The opinion of the court was delivered by: COOLAHAN
Plaintiff, Morse Electro Products Corp. (hereinafter Morse), is the consignee of 466 cartons of 8-track tape recording/playing decks shipped f.o.b. from Kobe, Japan, to Port Newark, New Jersey, aboard the vessel S.S. Great Peace. Plaintiff claims it failed to receive 432 of these cartons because of a "misdelivery" of the cargo to an unknown thief. This admiralty action
requires that a determination be made as to who among the parties should bear the loss of the cargo.
Plaintiff moves for summary judgment pursuant to Fed. R. Civ. P. 56(a) against defendant Ta Cheng Marine Co., Ltd. (hereinafter Ta Cheng), the carrier and owner of the S.S. Great Peace. Ta Cheng moves to dismiss the complaint, and moves, in the event it should be held liable to Morse, for summary judgment on the issue of indemnification against defendant Maher Terminals Company, Inc. (hereinafter Maher), the terminal operator. W.J. Byrnes & Co. of New York, Inc. (hereinafter Byrnes), plaintiff's customs broker-freight forwarder, moves for summary judgment against plaintiff. Interport Trucking Corp. (hereinafter Interport) and Ultimate Distribution Systems, Inc. (hereinafter Ultimate), the designated truckmen, move for summary judgment against plaintiff and cross-claimant defendants Maher and Byrnes.
All of these motions have been submitted on the papers in accordance with Fed. R. Civ. P. 78.
On February 14, 1973, Ta Cheng, the carrier, issued an on-board bill of lading (No. TRSKN-12) at Kobe, Japan, which acknowledged receipt in apparent good order and condition of 466 cartons containing six 8-track tape recording/playing decks per carton. The cartons were to be delivered at the Port of New York to the order of First National City Bank, whose assistant cashier endorsed the reverse side of the bill of lading over to plaintiff, Morse. See Exhibit 1 to plaintiff's answer to Ta Cheng's interrogatories. Ta Cheng agreed to notify Morse, the consignee of the cargo, of the arrival date. Norton Lilly & Co. acted as Ta Cheng's New York agent.
On April 1, 1973, the cargo arrived at Port Newark. The day before, March 31, Morse was notified of the expected date of arrival. (Traufield deposition, pp. 25-26.) The entire shipment of 466 cartons was received by Maher and placed in shed No. 141 at the terminal. (Deposition of Frank Jadach, senior vice president of Maher operations, p. 41, lines 8-9, 24-25; p. 52, lines 1-3.) Maher arranged the security at the terminal. (Jadach deposition, p. 58, lines 11-14).
None of Norton Lilly's personnel was physically at the pier or the terminal. (Jadach deposition, p. 56, lines 23-25.)
Byrnes was notified of the delivery. On April 3, 1973, Byrnes prepared in quintuplicate a delivery order designating Interport as the truckman for the cargo. Byrnes addressed the order to Maher's terminal delivery clerk of the S.S. Great Peace, who would release the cargo to truckmen bearing a proper delivery order. (Maher's answer to cross-claimant Ta Cheng's interrogatories, paras. 31, 32.)
Byrnes received from Morse the shipping documents before the S.S. Great Peace arrived in port. Delivery orders are routinely prepared by a clerk at Byrnes but are left undated until the cargo is cleared through customs and a permit has been lodged at the pier. On April 3, 1973, identification permit No. 034228 was lodged covering the subject shipment with customs at shed 141. Therefore, on April 3, Lori Eadicicco, Byrnes' clerk, signed and dated the original delivery order (No. 38245) and named Interport and Ultimate as designated truckmen. (Affidavit of Anthony Firrielo, paras. 1-6.)
According to Firrielo, Byrnes' vice president (Firrielo affidavit, para. 7), Byrnes followed the routine procedure established by Interport and Ultimate in 1972. This procedure required Byrnes to place several delivery orders designating Interport and Ultimate together in a sealed envelope addressed to them. Interport/Ultimate's messenger would then pick up the envelope. Delivery orders are normally kept in the desk drawer of the preparer. (Byrnes' answers to Ta Cheng's interrogatories, 6.) Blank delivery orders are also kept in Byrnes' warehouse.
