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GIC Services, L.L.C. v. Freightplus USA, Inc.

United States Court of Appeals, Fifth Circuit

August 15, 2017

GIC SERVICES, L.L.C., Plaintiff - Appellee,
v.
FREIGHTPLUS USA, INCORPORATED, Defendant - Third Party Plaintiff - Appellant - Appellee, INDUSTRIAL MARITIME CARRIERS, L.L.C., Third Party Defendant-Appellant - Appellee.

         Appeals from the United States District Court for the Eastern District of Louisiana

          Before ELROD, SOUTHWICK, and GRAVES, Circuit Judges.

          JENNIFER WALKER ELROD, Circuit Judge

         This case is about a tugboat and its voyage across the Atlantic from Houston to Nigeria. Though the tugboat arrived safely in port, the parties dispute whether it was discharged at the correct port. The party that arranged for the tugboat's transport wanted it discharged at Lagos, Nigeria; the ocean carrier believed Warri, Nigeria to be the correct port of discharge, claiming it was told so by an intermediary. Despite the parties' efforts to secure discharge at Lagos, the ocean carrier was unable to do so and continued on to Warri. And there the tugboat remained. Predictably, litigation ensued. After a bench trial, the district court entered judgment, allocating the liabilities and associated damages among the parties. On appeal, the ocean carrier and the intermediary challenge various aspects of the judgment. We AFFIRM in part and REVERSE in part.

         I.

         The plaintiff in this case, GIC Services, L.L.C. (GIC), contracted with Freightplus USA, Inc. (Freightplus), the defendant/third-party plaintiff, to arrange for the transport of a tugboat-the REBEL-to Nigeria.[1] Freightplus does not own vessels capable of transporting the REBEL, so Freightplus contracted with Yacht Path International, Inc. (Yacht Path)[2]-a broker specializing in the transportation of large water craft-who in turn contracted with Industrial Maritime Carriers, L.L.C. (IMC) as the "vessel-operating common carrier." In the end, GIC agreed to pay Freightplus $111, 000 for its services, Freightplus agreed to pay Yacht Path $85, 000, and Yacht Path agreed to pay IMC $70, 000. While GIC paid the amount it owed to Freightplus, and Freightplus paid the amount owed to Yacht Path, Yacht Path did not remit the amount owed to IMC.

         In the course of making these arrangements, representatives from Yacht Path spoke with representatives of IMC via telephone and communicated information for IMC's bill of lading, [3] including the desired port of discharge. Exactly what was communicated by Yacht Path is in dispute: IMC claims that Yacht Path said that Warri was the port of discharge, while Freightplus claims that Yacht Path identified Lagos as the port of discharge. IMC then issued a "booking note, " which purported to specify the terms of its agreement with Yacht Path. This "booking note, " which was sent to Yacht Path, lists Warri as the port of discharge. Yacht Path issued its own booking note and bill of lading, both of which list Lagos as the port of discharge. In late December, Freightplus issued a "house bill of lading, " identifying Lagos as the port of discharge. The next day, IMC issued a "non-negotiable" bill of lading and a cargo manifest, both of which listed Warri as the port of discharge.[4] IMC asserts that its non-negotiable bill of lading and cargo manifest were both sent to Yacht Path. At no time prior to the REBEL's departure from Houston did anyone notice or acknowledge the discrepancy as to the port of discharge.

         The REBEL departed Houston in late December. In early January, while the REBEL was en route to Nigeria, communications occurred between Mr. Branting of IMC and Mr. Cummings of Yacht Path through which it became clear that there was confusion over the REBEL's port of discharge. In mid-January, representatives from Yacht Path, Freightplus, and GIC attempted to find a way to discharge the REBEL at Lagos. However, the district court found that a late-night e-mail on January 16 from a Yacht Path representative was the first occasion in which "anyone at Yacht Path or IMC discussed the need for changing the REBEL's destination" from Warri to Lagos. Despite efforts to rectify the situation, IMC was unable to discharge the REBEL at Lagos. While various parties blame an inability to contact GIC's agent in Nigeria at the eleventh hour, the district court found that "manifest and customs documents" listing Warri as the port of discharge also contributed to IMC's inability to discharge the REBEL at Lagos.

