Continental Insur Co v. M/V Orsula ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-1721, 03-1722 & 03-1723
CONTINENTAL INSURANCE COMPANY,
Plaintiff-Appellant,
v.
M/V ORSULA, her engines, boilers, etc.,
FEDNAV INTERNATIONAL LTD., and
ATLANT ADRIA CORPORATION, et al.,
Defendants-Appellees.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
Nos. 02 C 4390, 02 C 4391 & 02 C 4392—James B. Zagel, Judge.
____________
ARGUED SEPTEMBER 8, 2003—DECIDED DECEMBER 24, 2003
____________
Before KANNE, ROVNER, and DIANE P. WOOD, Circuit
Judges.
KANNE, Circuit Judge. In this consolidated appeal, we
are asked to review the dismissal of three separate causes
of action by the district court. The defendant moved for
dismissal of all three lawsuits under a variety of Federal
Rules of Civil Procedure 12(b) motions. Two of the lawsuits
were dismissed for improper venue under Rule 12(b)(3) mo-
tions; the forum-selection clause governing all three cases
2 Nos. 03-1721, 03-1722 & 03-1723
mandated that the plaintiff should have filed elsewhere.
The third lawsuit, although subject to the same improper
venue considerations, was dismissed because the statute of
limitations had run on the statutory claim before filing. The
district court did not indicate which Rule 12(b) motion it
was granting when it dismissed the third case on statute of
limitations grounds. We affirm the district court’s dismissal
of all three cases solely on venue grounds.
I. History
This appeal arises out of disputes concerning three sep-
arate shipments of cold-rolled steel from Ghent, Belgium to
Burns Harbor, Indiana on board three separate vessels. In
each case, the plaintiff, Continental Insurance Company, as
subrogee of the owner of the steel, alleges damage to the
steel during the voyage. Continental seeks to recover
damages from the defendants, herein referred to collectively
as “Fednav,” under the Carriage of Goods by Sea Act
(“COGSA”), the appropriate cause of action for damage to
goods during shipment in international trade. 46 U.S.C.
§ 1300 et. seq.
The first appeal pertains to a steel shipment aboard the
M/V Orsula, discharged at Burns Harbor on April 24, 2001.
The second appeal relates to a steel shipment aboard the
M/V Federal Rideau, discharged at Burns Harbor on July
5, 2001. The third appeal concerns a steel shipment aboard
the M/V Daviken, discharged at Burns Harbor on April 7,
2001. Each bill of lading for each of the three shipments
included three contractual provisions relevant to the
present appeal: (a) Burns Harbor was designated as the
port of discharge; (b) a forum-selection clause chose the
“United States District Court having admiralty jurisdic-
tion at the . . . USA port of discharge . . . to the exclusion of
any other Court or forum;” and (c) a provision tracked the
Nos. 03-1721, 03-1722 & 03-1723 3
COGSA statute of limitations of one year from the date of
discharge of the shipment of goods.
On March 27, 2002, Continental contacted Fednav to
request an extension of time to file suit for damages to the
steel shipped on the Daviken. This was necessary because
the April 7 deadline under the COGSA statute of limita-
tions was quickly approaching. Such extensions are com-
monly used in the industry to avoid litigation by providing
more time for settlement negotiations. Fednav agreed to
extend the statutory deadline for filing a COGSA claim in
the Daviken case to July 6, 2002, “subject to [Continental
providing] complete claims supporting documents within
thirty days” of March 27. Continental answered this request
on April 3 by estimating its damage at $700,000 and
mailing a series of documents to Fednav.
On April 29, Continental requested an additional ex-
tension of time. Fednav declined to grant this request,
indicating that its insurer did not consider the documents
already submitted to be “complete claims supporting doc-
uments.” The documents were incomplete, according to
Fednav, because they did not provide enough information
to “make a proper assessment of . . . legal liability for the
claim, or make a proper settlement offer to claimants, or
present a proper indemnity claim against third parties.”
(R., 03-1723, Exh. D.) Specifically, the eight documents did
not include an independent survey of the damage to the
steel that would include information as to the amount of
damage, the cause of the damage, and the number and
identity of damaged coils of steel. This survey was available
to Continental approximately one week prior to the April
27, 2002 deadline.
Fednav informed Continental that due to its failure to
comply with the condition precedent, the original time ex-
tension to July 6 was null with regard to any lawsuit
arising out of the Daviken shipment. Fednav considered any
4 Nos. 03-1721, 03-1722 & 03-1723
potential claim from the Daviken shipment to be time-
barred by the COGSA statute of limitations. Continental
responded to this series of events by filing suit in the
Northern District of Illinois on June 19, 2002. Continental
filed three separate suits, one for each shipment of steel.