Byrnes states that at approximately 4:45 p.m. on April 3, 1973, Interport's messenger, Jack Schwartz, picked up the sealed envelope which contained two copies of the delivery order for the 466 cartons of tape-players, along with two other delivery orders for cargos belonging to Morse.
Another copy of the delivery order for the tape-players was sent to Ann Laona (or Leona), an employee of Morse. (Affidavit of Lori Eadicicco, Byrnes' employee, paras. 1-5; see also, Hughes deposition, p. 77, lines 3-6, 20-25; p. 78, lines 3-5.) Lori Eadicicco placed the sealed envelope along with another sealed envelope addressed to Interport/Ultimate in a pick-up box on her desk. (Eadicicco affidavit, paras. 6-7.)
Interport denies ever having received this delivery order. (Interport's answers to Byrnes' interrogatories, 4-5, 6d, 7a.) Byrnes, however, contends the delivery order was sealed in the envelope which Interport picked up on April 3. Interport's messenger, who was well known to Byrnes' employees, contends that he was not required to sign for the envelopes.
On April 10, 1973, the Allied truck returned, again presenting the delivery order. Maher employees gave the truckmen 216 cartons of the cargo. The next day, April 11, another 216 cartons were loaded onto the Allied truck pursuant to the bogus delivery order. A total of 432 of the 466 cartons were misdelivered.
The bogus delivery order was signed "H. Kingman," a fictitious signature. Allied had no employee by that name and had no knowledge of Morse's cargo. Obviously someone had obtained the original delivery order and a blank Byrnes delivery order form. The blank form was conformed to the original, substituting only Allied for Interport and a fictitious signature for that of the Byrnes employee. Byrnes' employee notes, however, that the fraudulent delivery order lacked a customs identification number. (Hughes deposition, pp. 71-72.)
In the late afternoon of April 12, Ann Laona of Morse called Byrnes to inquire as to when Morse could expect delivery.
A check of Byrnes' records showed that the delivery order had been picked up on April 3. (Firrielo affidavit, para. 8.) Byrnes called Interport's president, Horace Schwartz (no relation to Interport's messenger, Jack Schwartz), who denied ever having received the delivery order for the 466 cartons of tape-players. Byrnes claimed that the Interport/Ultimate messenger signed for the order. (Firrielo affidavit, paras. 9-10.) Jack Schwartz denied signing for the order as no signature was normally required. (Byrnes answers to Ta Cheng's interrogatories, 16; Interport answers to Byrnes interrogatories, 2-3.) On April 13 a duplicate delivery order No. 38245 was sent to Interport. Horace Schwartz called Byrnes back on April 17 to advise that 432 of the cartons had already been picked up. Schwartz had been told by Maher's delivery clerk that the cargo had been picked up by Allied on April 10 and 11.
Maher states that its checker was assigned on April 10 and 11 to tally the 216 cartons on each occasion (Jadach deposition, pp. 41, 53) after it received the customs release (Jadach deposition, p. 35). Maher's pier personnel ran a credit check against the name of the truckman, Allied. Approval was received. (Jadach deposition, pp. 45, 59.) Frank Jadach, Senior Vice President of Operations for Maher, stated that the S.S. Great Peace received the usual "clerking" of a vessel; that is, there was a review of all delivery orders presented by truckmen and delivery of cargo to them. The procedures employed by Maher for the S.S. Great Peace were approved by Norton Lilly & Co., Morse's agent. These are the same procedures employed by other terminal operators at the port. (Jadach affidavit.) Norton Lilly inspected the Maher facilities just before the misdelivery. Maher required that truckmen drivers have their pictures taken. Maher also photographs their licenses and verifies the existence and credit of the truckman itself. These procedures, however, failed to prevent the misdelivery. Maher released the balance of 34 cartons to Interport which, in turn, delivered them to Morse. (Jadach deposition, p. 55.) Maher stated that all that was needed for release of cargo was a "Delivery Order." (Jadach deposition, p. 60, lines 18-25; p. 61, line 1.)