         The ocean carrier proceeded on to Warri and discharged the REBEL there. Though GIC initially sought to obtain the REBEL's release, it was informed that the REBEL could not be released because IMC had not been paid its freight. And so, the REBEL remained in Warri in the custody of a company called Julius Berger.

         GIC sued Freightplus, and Freightplus in turn brought a third-party action against IMC. IMC counter-claimed against Freightplus and the REBEL in rem to recover its unpaid freight. After a two-day bench trial, the district court concluded that Freightplus was liable to GIC for $1, 860, 985 in damages incurred as a result of the REBEL's discharge in Warri. The district court then determined that IMC was 30 percent at fault for GIC's damages and so the court required IMC to pay 30 percent of the judgment, as well as 30 percent of Freightplus's attorneys' fees. Finally, the district court concluded that IMC was entitled to recover $70, 309.12, plus pre-judgment interest, from Freightplus-the amount of IMC's unpaid freight. The district court subsequently amended its judgment to remove IMC's obligation to pay 30 percent of Freightplus's attorneys' fees.[5] Freightplus and IMC both timely appealed.

         After briefing in this court was completed, Freightplus filed a "Motion for Partial Dismissal of Appeal." In this motion, Freightplus represented that it and GIC have "reached a settlement" as to that part of the Second Amended Judgment "relat[ing] to GIC Services and Freightplus." Freightplus thus requested that we allow it to "dismiss its appeal." A few days later, GIC filed a "Notice of Satisfaction of Judgment" in the district court, indicating that "GIC and Freightplus entered into a settlement agreement, resolving all claims between them, " that "Freightplus has fulfilled the terms of the settlement agreement" and so "[t]he judgment [ ] in favor of GIC and against Freightplus is satisfied[.]" We granted Freightplus's motion and dismissed its appeal "as to those aspects of the Second Amended Judgment in favor of GIC Services, L.L.C. and against Freightplus USA, Incorporated ONLY."[6]

         II.

         The parties raise a host of challenges to the judgment. IMC challenges: (1) the requirement that it indemnify Freightplus for a portion of the damages award; (2) the amount of damages awarded GIC; (3) the allocation of damages between itself and Freightplus; and (4) the determination that it may not exercise a lien against the REBEL in rem to recover its unpaid freight. Like IMC, Freightplus objects to the allocation of damages between itself and IMC. It also challenges the district court's refusal to award it attorneys' fees and the requirement that it reimburse IMC for its unpaid freight.[7] We address each of these in turn.

         A.

         We first consider whether IMC is liable to Freightplus under a theory of tort indemnification for a portion of the judgment awarded to GIC.

         Once a prominent feature of maritime law, maritime tort indemnification is now available only in limited situations. Hardy v. Gulf Oil Corp., 949 F.2d 826, 833 (5th Cir. 1992). One of these situations arises from a "special relationship" between two entities. Cities Serv. Co. v. Lee-Vac, Ltd., 761 F.2d 238, 240 (5th Cir. 1985) (citing Fed. Marine Terminals, Inc. v. Burnside Shipping Co., 394 U.S. 404 (1969)); see also LCI Shipholdings, Inc. v. Muller Weingarten AG, 153 F.App'x 929, 931 (5th Cir. 2005). Under this theory, an entity will owe indemnity when its negligence is the cause of a loss to its counterpart.

         The parties agree with the district court[8] that a "special relationship" exists between a "non-vessel operating common carrier" (NVOCC)[9] and a "vessel-operating common carrier" (VOCC).[10] They disagree, however, with the district court's conclusion that: (1) Freightplus was operating as an NVOCC; and (2) IMC was negligent and its negligence caused Freightplus's injury.

