This case arose out of a fire on a container ship, the M/V Yantian Express, during its voyage from Sri Lanka to New York and other ports. Despite firefighting and salvage efforts, the vessel and containers on board suffered damage or loss. The owner and operator of the vessel, Hapag-Lloyd AG (Hapag), commenced an action in the United States seeking exoneration from, or limitation of, liability pursuant to the Limitation of Liability Act 1851 (US) (the Limitation Act): 46 USC §§ 30501 ff. Cargo claimants, non-vessel-operating common carriers (NVOCCs), and cargo insurers brought claims for damages, indemnity, and/or contribution against Hapag, and the third-party defendant, Ocean Network Express Pte Ltd (ONE).

ONE brought a bellwether motion based on the forum selection clause in its bill of lading terms to dismiss four test claims. ONE's bill of lading terms provided that '[u]nless otherwise agreed by the Carrier [ie ONE], any action against the Carrier hereunder must be brought exclusively before the Singapore High Court'. The ONE service contract, however, had a different provision governing disputes, requiring arbitration in New York:

In the event of a dispute under this Contract, the parties to the dispute shall attempt to resolve it amicably, by direct good faith negotiations between a senior executive of each such party. If there is no resolution within thirty (30) days, the dispute shall be resolved by arbitration in New York under the Rules of the Society of Maritime Arbitrators, Inc.

The first test claim involved a ONE bill of lading for carriage of a container of frozen fish from Vietnam to New York. The terms and conditions of the bill of lading were available at ONE's website and were incorporated by reference. The first test claim shipment did not include a service contract. This claim is the most basic of the four, consisting of only a bill of lading between ONE and a shipper.

The second test claim involves a ONE bill of lading for carriage of a container of TVs from Thailand to Georgia. This shipment did include a service contract. The service contract incorporated by reference the terms and conditions of ONE's bills of lading. Funai Electric Co Ltd was the shipper on the bill of lading and also the counterparty to the service contract. The second test claim, brought by the shipper's insurer, thus entailed both a bill of lading and a service contract between ONE and a shipper.

The third test claim involves a ONE bill of lading for carriage of containers of electronic automobile parts from Thailand to New York. The consignee on the bill of lading was Expeditors International of Washington Inc (Expeditors), one of ONE's NVOCC customers. ONE's bill of lading was issued to Expeditors. As a NVOCC, Expeditors issued its own bill of lading to its customer shipping the cargo. This shipment included a service contract between ONE and Expeditors. The service contract also incorporated by reference the terms and conditions of ONE's bills of lading. The third test claim, brought by the shipper's insurer, thus involved both a bill of lading and a service contract between ONE and a NVOCC.

The fourth test claim involves a ONE bill of lading for carriage of containers of organic coconut water from Thailand to New York. The consignee on the bill of lading is Apex, one of ONE's NVOCC customers. This shipment included a service contract between ONE and Apex. The service contract incorporated by reference the terms and conditions of ONE's bills of lading. The fourth test claim thus involved both a bill of lading and a service contract between ONE and an NVOCC, but differed from the third test claim in that the NVOCC is the claimant.

Held: ONE's bellwether motion to dismiss the four test claims for forum non conveniens should be denied in its entirety.

First Test Claim: Bill of Lading Between ONE and Shipper

The bill of lading's forum selection clause is unenforceable because it is rendered null and void by the Carriage of Goods by Sea Act, 46 USC § 30701 (COGSA), and the public interest weighs against its enforcement with respect to the first test case.

Courts in this Circuit apply a four-part analysis to determine the validity of a forum selection clause. First, a court must determine whether: (1) the clause was 'reasonably communicated' to the party resisting enforcement; (2) the clause is mandatory or permissive; and (3) the claims and parties involved in the suit are subject to the clause. If the court finds that the clause was reasonably communicated, mandatory, and applicable, then the clause is presumptively enforceable unless the party resisting enforcement can show: (4) that 'enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching'. The ONE clause satisfies the first three requirements, so it is presumptively enforceable; the fourth element, however, compels non-enforcement in this case.

Cargo claimants may rebut the presumption of enforceability by showing that enforcement of the forum selection clause would be unreasonable or unjust, or that the clause is otherwise invalid for reasons such as fraud or overreaching. In the Second Circuit, this fourth and final step of the validity analysis is made up of four subparts: a court must determine whether: (1) the forum selection clause's incorporation was the result of fraud or overreaching; (2) the law to be applied in the selected forum is fundamentally unfair; (3) enforcement contravenes a strong public policy of the forum in which suit is brought; or (4) trial in the selected forum will be so difficult and inconvenient that the plaintiff effectively will be deprived of its day in court.

Here, the cargo claimants do not argue that incorporation of the clause was the result of fraud or overreaching, or that trial in Singapore will be so difficult that the cargo claimants effectively will be deprived of their day in court. Rather, they contend that the law to be applied in Singapore is fundamentally unfair, and that enforcement of the clause contravenes this forum's strong public policy. Specifically, the cargo claimants maintain that the Singapore High Court would apply Singapore law, namely the LLMC 1976, which would lessen ONE's liability to the cargo claimants below what COGSA guarantees. The cargo claimants also argue that the Limitation Act requires all claims arising from the fire to be asserted in this proceeding; and (2) allows only vessel owners and bareboat charterers - not slot charterers such as ONE - to limit their liability. The Court agrees that enforcing the clause in this action would contravene both COGSA and the purposes of the Limitation Act.