Before this Court can address the rather difficult legal questions posed by this action, it must first turn its attention to the question of jurisdiction. Clearly, as noted above, p. 478, n.1, the Court has admiralty jurisdiction over claims arising out of the contract of carriage, bill of lading, between Morse, the consignee of the goods, and Ta Cheng, the ocean carrier. 28 U.S.C. § 1333(1); Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 807 (2d Cir. 1971); David Crystal, Inc. v. Cunard Steam-Ship Co., 339 F.2d 295, 297 (2d Cir. 1964), cert. denied, 380 U.S. 976, 14 L. Ed. 2d 271, 85 S. Ct. 1339 (1965); North American Smelting Co. v. Moller S.S. Co., 204 F.2d 384, 385 and n.2 (3d Cir. 1953). However, the question of jurisdiction is not resolved so simply. Former Chief Judge Friendly in dictum in Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d at 807 n.5, observed that the contract of carriage does not continue indefinitely after discharge of the cargo. He continued:
". . . If a shipper [consignee] is dilatory in calling for his goods, the relationship between the carrier and the shipper would no longer be governed by the contract of carriage. Cf. Carver, Carriage of Goods by Sea 697-698 (1957). In such event, it seems likely that any dispute between the parties would no longer be within the admiralty jurisdiction, their relative rights and duties becoming a matter for the common law. However, we need not decide that question, since here there is no claim of unreasonable delay on the part of the shipper in calling for the container."
Ta Cheng, in its supplemental brief, invites the Court to adopt this dictum. Ta Cheng for the first time in its supplemental brief claims that Morse, or its agents, were dilatory in picking up the cargo.
The Court must decline the invitation, because to accept it would extend Judge Friendly's dictum to a misdelivery case.
Footnote 5 of Leather's Best raises an interesting problem. In a case such as the one at bar, where the only basis for federal jurisdiction is admiralty,
footnote 5 would suggest that the Court can only determine it has jurisdiction after it has made a factual decision that the delay in picking up the cargo was not unreasonable. Ta Cheng advances no standard to judge the reasonableness of the delay. Were it not for the fact that the case at bar is a misdelivery as opposed to a theft case, the Court would have great difficulty with this issue.
The distinction between a misdelivery case and a theft case was succinctly made in David Crystal, Inc. v. Cunard Steam-Ship Co., supra, 339 F.2d at 298, where the court said:
In essence, the misdelivery case is one in which the party in possession of the cargo gives it to one not entitled to receive it. Or, as the court defined the term in David Crystal (339 F.2d at 300): "A 'misdelivery' in maritime practice is a technical term of art applied where there is a complete failure to deliver goods to the owner, consignee, or other authorized holder of a bill of lading." In the theft case, the thief steals the cargo from its rightful custodian.
In Leather's Best there was no misdelivery. The carrier was not "duped by false pretenses"; the cargo was simply stolen. Judge Friendly's dictum in footnote 5 referred to the fact that since David Crystal the contract of carriage had been interpreted as continuing to govern the relationship of the parties until delivery to the consignee. Judge Friendly obviously concluded that the carrier's liability under the bill of lading should not be increased or extended by the unreasonable delay of the shipper (consignee). At some point in time, the liability of the carrier for theft should be restricted to cases where the carrier was negligent under the common law. Consequently, the standard of care would be defined by the applicable State law, and the dispute would no longer give rise to federal admiralty jurisdiction.
Another factor which may have influenced Judge Friendly was that in Leather's Best the theft occurred after partial delivery. The shipper had already begun to carry away the cargo. On a Friday the shipper took about half the cargo away from the pier area, but left the remaining half for the next business day, the following Monday. The area where the cargo was stored was guarded and enclosed; the cargo was heavy and not easily transported. The shipper could have removed all of the cargo on Friday had he been willing to pay the extra cost for overtime work or for additional workers. Over the weekend the remaining half of the cargo was stolen. In the context of these facts, the delay may have made the theft possible despite the ordinary care exercised by the carrier. The court concluded that under the circumstances unreasonable delay would terminate the obligation of the carrier to safeguard the cargo under the bill of lading.
