PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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No. 16

- 4195

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LIBERTY WOODS INTERNATIONAL, INC.,

Appellant

v.

THE MOTOR VESSEL OCEAN QUARTZ, Her engines, tackle, appurtenanc es, etc., in rem; DALIA SHIP HOLDINGS SA, in personam

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On Appeal from the United States District Court

for the District of New Jersey (D. C. C ivil Action No. 1

- 1 5

- c v

- 0 8843 ) District Judge: Honorable Noel L. Hillman

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Argue d on July 11 , 2017

Before: MC KEE

, AMBRO and R OTH

, Circuit Judges

(Opinion filed : May 4 , 2018 )2 Craig S. English , Esq. ( ARGUED ) Kennedy, Lillis, Schmidt & English

75 Maiden Lane

Suite 402 New York, NY 10038

Counsel for Appellant

Richard Q. Whelan , E sq. ( ARGUED ) Palmer, Biezup & Henderson 190 North Independence Mall West

Suite 401 Philadelphia, PA 19106

Counsel for Appellee s

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OPINION

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RO TH

, Circuit Judge

Liberty Woods International (LWI) brought suit for

cargo damage sustained during a trip to Camden , New Jersey

,

on the Ocean Quartz (Vessel). L iability for the damage is governed by the carrier’s bill of lading, which contain s a forum selection clause requiring suit to be brought in South

Korea. LWI instead sou ght to bring an in rem suit against the Vessel in the District of New Jersey, arguing that the foreign forum selection clause violates the Carriage of Goods by Sea Act (COGSA) because South Korea does not allow in rem3 suits. The District Court dismissed t he case, and for the following reasons, we will affirm.

I.

LWI purchased plywood veneer sheets, which it shipped to Camden , New Jersey, on the Vessel. Dalia Ship Holding owns the Vessel; however, in a chain of chartering,

Dalia bareboat chartered 1 the Ve ssel to Star Bulk, which in

turn time chartered it to Daiichi, which in turn time chartered it to SK Shipping. SK Shipping issued a bill of lading which specified that “[a]ny claim, dispute, suit or action concerning goods carried under this Bill of Ladin g, whether based upon breach of contract, tort, or otherwise shall be brought before
the Seoul District Court in Korea.” Both parties agree that LWI’s cargo is covered by this bill of lading.

I n February 2013, the Vessel arrived in Camden, and

LWI disc overed that its cargo was damaged. Believing the damage was caused by improper stowage, LWI threatened to

arrest the Vessel . In lieu of an arrest, the Japan Ship Owners’ Mutual Protection & Indemnity Association (JSO) issued to
LWI and its insurers a let ter of undertaking (LOU) on behalf of the Vessel, which could be used to satisfy any judgment against the Vessel in rem up to and including $2.75 million.

On December 23, 2015, LWI filed suit in the District of New Jersey against the Vessel in rem and D alia in

personam . Dalia answered on behalf of the in rem defendant.

1 Bareboat chartering trans fers complete control and operation

of the vessel from the owner to the bareboat charterer without imposing liability for the acts of the charterer.4 LWI later learned that it could not recover in personam against Dalia because of the bareboat charter . While LWI

could have filed an in personam suit against S.K. Shipping in

South Kore a, it chose not to. At argument, counsel admitted that this was a strategic move on its part, because LWI fel t
that its suit would not be successful in South Korea.

The Vessel moved to dismiss the New Jersey suit

based on the forum selection clause in the bill of lading. LWI argued that enforcing the forum selection clause would violate section 3(8) of COGSA. In relevant part, th is section

states :

A ny clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from lia bility 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. A benefit of insurance in favor of the carrier, or similar clause, shall be deemed to be a clause

reliev ing the carrier from liability. 2

LWI argued that this provision invalidates the foreign forum

selection clause because South Korea does n ot recognize in

rem suits. On November 9, 2016, the District Court granted the motion to dismiss under Rule 12(b)(3). LWI appeal ed

.

2 Note to 46 U.S.C. § 30701, Title I, Section 8 ( emphasis added).5 I I. 3

A.

In granting the motion to dismiss, the District Court

erred in interpreting COGSA by confusing it with the Harte r Act, a precursor to COGSA. COGSA was modeled after the

Brussels Convention for the Unification of Certain Rules Relating to Bills of Lading (Hague Rules). 4 In 2006, COGSA

was relocated from 46 U.S.C. § § 1300 et seq.