         While we are not aware of a decision of ours recognizing maritime tort liability based on the relationship between a NVOCC and a VOCC, two of our sister circuits appear to have done so. See SPM Corp. v. M/V Ming Moon, 22 F.3d 523, 526-27 (3d Cir. 1994); Ins. Co. of N. Am. v. M/V Ocean Lynx, 901 F.2d 934, 937, 941 (11th Cir. 1990). Seeing no reason to depart from these decisions, and given the parties' agreement on this question, we conclude that the NVOCC/VOCC relationship may give rise to a claim for maritime tort indemnity to the extent articulated in this opinion.

         1.

         The first question is whether Freightplus was operating as an NVOCC. "Non-vessel operating common carrier" is a term defined by statute. See 46 U.S.C. § 40102(16). As such, we review the interpretation of that term de novo. See AEL Asia Express (H.K.) Ltd. v. Am. Bankers Ins. Co. of Fla., 5 F.App'x 106, 107 (4th Cir. 2001). To the extent this question involves factual issues, "[m]ixed questions of law and fact are also reviewed de novo." Trinity Indus., Inc. v. United States, 757 F.3d 400, 407 (5th Cir. 2014); see also Prima U.S. Inc. v. Panalpina, Inc., 223 F.3d 126, 129 (2d Cir. 2000) (reviewing de novo whether party was an ocean freight forwarder as a mixed question of law and fact).

         In the modern shipping industry, the shipment of goods by vessel from the United States often involves a chain of multiple entities, each with defined roles. One of these is the "non-vessel operating common carrier." NVOCCs operate as intermediaries between the shipper-the entity "seek[ing] to export cargo"-and the ocean common carrier-the entity that "physically carr[ies] the cargo on [its] vessel[ ]." Landstar Exp. Am., Inc. v. Fed. Maritime Comm'n, 569 F.3d 493, 494 (D.C. Cir. 2009). Under the Shipping Act of 1984, 46 U.S.C. § 40101 et seq., an NVOCC is defined as "a common carrier that (A) does not operate the vessels by which the ocean transportation is provided; and (B) is a shipper in its relationship with an ocean common carrier." 46 U.S.C. § 40102(16). Typically, the NVOCC's role is to "consolidate cargo from numerous shippers into larger groups for shipment by an ocean carrier." Prima, 223 F.3d at 129; see also Ins. Co. of N. Am. v. S/S Am. Argosy, 732 F.2d 299, 300-01 (2d Cir. 1984); All Pac. Trading, Inc. v. Vessel M/V Hanjin Yosu, 7 F.3d 1427, 1429-30 (9th Cir. 1993).

         An NVOCC is therefore something of a hybrid: it is a common carrier[11]vis-à-vis the shipper, but it is itself a shipper vis-à-vis the ocean common carrier. Ins. Co. of N. Am., 732 F.2d at 301; All Pac. Trading, 7 F.3d at 1429- 30. In its role as common carrier, an NVOCC issues a bill of lading to each shipper, which memorializes the terms of their agreement. Prima, 223 F.3d at 129; see also Landstar, 569 F.3d at 495. Because of an NVOCC's role as a common carrier and the issuance of a bill of lading, the NVOCC is liable to the shipper if "anything happens to the [cargo] during the voyage." Prima, 223 F.3d at 129; see also Landstar, 569 F.3d at 495. Further, in its role as a shipper, an NVOCC receives a bill of lading from each VOCC. Landstar, 569 F.3d at 495; All Pac., 7 F.3d at 1430. Typically, "NVOCCs receive compensation only from the shipper." Landstar, 569 F.3d at 495; see also Nat'l Customs Brokers & Forwarders Ass'n of Am., Inc. v. United States, 883 F.2d 93, 101 (D.C. Cir. 1989) ("The NVOCC is compensated only by the shipper.").