The facts in the case at bar indicate that the consignee did not exercise any control over the goods. The cargo was misdelivered before its agents attempted to pick it up.
In the case of misdelivery, the cargo is within the control of the carrier or his agents. It is the carrier's error or that of his agents which causes the delivery to the wrong party. The law imposes strict liability for such misdelivery in the absence of controlling language to the contrary in the bill of lading. However, the law recognizes that if the misdelivery is caused by the negligence of the consignee or its agents, then the carrier is relieved of liability. See, David Crystal, Inc. v. Cunard Steam-Ship Co., supra, 339 F.2d 295. The delay of the consignee or his agents in calling for the cargo under circumstances where the liability is absolute is clearly distinguishable from the Leather's Best situation, as David Crystal makes clear. Nor has it been alleged in the case at bar that the delay was the negligent act which caused the misdelivery so as to relieve the carrier of liability, and at the same time deprive this Court of jurisdiction.
The Court having admiralty jurisdiction over the claim arising out of the bill of lading, it may now consider whether it should exercise pendent jurisdiction over the claims against the other parties to this suit.
Clearly, the Court has the power to hear pendent State claims because they, along with the federal claim, derive from a "common nucleus of operative fact." The federal issue is substantial, and the nature of the claims are such that they would normally be expected to be tried all in one judicial proceeding. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966); Tully v. Mott Supermarkets, Inc., 540 F.2d 187 (3d Cir. 1976). In addition, since the merger of our Civil and Admiralty Rules in 1966, there is no longer an impediment to the exercise of pendent and ancillary jurisdiction in admiralty cases.
See, 3 Moore's Federal Practice (2d ed.) § 14.36, pp. 750-752; Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d at 810 n.11, 810-811 n.12.
As Judge Friendly observed in Leather's Best, 451 F.2d at 810 n.12, Fed. R. Civ. P. 14(c) adds support for this position.
Judge Friendly continued [ 451 F.2d at 810-811 n.12 (dictum)]:
Judge Friendly concluded that the only possible constitutional consideration which might have influenced the judicial limitation of admiralty impleader was the concern for the denial of the jury trial right guaranteed under the Seventh Amendment. In Leather's Best, the court found that it was not confronted with such a possible denial, because the third-party defendant there had made no demand for a jury trial. Likewise, in the case at bar, no demand for a jury trial has been made by any of the parties. Consequently, this Court is also not faced with this constitutional problem.
Defendant Byrnes relies most heavily on the District Court opinion in the David Crystal case in support of its position that this Court lacks jurisdiction to entertain the claims asserted against Byrnes.
In David Crystal, Inc. v. Cunard Steam-Ship Co., 223 F. Supp. 273, 290 (S.D. N.Y. 1963), the court found that the acts of the customs broker, even if tortious, did not have their impact on the pier, but in the offices of the customs broker, and thus were not maritime torts. However, the claims against Byrnes do not rest upon an allegation of maritime jurisdiction. Rather, the jurisdictional base is that of pendent and ancillary jurisdiction. The District Court in David Crystal likewise rejected pendent claims against the customs broker because it found it necessary to have an independent basis of admiralty jurisdiction to sustain claims against the impleaded party. The District Court's major concern was the deprivation of the right to a jury trial for non-admiralty claims. As Leather's Best makes clear, these concerns are moot absent a demand for a jury trial.
In addition, it must be remembered that the District Court opinion in David Crystal was written three years before the merger of the Civil and Admiralty Rules, and two years before United Mine Workers v. Gibbs, supra, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218. Gibbs liberalized the more restrictive pendent jurisdiction standards articulated in Hurn v. Oursler, 289 U.S. 238, 77 L. Ed. 1148, 53 S. Ct. 586 (1933). The District Court did not have the benefit of the Supreme Court's new standard in Gibbs when it wrote its opinion. Secondly, the court was aware of the limits of the Admiralty Rules and ...