UNITED ARAB SHIPPING COMPANY v. TRANSWORLD LOGISTICS GROUP INC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4684-11T2

UNITED ARAB SHIPPING COMPANY,

Plaintiff-Respondent,

v.

TRANSWORLD LOGISTICS GROUP,

INC.,

Defendant-Appellant,

and

HIGH PERFORMANCE MOTORS, INC.,

Defendant-Intervenor,

and

PATRICK J. MARROUM, Individually,

MICHAEL ALHARMOOSH a/k/a MOHAMMED

ALHARMOOSH, i/a/t/a CEDAR OF THE

EUPHRATES TRADING COMPANY a/k/a

CEDAR OF THE EUPHART TRADING

COMPANY, j/s/a,

Defendants.

__________________________________

March 8, 2013

 

Submitted February 12, 2013 - Decided

 

Before Judges Harris, Hayden, and Hoffman.

 

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-6379-10.

 

Carroll McNulty & Kull, LLC, attorneys for appellant (Lindsay A. Sakal, of counsel and on the brief; John A. Orzel (Carroll McNulty & Kull, LLC) of the New York bar, admitted pro hac vice, of counsel and on the brief).

 

Lawrence G. Tosi, attorney for respondent.

PER CURIAM

Defendant Transworld Logistics Group, Inc. (Transworld) appeals from two summary judgment orders entered in the Law Division on January 6 and January 23, 2012, dismissing its counterclaim and awarding plaintiff United Arab Shipping Company (United Arab) $105,373 in damages, plus attorneys' fees of $20,000, and costs. We affirm in part, reverse in part, and remand for further proceedings.

I.

Because the motion judge disposed of the dispute at the summary judgment stage, "we are obliged to view the facts in the light most favorable" to Transworld. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 374 (2010). Accordingly, we glean the following from the summary judgment motion record.1 Lombardi v. Masso, 207 N.J. 517, 549 (2011) (noting the appellate constraint that a summary judgment determination is defined and limited by the summary judgment record).

This appeal has its genesis in an international business transaction between High Performance Motors, Inc. (High Performance) and an entity referred to as Cedars of the Euphrates Trading Company (Cedars of the Euphrates), which may be a trade name for an import business operated by an individual named Michael Alharmoosh. From the patchy record, it appears that High Performance sought to export automobiles and used-automobile parts from the United States to be received and paid for by Cedars of the Euphrates in Iraq. None of the details of the arrangement between High Performance and Cedars of the Euphrates, including the price to be paid for the goods, are part of the appellate record. However, as of the time of the motion in the Law Division, "[Cedars of the Euphrates was] hounding [High Performance] for the cars, and [High Performance was] hounding [Cedars of the Euphrates] for [its] money."

In the summer and fall of 2008, High Performance arranged with Transworld, a non-vessel operating common carrier, to transport the goods in thirty forty-foot shipping containers2 by ocean transport to Umm Qasr, Iraq. The specific terms of the transaction between High Performance and Transworld are not part of the record. For example, although the parties agree that Transworld took control of High Performance's automobiles and car parts, the motion record contained no written documentation reflecting the scope of their engagement.

Because Transworld did not have vessels capable of transporting the containers, it contracted with United Arab to load the containers onto United Arab's ocean-going container ships in Norfolk, Virginia (the "port of loading") and sail to Umm Qasr, Iraq (the "port of discharge") on numerous dates between June and September 2008. Based upon an invoice created in 2010, United Arab charged Transworld $105,373.00 for its services.

The carriage of the containers was evidenced by twenty-three bills of lading issued by United Arab to Transworld.3 Although Transworld, as a non-vessel operating common carrier, had the authority to issue its own bills of lading, it inexplicably never issued any to High Performance. High Performance's interest, if any, in the cargo was not mentioned in United Arab's bills of lading.

Each United Arab bill of lading was typed onto a standardized form and completed in a similar fashion. The shipper of the containers was listed in the form's box #1 as Transworld (actually, "TLG, Inc."). The consignee was listed in box #2 as either Cedars of the Euphrates (in one bill of lading) or "to the order of the shipper" (in all other bills of lading). The "notify party" in box #3 always listed Cedars of the Euphrates (or a contraction of the name). Lastly, box #17, entitled, "Shipper's Declared Value/Ad Valorem Value," was left blank on all of the bills of lading.

By all accounts, the containers and their contents arrived at the Iraqi port, although the record does not clearly illuminate the dates of arrival of the container ships or when the containers were hoisted from their ships. Eight separate vessels were utilized, three of them twice, which accounted for eleven discrete ocean crossings between June and September 2008.