, to a note after

46 U.S.C. § 30701. 5 During this same period, the Harter Act

was also moved from 46 U.S.C. §§ 190

- 196 to 46 U.S.C. §§ 30701

- 30707. As a result, COGSA was amended, not merely relocated

. T he relocated Harter Act provisions were the “amended” COGSA provisions. Upon analyzing 46

U.S.C. §§ 30704 and 30705 , the District Court held that Congress modified COGSA’s language s o that it no longer

3 The District Court exercised jurisdi ction under 28 U.S.C. §§ 1332(a)( 2 ) and 1333(1 ), and we have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over the District Court’s construction of COGSA, see e.g. , U nited S tates v. Cooper

, 396 F.3d 308, 310 (3d Cir. 2005) (citation omit ted),
and review the District Court’s decision to dismiss a complaint on the basis of forum non conveniens for abuse of

discretion

, Windt v. Qwest Comms Int’l, Inc. , 529 F.3d 183, 189 (3d Cir. 2008) (“This Court reviews a district court’s

dismissal of a co mplaint on forum non conveniens grounds
for abuse of discretion.” (citations omitted) ).

4 Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer , 515 U.S. 528, 536 (1995).

5 200 A.L.R. Fed. 249 (2005) (noting the original locations

for COGSA and the Harter Act ).6 prohibit ed limiting a ship’s liability. 6 Th at , however, wa s a misinterpretation of COGSA.

B.

Nevertheless

, we will affirm the judgment be cause the foreign forum selection clause here does not violate COGSA.

While foreign forum selection clauses were originally disfavored under COGSA, the Supreme Court later adopted a policy that better reflected the need to respect the competence

of fore ign forums to resolve disputes. In the seminal case of Indussa Corp. v. S.S. Ranborg , the Second Circuit held a foreign forum selection clause to be invalid because it “put[] ‘a high hurdle’ in the way of enforcing liability, and thus [was] an effective m eans for carriers to secure settlements lower than if cargo [owners] could sue in a convenient
forum.” 7 After Indussa

, courts of appeal uniformly adopted this reasoning to invalidate foreign forum selection clauses 8 until the Supreme Court overruled Indus sa in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer

.

6 App. 14 (“Therefore, it is evident from the plain language of COGSA that ‘the carrier’ may not limit its liability through provisions inserted into a bill of lading. 46 U.S.C.A. §§ 30704, 30705. Congress did not make the same requirement of ‘the shi p.’”).

7 377 F.2d 200, 203 (2d Cir. 1967) (internal citation omitted).

8 Sky Reefer , 515 U.S. at 533 (collecting cases).7 Sky Reefer held that a foreign arbitration 9 clause would

not lessen carrier liability in violation of COGSA solely because litigating abroad would be more costly

. 10 While acknowledging that a cho ice of forum and choice of law clause would be invalid as against public policy if they operated as a “prospective waiver of a party’s right to pursue statutory remedies,” 11 the Court noted that “the historical judicial resistance to foreign forum selection clauses has little place in an era when . . . businesses . . . now operate in world

markets. ” 12 Moreover, the Court stated that it would be “out of keeping with the objects of the [Hague Rules] for the courts of this country to interpret COGSA to disparag e the authority or competence of international forums for dispute
resolution.” 13 Accordingly , the Court held that while COGSA prohibited lessening the “liability for loss or damage . . . arising from negligence, fault, or failure in the duties and obligati ons provided in this section

, ” 14 COGSA d id not
address the “means and costs of enforcing that liability.” 15

“ The relevant question

. . . is whether the substantive law to

9 While Sky Reefer involved a foreign arbitration clause, the Supreme Court noted that “ foreign arbitration clauses are but

a subse t of foreign forum selection clauses in general[.]” Id

. at 534 (citation omitted).

10 Id.

11 Id. at 540 ( internal quotation marks and citation omitted).

12 Id . at 537

- 38 (first omission in original) ( internal quotation

marks and citation omitted)

. 13 Id . at 537.

14 Id . at 534 (omission in original).

15 Id.8 be applied will reduce the carrier’s obligations to the cargo

owner below what COGSA guarantees.” 16

LWI argues , however, that the forum selection clause

here violates COGSA because in rem suits are themselves a substantive right guaranteed by the statute. In the alternative, LWI seems to argue that mandating a South Korean forum

will ef fectively limit the Vessel’s liability. We consider each argument in turn.

1.