         The parties dispute whether Freightplus was operating as an NVOCC. Yet while both parties discuss the statutory definition of an NVOCC, neither party addresses the statutory definition of the term "shipper, " which appears within the definition of NVOCC. See 46 U.S.C. § 40102(16) (NVOCC is a "shipper in its relationship with an ocean common carrier" (emphasis added)); id. § 40102(22) (defining "shipper"). Because the parties have not disputed whether Freightplus falls within the definition of "shipper, " we do not reach this issue and instead decide whether Freightplus is an NVOCC based on the arguments presented to us.

         We conclude that Freightplus qualifies as an NVOCC because it shares those characteristics typically associated with an NVOCC. First, Freightplus issued a bill of lading, which listed Freightplus as the "carrier"-the role an NVOCC plays vis-à-vis the ultimate shipper. Cf. Prima, 223 F.3d at 129 (NVOCC issues bill of lading to each shipper); Landstar, 569 F.3d at 495 (same). Second, the parties agree that Freightplus was paid exclusively by GIC, also an indicator that Freightplus was acting as an NVOCC.[12] See Landstar, 569 F.3d at 495; Nat'l Customs Brokers, 883 F.2d at 101.

         IMC argues that Freightplus was not operating as an NVOCC because it is not a "shipper" vis-à-vis IMC as required by Section 40102. See 46 U.S.C. § 40102(16). It asserts two bases for this argument: First, it argues that Freightplus is not a "shipper" because it is "not listed as a shipper on IMC's booking note, IMC's bill[ ] of lading, or [its] cargo manifest." Second, and relatedly, it argues that Freightplus cannot be considered an NVOCC because it did not "receive a bill of lading" from IMC, the VOCC.

         To begin with, the validity of these arguments depends in large part on whether Freightplus was a "shipper" within the meaning of Section 40102(22)-which, as noted, IMC has not addressed in its brief. Moreover, while it is true that Freightplus is not listed as "shipper" on the relevant documents and that it did not receive a bill of lading from IMC, an entity's status as an NVOCC (and as a shipper) depends on its function, not the labels ascribed to it by third parties. See AEL Asia, 5 F.App'x at 111 ("When dealing with NVOCCs, an intermediary's conduct, and not what it [is] label[ed], will be determinative of its status." (emphasis added) (quotation marks omitted)); see 46 U.S.C. § 40102(16), (22) (definitions of "shipper" and NVOCC). And here, it is clear that Freightplus possesses the characteristics typical of an NVOCC.

         IMC argues that Freightplus was "at most a freight forwarder." But an examination of the services typically performed by a freight forwarder undermines, rather than strengthens, IMC's argument. Unlike an NVOCC, a freight forwarder (1) does not issue a bill of lading, Prima, 223 F.3d at 129; and (2) "receives compensation for its services both from its customer . . . and from the ocean carrier." Nat'l Customs Brokers, 883 F.2d at 95; Landstar, 569 F.3d at 495. Neither is true of Freightplus. That Freightplus's conduct differs from that typical of a VOCC confirms our conclusion that it operated as an NVOCC.

         2.

         We next address the validity of the district court's finding that IMC acted negligently. In the maritime context, as in any other, "[q]uestion[s] of fault, including determinations of negligence and causation, are factual issues, and may not be set aside on appeal unless clearly erroneous." In re Omega Protein, Inc., 548 F.3d 361, 367 (5th Cir. 2008) (citing In re Mid-South Towing, 418 F.3d 526, 531 (5th Cir. 2005)). Where the "district court's account of the evidence is plausible in light of the record viewed in its entirety, " we will "not reverse . . . even though convinced that had [we] been sitting as the trier of fact, [we] would have weighed the evidence differently." Id. In this context, "'[f]indings based on the credibility of witnesses demand even greater deference.'" Id. (quoting Tokio Marine & Fire Ins. Co., Ltd. v. FLORA MV, 235 F.3d 963, 970 (5th Cir. 2001)).