Transworld contends that United Arab failed to deliver twelve containers because their contents became ineligible for importation due to the automobiles' ages at the time they physically arrived in Iraq. Transworld's circumstantial evidence of lack of timely delivery is founded upon a United Arab email dated September 4, 2008, written to Jamal Saleh, which stated, "we have containers of 2006 autos that have to get into [Iraq] prior to end of [September] or else they cannot be imported. Evidently there is a restriction on the age of vehicles that goes into effect on [October 1, 2008]."4 An earlier United Arab email, dated August 29, 2008, to High Performance employee Patrick Marroum (with a copy sent to Transworld employee Marlene Perez) indicated a different deadline: "the last date for cars model 2006 is 31\08\2008 and cargo will be rejected by Iraq [c]ustom authority if container does not reach . . . port . . . for this date." The parties have not cited to us any Iraqi law or regulation that would confirm either deadline. The parties have also failed to explain exactly what happened to those twelve containers and we are unsure of their (and their contents') fate.

The remaining containers were somehow delivered to Cedars of the Euphrates (or its principal Alharmoosh), which never paid for the cargo, but the record contains no competent evidence of the actual delivery. United Arab claims that these containers "were taken off the dock under the express instructions of [High Performance], who was a beneficial owner of the cargo, and were successfully transferred . . . to the proper consignee." Original bills of lading were not presented to United Arab to facilitate this delivery. Instead, United Arab relied entirely upon an August 29, 2008 email from Marroum to United Arab stating, "Please be advised that you have permission from me and High Performance Motors to release the containers without the original bill of ladings." According to Marroum's deposition testimony, High Performance did not have possession of any bills of lading because it never paid Transworld for its services. In like vein, Cedars of the Euphrates never paid High Performance because the twelve containers that supposedly never made it into Iraq failed to fulfill High Performance's contract with Cedars of the Euphrates. Marroum's deposition testimony revealed the following:

Q. Okay. Did there come a time when High Performance pursued [Cedars of the Euphrates or Alharmoosh] for the money directly?

 

A. We did not sue him, no but we always [told] him we have a balance we need to he said get me my truck containers. I reserve it.

 

Q. The other twelve containers that are in Iraq?

 

A. Stuck in Iraq.

 

Q. If those containers could be turned over to him will he pay?

 

A. Yes.

 

. . . .

 

Q. How do you know that he will pay?

 

A. I guess because that's what he indicated.

 

United Arab never received payment for the $105,373 in shipping charges. Consequently, it commenced the present action against Transworld in the Law Division on August 26, 2010, seeking those shipping charges, plus attorneys' fees. Transworld filed a counterclaim on October 16, 2010, seeking damages in excess of one million dollars, which supposedly reflected the value of lost cargo. On April 27, 2011, an amended answer and counterclaim was filed, which added High Performance as an intervenor claimant on the counterclaim. In August 2011, United Arab filed an amended complaint, which lodged direct claims against High Performance, Cedars of the Euphrates, Marroum, and Alharmoosh.

On December 8, 2011, United Arab filed its first motion for summary judgment, seeking dismissal of the entire counterclaim. After oral argument, the Law Division granted the motion, concluding that

under [T]itle 46 [of the United States Code], if there's a loss, number one, it has to be reported within three days. It was not done here. And then, also under [T]itle 46 [of the United States Code], you have to start suit within a year, and that wasn't done here. So I'm satisfied that the motion for summary judgment that has been made by United Arab with respect to the counterclaim should be granted.

The interlocutory order dismissing Transworld's and High Performance's counterclaim was entered on January 6, 2012.

United Arab's second motion for summary judgment, filed on December 19, 2011, sought relief against Transworld only. After rejecting Transworld's argument that the defense of recoupment survived the court's earlier ruling on the limitation of actions, the Law Division concluded that United Arab had unequivocally earned the right to be paid once the containers arrived at the destination port, regardless of their timeliness vis- -vis Iraqi import deadlines. Finding that the contract between United Arab and Transworld was not conditioned upon time being of the essence, the court held that "[United Arab] delivered . . . and [it is] entitled to be paid." Accordingly, the court entered judgment in favor of United Arab in the amount of $105,373, plus attorneys' fees of $20,000. Several months later, after United Arab's remaining claims were dismissed against High Performance, Cedars of the Euphrates, and the two individual defendants, this appeal followed.

II.

A.

