Overseas Philadelphia, LLC v. World Council of Credit Unions, Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
________________________________
)
OVERSEAS PHILADELPHIA, LLC, )
)
Plaintiff, ) Civil Action No. 11-1663 (EGS)
v. )
)
WORLD COUNCIL OF CREDIT )
UNIONS, INC., )
)
Defendant. )
)
MEMORANDUM OPINION
Plaintiff Overseas Philadelphia, LLC brought a one-count
Complaint against Defendant World Council of Credit Unions, Inc.
(“WCCU”), alleging (1) breach of the maritime contract entered
into by the parties, and (2) breach of the implied duty of good
faith and fair dealing. Pending before the Court is Defendant’s
Motion to Dismiss for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6). Upon consideration of the
motion, the opposition and reply thereto, the relevant law, the
record in this case, and for the reasons stated below, the Court
will GRANT Defendant’s Motion to Dismiss.
I. BACKGROUND
On March 19, 2010, Plaintiff and Defendant entered into a
maritime contract (the “Charter Party”), pursuant to which
Defendant chartered the vessel owned by Plaintiff to carry
23,000 tons of wheat from the Gulf Coast to Addis Ababa,
Ethiopia via the port of Djibouti. Compl. ¶ 6. The wheat was
provided to Defendant at no cost by the U.S. Department of
Agriculture (“USDA”) under the Food for Progress Act (“FFPA”), 7
C.F.R. § 1499, et seq. Compl. ¶ 7. Paragraph 35 of the Charter
Party provides: “This Charter Party is subject to all the
provisions of the [FFPA], rules and regulations issued pursuant
thereto and all applicable USDA regulations.” Compl. Ex. A, at
¶ 35. One of the applicable regulations provides, in pertinent
part, that “[t]he participant shall make all necessary
arrangements for receiving the donated commodities in the
targeted country, including obtaining appropriate approvals for
entry and transit,” and that “[a] participant shall arrange with
the government of the targeted country that all donated
commodities to be distributed will be imported and distributed
free from all customs, duties, tolls, and taxes.” Compl. ¶ 9
(citing 7 C.F.R. § 1499.8(a), (d)). Defendant concedes that it
was a “participant” under the FFPA. Def.’s Mem. of P&A in Supp.
of its Mot. to Dismiss (“Def.’s Mem.”) at 2.
According to Plaintiff, the vessel loaded in a timely
manner and departed from Galveston, Texas on April 15, 2010.
Compl. ¶ 12. Soon after the vessel’s departure, Plaintiff’s
agent, Phoenix Chartering (“Phoenix”), contacted Defendant’s
agent, Pacific Cargoes, Inc. (“PCI”) to confirm that all duty
exemptions would be in order prior to the vessel’s arrival. Id.2
¶ 14. PCI responded that “the documentation would be
distributed in ‘ample time to have all clearances in place prior
to vessel arrival in Djib[outi].’” Id. Phoenix sought further
confirmation that WCCU’s documentation obligations would be
fulfilled, and Phoenix expressly advised PCI that special care
was needed for the transaction and that Plaintiff would suffer
damages if the vessel were delayed. Id. ¶ 15. According to
Plaintiff, another of Defendant’s agents, BKA Logistics LLC,
responded “that the sale was complete, that bills of lading had
been issued, and that WCCU would be advised ‘to have everything
in order prior to Vessel arrival.’” Id.The vessel arrived at the port of Djibouti on May 12, 2010.
According to Plaintiff, however, the cargo documentation -- in
particular documentation to establish that Plaintiff could
discharge the cargo free of duty -- was still pending clearance
with Ethiopian customs authorities. Id. ¶¶ 16-17. Therefore,
the cargo could not be discharged and the vessel had to wait at
anchorage. Id. Plaintiff asserts that Defendant could have
paid the duty provisionally and sought reimbursement upon
obtaining clearance so that discharge of the cargo could begin,
but Defendant chose not to do so. Id. ¶ 18. During the time
that the vessel was idled, Plaintiff secured, at its own
expense, a lay berth within the port to safeguard the vessel and
cargo until receiving clearance. Id. ¶ 19. Ethiopian customs
3
cleared the cargo on May 21, 2010, and Plaintiff began
discharging the vessel on May 23, 2010. Id. ¶ 20. Plaintiff
alleges that, during the period from May 12 through May 23,
2010, it incurred significant charges including “daily operating
costs, security, port charges and contractor truck charges.”
