JAMES L. COTT, United States Magistrate Judge.
This admiralty action, which arises out of the breach of an agreement between plaintiffs APL Co. Pte. Ltd. and American President Lines, Ltd. (together "APL") and defendant Blue Water Shipping U.S. Inc. ("Blue Water") concerning the transport of fresh garlic containers, is before the Court on remand from the United States Court of Appeals for the Second Circuit. On February 28, 2008, after a bench trial, Magistrate Judge Douglas F. Eaton found Blue Water liable in contract but concluded that APL failed to mitigate its damages reasonably and accordingly awarded APL damages in the amount of $184,910.00—substantially less than the $474,072.18 in damages APL had originally sought. By decision dated January 8, 2010, the Second Circuit vacated the portion of the judgment that reduced the amount of damages awarded to APL for failure to mitigate its loss and remanded the action for a re-assessment of the reasonableness of APL's mitigation efforts.
For the reasons set forth below, I conclude that APL's mitigation efforts were within the range of reason and award APL additional damages of $288,337.18 plus pre-judgment interest to be calculated by the Clerk of the Court as set forth in Part II.E. infra.
The factual background to this action is set out more fully in Judge Eaton's February 28, 2008 decision, APL Co. PTE Ltd. v. Blue Water Shipping U.S. Inc., No. 05 Civ. 3454(DFE), 2008 WL 539927 (S.D.N.Y. Feb. 28, 2008) (hereinafter "APL I"), and the Second Circuit's January 8, 2010 decision, APL Co. PTE Ltd. v. Blue Water Shipping U.S. Inc., 592 F.3d 108 (2d Cir.2010) (hereinafter "APL II"), familiarity with which is assumed. The Circuit did not disturb the factual findings in APL I, and accordingly the Court incorporates them here. See In re M/V DG Harmony, No. 98 Civ. 8394(DC), 2009 WL 3170301, at *1 (S.D.N.Y. Sept. 30, 2009) (incorporating factual findings of first opinion on remand where findings undisturbed by Second Circuit); BrandAid Mktg. Corp. v. Biss, No. 03 Civ. 5088(WHP), 2008 WL 190494, at *1 (S.D.N.Y. Jan. 22, 2008) (same). The following constitutes the Court's additional findings of fact and conclusions of law pursuant Fed.R.Civ.P. 52(a), with certain prior findings and conclusions repeated for context.
In March and April 2003, APL served as the ocean carrier for 29 refrigerated containers ("reefers") of fresh garlic that were shipped from China to the United States in four separate shipments. APL I, 2008 WL 539927, at *11 ¶¶ 45-46. Blue Water was the non-vessel operating common carrier (the "NVOCC") with respect to the shipments, and Akata Food Trading, Inc. ("Akata") was its ultimate consignee. Id. at *12 ¶¶ 47-48.
The standard terms and conditions of each of the MBLs provide, in relevant part, as follows:
Id. at *1 ¶ 4 (citing MBL terms and conditions Clauses 13(iii), 14(iii), 21(iv)). The MBLs also define the term "Merchant" as including:
Id. (citing MBL terms and conditions Clause 1).
The four shipments of garlic arrived in California on March 31, 2003, April 1, 2003, April 16, 2003, and April 22, 2003, respectively. Id. at *12 ¶ 51. After the garlic shipments arrived in the United States, the United States Customs and Border Protection Agency ("Customs") assessed Anti-Dumping Duties of 376.76% of the
After the garlic shipments failed to clear Customs within 15 days from the date of each of the four vessels' arrival into the United States, APL's Customs Compliance Clerk, Mark Porter, began the General Order ("G.O.") process. Id. at *13 ¶ 55. "Once in G.O., the cargo is under the custody and control of U.S. Customs. If the G.O. merchandise is perishable, the customs regulations provide that it can be auctioned by a quick sale." Id. at *18 ¶ 78 (internal citations omitted).
Beginning in late April 2003, Mr. Porter sent certain required G.O. notifications to Customs and to Crescent Warehouse Company, Ltd. ("Crescent"), a G.O. warehouse, along with a letter requesting a constructive G.O. number. Id. at *13 ¶ 55. He made this request because the containers contained fresh garlic requiring refrigeration and no G.O. warehouse in the area had cold storage. Id. ¶ 55. In response to this request, Customs placed the cargo in constructive G.O., and the garlic remained in APL's reefers and under Customs' control. Id. ¶ 56.
