American International Group Europe S.A. (Italy) (AIGE) v. Franco Vago International, Inc., 09 Civ. 6525 (S.D.N.Y. Nov. 2010), succinctly addresses several issues of international litigation practice, specifically the enforceability of jurisdictional provisions in bills of lading and waiver. AIGE is the subrogee of Sixty USA, Inc. The case is a maritime case (138 cartons of women’s garments) , but the international practice issues that were decided arise in international practice cases generally.
First, there were two independent entities issuing bills of lading. The Court held, as other cases have, that “an upstream intermediary cannot co-opt the terms of a downstream carrier’s bill of lading, but must instead rely on the terms of its own bill of lading”.
Second, the Court addressed the recurring issue arising from the fact that the Federal Rules of Civil Procedure do not have a specific or even obvious rule enabling courts to address and enforce contractual forum selection clauses at the commencement of a litigation. As the Second Circuit has stated: “The Supreme Court has not specifically designated a single clause of Rule 12(b) as the proper procedural mechanism to request dismissal of a suit based upon a valid forum selection clause, nor [has the Second Circuit]”. Asoma Corp. v. SK Shipping Co., 467 F.3d 817 (2d Cir. 2006). The District Court here noted that Rule 12(b)(1) (lack of subject matter jurisdiction) and Rule 12(b)(3) (lack of proper venue) were both candidates The Court followed the Second Circuit’s approach in New Moon Shipping Co. v. MAN B&W Diesel, 121 F.3d 24 (2d Cir. 1997), which “refused to pigeon-hole these claims into a particular clause of Rule 12(b)” but instead permited such motions early in a case and placed the “burden on the plaintiff, who brought suit in a forum other than the one designated by the forum selection clause, to make a ‘strong showing’ in order to overcome the presumption of enforceability”.
Third, the District Court applied the four-part test endorsed by the Second Circuit and based on M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), focusing on whether the clause was reasonably communicated to the party resisting enforcement; whether it was mandatory or permissive; whether the claims and parties are covered by the clause; and whether the presumption of enforceability was adequately rebutted (by making a strong showing that enforcement would “unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching”).
Fourth, on the particular facts here, the Court was unwilling to enforce a clear forum clause, finding that reliance on the clause was waived by failure to raise it as a defense in an answer or otherwise to assert it for over 11 months after commencement of the action. The Court was unwilling to read a preservation of the defense into the defense of personal jurisdiction, which was pleaded. The Court determined that it would apply the law of waiver otherwise applicable to contractual rights and found that in this case the delay was not merely the result of “silence, oversight or thoughtlessness in failing to object”; the party being found to waive had “availed itself of this forum by attempting to implead third-party defendants and filing several affidavits, affirmations, and memoranda of law with the Court”. The Court acknowledged the cases holding that the filing of a cross-claim or impleding a third party does not necessarily waive the right to insist on a forum selection clause.