Id. ¶ 21. Plaintiff sent an invoice for these charges to
Defendant on June 8, 2010, but Defendant has not paid the
invoice. Id. ¶ 24.
On September 14, 2011, Plaintiff filed its Complaint
alleging breach of contract and the implied duty of good faith
and fair dealing. Plaintiff seeks recovery of damages it
suffered due to Defendant’s failure to obtain the necessary
import documentation for discharge of the cargo prior to the
vessel’s arrival in Djibouti, despite Defendant’s assurances
that it had done or would do so. Id. ¶¶ 1, 28-29. Defendant
has filed a Motion to Dismiss the Complaint pursuant to Rule
12(b)(6). In its Motion, Defendant argues that a clause of the
Charter Party precludes Plaintiff from recovering damages
because that clause places all risk, time, and expenses of
discharge upon Plaintiff. The motion is ripe for determination
by the Court.
II. STANDARD OF REVIEW
A motion to dismiss under Rule 12(b)(6) tests the legal
sufficiency of a complaint. Browning v. Clinton, 292 F.3d 235,
4
242 (D.C. Cir. 2002). A complaint must contain “a short and
plain statement of the claim showing that the pleader is
entitled to relief, in order to give the defendant fair notice
of what the . . . claim is and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
quotation marks and citations omitted). When ruling on a motion
to dismiss under Rule 12(b)(6), a judge must accept as true all
of the factual allegations contained in the complaint and grant
the plaintiff the benefit of all inferences that can be derived
from the facts alleged. Aktieselskabet AF 21 November 2001 v.
Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir. 2008); Kowal v. MCI
Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). A court
need not, however, “accept inferences drawn by plaintiff[] if
such inferences are unsupported by the facts set out in the
complaint. Nor must the court accept legal conclusions cast in
the form of factual allegations.” Kowal, 16 F.3d at 1276. In
addition, “[t]threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Aschroft v. Iqbal, 556 U.S. 662, 678 (2009). The
complaint must plead facts that are more than “merely consistent
with” a defendant’s liability; “the plaintiff [must plead]
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550 U.S. at 556); Rudder v.
5
Williams, 666 F.3d 790, 794 (D.C. Cir. 2012). In evaluating a
Rule 12(b)(6) motion, the Court may consider the facts alleged
in the complaint, as well as any documents either attached to or
incorporated in the complaint. EEOC v. St. Francis Xavier
Parochial Sch., 117 F.3d 621, 624-25 (D.C. Cir. 1997).
III. ANALYSIS
A. The Charter Party Precludes Claims for Detention
Damages
Defendant argues -- and Plaintiff does not dispute -- that
Plaintiff’s claims are for “detention” damages. Def.’s Mem. at
5-6. Clause 18 of the Charter Party states, in relevant part:
“The cargo is to be discharged at vessel’s time, risk and
expense with no demurrage, no despatch, no detention.”1 Compl.
Ex. A, ¶ 18. Therefore, Defendant argues that the clear terms
of the Charter Party preclude Plaintiff from bringing a claim
for detention damages, and this case must be dismissed. Def.’s
Mem. at 6-10.
Detention damages are actual damages due the vessel owner
for delay in the discharge of the cargo. Id. at 5 (citing GRANT
GILMORE & CHARLES L. BLACK, JR., THE LAW OF ADMIRALTY 212-13 (2d ed.
1975)). Detention damages are equivalent to “demurrage,” which
is defined as “the sum which is fixed by the contract of
1
The “vessel” was defined as the M/T Overseas Philadelphia,
owned by Plaintiff. Compl. Ex. A, at 1.