APL and Blue Water had numerous communications regarding the disposition of the garlic. On April 21, 2003, a Blue Water employee, Frank Xu, sent a fax to APL acknowledging that the first five containers (which had arrived in the United States on March 31, 2003) were "on demurrage" and reporting that Akata intended
On May 7, 2003, an APL employee, Liam Powers, emailed Mr. Xu regarding the demurrage charges that were accruing on the containers. Id. ¶ 58. He wrote as follows:
Id. ¶ 58. Mr Xu replied that he had finally been "in touch with AKATA, and was told that their lawyer is working on this case now. [Their lawyer] asked whether we can give him some extra time for finishing the mess." Id. ¶ 58. Mr. Powers responded that he didn't think APL could give Akata any more time to pick up the cargo than two more days, that is, until May 9, 2003. Id. ¶ 58. Mr. Xu "agree[d] with [this] idea," stating that "Frida[y, May 9, 2003,] is the last day." Id. ¶ 58.
Ten days later, on May 19, 2003, Mr. Porter called Customs Inspector Rachel S. Ybarra to see how APL could dispose of the cargo within Customs regulations. Id. at *14 ¶ 59. Having spoken with Inspector Ybarra, Mr. Porter emailed Mr. Powers and stated that "she advises [that the] cargo must remain intact w/seals for the 6 mos required, if these do not clear customs." Id. ¶ 59. Concerned about the demurrage charges that would accrue if the containers were required to be sealed and left on the dock for six months, Mr. Powers spoke with Inspector Ybarra on May 21, 2003 and reported to Kris Stephens, of APL's Custom Compliance Group, that "she advises that under 19 CFR sec 4.37E[e] does not allow cargo to be moved to cold storage. Also, since it is under constructive G.O. it is to be held on dock until 6 months." Id. at *15 ¶ 60.
On May 22, 2003, Ms. Stephens contacted Inspector Ybarra's supervisor and left a message regarding the garlic shipments. Id. ¶ 61. Since Ms. Stephens was leaving for vacation, she asked Kellie Reynolds, an APL Customs Compliance Representative, to follow-up with Inspector Ybarra's supervisor, having left Ms. Reynolds' contact information in her message to the supervisor. Id. ¶ 61. The supervisor called Ms. Reynolds on May 23, 2003 and left the FDA's phone number with her. Id. ¶ 62.
Later that day, Ms. Reynolds called the supervisor back and also attempted to call the FDA three or four times. Id. ¶ 63. Meanwhile, APL's Claims Department engaged a surveyor to determine whether the garlic was still saleable. Id. ¶ 64. The purpose of this survey was "to convince U.S. Customs to act quickly" so that the perishable garlic did not spoil. Id. ¶ 64 (citation omitted). It was not until June 5, 2003, however, that Inspector Ybarra advised APL that a quick sale procedure could be used to dispose of the garlic. Id. at *16 ¶ 66.
On June 11, 2003, Inspector Ybarra advised Mr. Porter that, in order to effect a quick sale of the cargo, he needed to call Cindy Ewers at Crescent, where the shipments
By that point, however, an FDA inspector conducting an initial investigation had determined that at least some of the garlic was no longer saleable and would have to be destroyed. Id. at *17 ¶ 70. A more thorough FDA investigation occurred on July 16, 2003, the earliest day an FDA Inspector was available, and the FDA determined that none of the garlic in the 26 remaining containers was saleable. Id. ¶¶ 71-72. The garlic was therefore destroyed at the expense of APL between August 13 and August 25, 2003. Id. at *18, ¶ 74.
On April 1, 2005, APL filed suit seeking $474,072.18 in damages from Blue Water. Id. ¶ 77. This amount consisted of (1) $402,700.00 in demurrage for the 29 containers; (2) $2,600.00 for a survey of the cargo in May 2003; (3) $425.00 for a survey of the cargo prior to its destruction; (4) $62,192.18 for the cost of destruction; and (5) $6,155.00 for various miscellaneous items. Id. ¶ 77.
Judge Eaton, to whom the parties had consented to handle the case for all purposes under 28 U.S.C. § 636(c), concluded that Blue Water constituted a "Merchant" under the MBLs, thus rendering it liable to APL for the damages listed above pursuant to clauses 14(iii) and 21(iii), (iv), and (ix) of the MBLs' terms and conditions. Id. at *20 ¶¶ 86-90. He reached this conclusion on two separate grounds. Id. ¶¶ 86, 88. First, 46 U.S.C. § 40102(16) defines a NVOCC such as Blue Water as a Shipper and, under Clause 1 of the terms and conditions of the MBLs, a Shipper falls within the definition of Merchant. Id. ¶ 86. Second, on the MBLs, Blue Water is listed as the Consignee and Notify Party; a Consignee also falls within the definition of Merchant. Id. ¶ 88; see also id. at *1 ¶ 4.