LWI claims that COGSA designates in rem suit s as substantive right s , which are violated by the instant forum selection clause. We disagree

. As LWI concedes, when the plain la nguage of a statute is clear, the text should govern. 17

An examination of the plain language of s ection 3(8) shows

that the clause clearly protects both carrier and ship liability; any clause completely eliminating or lessening ship liability

runs afoul of COGSA. 18 T his does not mean , however, that section 3(8) guarantees the right to an in rem suit. Rather, COGSA protects ship liability , not any particular vehicle for imposing it. The text does not mention in rem suits, nor require any specific remedy fo r enforcing ship liability. Indeed, such an interpretation would run counter to Sky Reefer ’s holding that COGSA does not protect procedural

16 Id . at 539 (citation omitted)

. 17 Cooper , 396 F.3d at 310 (citation omitted)

. 18 Note to 46 U.S.C. § 30701, Title I, Section 3( 8 ) ( prohibiting “[a] ny clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability[.]”).9 means for enforcing liability. Insofar as prohibiting in rem
suit s makes enforcing ship liability more costly or l ess convenient, Sky Reefer explicitly held that liability is not improperly lessened by procedural costs

. 19

While LWI acknowledges that section 3(8) protects against lessening of ship liability, it cites this language as establishing a substantive right to in rem suits without adequately explain ing this analytic leap

. LWI argues in its

brief that in rem suits are well established and important

features of maritime law in the United States . It maintains

that nothing in section 3 excludes in rem rights or limits in

rem rights against the ship to a procedural device for the

enforcement of an in personam defendant’s liability. This argument turns the necessary discussion on its head; arguing that absence of express limitations grants a substantive right,

es pecially in light of Sky Reefer ’s limitations, is woefully inadequate.

In addition to the textual reasons for concluding that

COGSA does not grant the substantive right to in rem suits, there are strong policy consider ations that caution against

such an interpretation

. Requiring in rem suits would essentially invalidate numerous foreign forum selection clauses, as many countries do not acknowledge in rem suits

. 20

19 Sky Reefer , 515 U.S. at 534 (noting the difference “between applicable liability principles and the forum in which they are

to be vindicated ”)

. 20 See, e.g.

, Thyssenkrupp Materials NA, Inc. v. M/V KA CEY

, 236 F. Supp. 3d 835, 840 ( S.D.N.Y. 2017) (acknowledging

that Greek law do es not recognize in rem actions); Uniwire Trading LLC v. M/V Wladyslaw Orkan , 622 F. Supp. 2d 15,10 Indeed, t he United States is one of the few countries that do recognize in rem suits. Impo sing this idiosyncratic procedural requirement on other countries would be needlessly parochial. For th e s e reason s , we conclude that COGSA section 3(8)’s substantive protections 21 encompass ship liability, not in rem suits specifically as the instrument to seek that recovery

. 22

21 (S.D.N.Y. 2008) (acknowledging that Polish law does not recognize in rem suit s) ; Matter of Topgallant Lines, Inc. , 154 B.R. 368, 380 (S.D. Ga. 1993), aff ’ d sub nom. McAllister Towing v. Ambassador , 20 F.3d 1175 (11th Cir. 1994) (acknowledging that German law does not recognize in rem suits)

. 21 For this reason, and because LWI has not argued that any other statute creates a substantive right to in rem suits, we reject LWI’s argument that the forum selection clause functions as a prospective waiver of a statutory remedy, as prohibited by Sky Reefer

. 22 We join the Ninth Circuit in s o holding. The Ninth Circuit upheld a forum selection clause specifying that Korean law would govern in Fireman ’ s Fund Insurance Co. v. M.V. DSR

Atlantic , holding that an in rem proceeding was merely a “means . . . of enforcing [COGSA] liability.” 131 F. 3d 1336

, 13 39

- 40 (9th Cir. 1997), as amended (Mar. 10, 1998) (internal quotation marks and citation omitted) (omission in original)

. The Ninth Circuit found no COGSA violation

because the vessel presented u ncontroverted evidence that

Korean law was at lea st as favorable to the plaintiff as

COGSA. Id . at 1340. The Ninth Circuit summarily confirmed this holding in Kukje Hwajae Ins

. Co

. , L t d

. v. M/V/ Hyundai Liberty

, 408 F.3d 1250, 1255 (9th Cir. 2005).11 2.

LWI argues that even if in rem suits are not a substantive right, th e forum selection clause here effectively relieves or lessens ship liability by not recognizing in rem
actions , in violation of COGSA. Once again, we disagree.