6
carriage . . . as remuneration to the owner of a ship for the
detention of his vessel beyond the number of days allowed by the
charter-party for loading and unloading[.]” BLACK’S LAW DICTIONARY
432 (6th ed. 1990); see also Fregata Shipping Co. v. Star
Carriers, S.A., No. 84-0756, 1987 WL 8716, at *2 n.1 (D.D.C.
Feb. 27, 1987) (“‘Demurrage’ is the charge assessed under the
charter party to the charterer for detaining a vessel beyond the
free time stipulated for loading and unloading.”); Hellenic
Lines, Ltd. v. Dir. Gen. of India Supply Mission, 319 F. Supp.
821, 831 (S.D.N.Y. 1970), aff’d on other grounds, 452 F.2d 810(2d Cir. 1971) (hereinafter, Hellenic I).2 “It is plain that
when the parties choose, they may contract out of any liability
for delay in discharge.” Hellenic Lines, Ltd. v. Embassy of
Pak., 467 F.2d 1150, 1156 (2d Cir. 1972) (internal citation
omitted) (hereinafter, Hellenic II); see also Am. S/A Frutas E
Alimentos v. M/V Cap San Rafael, 426 F. Supp. 2d 312, 318 (E.D.
Pa. 2006) (“Parties to a maritime contract are free to contract
away liability for delay.”).
Plaintiff argues that a “no demurrage or detention” clause
cannot excuse a charterer from liability for delays caused by
2
The distinction between the two terms is that “demurrage”
is the contractually stipulated amount for detention, see
Hellenic I, 319 F. Supp. at 831, while “detention” damages are
fixed by the court, see GILMORE & BLACK, at 212. Here, the parties
did not stipulate an amount for demurrage for unloading the
cargo.
7
its own actions. Instead, Plaintiff contends that such clauses
are intended to cover only delays that are beyond the
charterer’s control. See Pl.’s Opp’n at 5-6. The Court does
not find support for the distinction that Plaintiff asserts in
either the case law or the express terms of the Charter Party.
In Hellenic I, the freight contract between the parties
contained a clause that provided that “no demurrage or despatch
is applicable at either loading or discharging ports.” 319 F.
Supp. at 831. The court concluded that this clause “clearly
excludes any claims against the defendant for delay in berthing
the vessels or discharging cargo, contractual or non-
contractual.” Id.; see also Hellenic II, 467 F.2d at 1155-56(concluding that “the ‘no demurrage’ clause contained in the
freight contracts . . . preclude[s] holding [defendant] liable
for detention damages”).3 Plaintiff argues that in each of these
cases, the courts found expressly that the charterer was not at
fault. See Pl.’s Opp’n at 6. Although in its presentation of
3
Defendant also purports to rely on a case from this
District, Sealift Bulkers, Inc. v. Republic of Armenia, 96 F.
Supp. 2d 1 (D.D.C. 2000). There, although the contract between
the parties contained a “no demurrage” clause, the crux of the
court’s opinion related to a separate clause regarding “special
charges.” The plaintiff in that case had admitted that it was
responsible for expenses related to transportation of the cargo,
and therefore it could only recover expenses for extra storage
if some provision of the charter shifted responsibility for the
cost of storing the cargo to the defendant. See 96 F. Supp. 2d
at 3. Sealift Bulkers is thus not relevant to the issues in
this case.
8
the facts, the Hellenic I court noted that “[t]here is no
evidence in the record that the slowdown was the result of any
fault on the part of the [charterer], nor did the [charterer]
have any control over it,” the issue of fault does not appear to
have been material to -- or even considered in relation to --
the court’s conclusion that the “no demurrage” clause excluded
claims for delay against the charterer. Hellenic I, 319 F.
Supp. at 825, 831. Similarly, in Hellenic II, the Second
Circuit’s conclusion that a “no demurrage” clause precluded
liability for detention damages included no mention whatsoever
of the reason for the delay and did not consider whether or not
the charterer had been at fault. See 467 F.2d at 1156. Relying
on Hellenic I, the court in Hellenic II held that the charterer
was not liable because the contract included a “no demurrage”
clause, and “the most logical interpretation” of this clause is
to preclude liability for detention damages. Id.; see also
Intercontinental Transp. v. India Supply Mission, 261 F. Supp.
