on the non-settling defendant. Demurrage, a charge for delays beyond agreed free time, is accepted as liquidated damages in shipping and is enforceable as a contract term based on the shipping contract, bill of lading, and applicable tariffs. Maersk seeks demurrage for newly stacked containers that held leaking acid, which had to be repackaged from initially double-stacked twenty-foot containers.
The terms and conditions of the bills of lading define "carriage" as encompassing all services related to the cargo, with Maersk acting as the carrier. Clause 11 specifies that if the container is not packed by the carrier, the bill of lading serves merely as a receipt, releasing the carrier from liability for loss or damage to the contents due to factors beyond their control, including improper packing or unsuitability of the goods or container. Clause 15 outlines the joint and several liabilities of all merchants for fulfilling obligations under the bill of lading, including indemnifying the carrier against various liabilities and ensuring that unpacked containers are returned in clean and proper condition within the designated time.
Liability for failure to return a Container in the required condition or within the specified timeframe under the Tariff falls on the Merchant, who is also responsible for any resulting detention, loss, or expenses. Under Clause 21, the Merchant must ensure that dangerous goods, such as hydrochloric acid, are adequately packed and comply with applicable laws. The Merchant indemnifies the Carrier against various claims and losses associated with the carriage of such goods and breaches of packing warranties. Clause 22 mandates that the Merchant take delivery of goods promptly; failure to do so allows the Carrier to unpack or store the goods at the Merchant's risk, which constitutes due delivery and absolves the Carrier of further liability. If goods are discharged to customs or other authorities, this also counts as due delivery.
Maersk does not pursue summary judgment on the negligence claims or fault-based liability in the Second Amended Complaint, making Samrat’s arguments regarding lack of wrongdoing and CERCLA irrelevant to the summary judgment motion and the issue of joint and several liability. Federal maritime law acknowledges agency principles, binding consignees to bills of lading through their relationship with the seller/shipper. Consignees are generally bound by the terms of the transportation contract established by the shipper, which acts as their agent. The agency relationship can arise from actual authority, apparent authority, or estoppel, as illustrated in relevant case law.
Maersk argues that Hexco does not support Samrat's claim regarding the nature of the bills of lading in this case, asserting that Samrat, as a named consignee, remains liable. The Court agrees with Maersk, referencing the Second Circuit's ruling in Berisford Metals Corp. v. S/S Salvador, which emphasizes the critical role of bills of lading in international trade. These documents serve as acknowledgments of goods received for shipment, contracts of carriage, and documents of title controlling the goods. The legal framework views the bill of lading as representing the property it describes, allowing for easier negotiation and transfer compared to the physical goods. The law supports equitable estoppel, favoring the party that issues an assignable bill of lading over one who relies on it. Maersk distinguishes between private and common carriage, noting that the present case involves common carriage due to containerized shipments, which differs from the private carriage cases cited by Samrat.
