Lead Opinion
Plаintiff Carbotrade S.p.A. (“Carbotrade”) appeals from an opinion and order of the United States District Court for the Southern District of New York (John G. Koeltl, District Judge) that granted the motion of defendant Bureau Veritas (“BV”) for summary judgment pursuant to Fed.R.Civ.P. 56(c). Carbotrade’s suit followed the sinking of a vessel, the Star of Alexandria, which had been classified by BV — negligently in the view of Carbotrade — as complying both with international conventions and with BVs own rules and regulations. The district court, applying United Kingdom law, concluded that no duty was owed by a classification society, such as BV, to a third-party, such as Carbotrade. On appeal, Carbotrade argues that the district court erred in applying United Kingdom law; that Greek law, or alternativеly, United States admiralty law, governs this dispute; and that under either Greek or United States law BV may be held liable by Carbotrade for negligent misrepresentation. Carbotrade further argues that the district court erred in concluding that Carbotrade could not establish that it relied on the alleged negligent misrepresentations, BV owed Carbotrade a duty. We vacate and remand.
BACKGROUND
This controversy originated when the Star of Alexandria, a ship registered in the United Kingdom dependency of Gibraltar, sank on April 17, 1989, in international waters while en route to New Jersey from Greece. The facts surrounding the incident are fully set forth in the opinion of the district court, reported at Carbotrade SpA v. Bureau Veritas,
The Star of Alexandria was owned by Cari-bene Investments, Ltd., a corporation organized under the laws of Gibraltar. Caribene had contracted with Palm Navigation, a company with offices in Greece, to manage the vessel. On February 28,1989, less than two months before the Star of Alexandria sank, Caribene chartered the vessel to Carbotrade, an Italian corporation with its principal place of business in Italy. Carbotrade subchar-tered the vessel to Essex Cement Company, a New Jersey partnership and affiliate of third-party defendant Titan Cement Compa
After the vessel sank, Carbotrade sued BV. BV is a French classification society with its principal place of business in France and offices in ports throughout the world. A classification society sets standards for the quality and integrity of vessels and performs surveys to determine whether vessels are in compliance with the classification society’s rules and regulations, national laws, and international conventions. If a vessel passes inspection, the classification society either issues a certificate attesting to the vessel’s conformity with the applicable rules, regulations, laws, and conventions or endorses an existing certificate with a visa reflecting the survey. If the vessel fails to pass thе inspection, the classification society either does not issue the certificate or withdraws the existing certificate.
At least as far back as 1985, BV contracted with Caribene to survey the Star of Alexandria. Between March 6 and March 28,1989, BV conducted several surveys of the Star of Alexandria: a survey to determine whether the vessel was in compliance with certain international conventions; a bottom survey to determine whether the vessel required dry docking; and an intermediate survey to determine the soundness of its interior compartments. After completing the surveys, BV issued certificates indicating that the Star of Alexandria was in compliance with the international conventions and endоrsed the existing ship’s classification certificate on the basis of the bottom and intermediate surveys.
Carbotrade claims that BV negligently performed the bottom and intermediate surveys and thus negligently endorsed the classification certificate. In particular, Car-botrade alleges that BVs surveyor, Kon-stantinos Stavropoulos, was negligent in failing to withdraw the classification certificate after he noticed that the vessel’s wing-tanks were leaking. Carbotrade claims that cracks in the wingtanks reduced the vessel’s strength and contributed to the sinking of the Star of Alexandria. Carbotrade further argues that under BVs own rules and regulations, a new visa cannot be issued when the surveyor discovers cracks in the wingtanks. If the visа had. not been issued, the Star of Alexandria’s previous classification certificate would have lapsed, and the vessel would not have been “in class” for the period of the voyage.
Carbotrade maintains that it relied on BVs representation that the vessel was fit and suitable to carry cargo and that, if BV had refused to extend the hull certificate, Carbotrade would not have allowed the vessel to sail with the cargo on board. BV responds in its brief on appeal that its “Rules [do] not require that the vessel’s wing tanks [ ] be absolutely watertight for. the vessel to pass the intermediate survey.” In addition, BV notes that dining March 1989, an independent surveyor hired by Essex also inspected and passed the vessel. Thе survey- or, Constantine Tsamados, saw some water leaking from the wingtanks, but noted that the wingtanks would not be used during the voyage and, thus, certified the vessel as suitable for the carriage of the cement cargo that was ultimately boarded. Carbotrade dismisses the significance of Tsamados’s survey, claiming that the “purpose of [Tsamados’] survey was limited to establishing that the holds were clean, dry, and rust free, and not to assessing the seaworthiness of the vessel.”
Because the Star of Alexandria was registered in Gibraltar, the United Kingdom Department of Transportation investigated the sinking. The department concluded that the vessel sank because it “was so overloaded and reduced in structural strength that, having experienced exceptionally stormy weather conditions crossing the Atlantic, [it] broke in two and sank.” Carbotrade argues that BVs topside wingtank test was designed to detect the structural weakness that caused the ship to break in two.
Carbotrade first invoked arbitration, and obtained a default judgment, against Cari-bene in London pursuant to the arbitration clause in the head charter. Caribene has no known assets and the judgment has not been satisfied. Caribene’s insurers have refused to satisfy this judgment because they claim that Caribene was in violation of Gibraltar’s manning requirements.