Clause 14(iii) of the terms and conditions of the MBLs provides, in relevant part, that "[a]ll charges due hereunder together with Freight ... shall be due from and payable on demand by the Merchant (who shall be jointly and severally liable to the Carrier therefore)..." Id. at *1 ¶ 4. Meanwhile, Clause 21(iii)-(v) of the terms and conditions of the MBLs provide that the Merchant is required to take delivery of the goods, and that any costs or expenses resulting from a failure to do so— including the costs to store, sell or destroy the goods—are the responsibility of the Merchant. Id. at *20 ¶ 90; id. ¶ 4. Consequently, Judge Eaton concluded that Blue Water, as Merchant, was contractually liable for the costs and expenses APL incurred as a result of Akata's failure to pick up the garlic shipments. Id. at *20 ¶¶ 90-91.
Blue Water was not liable for the full amount of the damages, however, as Judge
Had APL acted reasonably, Judge Eaton found, a quick sale of the cargo likely "would have been completed no later than May 30," thus ending the accrual of demurrage charges and forestalling the need to incur costs destroying the garlic. Id. ¶ 102. Based on a May 23 survey of the garlic, Judge Eaton inferred that the garlic would have still been saleable on May 30, but also acknowledged the possibility that Customs or Crescent would have delayed a quick sale of the garlic beyond that date, likely rendering some of the garlic rotten. Id. at *23 ¶ 103. Judge Eaton resolved this tension by holding Blue Water liable for all demurrage charges incurred through June 7, 2003 plus $8,755.00, representing the cost of the surveys of the cargo and other various miscellaneous expenses, along with pre-judgment interest. Id. ¶¶ 104-05. Judgment was thus entered in the amount of $184,910.00 for demurrage and other expenses and $62,413.86 for prejudgment interest. Judgment dated March 18, 2008 (Dkt. No. 34). Blue Water paid the judgment on March 14, 2008 (Dkt. No. 36).
APL appealed; on appeal, the question before the Second Circuit was as follows:
APL II, 592 F.3d at 109. It answered this question in the negative and concluded that the trial court had failed to properly assess whether APL's various mitigation efforts—and its missteps—were within the "range of reason" standard enunciated in Ellerman, Id. at 111.
The Second Circuit found that while the trial court had identified the proper legal standard regarding mitigation, it had failed to properly apply that standard to APL's mitigation efforts. Id. To this end, the Circuit observed:
Id. at 112 (citation omitted). Such an inquiry, the Second Circuit noted, would necessarily begin with the expectations of the parties as' revealed by their contract. Id. It also suggested that Blue Water's knowledge of Customs rules and regulations, along with its post-breach conduct, may "provide a yardstick by which to measure the reasonableness of APL's mitigation efforts." Id.
In addition, the Second Circuit found shortcomings in the trial court's assessment
By Order dated June 18, 2010, I directed each party to simultaneously file and serve a memorandum of law addressing the issues that each believes the Court should address on remand. Dkt. No. 43.
The issues before the Court on remand are narrow: to determine whether APL's mitigation efforts were within the range of reason and, if so, the proper award of damages to which APL is entitled.
Under the law-of-the-case doctrine, "when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (citation omitted). The mandate rule is a subsidiary of the law-of-the-case-doctrine that governs the relationship between appellate courts and trial courts, and it controls the scope of the inquiry a trial court may make in a case remanded from a circuit court. United States v. Ben Zvi, 242 F.3d 89, 95 (2d Cir.2001); see generally C. Wright, et al., Federal Practice & Procedure § 4478.3, at 733-69 (3d ed. 2008). The mandate rule provides: "where issues have been explicitly or implicitly decided on appeal, the district court is obliged, on remand, to follow the decision of the appellate court." Burrell v. United States, 467 F.3d 160, 165 (2d Cir. 2006) (citing United States v. Minicone, 994 F.2d 86, 89 (2d Cir.1993) and Ben Zvi, 242 F.3d at 95). The rule "compels compliance on remand with the dictates of the superior court and forecloses relitigation of issues expressly or impliedly decided by the appellate court." Ben Zvi, 242 F.3d at 95 (internal quotations and citations omitted). To determine whether an issue may be reconsidered on remand, a district court "should look to both the specific dictates of the remand order as well as the broader spirit of the mandate," id. (internal quotation marks and citation omitted), and it "`must always look to the opinion to interpret the mandate.'" Meacham v. Knolls Atomic Power Lab., 358 Fed.Appx. 233, 235 (2d Cir.2009) (summary order) (quoting FTC v. Standard Educ. Soc'y, 148 F.2d 931, 932 (2d Cir.1945)).