Pursuant to motions filed by Fednav under Rule 12(b),
the district court dismissed all three causes of action in an
Amended Memorandum Opinion and Order entered on
February 18, 2003. The Orsula and Rideau cases were
dismissed on the grounds that the Northern District of
Illinois was not the proper venue. Fed. R. Civ. P. 12(b)(3);
28 U.S.C. § 1406(a). Although the district court could have
applied the same venue rationale to the Daviken shipment,
it opted to dismiss on the grounds that the statute of limi-
tations had run. The procedural posture for this dismissal
is not entirely clear from the district court opinion, but it
was made in response to a Rule 12(b)(1) motion to dismiss
for lack of subject-matter jurisdiction and a Rule 12(b)(6)
motion to dismiss for failure to state a claim. Fednav
did not defend the Orsula case on statute of limitations
grounds, so apparently Continental effectively received a
time extension on that suit. The Rideau case was filed
before July 5, so there was no statute of limitations issue.
Continental appealed to this court on March 18, 2003.
II. Analysis
We must first determine the proper fashion in which to
review this appeal. Clearly, the Orsula and Rideau cases
were dismissed pursuant to a Rule 12(b)(3) motion for lack
of proper venue under 28 U.S.C. § 1406(a). The Daviken
case, however, is somewhat of a mystery. The parties
assume that the district court dismissed under a Rule
12(b)(1) motion for lack of subject-matter jurisdiction. Since
we disagree with the conclusion that the COGSA statute of
limitations is jurisdictional, we review the dismissal of all
Nos. 03-1721, 03-1722 & 03-1723 5
three cases under 28 U.S.C. § 1406(a) for a lack of proper
venue.1 We may affirm a district court’s judgment on
alternate grounds found in the record. Latuszkin v. City of
Chicago, 250 F.3d 502, 503 (7th Cir. 2001); Rowe v. Shake,
196 F.3d 778, 782 (7th Cir. 1999); Mendelovitz v. Vosicky, 40
F.3d 182, 187 (7th Cir. 1994).
Continental challenges two aspects of the district court’s
dismissal of the suits on venue grounds. First, Continental
disagrees with the conclusion that the meaning of the
forum-selection clause “is clear and the clause required the
suit to be brought in Indiana.” (Dist. Ct. Op. 8.) Second,
Continental disputes the district court’s decision to dismiss
the actions rather than transferring them to the Northern
District of Indiana. For the reasons set forth below, we find
both challenges to be unpersuasive.
A. Interpretation of the Forum-Selection Clause
A lack of venue challenge, based upon a forum-selection
clause, is appropriately brought as a Rule 12(b)(3) motion
1
Under COGSA, “the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods.” 46 U.S.C.
§ 1303(6). The COGSA statute of limitations is not jurisdictional.
Shippers are able to grant time extensions to their customers or
waive the defense entirely; this indicates that federal courts re-
tain the right to hear COGSA claims after the statutory limita-
tions period if the defendant is willing to waive its rights. See, e.g.,
Sea-Land Service Inc. v. R.V. D’Alfonso Co., 727 F.2d 1 (1st Cir.
1984); Marine Office of America Corp. v. NYK Lines, 638 F. Supp.
393 (N.D. Ill 1985); Toyomenka, Inc. v. Toko Kaiun Kabushiki
Kaisha, 342 F. Supp. 292 (S.D. Tex 1972); Monarch Industrial
Corp. v. American Motorists Ins. Co., 276 F. Supp. 972 (S.D.N.Y.
1967). In contrast, subject-matter jurisdiction cannot be waived by
the parties. Levin v. ARDC, 74 F.3d 763, 766 (7th Cir. 1996).
6 Nos. 03-1721, 03-1722 & 03-1723
to dismiss. Frietsch v. Refco, Inc., 56 F.3d 825, 830 (7th Cir.
1995); Hugel v. Corporation of Lloyd’s, 999 F.2d 206, 207
(7th Cir. 1993).2 Our review of the enforceability and
applicability of a forum-selection clause, a contractual term
used to select a specific venue, is de novo. Hugel, 999 F.2d
at 207. In admiralty cases, forum-selection clauses “are
prima facie valid and should be enforced unless enforce-
ment is shown by the resisting party to be unreasonable
under the circumstances.” M/S Bremen v. Zapata Off-Shore
Co., 407 U.S. 1, 10 (1972). Recognizing this, Continental
does not contest the validity of the forum-selection clause.
Instead, Continental argues that the district court erred in
its application of the clause. Continental insists that they
complied with the clause by filing in the Northern District
of Illinois because either (1) the clause provides for two
equally appropriate venues; or (2) the clause was ambigu-
ous and should be construed against Fednav, the drafter of
the bills of lading. We reject both contentions.
In each of the three bills of lading, a forum-selection
clause limited venue in the following way:
Any action by the Merchant arising out of the goods
carried under this Bill of Lading shall, whenever the
port of loading or the port of discharge named on the
face hereof is in the United States of America, be
brought only in the United States District Court having
admiralty jurisdiction at the USA port of loading or
USA port of discharge, as the case may be, to the
exclusion of any other Court or forum.
2
A circuit split has arisen on this issue. See, e.g., Lipcon v.
Underwriters at Lloyd’s, London, 148 F.3d 1285, 1290 (11th Cir.