Appeals from grants of summary judgment require that an appellate court use the same standard employed by the motion court, which grants summary judgment only if the record shows that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Tymczyszyn v. Columbus Gardens, 422 N.J. Super. 253, 260-61 (App. Div. 2011) (recognizing the standard of review). Issues of law are reviewed by this court de novo, without deference to the trial court's conclusions. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009). We may affirm the motion court even if we disagree with its rationale, as long as there exists a valid and independent basis for affirmance that is readily apparent from the record. See Osoria v. W.N.Y. Rent Control Bd., 410 N.J. Super. 437, 439 (App. Div. 2009) (citing Isko v. Planning Bd. of Livingston, 51 N.J. 162, 175 (1968)).

B.

This appeal is primarily governed by the Carriage of Goods by Sea Act (COGSA), see 46 U.S.C.A. 30701 note. Using this federal law as our guidepost, we first review the dismissal of Transworld's counterclaim.5

The amended counterclaim contained four counts. The first count was explicitly labeled, "First Count for Recoupment or Offset," and alleged that United Arab "failed to deliver . . . shipments, contrary to the express terms of the bills of lading and thereby convert[ed] the goods of [High Performance]."6 The remaining three counts variously asserted claims for "gross negligence, recklessness, unreasonable deviation, misdelivery and fundamental breach of contract"; "misrepresentation"; "breach of warranty"; and "indemnification."

The Law Division dismissed all of Transworld's claims against United Arab on the basis that they were time barred by the COGSA's three-day notice-of-claim requirement and one-year limitation of actions rule. COGSA 3(6), 46 U.S.C.A. 30701 note (previously codified at 46 U.S.C.A.app. 1303(6)). This was both improvident and contrary to established decisional law interpreting the COGSA.

"[The] COGSA governs the terms of bills of lading issued by ocean carriers engaged in foreign trade." Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., ___ U.S. ___, ___, 130 S. Ct. 2433, 2440, 177 L. Ed. 2d 424, 434 (2010). Moreover, section 29 of United Arab's bills of lading to Transworld provided:

If carriage includes [c]arriage to, from or through a port in the United States of America, this bill of lading shall be subject to US COGSA, the terms of which are incorporated herein and shall be paramount throughout the carriage by sea and the entire time that the [g]oods are in the actual custody of the [c]arrier or any [s]ub-contractor at the sea terminal in the United States of America before loading onto the [v]essel or after discharge therefrom, as the case may be.

"By its terms, COGSA governs bills of lading for the carriage of goods 'from the time when the goods are loaded on to the time when they are discharged from the ship.'" Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 29, 125 S. Ct. 385, 396, 160 L. Ed. 2d 283, 298 (2004) (quoting the COGSA 1(e), 46 U.S.C.A. 30701 note). Said another way, "COGSA applies when there is a contract for carriage of goods between a foreign port and a port of the United States," Barretto Peat, Inc. v. Luis Ayala Col n Sucrs., Inc., 896 F.2d 656, 659 (1st Cir. 1990), but only during the interval when the cargo is at sea, also referred to as the "tackle-to-tackle" period. Greenpack of P.R., Inc. v. Am. President Lines, 684 F.3d 20, 23 (1st Cir. 2012). However, as here, "'the parties to a shipping contract may agree to extend [the COGSA's] coverage to the period before loading or after unloading of the goods,'" Id. at 24 (alteration in the original) (quoting Ins. Co. of N. Am. v. P.R. Marine Mgmt., Inc., 768 F.2d 470, 475 (1st Cir. 1985)), to cover "the entire period in which [the goods] would be under [a carrier's] responsibility." Kirby, supra, 543 U.S. at 29, 125 S. Ct. at 396, 160 L. Ed. 2d 298.

The COGSA's notice-of-loss provisions are found in Section 3(6), which provide, in relevant part:

Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of delivery.

 

Requiring such advance notice serves several purposes. It allows the carrier to promptly investigate any claim for damage while witnesses are available, or before it is otherwise too late, in order to defend against claims, and it raises a presumption of good delivery by the carrier which the claimant must overcome. Howmet Corp. v. Tokyo Shipping Co., 318 F. Supp. 658, 662 (D. Del. 1970).

However, "'when sufficient evidence indicating that the cargo was damaged prior to discharge is introduced, the prima facie evidence under [COGSA 3(6)] is accorded no special weight beyond that given other evidence concerning where the damage occurred.'" Associated Metals & Minerals Corp. v. Etelae Suomin Laiva, 858 F.2d 674, 677-678 (11th Cir. 1988) (quoting Harbert Int'l Establishment v. Power Shipping, 635 F.2d 370, 373 (5th Cir. 1981)). Thus, once Transworld came forward with sufficient evidence to suggest that the cargo was misdelivered, a fact issue is created, which must be resolved by a trier of fact. SeeSocony Mobil Oil Co. v. Tex. Coastal & Int'l, 559 F.2d 1008, 1012 (5th Cir. 1977).