The mandate here provides as follows:
Mandate of United States Court of Appeals for the Second Circuit filed January 8, 2010 (Dkt. No. 38). The Second Circuit's decision contained similar language and provided that "we vacate that portion of the final judgment entered below that reduced the amount of damages awarded appellant for failure to mitigate its loss and remand this matter to the district court for further proceedings consistent with this opinion." APL II, 592 F.3d at 113.
Consequently, pursuant to the mandate, the Court must determine whether APL's mitigation efforts were within the range of reason and whether APL may recover the full amount of the damages that it originally sought from Blue Water. Consistent with the other dictates in the Second Circuit's opinion, the Court must also (1) more clearly define the nature and circumstances of Blue Water's breach; and (2) examine Blue Water's post-breach conduct, including the role, if any, it should have had in the disposal process. Id. at 112-13. Each of these determinations requires the Court to make additional conclusions of law pursuant to Fed. R. Civ. P. 52(a). The Court makes each of these additional conclusions of law in turn below.
The nature and circumstances of Blue Water's breach of the MBLs at issue in this case are straightforward. In short, Blue Water, as "Merchant" under the MBLs, was obligated under Clauses 13, 14, and 21 of the MBLs to pay APL, as "Carrier" under the MBLs, for the costs associated with Akata's failure to pick up the garlic, and Blue Water breached this obligation when it failed to pay APL. APL I, 2008 WL 539927, at *20 ¶¶ 86-90; see also Part I.B.1, supra.
These clauses, in relevant part, provide as follows:
Id. at *1 ¶ 4 (citing MBL terms and conditions Clauses 13(iii), 14(iii), 21(iv), 21(v)). All costs associated with Akata's failure to pick up the garlic fall within these provisions: (1) $402,700.00 in demurrage for the 29 containers; (2) $2,600.00 for a survey of the cargo in May 2003; (3) $425.00 for a survey of the cargo prior to its destruction; (4) $62,192.18 for the cost of destruction; and (5) $6,155.00 for various miscellaneous items. Id. at *18 ¶ 77.
Both APL and Blue Water agree that Blue Water's failure to pay APL for these expenses constitutes the proper characterization of Blue Water's breach. See Def.'s Mem. at 14-15 ("[T]he specific nature of the breach in this case is clear from the record. Blue Water failed to pay demurrage and other charges assessed by APL in connection with the garlic shipments."); Pls.' Mem. at 19 ("Clauses 14(iii) and 21 [of the MBLs' terms and conditions], when read together, make Blue Water contractually liable for the costs associated with Akata's failure to pick up the garlic").
An analysis of Blue Water's post-breach conduct is similarly straightforward. Blue Water, as a NVOCC, had no role to play in the disposition of the garlic shipments and no standing with Customs to attempt to expedite the shipments' disposition. Again, the parties agree with this characterization. Pls.' Mem. at 19-20; Def.'s Mem. at 15-16 & n.11.
The report of APL's expert, John Day, which Judge Eaton relied on extensively, clarifies the lack of involvement of a NVOCC such as Blue Water in the process of releasing cargo under the control of Customs. See Day Report at 1-2. His report, in relevant part, provides as follows:
Id. at 1-2. Here, the HBLs listed Akata as the Consignee and Notify Party, while the MBLs listed Blue Water as the Consignee and Notify Party. APL I, 2008 WL 539927, at *12 ¶¶ 49-50. Blue Water was thus the "nominal consignee" of the garlic shipments at issue and was not authorized to file the necessary entries with Customs that were required for the release of the shipments. Instead, only Akata, the consignee
Accordingly, I conclude that Blue Water had no role to play in the disposition of the cargo. I now turn to an analysis of APL's mitigation efforts against the range of reason standard.