757, 758 (S.D.N.Y. 1966) (“Where there is no express exception,
a demurrage clause, by settled construction, covers all delays
during the process of loading, including failure to supply
sufficient cargo. The shipowner may not recover detention
damages for delays covered by the demurrage clause.”).
By contrast, Plaintiff argues that case law and arbitration
awards support its argument that, in cases where the charterer
9
or shipper’s actions caused avoidable delay, a “no demurrage or
detention” clause does not bar damages for breach of contract.
Pl.’s Opp’n at 7-9. The authorities cited by Plaintiff,
however, construe contractual language dealing with “full liner
terms,” rather than clauses precluding liability for demurrage.4
See Transamerican Steamship Corp. v. Riviana Int’l, Inc., No. 80
Civ. 5075 (LBS), 1982 WL 195631 (S.D.N.Y. June 10, 1982)
(dealing only with provision for “full liner terms”); Pl.’s
Opp’n Ex. B, Seaborne Trading Corp. v. Louis Dreyfus Corp., SMA
No. 3318SP, at 1585-86 (N.Y. Nov. 25, 1996) (holding that where
defendant was responsible for delays that were “unreasonable and
excessive,” in spite of the fact that the terms were “full liner
terms,” “and because there was no provision for laytime and
demurrage, . . . Owner is entitled to be compensated for
detention”) (emphasis added).5 Plaintiff has not provided the
Court with any authority to support the proposition that “full
liner terms” should be equated with a “no demurrage” clause in
4
“Full liner terms” is a term of art that means the vessel
owner, “[bears] the burden of loading and discharging cargo and
assume[s] all risk of delay in port.” Mendes Jr. Int’l Co. v.
M/V Sokai Maru, 43 F.3d 153, 154 (5th Cir. 1995).
5
The only arbitration award cited by Plaintiff in which the
charter party actually contained a “no demurrage” clause is also
distinct. In Unimarine, Inc. v. Egyptian Company for Maritime
Transport, SMA No. 1436, 1980 WL 580843 (N.Y. May 13, 1980), the
charter party provided that the charterers were responsible for
loading and discharging the cargo, not the ship owners.
10
interpreting maritime contracts. Indeed, the definition of
“full liner terms” that Plaintiff itself cites suggests that the
term is broader than a “no demurrage” clause, and therefore that
the term must operate differently in a charter party. See Pl.’s
Opp’n at 7 n.10 (“[‘Full liner terms’] . . . means that the
shipowner bears all costs related to the cargo handling and
carriage.” (quoting BES’ CHARTERING AND SHIPPING TERMS (11th ed.
1992))). Plaintiff’s attempt to analogize provisions regarding
“full liner terms” to a clause specifying “no demurrage or
detention” is therefore not persuasive. Had the parties
intended to ship on “full liner terms,” they could have used
that language in the Charter Party.
As Defendant argues, Clause 18 of the Charter Party
unambiguously precludes holding it liable for detention or
demurrage. “Under federal maritime law, a court ‘may not look
beyond the written language of the document to determine the
intent of the parties unless the disputed contract provision is
ambiguous.’”6 United States ex rel. E. Gulf, Inc. v. Metzger
Towing, Inc., 910 F.2d 775, 779 (11th Cir. 1990) (quoting
Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 332-33 (5th
Cir. 1981)); see also F.W.F. Inc. v. Detroit Diesel Corp., 494
6
The interpretation of a maritime contract, where the
dispute is not an inherently local one, is controlled by federal
law. Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 22-23 (2004);
see also Casco Marina Dev., LLC v. M/V Forrestall, 384 F. Supp.
2d 154, 160 (D.D.C. 2005).
