Ferrostaal v. M/V Sea Baisen

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Ferrostaal, Inc. v. M/V Sea Baisen
United States: United States District Court for the Southern District of New York: Richard J. Holwell, District Judge: No. 02 Civ. 1900: 2004 U.S. Dist. LEXIS 24083 : November 30, 2004
In this case, the United States District Court for the Southern District of New York held, in a summary judgment, that a shipowner and its manager were not bound by extensions of time granted to cargo claimants on their behalf by the time-charterer’s agent, there being no agency relationship between the former and the latter. As a result, the claim brought by cargo interests was dismissed, as it had not been brought within the one-year period prescribed by the US Carriage of Goods by Sea Act, 1936 ("COGSA").

DMC Rating Category: Confirmed

This case note is contributed by David Jensen of Healy & Baillie, LLP in New York. Healy & Baillie are the International Contributors to the website for the United States

Pan Ocean Shipping Co., Ltd. ("Pan Ocean"), a Korean company operating in the U.S. through its agent Panobulk America, Inc. ("Panobulk"), was the time charterer of the M/V Sea Baisen. Pan Ocean contracted with Ferrostaal, Inc. ("Ferrostaal") to transport a cargo of steel pipe from China to Houston, Texas by three bills of lading dated July 19, 1999. Sea Baisen Maritime, Inc. ("Sea Baisen") owned the vessel and Qingdao Ocean Shipping Co. ("Cosco") was its operator and manager. The cargo was offloaded on approximately September 12, 1999, and Ferrostaal thereafter alleged that its pipe had been damaged. About nine months later, after retaining an expert, Ferrostaal submitted three "claim bills" to Panobulk. Ferrostaal also requested that Panobulk grant it an extension of time for bringing suit pursuant to COGSA.

Panobulk granted the extension request as to the vessel and its owners, managers, and charterers. Panobulk ultimately granted six extensions as to two of the claims and five extensions as to the third. Ferrostaal specifically requested extensions as to all of the parties from Panobulk, and Panobulk repeatedly purported to grant the request. In addition, Panobulk promptly transmitted the notice of claim to Cosco and stated its intention to seek reimbursement from Cosco for any claims paid to Ferrostaal. Ferrostaal brought suit against Panobulk, Cosco, Sea Baisen, and Pan Ocean on March 7, 2002, before the extensions had expired as to any of the claims. Sea Baisen and Cosco jointly moved for summary judgment, arguing that Ferrostaal’s claims against them failed as a matter of law because Ferrostaal had no evidence to support an agency relationship between either of the two and Panobulk, thus negating any extensions purportedly made on their behalf by Panobulk.

Judge Richard J. Holwell of the United States District Court for the Southern District of New York ruled that Ferrostaal’s claims against Cosco and Sea Baisen failed as a matter of law. There was no dispute that the suit had been filed after COGSA’s one year time limitation had expired and that neither Cosco nor Sea Baisen had itself directly granted an extension. As a result, Ferrostaal had the burden of establishing that Panobulk was in fact acting as the agent of the two when it purported to grant extensions on their behalf.

As this was an application for summary judgment, Judge Holwell addressed the issue whether Ferrostaal had established a genuine question of fact as to the existence of actual, implied, or apparent authority. [If it had, the application for summary judgment would have failed, and the case would have gone on to trial] Actual and implied authority can exist "only where the agent may reasonably infer from words or conduct of the principal that the principal has consented to the agent’s performance of a particular act" (quoting Minskoff v. Am. Exp. Travel Related Servs. Co., 98 F.3d 703, 708 (2d Cir. 1996)) (emphasis added). Apparent authority exists where "written or spoken words or any other conduct of the prinicipal which, reasonably interpreted, causes [a] third person to believe that the principal consents to have [an] act done on his behalf by the person purporting to act for him" (quoting Minskoff, 98 F.3d at 708) (emphasis added). Therefore, to state a triable - capable of going on to trial - claim, of actual, implied, or apparent authority, Paobulk needed to "allege some action on the part of Cosco and/or Sea Baisen from which Panobulk’s agency may be inferred."

Analyzing the communications between Ferrostaal and Panobulk, the court noted that the communications were not made by Cosco or Sea Baisen, the two alleged principals. Because "an alleged agent cannot establish actual authority through his own statements, and apparent authority can only be found in the words or actions of the alleged principal" Ferrostaal’s claims of actual, implied, and apparent authority all failed as a matter of law.

The court also considered whether Cosco and Sea Baisen were estopped from denying an agency relationship or from asserting the COGSA time limitation. The court concluded that apparent authority was itself "based on the principle of estoppel" and that neither doctrine -- estoppel or apparent authority -- was available "in the absence of affirmative actions by the purported principal." Furthermore, Cosco and Sea Baisen could not be estopped from invoking the COGSA limitation unless Ferrostaal showed that it "reasonably and justifiably believed that the statute of limitations would not be used as a defense or would be extended" (quoting Mikinberg v. Baltic S.S. Co., 988 F.2d 327, 331 (2d Cir. 1993)). The court concluded that Ferrostaal had no ground for such a belief as to Cosco or Sea Baisen.

While this decision does not pronounce new law, it is significant because it illustrates how the law of agency requires affirmative conduct by a principal in order for an agent’s conduct to be imputed to that principal. Even though Cosco had reasonable grounds for knowing that Panobulk was in some manner handling a claim and potentially expecting reimbursement from Cosco, the absence of evidence showing that Cosco had itself indicated to Ferrostaal that Panobulk had authority to act on its behalf defeated any claim that Cosco ought to be bound by Panobulk’s conduct. The decision is also significant as an example of a court’s consideration of estoppel -- a claim based on equity. Following the maxim that equity cannot be invoked unless the remedy at law is inadequate, the court declined to find an equitable estoppel where established law compelled the conclusion that the vessel’s owner and operator were not bound by Panobulk’s conduct.


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