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Sea King Corp. v. Eimskip Logistics, Inc.

United States District Court, E.D. Virginia, Norfolk Division

February 15, 2019

EIMSKIP LOGISTICS, INC., CMA CGM AMERICA, LLC, and CMA CGM, S.A., Defendants and Third-Party Plaintiffs,


          Mark S. Davis Chief United States District Judge

         This maritime matter is before the Court following a bench trial, and involves a contract dispute between third-party plaintiff CMA CGM, S.A. ("CMA") and third-party defendant Marine Repair Services of Virginia ("MRS"). Although a trial was necessary in this case, the majority of the facts are not in dispute, and the primary legal issue is whether CMA is entitled to complete indemnity from MRS pursuant to the "warranty of workmanlike performance" that has been recognized in this Circuit to apply in maritime stevedoring contracts, ship repair contracts, and at least some towage contracts.

         I. Findings of Fact

         A. Stipulated Facts

         The Court adopts, and incorporates herein by reference, the forty-five stipulations of fact set forth in the final pretrial order. ECF No. 94, at 3-13. Reproduced immediately below is an abbreviated version of such stipulations.[1]

         CMA is a French ocean carrier with its headquarters in France, and CMA conducts business in the United States through its agent, CMA CGM (America), LLC ("CMA America"). MRS is a Virginia corporation that, among other things, maintains and services refrigerated cargo containers ("reefers") at various terminals in the Port of Virginia.

         In October of 2016, plaintiff Sea King Corporation ("Sea King") contacted defendant Eimskip Logistics Inc. ("Eimskip") to arrange for the transport of a cargo of frozen conch meat from Sea King's facility in Atlantic, Virginia to Hong Kong. On October 14, 2016, Eimskip made a "web booking" for such shipment with CMA America. Such booking indicated that the cargo was 'frozen seafood" to be shipped from Virginia International Gateway terminal ("VIG") to Hong Kong, in a refrigerated container set at -20° Celsius, vents closed. CMA[2] sent Eimskip a booking confirmation reflecting such shipping requirements, and Eimskip sent a follow up email to Sea King confirming the booking for shipment through CMA. After Sea King was paid in full for the cargo by the Hong Kong buyer, it executed a written contract with Eimskip for shipment of the frozen conch meat (valued at over $250, 000) to Hong Kong in a 40-foot reefer set to an internal temperature of -20° Celsius. Sea King paid Eimskip approximately $5, 500 for ocean freight, pre-carriage transport, and insurance.

         Virginia International Terminals ("VIT"), the entity that operates the VIG terminal, has an electronic data interface" ("EDI") system that permitted CMA to electronically forward the electronic booking made by Eimskip to the terminal. However, VIT had an EDI server issue beginning on October 25, 2016 that delayed certain booking entries from posting in the system until late on October 27, 2016.

         As a result of the booking with Eimskip, CMA sent an email order to MRS requesting that MRS prepare a reefer for release, listing the required preset temperature as -20° Celsius. A reefer is an insulated container with a refrigeration unit powered either by an external source (plugged into shore or ship power) or by a portable generator attached to the container (commonly known as a "genset"). A genset is attached to a reefer when it is being transported by truck, and the genset is generally removed when the reefer is stored at a facility that has power or when it is loaded onto a ship. A reefer container is readily distinguishable from a standard cargo container because reefers have smooth sides and dry cargo containers have corrugated sides.

         Based on CMA's email request, MRS "pre-tripped" reefer Container No. TRIU8137918 (the "Container"), which was leased by CMA and stored at MRS's "depot" in Chesapeake, Virginia. The pre-trip inspection, performed by MRS in Chesapeake, confirmed that the Container's refrigeration system was operating properly.

         As of October 2016, CMA and MRS had a general course of dealing under which MRS agreed to: (1) pre-trip CMA's containers as needed; and (2) monitor CMA's export container temperatures twice per day after a live container with temperature requirements was in-gated at the VIG terminal. The purpose of the monitoring was to confirm that the temperature stayed within a designated range and to protect the integrity of the cargo. As a matter of practice, when MRS identifies a discrepancy between the booking temperature and the actual temperature of a reefer, it immediately notifies the ship line (here CMA) as a failsafe against cargo damage.