11
F. Supp. 2d 1342, 1357-58 (S.D. Fla. 2007). If the contract is
unambiguous on its face, the parties’ intent must be gathered
from the instrument itself without reference to extrinsic
evidence. F.W.F., 494 F. Supp. 2d at 1358. Plaintiff argues
that “a contractual provision that purports to excuse a party
from liability for its own breach or fault must provide so
expressly in order to be given effect.” Pl.’s Opp’n at 10. The
Court concludes that Clause 18 of the Charter Party is
unambiguous. The plain language of Clause 18 expresses a clear
intention that discharge was to take place at Plaintiff’s time,
risk and expense, with no damages available for delay,
regardless of the cause of the delay. Therefore, the
unambiguous language of the Charter Party makes clear that
Defendant cannot be liable for the relief Plaintiff seeks and
this case must be dismissed.
B. Failure to State a Claim for Relief
Even if the Court did not conclude that the “no demurrage”
clause prevents Plaintiff from seeking detention damages from
Defendant, the Complaint does not contain factual allegations
that, taken as true, would permit the Court to infer that
Defendant breached any provision of the Charter Party. In order
to state a claim for breach of contract in an admiralty case, a
plaintiff must state: (1) the terms of the maritime contract;
(2) that the contract was breached; and (3) the reasonable value
12
of purported damages. Sweet Pea Marine, Ltd. v. APJ Marine,
Inc., 411 F.3d 1242, 1249 (11th Cir. 2005) (citing Exxon Corp.
v. Cent. Gulf Lines, Inc., 500 U.S. 603, 605-06 (1991)). In the
Complaint, Plaintiff’s sole allegation in support of its breach-
of-contract claim is that Defendant failed to “obtain[]
appropriate approvals for entry and transit before the Vessel
arrived at Port, and [failed] to make timely arrangements with
the Ethiopian government that the cargo be imported and
distributed free from all customs, duties, tolls, and taxes.”
Compl. ¶ 28. Plaintiff does not allege that Defendant failed to
obtain the approvals, but rather that it failed to obtain them
before the vessel arrived at port. However, the Charter Party
nowhere obligates Defendant to have the approvals ready before
the vessel’s arrival in Djibouti. Rather, it simply imposes
upon Defendant the responsibility set forth in the FFPA
regulations for making all necessary arrangements for receipt of
the cargo in Ethiopia, including obtaining the approvals for
entry and transit. Compl. ¶ 9 (citing 7 C.F.R. § 1499.8).7 One
cannot breach a contract without breaching a particular
7
“When a contract fails to specify a time for the
performance of an act, the law implies that it must be done
within a reasonable time.” Armenian Assembly of Am., Inc. v.
Cafesjian, 772 F. Supp. 2d 20, 124 (D.D.C. 2011) (internal
citations omitted); see also Hellenic II, 467 F.2d at 1153-54.
Even if a reasonable time is read into the Charter Party for
securing the clearance documentation, the Complaint nowhere
alleges that the 11-day delay between the vessel’s arrival and
the clearance being approved was unreasonable.
13
obligation created under the contract. See Ihebereme v. Capital
One, N.A., 730 F. Supp. 2d 40, 47 (D.D.C. 2010). The Complaint
does not allege any contractual term or regulatory duty that
required Defendant to obtain the approvals before the vessel
arrived at port. Moreover, Plaintiff fails to identify any
specific terms of the Charter Party that were breached. As
such, Plaintiff has not pled sufficient facts in order to state
a legally-cognizable claim for breach of contract.
In addition, the Complaint fails to state a claim for
breach of the implied duty of good faith and fair dealing.
Plaintiff asserts that Defendant breached its implied duty of
good faith and fair dealing by “failing to secure the necessary
documentation and import permits before the Vessel arrived at
the discharge port despite assurances from [Defendant’s] agents
that it had done or would do so,” and “by allowing the Vessel to
proceed to Djibouti without informing [Plaintiff] that the
approvals necessary to effectuate the basic purpose of the
Charter and allow discharge of the cargo had not in fact been
secured.” Compl. ¶ 29. Defendant argues that there are no
factual allegations in the Complaint upon which the Court can
infer bad faith motive or malice, without which there cannot be
a breach of the implied duty. See Def.’s Mem. at 12. Plaintiff
contends, however, that Defendant’s failure to have the
documentation in order before arrival caused substantial damages
14
to Plaintiff, and that Defendant’s failure to notify Plaintiff
that the clearance would not be obtained prevented Plaintiff
from being able to take steps to reduce its losses. Pl.’s Opp’n
at 10-12.