W hile in rem suit s might appear to be an obvious way to impose ship liability, courts have recognize d other avenues

for imposing liability in situations where in rem suits are prohibit ed . Courts have recognize d plaintiffs’ ability to

obtain LOUs in lieu of bringing an in rem suit when they are precluded from doing so by arbitration clauses, which functionally prohibit in rem suits. 23 For example, in Thyssen Inc. v. Calypso Shipping Corporation, S.A. , the Second

Circuit held that an arbitration clause did no t violate COGSA because the plaintiff accepted a n LOU as full security of its claims and could have recovered against the ship pursuant to
the LOU. The Second Circuit reasoned that “ [a] letter of undertaking replaces the vessel as the res and moots the

qu estion of the need for separate in rem claim.” 24 This

Circuit similarly held that “[g]enerally, once a [n] LOU is issued, the letter becomes a complete substitute for the res and the maritime lien transfers from the vessel to the LOU.” 25

23 Petroleos Mexicanos Refinacion v. M/T KING A , 554 F. 3d 99, 108 (3d Cir. 2009) (“An in rem action is cognizable only in federal court; therefore the vessel could not have been a party to the in personam arbitration.” ( citing Madruga v. Superior Court, 346 U.S. 556, 560 (1954))).

24 Thyssen, Inc. v. Calypso Sh ipping Corp., S.A. , 310 F.3d 102, 107 (2d Cir. 2002) (citations omitted)

. 25 Petroleos , 554 F.3d at 104 (citation s omitted)

.12 As the Vessel argu es
, LWI could have obtained an

LOU that would provide security for an in personam suit in

South Korea. Moreover, t he Vessel produced an unchallenged affidavit by Korean lawyer Byung

- Suk Chung, claiming that South Korean law allows a party to “obtain[]

sec urity from vessel interests by arresting a vessel or attaching other assets in a foreign jurisdiction . . . to act as security for an in personam judgment to be obtained in the
Seoul District Court.” 26 Because LWI would then be able to

collect from the Ves sel using the LOU, the forum selection clause would not lessen or relieve the ship’s liability in

violation of COGSA.

In response, LWI raises a narrow argument: LWI

concedes that obtaining an LOU is an accepted practice that is functionally equivalent to arresting a ship in an in rem suit. 27
Further, LWI does not argue that the forum selection clause prevented LWI from arresting the Vessel and obtaining a

bond or an LOU. Instead, LWI argues that the forum

selection clause eliminated ship liability in t his case , because

LWI received a n LOU that secured only an in rem judgment against the Vessel. LWI does not allege that it could not have

obtain ed a n LOU unencumbered by this restriction. Indeed,

26 App. 119.

27 LWI’s counsel admitted that the LOU is limited to the amount “you could get if you actually arrested the vessel. So what you get in a letter of undertaking is exactly the same thing that you get when you arrest the vessel . . ..” Audio Recording of Oral Arguments held July 11, 2017 at 5:50

- 6:15

, http: //www.ca3.uscourts.gov/oral

- argument

- recordings

. Additionally, the Federal Rules of Civil Procedure Supplemental Rules allow for a similar procedure.13 LWI’s inability to recover seems to be a consequence of it s own deliberate inaction: First, it refused to file an in

personam suit against S.K. Shipping in South Korea. Second, it did not obtain an LOU that would be applicable to an in

personam suit . LWI’s own willful limitation of alternatives,

not the forum selection clause, has eliminated its ability to recover. For this reason, we hold that the forum selection clause did not effectively lessen or eliminate the Vessel’s

lia bility and that it is valid under COGSA.

Because LWI has not raised any other argume nts as to
how the District Court abused its discretion in enforcing the forum selection clause, we will affirm the District Court’s

dismissal of the suit.

IV.

In this case, we are asked to support an interpretation

of COGSA that would invalidate a host of foreign forum selection clauses for the sake of a procedural device available in few countries besides the United States. Where parties have contracted to bring suit abroad, the U.S. must be cognizant of its status as a member of a global community

and respect the competence of other jurisdictions to adjudicate claims. In light of this and in light of the fact that

the forum selection clause did not lessen or eliminate ship liability for cargo damage, we decline to impose LWI’s restrictive interpretati on of COGSA. COGSA does not invalidate the forum selection clause simply because the

selected jurisdiction does not acknowledge in rem suits. For this reason, we will affirm the District Court’s order,

dismiss ing the action

.1

AMBRO, Circuit Judge

, concurring

For a maritime creditor an action in rem is a procedure for obtaining pre

-

judgment security and post

- judgment

enforcement. In the global shipping business the debtor’s ship is typically the main asset on which a judgment

- creditor can rely to collect from a defendant located perhaps on the other side of the world. A court can easier locate, bring within its jurisdiction, and arrest t he ship th an a defendant’s other foreign assets.