         On October 26, 2016, third-party defendant Leighton Trucking, LLC ("Leighton"), a company hired by Eimskip to transport the empty pre-tripped Container from MRS's Chesapeake facility to Sea King's facility for loading, and then transport the loaded Container to VIG, picked up the Container in Chesapeake. On the morning of October 27, 2016, Leighton brought the Container to Sea King's facility, and the properly functioning reefer was loaded with frozen conch meat and sealed.

         That same morning, Eimskip contacted CMA to inform it that the Container was actively being loaded, but that there was not a booking for such reefer in VIT's computer system (a fact that resulted from the EDI server issue). In response to this email, a CMA employee manually input the booking data into VIT's system, and although such booking identified the Container as a loaded reefer for export, it failed to reflect a temperature requirement for the Container.

         VIG is an automated terminal that minimizes personal contact with containers moving through the terminal facility. The gate-in process is handled remotely, with inspection of incoming and outgoing containers performed though video and photographs. With respect to "live" reefer containers, however, VIT reefer mechanics ensure that reefers are visually checked at VIG before a delivering driver is released from the terminal. The steamship lines, like CMA, also take special precautions to ensure that human or mechanical failures do not compromise frozen cargo. At VIG, all gensets are removed by MRS employees and MRS charges all carriers, such as CMA, for genset removal services.

         The Leighton truck arrived at the VIG gate and entered the terminal at 2:55 p.m. on October 27, 2016. The genset mounted on the Container was operating and the Container displayed a digital temperature of -20° Celsius. However, because of CMA's error in omitting the temperature requirement from the manual booking, VIT's booking information indicated that the Container was a reefer with no temperature requirement, i.e. not a "live" container. Although VIT inspected the Container upon arrival at VIG by video and photographs, its clerks did not notice the discrepancy between the booking information and the "live" reefer that appeared at the gate. The Container was admitted to VIG and the driver received a routing ticket from the unmanned kiosk at the gate, instructing him to take the Container to "yard location 08L." Although it is not indicated on the ticket, yard location 08L is a non-powered "stack" of containers that is not suitable for storing a "live" reefer with a temperature requirement. The Routing Ticket instructed the driver that:

If you are dropping off reefer in the stacks, proceed to 407 row first to have the genset removed.

         At the time, VIT's Operations Manual provided detailed instructions for the handling of live export reefers assigned to the "reefer rows," where the truck chassis, with reefer attached, would be parked in an assigned slot. The driver was required to wait with the reefer in the reefer rows until a VIT reefer mechanic verified the container temperature. If the temperature was acceptable, VIT would plug the container into shore power and the driver would be released. At VIG, VIT is the entity responsible for plugging reefer containers into both shore power and vessel power. Because live export reefers were not ordinarily stored in "the stacks," VIT's Operations Manual provided no procedure for sending live export reefers to the stacks. The practice of sending a live export reefer to the stacks was considered by VIT to be unusual and abnormal and only done when the reefer rows were full. Only rows 3, 6, 9, 12, and 15 of the stacks contained reefer slots (i.e., these rows had shore power).

         In accordance with the instructions on the printed VIG gate ticket, the Leighton driver drove to "row 407," where two of MRS's reefer mechanics confirmed (from looking at the gate ticket) that the Container was headed for the stacks, and not the reefer rows, and it therefore had to have its genset removed at that time.[4] The Container's refrigeration unit was switched off by MRS at 4:41 p.m. that day (Oct. 27, 2016), and the genset was removed. The Container was then taken to the stacks and was never connected to shore power at VIG, nor to ship power during oversees transport. Although the Container was powered-off on October 27, 2016, the cargo remained frozen and undamaged at the VIG terminal through at least October 28, 2016. The cargo was discovered to be a total loss upon delivery in Hong Kong in December of 2016.