“Every maritime contract imposes an obligation of good
faith and fair dealing between the parties in its performance
and enforcement.” F.W.F., 494 F. Supp. 2d at 1359 (citing
Flores v. Am. Seafoods Co., 335 F.3d 904, 913 (9th Cir. 2003);
Misano di Navigazione, SpA v. United States, 968 F.2d 273, 274-
75 (2d Cir. 1992)); see also, e.g., Gaujacq v. EDF, Inc., 601
F.3d 565, 580 (D.C. Cir. 2010); Allworth v. Howard Univ., 890
A.2d 194, 201 (D.C. 2006).8 Under the implied covenant of good
faith and fair dealing, “neither party shall do anything to
injure or destroy the right of the other party to receive the
benefits of the agreement.” F.W.F., 494 F. Supp. 2d at 1359
(internal quotation marks and citation omitted); see also
Allworth, 890 A.2d at 201. Accordingly, “[i]f the party to a
contract evades the spirit of the contract, willfully renders
imperfect performance, or interferes with performance by the
other party, he or she may be liable for breach of the implied
8
The standards for breach of the implied duty of good faith
and fair dealing are materially the same under federal maritime
law and District of Columbia law, as both follow the Restatement
(Second) of Contracts, § 205. See Flores, 335 F.3d at 913;
F.W.F., 494 F. Supp. 2d at 1359; Allworth, 890 A.2d at 201.
15
covenant of good faith and fair dealing.” Allworth, 890 A.2d at
201 (internal citations omitted). A party to a contract engages
in bad faith by “violat[ing] standards of decency, fairness or
reasonableness,” or “engag[ing] in any arbitrary or capricious
action” towards the other party. Gaujacq, 601 F.3d at 580
(citing Allworth, 890 A.2d at 201-02).
Plaintiff does not allege that Defendant’s failure to
obtain the import documentation by the time the vessel arrived
at port had the effect of “injur[ing] or destroy[ing] the right
of [Plaintiff] to receive the benefits of the agreement.”
F.W.F., 494 F. Supp. 2d at 1359. Plaintiff also fails to allege
facts that would permit the Court to conclude that Defendant’s
failure to obtain the import documentation within that time
amounted to “violat[ing] standards of decency, fairness or
reasonableness” or “engag[ing] in any arbitrary or capricious
action” towards Plaintiff. Gaujacq, 601 F.3d at 580. As the
allegations in the Complaint acknowledge, the necessary import
documentation ultimately was obtained. Compl. ¶ 20. Plaintiff
also alleges that Defendant breached the implied duty of good
faith and fair dealing by failing to inform Plaintiff before the
vessel’s arrival that the clearance permits had not yet been
secured. Compl. ¶ 29. However, Plaintiff does not allege
sufficient facts to support an inference that Defendant’s
failure to inform Plaintiff of the delay was a violation of the
16
“standards of decency, fairness or reasonableness” or that
Defendant’s omission was “arbitrary or capricious.” Gaujacq,
601 F.3d at 580. Therefore, based on the minimal allegations
Plaintiff has made regarding Defendant’s actions, Plaintiff has
failed to allege facts that would permit the Court to infer that
Defendant acted with the requisite bad faith.
Accordingly, because Plaintiff has failed to allege
sufficient facts to demonstrate that Defendant breached either
the Charter Party or the implied duty of good faith and fair
dealing, the Court will GRANT Defendant’s Motion to Dismiss.
IV. CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss
the Complaint pursuant to Rule 12(b)(6) is GRANTED, and this
case is hereby DISMISSED. A separate Order accompanies this
Memorandum Opinion.
SIGNED: Emmet G. Sullivan
United States District Court Judge
September 24, 2012
17