         To establish maritime negligence, "a plaintiff must 'demonstrate that there was [1] a duty owed by the defendant to the plaintiff, [2] breach of that duty, [3] injury sustained by the plaintiff, and [4] a causal connection between the defendant's conduct and the plaintiff's injury.'" Canal Barge Co. v. Torco Oil Co., 220 F.3d 370, 376 (5th Cir. 2000) (quoting In re Cooper/T. Smith, 929 F.2d 1073, 1077 (5th Cir. 1991) (alteration omitted)). The district court concluded that IMC was negligent because its agent (Intermarine) had notice that Lagos was the correct port of discharge for two weeks before the REBEL arrived there but did not "take steps to ensure proper delivery at Lagos."[13]

         IMC raises a single objection to the finding of negligence. Specifically, IMC argues that it was contractually bound to deliver the REBEL to Warri, and so it cannot be found negligent for delivering cargo to the contractually agreed-upon port. Imposing liability under these circumstances, IMC argues, would place it in a cross-current between: (1) complying with its contractual obligations, but then facing tort-indemnity liability for refusing to change the port of discharge; or (2) avoiding tort-indemnity liability by changing the port of discharge, but then facing breach-of-contract liability for doing so.

         This argument, however, sails right into the headwinds of the district court's findings. Despite IMC's repeated insistence to the contrary, the district court did find that IMC erroneously listed Warri as the port of discharge on its various documents. In its opinion, the district court noted IMC's argument that "it was told by Yacht Path that the REBEL's final destination was Warri and therefore fully performed its contractual duties."[14] But the district court concluded that "this argument is unsupported, " and that IMC had "mistakenly record[ed] the REBEL's port of discharge as Warri, " based on the fact that IMC did not produce any evidence that Yacht Path informed IMC that Warri was to be the port of discharge.

         We cannot overturn this determination absent clear error. IMC admits that it is unable to produce any documentation showing that Yacht Path identified Warri as the port of discharge. It contends, however, that "there is ample evidence in the record to prove that IMC followed its instructions when it designated Warri as the discharge port." IMC points to the testimony of Mr. Branting and Mr. Jackson, whose testimonies support IMC's account. IMC also points to the fact that its bill of lading, cargo manifest, and booking note identify Warri as the port of discharge, and to an e-mail from Mr. Cummings at Yacht Path, which indicates that "[t]he small tug"-presumably the REBEL-"is booked with my client at Warri."

         But the record also contains evidence pointing the other way. For example, the deposition of Mr. Cummings-IMC's point of contact at Yacht Path-was introduced at trial, and he testified to identifying Lagos as the port of discharge in his communications with IMC. We owe particular deference where "credibility of witnesses" is at issue. See Omega Protein, 548 F.3d at 367. Moreover, while the designation of Warri on IMC's documents and the e-mail from Mr. Cummings is evidence-perhaps even strong evidence-that Yacht Path did identify Warri as the port of discharge, there is evidence cutting the other way, including the Yacht Path booking note-issued five days before Mr. Cummings's e-mail-which designates Lagos as the port of discharge. The existence of conflicting evidence is precisely the context in which we defer to the district court's factual findings. See id. (we will not reverse factual findings "even though convinced that had [we] been sitting as the trier of fact, [we] would have weighed the evidence differently").

         It follows from this conclusion that IMC's objection to the district court's negligence finding must be rejected. Simply put, if IMC did not contract to deliver the REBEL to Warri, then holding IMC liable for doing so does not place it in the catch-22 it posits.[15] IMC offers no other objection to the district court's finding.

         Accordingly, because the district court correctly determined that Freightplus was operating as an NVOCC and because its conclusion that IMC was negligent is not clearly erroneous, we uphold its determination that IMC is liable to Freightplus.[16]

         B.

