Bst Corporation v. M/V Elliott Bay

Background

BST Corporation brought an admiralty action seeking damages for cargo damage against the vessel then called the M/V Elliott Bay and now called the M/V Dally, along with Pacific Basin Handysize Limited and Pacific Basin Handysize (HK) Ltd. (collectively, PBHS), which the opinion describes as the entities that own and operate the vessel. The cargo consisted of steel beams transported from Taiwan to California. BST alleged that the cargo was damaged because of PBHS’s fault and neglect.

PBHS had entered into a charter party with Tung Ho Steel Enterprise Corporation of Taiwan for the shipment. The charter party said that claims for cargo loss or damage would be brought in the United States District Court for the Southern District of New York, and that Pacific Basin Handysize Limited consented to jurisdiction there. The bills of lading listed BST as consignee and Pacific Basin Handysize (HK) Ltd. as carrier. Their jurisdiction clause referred to disputes being resolved in the ship’s flag-state or in another place mutually agreed between the carrier and the merchant.

After the cargo was damaged, BST obtained an assignment of the charter party from Tung Ho and sued PBHS and the vessel. PBHS moved to dismiss for lack of personal jurisdiction, arguing that it had no New York or United States presence and that BST could not enforce the charter party because BST was not a signatory or party to it. PBHS argued that the bills of lading, rather than the charter party, governed BST’s claims.

Legal standard

A motion under Federal Rule of Civil Procedure 12(b)(2) challenges personal jurisdiction—the court’s authority over a defendant. The plaintiff generally bears the burden of showing that jurisdiction exists. At this stage, the court may consider the pleadings and supporting materials, and it views jurisdictional allegations in the plaintiff’s favor.

The court explained that parties may consent to personal jurisdiction through an enforceable forum-selection clause. A forum-selection clause is generally presumed valid unless the opposing party shows that it resulted from improper conduct or overwhelming bargaining power, that enforcement would be unreasonable, or that enforcement would violate a strong public policy of the United States.

Analysis

The court agreed with PBHS that BST was not adequately shown to be a party, third-party beneficiary, or agent under the charter party. Unlike a prior related case involving a charter party that expressly made the plaintiff a nominee, nothing in this charter party indicated that BST held one of those roles. Therefore, the bills of lading were the relevant contracts of carriage between BST and PBHS.

The court nevertheless rejected PBHS’s reading of the bills of lading. The bills of lading did not limit jurisdiction to the ship’s flag-state; they also allowed disputes to be brought in a place mutually agreed between the carrier and the merchant. The charter party identified that mutually agreed place as the Southern District of New York for cargo-damage claims and stated that PBHS consented to jurisdiction there.

Reading the charter party and bills of lading together, the court concluded that the documents showed PBHS’s intent to consent to jurisdiction in the Southern District of New York for cargo-damage litigation, including litigation involving BST. The court also noted that PBHS had not shown that enforcing the forum-selection provision would be unjust or unreasonable, or that it resulted from fraud or improper pressure.

Disposition

The court denied PBHS’s motion to dismiss for lack of personal jurisdiction. The Clerk was directed to terminate the motion. The defendants were ordered to file a responsive pleading by March 20, 2020, and the parties were ordered to submit a proposed case-management plan and joint status letter by March 27, 2020. Judge Katherine Polk Failla did not decide whether BST would ultimately prevail on its cargo-damage claim.