         When pre-tripping the reefer in Chesapeake, MRS posted a placard on the Container next to the control panel at eye level stating the booked temperature (-20° Celsius). Both MRS reefer mechanics working at VIG on the day the Container arrived have testified that they did not know that stack 8 at VIG had no powered reefer slots. At a corporate level, MRS was aware that row 8 of the stacks did not contain reefer slots. MRS Reefer Mechanic Glen Carpenter filled out a Reefer Receive/Release Log showing that the Container had been received at VIG (identified by container number) and that the temperature setting was -20° Celsius. This was the only CMA reefer received at VIG on October 27 and this log page included just one entry. Carpenter turned the log page into his MRS foreman at the end of his shift on October 27, 2016. The MRS foreman, Leo Castellanos, was responsible for preparing a Refrigerated Tracking and Monitoring log. Castellanos, or occasionally other MRS reefer mechanics, would check the temperature on CMA containers twice per day and record them in this log.

         VIT's server problem was fixed late on October 27, and at 7:38 p.m., the VIT system finally showed the original booking made by CMA back on October 25, which included the proper temperature setting for the Container. Such updated booking did not, however, change any container-specific information in the VIT system, meaning that if MRS accessed VIT's system for information regarding the Container (as opposed to searching the system based on the booking number) the system would indicate that the Container was a loaded export reefer but would not indicate a temperature requirement.

         The parties agree and stipulate that the contract or contracts between CMA and MRS involved in this case were maritime contracts within the meaning of that term for purposes of the Court's admiralty jurisdiction and choice of law in this case. The original plaintiffs settled their maritime claims against Eimskip, and CMA and Eimskip settled its third-party claims with VIT and Leighton. CMA settled with Plaintiffs by agreeing to pay them $260, 000 in consideration of complete releases.[5]

         B. Facts Determined by the Court as Factfinder

         1. MRS and CMA's business relationship is not governed by a written contract, but rather, such entities have established, through a long-term course of dealing, that MRS provides CMA with three distinct services relevant to this case: (a) MRS "pre-trips" reefer containers for CMA and arranges for their release; (b) MRS provides CMA with genset mounting and dismounting services at VIG, a service that is also provided to all other carrier companies that move reefers through VIG; and (c) MRS provides reefer temperature monitoring and container repair for CMA's reefers at VIG, although unlike the mounting/dismounting services, such monitoring service is not provided to all other carriers, as some carriers contract directly with VIT for similar monitoring services.

         2. Although MRS monitors CMA's live reefers twice daily while they are stored at VIG, unlike other terminals in the area, MRS is not responsible for, nor is it permitted, to intake such containers at VIG and plug them into shore power. Such intake duties, which include both confirming that the reefer is operating at the time of intake within an acceptable temperature range, and connecting the reefer to shore power, are borne solely by VIT.

         3. MRS bills CMA separately for each aspect of its services as they are performed. Accordingly, an invoice is issued when MRS's storage facility in Chesapeake, Virginia releases a pre-tripped container, an invoice is issued for genset removal after gensets are installed or removed from CMA's containers at VIG, and an invoice is issued for the twice daily monitoring of the CMA reefers at VIG. No written contracts govern such services beyond the emails/orders sent by CMA to MRS to arrange for the pre-tripping/release of reefers needed for upcoming exports.

         4. In order to conduct its monitoring services at VIG, the MRS foreman maintains a handwritten monitoring log. Each morning, and each afternoon, the foreman accesses the on-terminal "SPARCS" computer database maintained by VIT and prints a list of all CMA reefer containers that have been in-gated with temperature requirements. The SPARCS information is "live" and updates constantly, including updates to the current location of each container at VIG, and this system can only be accessed by MRS while physically at the terminal. MRS cross-references the updated SPARCS list to its handwritten log twice a day to ensure that CMA's reefers are accounted for and being monitored. Pursuant to its course of dealing with CMA, MRS visually inspects each CMA reefer container with an assigned temperature requirement twice a day to ensure that the reefer is maintaining a temperature consistent with the booking information (the temperature requirement is available in the SPARCS system and is printed on the MRSwsticker" that is affixed to the exterior of the reefer when it leaves MRS's Chesapeake depot). Should there be any issues with a reefer, MRS performs necessary repairs without further guidance from CMA (and bills CMA for such repairs) except in those cases where the repair is major, in which case MRS contacts CMA to work out a plan for addressing the issue.