COGSA represents the codification of the United States' obligations under the Hague Rules. This Convention was the culmination of a multinational effort 'to establish uniform ocean bills of lading to govern the rights and liabilities of carriers and shippers inter se in international trade'. Among other things, COGSA prescribes a carrier's limitation of liability in the event of damage to or loss of cargo to '[USD] 500 per package ... or ... per customary freight unit ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading': 46 USC § 30701 n § 4(5).

COGSA applies by its own force from when goods are loaded on a ship to when they are discharged from the ship: 46 USC § 30701 n § 1(e). ONE's bill of lading terms expressly incorporate COGSA, stating that '[f]or shipments to or from the United States ... , the contract evidenced by or contained in this Bill shall be governed by US law', and 'this Bill shall be subject to US COGSA, the terms of which are incorporated herein and US COGSA shall govern throughout the entire Carriage set forth in this Bill'. As the cargo claimants note, COGSA thus applies ex proprio vigore (by its own force) and ex contractu (by contract) to their shipment.

The parties agree, however, that if the clause were enforced, the Singapore High Court would also apply the LLMC 1976 to which Singapore, but not the United States, is a party. As explained by Bernard Yee Weng Wai, an Advocate and Solicitor of the Supreme Court of Singapore, '[t]he Singapore court will ... apply U.S. COGSA as substantive law ... [and] the 1976 Limitation Convention as procedural law'. Further, the parties agree that if claims against ONE are pursued in Singapore, the most that the cargo claimants can collectively recover is approximately USD 16.4 million as a result of the limitation provisions of the LLMC 1976. Under COGSA, however, the extent of the cargo claimants' recovery is estimated to be considerably higher, at USD 75 million. In other words, as the cargo claimants observe, 'ONE's admitted goal is to limit its liability to less than twenty-five percent of the amount that [Cargo] Claimants are entitled to recover under COGSA'. Such a result renders the clause void under COGSA §3(8).

Section 3 of COGSA is titled Responsibilities And Liabilities. Among other things, § 3 sets forth the carrier's duties and liabilities with respect to shipping and care of cargo, § 3(1), and issuing bills of lading, § 3(3). The last subsection, § 3(8), prohibits bill of lading terms that eliminate or lessen a carrier's liability and states 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, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this Act, shall be null and void and of no effect.

The express language of the statute thus renders void any contract term that relieves a carrier of liability or lessens a carrier's liability for loss of or damage to cargo caused by the carrier's failure to fulfill its duties and obligations under § 3. Enforcement of the clause would do exactly what COGSA § 3(8) prohibits: lessen ONE's liability for the loss and damage of the claimants' cargo. By virtue of Singapore's application of the LLMC 1976, enforcement of the clause would reduce the extent of ONE's liability available to the cargo claimants under COGSA by tens of millions of dollars.

The Supreme Court construed § 3(8) in Vimar Seguros y Reaseguros SA v M/V Sky Reefer 515 US 528, 115 S Ct 2322, 132 L Ed 2d 462 (1995) (CMI1456), a case on which ONE relies but reads too broadly. In Sky Reefer, a shipment of fruit was damaged in transit from Morocco to Massachusetts. The shipper's insurer sued in federal court in Massachusetts under a standard form bill of lading. The bill of lading included a forum selection clause requiring arbitration in Tokyo as well as application of Japanese law. The defendant moved to compel arbitration in Tokyo. The plaintiffs argued that if forced to arbitrate in Japan, they would incur additional costs such as for travel and hotel accommodations. As a result, the plaintiffs argued, they would recover a lesser net amount than if the action proceeded in the US, and the forum selection clause must be deemed void under COGSA § 3(8). The Court rejected that argument, as well as a consistent line of decisions from Courts of Appeals that had categorically invalidated foreign forum selection clauses in bills of lading under § 3(8). To determine whether the burden of increased transaction costs of litigating abroad violated § 3(8)'s bar on bill of lading terms that lessen liability, the Court focused on the purpose of COGSA and the specific guarantees that may not be diminished by a bill of lading:

The liability imposed on carriers under COGSA § 3 is defined by explicit standards of conduct, and it is designed to correct specific abuses by carriers. In the 19th century it was a prevalent practice for common carriers 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. Thus, § 3, entitled 'Responsibilities and liabilities of carrier and ship,' requires that the carrier 'exercise due diligence to make the ship seaworthy' and 'properly man, equip, and supply the ship' before and at the beginning of the voyage, 'properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried,' and issue a bill of lading with specified contents. Section 3(6) allows the cargo owner to provide notice of loss or damage within three days and to bring suit within one year. These are the substantive obligations and particular procedures that § 3(8) prohibits a carrier from altering to its advantage in a bill of lading.