As both Judge Eaton and the Second Circuit found, the reasonableness of APL's mitigation efforts is governed by the standard articulated in Ellerman. Under this standard, "if plaintiff takes such [mitigating] action within the range of reason," the breaching party remains liable if such reasonable attempts at mitigation fail. Ellerman, 288 F.2d at 290. "The standard of what reason requires of the injured party is lower than in other branches of law." Id. For the reasons discussed below, I conclude, in applying the Ellerman standard, that APL's mitigation efforts fell within the range of reason.
After the garlic shipments failed to clear Customs, APL properly initiated the G.O. process by informing Crescent, the G.O. Warehouse, and Customs that the cargo was perishable fresh garlic and requesting that the cargo be placed in constructive G.O. in order to preserve it. APL I, 2008 WL 539927, at *13 ¶ 55. The garlic was then placed in constructive G.O. and remained in APL's containers "pending the disposition of the cargo at Customs's direction." Id. ¶ 56. APL realized the demurrage charges that would accrue during that period would be quite substantial; accordingly, it had numerous communications with Blue Water regarding whether Akata still intended to pick up the garlic. Id. ¶¶ 57-58.
The record is undisputed that, after learning definitively from Blue Water that Akata would not be picking up the garlic,
Once APL learned this fact, it contacted Crescent several times in June in order to expedite the quick sale process, as only Crescent could initially request the sale from Customs and provide Customs with the required 5251 forms to effectuate the sale. Id. ¶ 68; id. at *19 ¶ 80. However, due to confusion within Crescent, its transmission of the required forms was delayed nearly two weeks and by June 23, 2003, the date Crescent eventually sent the required forms to Customs, some of the garlic was no longer saleable. Id. at *17 ¶ 70.
Taken together, APL's mitigation efforts fall within the range of reason.
Accordingly, I award APL damages of $288,337.18. This amount represents $474,072.18—the total amount Blue Water was obligated to pay under the MBLs—less (1) $184,910.00, the amount awarded in APL I and previously paid by Blue Water, and (2) $825.00 in salvage proceeds from sales of garlic in the three of the 29 containers that were taken off demurrage and had their contents sold.
APL also seeks pre-judgment interest, though it does not specify the rate of interest that it believes should be applied to the damages award. Pls.' Mem. at 2. Blue Water does not address the issue of pre-judgment interest in its submission to the Court. "In this Circuit, prejudgment interest will be denied in admiralty cases only under extraordinary circumstances." Federal Ins. Co. v. Sabine Towing & Transp. Co., 783 F.2d 347, 352 n. 4 (2d Cir.1986) (citation omitted). There are no such circumstances here, so APL is entitled to pre-judgment interest.
The appropriate rate of interest and the date when such interest begins is within the broad discretion of the district court. N.Y. Marine & Gen. Ins. Co. v. Tradeline (L.L.C.), 266 F.3d 112, 131 (2d Cir.2001) (citation omitted); Indep. Bulk Transp., Inc. v. Vessel Morania Abaco, 676 F.2d 23, 25 (2d Cir.1982). "Interest is intended to make the injured party whole, and generally should be measured by interest on short-term, risk-free obligations." N.Y. Marine & Gen. Ins. Co., 266 F.3d at 131 (citations omitted). "[A]n award of interest based on the average annual United States Treasury Bill rate is becoming more common in this Circuit. The treasury bill rate more closely parallels the income the damages would have earned in a short-term, risk-free investment." Man Ferrostaal, Inc. v. M/V Akili, Nos. 07 Civ. 6269(DLC), 09 Civ. 2408(DLC), 763 F.Supp.2d 599, at 614, 2011 WL 207968, at *11 (S.D.N.Y. Jan. 24, 2011) (citation, internal quotations, and alterations omitted); see also N.Y. Marine & Gen. Ins. Co., 266 F.3d at 131 (approving of application of average annual Treasury Bill yield in admiralty action). Moreover, "in the absence of a single date from which damages flowed, a reasonable intermediate date,"
Accordingly, APL is entitled to 2.035 percent pre-judgment interest from June 17, 2003 through the entry of judgment on $288,337.18.
For the reasons discussed above, I conclude that APL's mitigation efforts were within the range of reason and therefore award APL damages of $288,337.18 plus 2.035 percent pre-judgment interest to be calculated by the Clerk of the Court from June 17, 2003 through the entry of judgment. The Clerk of the Court is directed to enter judgment consistent with this decision.
Expert Report of John Day, dated April 21, 2006 (the "Day Report") at 1-2 (internal citations omitted).