         5. When a pre-tripped reefer is released from the MRS depot, certain MRS employees are aware of the intended local export terminal as well as the approximate date that the reefer will arrive at such terminal. However, because MRS turns over custody of the reefer, and because CMA does not notify MRS of any changes to the shipping timeframe, to include changes to the export vessel, export terminal, or the number of days that the container will be stored at the terminal prior to export, MRS does not *track" the released container. CMA failed to present evidence at trial demonstrating that MRS had an obligation, whether express, implied, or through "course of dealing," to track a reefer after it is pre-tripped and released. Rather, MRS merely reacts when a CMA reefer is in-gated at a local terminal.

         6. MRS has no functions at the VIG gate, nor does it have any-direct communications with the gate regarding which containers have entered the terminal. MRS also has no role in: (a) assigning the VIG location where truck drivers should deliver a reefer designated for export; or (b) moving, or directing the movement of, reefers at VIG. Rather, VIT controls the movement of all containers at VIG. If a reefer being monitored by MRS is repositioned by VIT, VIT does not communicate with MRS either before or after the container is moved, and MRS is only "informed" of the move through accessing the real-time SPARCS system.

         7. Because MRS has no control over where containers are stored at the VIG terminal, it has no ability to group containers by client in order to facilitate more efficient/effective monitoring.

         8. As established through the deposition of CMA's Rule 30(b)(6) representative, CMA believed that MRS knew when a live reefer arrived at VIG through two channels: (1) MRS received a "printout" of the reefers that arrived each day (the SPARCS information); and (2) MRS created its own log from the "temperature check" it performed in "the lane" as part of the receiving function at VIG. CMA believed that MRS would cross-check these lists to ensure that all live CMA reefers were accounted for.

         9. Although CMA's representative may have accurately summarized how MRS tracks reefers at other local terminals where MRS does in fact perform initial intake temperature checks, he was mistaken as to the procedure at VIG. Notably, at VIG, the initial temperature check is performed by VIT personnel, rather than MRS personnel, and MRS therefore does not create a log of live reefers passing through a temperature check "lane" that it can later cross check against the SPARCS "printout." MRS's 30(b)(6) representative testified that MRS does maintain a log of the CMA reefers visually identified (twice daily) in the reefer rows and powered reefer stacks and cross checks that log against the SPARCS list. MRS would, of course, investigate the matter if its employees discovered a CMA reefer parked in the reefer rows, or powered reefer stacks, that did not appear on the SPARCS list; however, the Container at issue was not assigned to, nor stored in, either of these two appropriate areas.

         10. Reefer containers are sometimes used to ship dry goods that do not require refrigeration, including situations where there are humidity concerns and when there is a surplus of reefers in the area.

         11. MRS reefer mechanics perform genset install and removal for all reefers that arrive or depart VIG regardless of whether the carrier contracts with MRS for any monitoring services. MRS creates a genset "Mount Dismount Log" and a "Reefer Receive/Reefer Release" log when it installs or dismounts a genset at VIG, but MRS does not cross-check either of these logs with its monitoring log.

         12. Because the Container at issue was in-gated without a temperature requirement (due to the EDI server issue, the CMA manual input error, and the failure of the VIT gate inspection to discover that the Container was "live") VIT never performed an initial temperature check nor did it take any steps to plug the container into shore power. The Container never appeared on the relevant SPARCS list, and MRS never attempted to locate it or monitor it.

         13. Based on CMA and VTT's errors, which dictated/controlled the handling of the Container at VIG, the Container was placed in a dry stack where: (1) there was no available power; and (2) it was essentially impossible for MRS, or anyone else, to visually "discover" the Container, and/or see the MRS "sticker" while monitoring other reefers because the unpowered stacks are physically inaccessible, ...

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