1998) (“[W]e hold that motions to dismiss upon the basis of choice-
of-forum and choice-of-law clauses are properly brought pursuant
to Federal Rule of Civil Procedure 12(b)(3) as motions to dismiss
for improper venue.”); Lambert v. Kysar, 983 F.2d 1110, 1112 n.1
(1st Cir. 1993) (“[S]uch dismissals are founded on Rule 12(b)(6).”).
Nos. 03-1721, 03-1722 & 03-1723 7
(R., Bills of Lading 501, 502, 509). There is nothing unclear
or ambiguous about this contractual provision. The clause
calls for suit to be brought in the district court with ad-
miralty jurisdiction at the point of loading or discharge;
that single court is the proper forum to the exclusion of all
others.
It is uncontested that all three shipments of steel were
loaded in Belgium, and were discharged at Burns Harbor.
It is uncontested that the district court properly took
judicial notice of the fact that Burns Harbor is geographi-
cally located in Porter County, Indiana. (Dist. Ct. Op. 8.)
The Northern District of Indiana, Hammond Division,
encompasses Porter County. 28 U.S.C. § 94(a)(3). Of course,
the Northern District of Illinois does not include any part of
Indiana. 28 U.S.C. § 93(a). There is neither an option to file
in multiple venues nor an ambiguity in the forum-selection
clause.
Continental makes much of the fact that, under customs
regulations, Burns Harbor is considered to be within the
“Port of Chicago.” 19 C.F.R. § 101.3; Bureau of Customs,
Decision 71-121, Fed. Reg. (May 3, 1971). We agree with the
district court that this “useful legal and commercial fiction”
has nothing to do with proper admiralty jurisdiction in
federal district courts, and therefore nothing to do with the
forum-selection clause at issue.
B. Dismissal of the Suit
Since venue was not proper in Illinois, Continental is left
to argue that the district court should have transferred the
cases under 28 U.S.C. § 1406(a), rather than dismissing
them and thus effectively barring them under the statute of
limitations. The applicable venue statute reads:
The district court of a district in which is filed a case
laying venue in the wrong division or district shall
8 Nos. 03-1721, 03-1722 & 03-1723
dismiss, or if it be in the interest of justice, transfer such
case to any district or division in which it could have
been brought.
28 U.S.C. § 1406(a) (emphasis added). Our review of the
district court’s application of the “interest of justice” stand-
ard is for a “clear abuse of discretion.” Willis v. Caterpillar,
Inc., 199 F.3d 902, 904 (7th Cir. 1999); Hapaniewski v. City
of Chicago Heights, 883 F.2d 576, 579 (7th Cir. 1989).
Hence, “we will not second-guess the decision of a district
court judge that is in conformity with established legal
principles and, in terms of the court’s application of those
principles to the facts of the case, is within the range of
options from which a reasonable trial judge would select.”
Platinum Home Mortg. Corp. v. Platinum Fin. Group, 149
F.3d 722, 729 (7th Cir. 1998) (quotation omitted).
The district court was justified in dismissing, rather than
transferring, the suits. The district court reasoned that “in
a case in which all parties are commercially sophisticated
and familiar with the forms of litigation in which they
engage,” a transfer in the interests of justice is not justified
when “[t]here was nothing obscure” about the proper forum.
(Dist. Ct. Op. 8-9.) While dismissing the suit because of a
mistake that is “easy to commit” might be “so disproportion-
ate” a penalty as to constitute an abuse of discretion, the
“proper penalty for obvious mistakes that impose costs on
opposing parties and on the judicial system is a heavy one.”
Cote v. Wadel, 796 F.2d 981, 985 (7th Cir. 1986). Dismissal
was proper; filing in the Northern District of Illinois was an
obvious mistake made by a sophisticated party with
representation. We will not second-guess the district court
when it has not clearly abused its discretion.
Furthermore, the dismissal of a cause of action for
improper venue under 28 U.S.C. § 1406(a) after the statute
of limitations has run does not, on its own, constitute an
abuse of discretion. Hapaniewski, 883 F.2d at 578-80 (hold-
ing that the lower court did not abuse its discretion in dis-
Nos. 03-1721, 03-1722 & 03-1723 9
missing the suit where the plaintiffs filed in the wrong
federal district court, despite the heavy cost of losing the
right to sue because of statute of limitations considera-
tions). Congress enacted § 1406(a) to avoid “the injustice
which had often resulted to plaintiffs from dismissal of their
actions merely because they had made an erroneous guess
with regard to the existence of some elusive fact of the kind
upon which venue provisions often turn.” Goldlawr, Inc. v.
Heiman, 369 U.S. 463, 466 (1962). The district court did not
abuse its discretion in finding that the fact upon which
venue under the forum-selection clause turned—the
location of Burns Harbor—was not elusive.
III. Conclusion
For the foregoing reasons, we AFFIRM the district court’s
dismissal of all of the COGSA claims put forth by the
plaintiff on the basis of improper venue.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-24-03