COGSA 3(6) further provides that "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 or the date when the goods should have been delivered." Although the record is far from clear as to when United Arab actually delivered the containers to Umm Qasr, no one seriously disputes that the deliveries properly made or otherwise were completed no later than October 1, 2008. Transworld's initial counterclaim was not filed until October 16, 2010. Thus, if the COGSA's one-year time-for-suit provision applies, the Law Division properly dismissed the counterclaim in its entirety.

We agree that Transworld's affirmative claims in counts two, three, and four of its counterclaim are barred by the COGSA one-year limitation. See, e.g., M. V. M., Inc. v. St. Paul Fire & Marine Ins. Co., 156 F. Supp. 879 (S.D.N.Y. 1957). However, count one purports to seek recoupment, a defense recognized under the COGSA as not being subject to the one-year limit. SeeShipping Corp. of India, Ltd. v. Pan Am. Seafood, Inc., 583 F. Supp. 1555 (S.D.N.Y. 1984).

The few cases that have directly addressed recoupment in the context of [the] COGSA have expressly held that where a carrier files suit against a shipper for breach of contract, a counterclaim for damages to cargo is not time barred even though it is asserted after COGSA's one year time period. The rationale is that because recoupment is in the nature of a defense, it is never barred by the statute of limitations so long as the plaintiff's main action itself is timely.

 

Distribution Servs., Ltd. v. Eddie Parker Interests, Inc., 897 F.2d 811, 813 (5th Cir. 1990) (citations omitted).

 

We are in accord with this point of view, and consider the Law Division's dismissal of the entire counterclaim a mistaken application of law. We hold that Transworld can assert a claim for damages by way of a recoupment under the COGSA, even though an affirmative action for damages would be barred. However, a recoupment defense or counterclaim is brought to reduce a plaintiff's recovery by "all just allowances or demands accruing to the defendant with respect to the same contract or transaction." Id. at 812. It is a "purely defensive procedure" aimed at a plaintiff's claim rather than an affirmative cause of action. Ibid.

 

 

C.

We next address whether granting summary judgment to United Arab on its affirmative claim for the shipping charges, aside from the recoupment defense, was proper. We deem that material fact questions permeated the summary judgment process, rendering the grant of summary judgment erroneous. Of significant concern is the absence of competent evidence from United Arab concerning the actual dates and manner of delivery of the containers, the identity of the person or persons to whom the containers were ultimately delivered, and an explanation for the whereabouts of the claimed missing twelve containers. Without, at least, this critical information, we cannot adequately determine whether United Arab, in fact, performed its contract of carriage in accordance with its terms.

Other issues abound. For example, the motion court did not have all of the relevant bills of lading before it at the time of its decision. Also, United Arab never differentiated between those bills of lading that evidenced the containers that were actually delivered to someone in Iraq, and those that were apparently sequestered by Iraqi customs officials. Since several vessels with different delivery dates were involved, it was incumbent upon the party with the affirmative claim United Arab to make its presentation clear. That is simply the burden of any party moving for summary judgment, to demonstrate "the evidence is so one-sided that one party must prevail as a matter of law." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

We have reservations that United Arab must prevail as a matter of law, even if it may potentially succeed at trial.
49 U.S.C.A. 80110(b) specifies the persons to whom a carrier has a duty to deliver the goods:

[A] common carrier may deliver the goods covered by a bill of lading to . . . (3) a person in possession of a negotiable bill if . . . (A) the goods are deliverable to the order of that person; or (B) the bill has been indorsed to that person or in blank by the consignee or another indorsee.

 

The bills of lading at issue were all consigned to the order of Transworld, the shipper, except for the first one (bill of lading #ORFA045200) issued on June 8, 2008, which was consigned to the order of Cedars of the Euphrates. There is nothing in the record to indicate that any of the bills of lading were properly indorsed, allowing for release of the cargo. United Arab, the carrier, contacted High Performance, not Transworld, requesting authority to release some of the cargo. High Performance is not mentioned anywhere on the bills of lading, was never in possession of bills of lading, and had no contract with United Arab. Thus, when High Performance's Marroum granted his email permission for release of the cargo without the original bills of lading, it was unconventional, to say the least. Arguably, one of the purposes for the consignee to be listed as "to the order of shipper" was to ensure that that Transworld received payment for its services. That purpose was diluted when the cargo left United Arab's hands without confirmation that it was Transworld's decision. It may be that High Performance, in fact, had a proxy to act for Transworld, but the summary judgment record does not clearly demonstrate that status.