I t is no surprise then that maritime la w supplies in rem liability against a ship, that is, permits an action naming the ship as though it were the defendant. As is relevant here, in the United States a ship can be liable in rem for cargo damage, the idea being that the ship impliedly ratified the shipping contract when the c arrier loaded the cargo onboard.

See Man Ferrostaal, Inc. v. M/V Akili , 704 F.3d 77, 83 (2d Cir. 2012); see also Pioneer Import Corp. v. Lafcomo , 49 F.Supp. 559, 561

– 62 (S.D.N.Y. 1943), aff’d , 138 F.2d 907 (2d Cir. 1943) (“ A lien against the ship arises for damage to cargo caused by improper storage.”). The Carriage of Goods by Sea Act, or COGSA, assumes the availability of an action against the ship. Indeed, § 3 of COGSA is titled, “Responsibilities and Liabilities of

Ca rrier and Ship. ” (emphasis added). And u nder § 3(8), the parties to a contract for shipping goods by sea cannot agree to lessen or relieve the liability of the “carrier or the ship.” However, an action in rem is only one way to impose liability on a ship . Although South Korean law does not allow in rem suits, Liberty Woods International concedes that equivalent security for in personam suits is available. As it chose not to pursue this avenue for relief, I agree with my colleagues that any lessening of the ship’s liability is the fault of Liberty Woods, not the selection of a foreign forum.
If, however, a forum

- selection clause were to operate such that a shipper could never enforce the selected forum’s judgment against the value of the ship that carrie d the shipper’s damaged goods, th e clause would be unenforceable per COGSA § 3(8). See Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer , 515 U.S. 528, 540 (1995) (“[W]ere we persuaded that the choice

- of

- forum and choice

- of

- law clauses operated in tandem as a prospective waiver of a party's right2 to pursue statutory remedies, we would have little hesitation in condemning the agree ment as against public policy.” (internal q uotations and ellipsis omitted)) . My concern is that, in another case, the common sh ipping industry practice of chartering and sub

- chartering a ship risks placing it and its owner beyond the reach of the designated forum’s in

personam jurisdiction. Here, because sub

- charter er SK Shipping Co. Ltd. operated the Ocean Quartz

, the parties

ag ree that its owner, Dalia Ship Holding S.A., bears no liability for damage to Liberty Woods’ cargo. This naturally leads to a question: if Dalia Ship Holding bears no liability,

ho w could Liberty Woods attach Dalia Ship’s property

— that is, the Ocean Quart z

— to enforce a judgment against someone else ( i.e. , SK Shipping)? As noted, the parties do not contest that Liberty Woods could have enforced a judgment obtained in South Korea against the Ocean Quartz’s value. So there is no reason to question that prop osition here. But I am not convinced it will hold in every case. It is easy to imagine a shipowner contending that a personal judgment against a sub

- charter er several steps removed should not be enforceable against the

owner’s vessel. The use of so

- call ed “bareboat” or “demise” charter agreements

, in which a shipowner surrenders control

of the vessel to the charterer (and ultimately any sub

- charterer down the line) and disclaims carrier liability , heightens the

concern . An owner can credibly “seek to us e the bareboat charter as a shield against in personam liability.” Backhus v.

Transit Cas. Co. , 532 So. 2d 447, 449 (La. Ct. App. 1988), aff'd

, 549 So. 2d 283 (La. 1989). I f the sub

- charter er has few assets or becomes insolvent, the shipper might be left high and dry without compensation for damage to its cargo.

A suit in rem provides a means of cutting through a

web of sub

- charter agreements to impose liability on the ship directly and vindicate § 3(8)’s command (and thereby protect shippers in the face of judgment

- proof sub

- charter er s). Other jurisdictions may provide other procedural vehicles to deliver these protections (as apparently South Korea does). In my view, COGSA requires that a shipper have some means to assess liability for damaged goods ag ainst the value of the ship. Because Liberty Woods has not explained why it would be impossible to vindicate its rights in the designated forum, I agree with my colleagues that we must affirm the dismiss al of

its in rem action.