Bill of lading trumps guarantee
Affirming a district court’s summary judgment, the U.S. Court of Appeals for the 9th Circuit held misdelivery claims against a freight forwarder were barred by a one-year limitations period set forth in bills of lading (Clevo v Hecny Transportation. 9th Cir. 11-55823. April 26).
Clevo, a Taiwan-based manufacturer, agreed in 2007 to sell computer parts to Brazil’s Amazon PC (not to be confused with online retailer Amazon.com).
Amazon would take delivery in Brazil and pay for each shipment in three installments: 10 percent before manufacturing; 20 percent before Clevo arranged shipment; and 70 percent after shipment, but before Amazon took possession of the parts.
To protect its interest in receiving full payment, Clevo insisted after it released a shipment for international carriage it would retain the original bills of lading for that shipment until it received the final 70 percent payment.
Clevo and Amazon agreed shipments would not be released unless Amazon presented the original bills of lading.
Under Clevo and Amazon’s negotiated terms, Hecny Shipping Group was designated to handle all of the contract shipments. Hecny had members in Miami, China, Hong Kong, and Manaus, Brazil.
In May 2007, Clevo made numerous shipments of parts to Amazon without incident. At the end of 2007, Clevo took additional measures to both protect its right to payment and formalize the role of Hecny Transportation in Miami in the delivery process.
To that end, Clevo sent a “guarantee letter” on Dec. 21, 2007 to Hecny Transportation in Miami that stated Clevo would give shipments to Hecny’s agent in Shanghai and requested Hecny in Miami to sign a guarantee letter.
The letter said “If you release any sea shipment to Amazon PC without our further notice, Hecny Transportation, Inc.-MIA must compensate Clevo all damage which we suffer.”
The court said the letter lacked any reference to a contractual statute of limitations or any other significant provisions limiting the parties’ liability. An employee for the Miami company signed the letter and returned a copy to Clevo.
After receiving the guarantee, Clevo made additional shipments to Amazon without any apparent difficulty.
In October 2008, Amazon ordered an additional $2.21 million in parts, and received the pre-shipment payments. Clevo delivered the parts to Hecny Shanghai for transport on or about Oct. 23.
Four days later, Hecny in Hong Kong issued two bills of lading for the shipment. The back pages of each document contained numerous terms and conditions, including a so-called Himalaya clause, which are commonly used in bills of lading.
The clause provided that Hecny Shipping in Hong Kong would “be entitled to subcontract on any terms the whole or any part of the carriage… and any and all duties whatsoever... (E)very such servant, agent and sub contractor shall have the benefit of all provisions herein for the benefit of (Hecny Shipping) as if such provisions were expressly for their benefit...”
Section 21 of the terms and conditions stated in part that Hecny Shipping would be “discharged from all liability in respect of non-delivery(,) misdelivery… unless suit is brought within 1 year after delivery of the goods.”
Clevo received the original bills of lading on or about Oct. 27, and retained them, as Amazon had yet to pay the remaining 70 percent of the purchase price.
Hecny Shipping issued the bills of lading, and the goods began their transit—by sea from Shanghai to Los Angeles, then by truck to Miami where Hecny Transportation arranged for Arrow Air to move the goods to Manaus on two flights.
For both flights, Hecny Transportation issued its own house air waybill, as well as a master air waybill on behalf of Arrow Air.
Soon after the goods arrived in Manaus, Hecny Transportation forwarded the waybills to Hecny Brazil, and Hecny Brazil released those waybills to Amazon. With the waybills in hand, Amazon took delivery of the goods in November 2008.
Hecny Brazil never required Amazon to present the bills of lading prior to taking possession of the goods and Clevo never provided the bills of lading to Amazon nor notified any Hecny entity that it could release the goods. Instead, Clevo retained the bills of lading while awaiting the final 70 percent payment.
In January 2009, Clevo emailed Hecny Transportation to ensure that the goods were still being held. A Hecny Transportation employee responded that the shipments were moved to Manaus and he had not received any request to hold the shipments in Miami.
Amazon never forwarded the outstanding balance and filed for bankruptcy.
More than one year after the initial misdelivery to Amazon, Clevo sued Hecny Group entities for the remainder of the goods’ purchase price.
Viewing the evidence in the light most favorable to Clevo, the 9th Circuit said the record reflects that Hecny Transportation and its agent, Hecny Brazil, were required to obtain the original bills of lading from Amazon prior to releasing the goods. And there was no dispute that the relevant Hecny entities never obtained the documents.
But because Clevo filed suit more than one year after the improper delivery, the court said the central question was whether Clevo’s claims were governed by the guarantee letter, which established no express statute of limitations, or the bills of lading, which established a one-year limit on the suit.
The 9th Circuit held the guarantee was initially effective to place Clevo and Hecny Transportation in “direct contractual privity, without any contractually-created statute of limitations.” But that initial relationship was modified when the bills of lading issued.
The terms and conditions in the bill of lading supplemented the terms of the guarantee and created an express limitations period, providing that Hecny Shipping “shall (be) discharged from all liability in respect of... misdelivery… unless suit is brought within 1 year after delivery of the goods.”
The 9th Circuit held that because of the Himalaya clause, the benefit of the one-year statute of limitations in the bills of lading extended beyond Hecny Shipping in Hong Kong to Hecny Transportation in Miami.
The district court’s grant of summary judgment to Hecny Transportation was affirmed.