Framing the issue of enforceability of bill of lading terms vis-à-vis COGSA, the Court identified the relevant question as 'whether the substantive law to be applied will reduce the carrier's obligations to the cargo owner below what COGSA guarantees'. The Court held that an increase in transaction costs does not lessen liability in the way that COGSA prohibits, distinguishing 'the lessening of the specific liability imposed by the Act' and 'the separate question of the means and costs of enforcing that liability'. The Court's conclusion makes eminent sense, given the purpose of COGSA and the language of § 3(8); transaction costs associated with having to litigate abroad may reduce the claimants' net recovery, but they do not lessen the carrier's liability. In other words, the carrier is required to pay the same amount, regardless of the transaction costs incurred by the plaintiffs.

In reaching its conclusion, the Court also rejected the plaintiffs' argument that enforcement of the forum selection clause would violate § 3(8), because it was possible that the Tokyo arbitrators would not apply COGSA or would not do so properly. The Court found that argument 'premature', reasoning that the case was at an interlocutory stage and that it had 'not [been] established what law the arbitrators will apply to petitioner's claims or that petitioner will receive diminished protection as a result'. The Court recognised that the District Court had retained jurisdiction over the case and therefore would 'have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the laws has been addressed'.

Sky Reefer is materially distinguishable from this case in at least three respects. First, the issue before the Court is not one of transaction costs, but rather a lessening of the carrier's liability otherwise guaranteed by COGSA. Second, lessening of ONE's liability is not a mere possibility, but a virtual certainty, as acknowledged by the parties. Third, the clause requires litigation, not arbitration. If the claimants are compelled to pursue their claims in Singapore, they will not have the opportunity to obtain review by a US court at a later award-enforcement stage.

This Court is not aware of any controlling or persuasive case where a court has, over a claimant's objection, enforced a forum selection clause in a bill of lading to which COGSA applied and as to which there was no dispute that enforcement would reduce the carrier's liability for damage or loss of cargo.

Second and Fourth Test Claims: Bill of Lading and Service Contract Between ONE and Shipper (Second Test Claim) / NVOCC (Fourth Test Claim)

The Court's discussion as to why the clause is unenforceable in the first test claim applies with equal force to the second and fourth test claims, but not for all the reasons that the claimants advance.

The claimants argue that for claims implicating ONE's service contract, the bill of lading's clause is not mandatory, and therefore does not qualify for even the presumption of enforceability. More specifically, where both a ONE bill of lading and service contract are involved, the clause is not mandatory because it 'specifically allows possible alternative fora', and 'ONE in fact did agree to suit in this Court' pursuant to the terms of the service contract. The Court does not agree. The claimants seize upon a clause that specifically and only applies in the context of arbitration. That provision is not a general forum selection clause, and no party has invoked arbitration. The service contract's consent to jurisdiction provision is thus inapplicable, and, as set forth in ONE's bill of lading, Singapore remains the operative, mandatory forum.

Neither party satisfactorily addresses what appears to be a direct conflict between the forum selection clause in ONE's bill of lading terms and the arbitration provision in ONE's service contract. The former calls for litigation of any claims in Singapore, while the latter requires arbitration of any disputes in New York. Where there is such a conflict, ONE's service contract terms make clear that the service contract and its arbitration provision should prevail. In any event, the Court need not resolve the conflict between dispute resolution provisions for purposes of this motion. No party has moved to compel arbitration. To the extent that ONE's bill of lading controls, it is unenforceable under the second and fourth test claims for the same reasons as the first test claim. Accordingly, the second and fourth test claims compel the same outcome as the first test claim. ONE's motion to dismiss based on the clause should be denied.

Third Test Claim: Bill Of Lading and Service Contract Between ONE and NVOCC, but Shipper's Insurer is Claimant

The third test claim differs from the other test claims in significant respects. The shipper first arranged for carriage through Expeditors, a NVOCC. Expeditors then arranged for carriage through ONE, a slot charterer and VOCC. As part of those transactions, ONE issued its bill of lading (and service contract) to Expeditors, and Expeditors issued its house bill of lading to the shipper. The shipper's insurer is now suing ONE. In response, ONE seeks to enforce its bill of lading clause against the shipper, even though the shipper was not a party to the bill of lading that ONE issued to Expeditors. That fact pattern raises the question of whether the shipper (and its insurer) is bound by the clause. If not, the clause would not meet the third required element for there to be a presumption of enforceability. However, the shipper is so bound.

It is settled law in this District that a cargo owner can be bound by a forum selection clause in a bill of lading accepted by an NVOCC or other intermediary if that party was acting on behalf of the owner or as the owner's agent, even if the owner was not a party to the bill of lading. The cargo claimants do not dispute that Expeditors was acting on behalf of the shipper or as the shipper's agent in accepting ONE's bill of lading. The shipper (and by extension its insurer) is therefore subject to the clause, and the clause receives the presumption of enforceability. Nonetheless, the clause is unenforceable for the reasons discussed above. ONE's motion to dismiss under the third test claim should also be denied.