"A common carrier is liable for damages to a person having title to, or right to possession of, goods when . . . (1) the carrier delivers the goods to a person not entitled to their possession unless the delivery is authorized under section 80110(b)(2) or (3) of this title[.]" 49 U.S.C.A. 80111(a)(1). On the face of the documents provided in this record, it would appear that United Arab exposed itself to claims of its shipper by its conduct. Whether measurable damages can be proven or whether United Arab can demonstrate ratification or another basis to lawfully and contractually explain its shortcut remains to be demonstrated.

In addition, there appear to be genuine issues of material fact concerning the beneficial ownership of the cargo, the fault for and reasonableness of the delay, the understanding of parties regarding the Iraqi import restrictions on car models from 2006 or older, and the current status of the twelve unaccounted-for containers. In addition, the Law Division failed to explore any general maritime law relating to delays in delivery.7 In this posture of the case, summary judgment should not have been granted in favor of United Arab.

D.

We lastly touch upon United Arab's argument that Transworld's damages are severely limited by the COGSA. Another purpose of the COGSA is to "limit liability of common carriers for damage to cargo where the value of the cargo is not known to the carrier." Gen. Motors Corp. v. Moore-McCormack Lines, Inc., 451 F.2d 24, 26 (2d Cir. 1971). COGSA 4(5) provides that neither the carrier nor the ship shall be liable for any loss or damage to goods in an amount over $500 per package, or in the case of goods not shipped in packages, per customary freight unit (the CFU), unless the nature and value of the goods have been declared by the shipper before shipment and inserted in the bill of lading.

If Transworld wanted to avoid the $500 limit, it was permitted to declare a higher value for its cargo, thereby "alerting the carrier of its potential liability and allowing it to charge extra freight, if appropriate." Moore-McCormack, supra, 451 F.2d at 26. Transworld did not make such a declaration here, and on remand, it will have the burden of demonstrating the quantum of its entitlement, if any, to damages under the application of the $500 per package or CFU limitation.

In summary, we affirm the dismissal of Transworld's counterclaim, except for its count one seeking recoupment. We reverse the grant of summary judgment in favor of United Arab. We remand for further proceedings in accordance with this opinion.8

 

1 The summary judgment record is a morass of fragmentary and nearly incomprehensible deposition testimony, incomplete documents, and almost unintelligible email threads. Most important, movant United Arab's submission was largely a collection of unauthenticated information contained in counsel's certification, contrary to Rule 1:6-6.

2 The parties' briefs refer to thirty-one containers, but our review of the bills of lading indicates that only thirty containers were involved.

3 Although there were twenty-three bills of lading involved in the overall transaction, only eleven were presented as part of the summary judgment motion record, which related to eighteen containers. United Arab never moved to supplement the record, yet it supplied all twenty-three bills of lading in its appendix. Because the bills of lading are substantially similar, we have elected to review those that are beyond the motion record.

4 Although Transworld asserts twelve containers missed the deadline, the cited email only listed ten containers that arrived at the port.

 

5 The only appellant is Transworld. Because High Performance did not file a notice of appeal, its claims against United Arab, which were dismissed along with Transworld's in the January 6, 2012 order, are not the subject of this appeal. Whether High Performance retains any viable claims against Transworld is not before us.

 

6 Transworld's original counterclaim did not mention conversion, but only alleged that United Arab "failed to deliver . . . shipments, contrary to the express terms of the bills of lading."

7 COGSA does not "provide[] a remedy for delay in delivery. Where a shipper makes a claim based on delay, courts look to the general maritime law, which is based on common-law rules relating to common carriers." Robert Force, Admiralty and Marine Law, Federal Judicial Center 77 (2004) http://www.fjc.gov/public/pdf.nsf/lookup/admiralt.pdf/$file/admiralt.pdf (last visited on February 28, 2013). If the carrier is aware of the shipper's need to have the cargo delivered within a set time frame and the carrier fails to transport the goods expediently, the carrier may be seen as causing unreasonable delay. Hellenic Lines, Ltd. v. United States, 512 F.2d 1196, 1207-10 (2d Cir. 1975).

8 United Arab's arguments that (1) the appeal is untimely and (2) Transworld waived its right to appeal due to a purported settlement are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).