         We next address the amount of damages awarded. The district court determined that Freightplus was liable to GIC in the amount of $1, 811, 385. IMC argues that the district court erred in calculating these damages in two respects: First, it objects to the district court's reliance on a particular trial exhibit. Second, it argues that the district court did not account for GIC's failure to mitigate its damages.

         We "review[ ] challenges to evidence admitted or excluded for abuse of discretion." EMJ Corp. v. Hudson Specialty Ins. Co., 833 F.3d 544, 551 (5th Cir. 2016). We will reverse only if "the abuse of . . . discretion is clearly shown from the record, " U.S. Bank Nat'l Ass'n v. Verizon Commc'ns, Inc., 761 F.3d 409, 430 (5th Cir. 2014), as revised (Sept. 2, 2014), and "if substantial prejudice resulted from the error, " EMJ Corp., 833 F.3d at 551 (quotation marks omitted). "Resolution of preliminary factual questions concerning the admissibility of evidence are reviewed for clear error." Meadaa v. K.A.P. Enters., L.L.C., 756 F.3d 875, 880 (5th Cir. 2014). Further, we review the district court's determination of damages under a clearly erroneous standard. Fed. Sav. & Loan Ins. Corp. v. Tex. Real Estate Counselors, Inc., 955 F.2d 261, 268 (5th Cir. 1992); see also Neal v. United States, 562 F.2d 338, 341 (5th Cir. 1977). This deferential standard of review extends to determining whether a party failed to mitigate its damages. Marathon Pipe Line Co. v. M/V Sea Level II, 806 F.2d 585, 592 (5th Cir. 1986). "The burden rests with the wrongdoer to show that the victim of tortious conduct failed to mitigate damages" by demonstrating "(1) that the injured party's conduct after the accident was unreasonable and (2) that the unreasonable conduct had the consequence of aggravating the harm." Id.

         1.

         For the bulk of the damages awarded, the district court relied solely on Trial Exhibit 101-an invoice sent from Visfi Nigeria Ltd. to GIC Oil and Gas Services Ltd., detailing the costs for "storing, securing, and releasing the REBEL in Warri." IMC argues that the district court was wrong to do so because: (1) the invoice was never authenticated and so it was never properly admitted into evidence; and (2) it is not the "best evidence" of damages. By contrast, the district court found that IMC stipulated to the authentication of Exhibit 101.

         Prior to trial, IMC objected to the admission of Exhibit 101 "under Federal Rule of Evidence 901 and 902 because it has not been properly authenticated." The district court deferred on this objection because "[Exhibit 101] [could] be authenticated at trial by witness testimony." At the same time, and as was enshrined in the final pre-trial order, GIC indicated that it intended to call "[a]ny witness needed to authenticate any documents that cannot be agreed to by stipulation."

         At trial, GIC sought to introduce the testimony of Mr. Godwin Ebolo, the director of GIC Oil and Gas Services, as an authenticating witness. Though initially objecting, both Freightplus and IMC agreed to stipulate "[t]o the extent [Mr. Ebolo was called] specifically for a Rule 901 authentication . . . ." The relevant colloquy went as follows:

MR. BOONE [GIC counsel]: Your Honor, I'd like to call Mr. Godwin Ebolo as my authentication federal witness.
MR. WALTERS [Freightplus counsel]: Your Honor, we would object to this witness testifying. He was not listed in the pretrial order. To the extent that he's called specifically for a Rule 901 authentication, we will stipulate, and I think - -
MR. WAGUESPACK [IMC counsel]: We'll stipulate as well, Your Honor.
MR. BOONE: All right. And that's all he was going to testify to, nothing substantive, just to authenticate those documents that Freightplus and IMC both objected to, which are the three contracts and the agency agreement.
THE COURT: All right. So do we have a stipulation?
MR. WALTERS: Yes. As far as Freightplus, yes.
MR. WAGUESPACK: As far as IMC as well.
THE COURT: Okay. Well, sir, you can go home. Oh, you still want to call him?
MR. WALTERS: He's been ...

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