DISCUSSION
Our review of a grant of a motion for summary judgment is de novo. Schonholz v. Long Island Jewish Medical Ctr.,
[a] judge must ask himself not whether he thinks the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the [non-movant] on the evidence presented. The mere existence of a scintilla of evidence in support of the [non-movant’s] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movаnt].
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252,
The first and foremost task before us on this appeal is to decide which country’s law applies to Carbotrade’s cause of action for negligent misrepresentation. The district court concluded that, under the maritime conflicts of law test first announced by the Supreme Court in Lauritzen v. Larsen,
Carbotrade argues that the district court should have applied the law of Greece, which, Carbotrade . maintains, permits an injured third party to maintain a cause of action against a classification society for negligent misrepresentation. We agree with Carbo-trade that Greek law controls, but, because the issue was not fully explored below, we remand to the district court to determine what duty, if any, Greek law imposes on BV.
The traditional choice of law doctrine in tort cases, and adopted by the First Restatement of Conflicts of Law, is the lex loci delicti rule, which emрhasizes the place of the alleged wrongfid act and is still followed in a few American states. See Symeon C. Symeonides, Choice of Law in the American Courts in 1993 (and in the Six Previous Years), 42 Am. J. Comp. L. 599, 606 (1994). Virtually all American states have abandoned the traditional approach and the majority of them have adopted the interest analysis approach of the Second Restatement of Conflicts of Law or some other form of interest
The Supreme Court, in the Lauritzen triad, similarly has rejected a strict lex loci delicti approach to resolving conflicts questions in maritime tort cases and has adopted an interest analysis that looks to: (1) the place of the wrongful act; (2) the law of the ship’s flag; (3) the domicile of the injured party; (4) the domicile of the shipowner; (5) the place of the contract;
The district court concluded that, in the circumstances of this case, the Lauritzen factors pointed “indiscriminately to much of the globe” and that therefore the law of the flag would govern in the absence “of proof that another nation has a more significant, countervailing interest.” Carbotrade,
The law of the flag, however, is only one of several factors to be considered and in Rho-ditis itself the Supreme Court applied United States law notwithstanding that the ship flew a Greek flag, the plaintiff was a Greek citizen, and his employment contract was signed in Greece.
Although Rhoditis was a Jones Act case, we believe that nothing in the Court’s opinion limits its application to such cases and Rho-ditis ’s emphasis on applying the law of the state with the most substantial contacts to
We first note that certain Lauritzen factors do not apply to the case before us. First, in contrast to Lauritzen, no direct contractual relationship exists between the plaintiff and the defendant, so the fifth factor — the place of the contract — is not involved in our analysis. Also, Lauritzen’s sixth factor — the accessibility of the foreign forum — is irrelevant. As Lauritzen itself notes, this factor is more pertinent to a forum non conveniens test than to a choice of law test, and the Lauritzen Court included it as a factor to be weighed in favor of applying the Jones Act where the compensation scheme of another country only would permit suit in its own courts or when the plaintiff is present in that country.
We also believe that the domicile and base of operation factors must be adjusted to the particular facts of this case. Unlike thе typical Jones Act case, which involves a plaintiff seaman and a defendant shipowner, this case involves three different parties: (1) a plaintiff who chartered the vessel, (2) a defendant classification society, and (3) the shipowner, which actually contracted for the services of the classification society but is not a party to this action. The domiciles of the plaintiff and the defendant plainly are relevant here. Furthermore, we believe that the domicile of the shipowner continues to be relevant, not only because it is expressly mentioned in Lauritzen, but because it is the shipowner who was in privity of contract with BV. And just as Rhoditis found the shipowner’s base of operations, in addition to its domicile, to be important under the Lauritzen test,
To summarize, we believe that five Laurit-zen factors are relevant to our determination of the proper law to apply in this case: (1) the place of the alleged wrongful act, (2) the law of the ship’s flag, (3) the domicile and báse of operations of the plaintiff, (4) the domicile and base of operations of the defendant, and (5) the domicile and base of operations of the shipowner. We believe that in the circumstances of this case these factors, taken together, favor the application of Greek law.
The first factor — the place of the wrongful act — plainly favors the application of Greek law: BV is alleged to have issued negligently the defective classification certificates in Greece. The fourth factor — the domicile and base of operations of BV — also supports the application of Greek law. BV is a French corporation and is therefore domiciled in France.
Furthermore, the fifth factor — the domicile and base of operations of the shipowner — . favors the application of Greek law. Although the nominal shipowner, Caribene, was a Gibraltar corporation, there is little doubt that Caribene was simply a shell corporation.
The third factor, which looks to the domicile and base of operations of the plaintiff, favors the application of neither Greek nor United Kingdom law, nor one over the other. No one disputes that Carbotrade is an Italian corporation with its principal place of business in Italy. Furthermore, Carbotrade’s assignor (Essex Cement) is a New Jersey partnership with its principal place of business in New Jersey.
Finally, the Star of Alexandria sailed under the flag of the United Kingdom, a fact that ordinarily would point to the application of the law of that country. Carbotrade repeats its argument that the Star of Alexandria flew the United Kingdom’s flag simply as a flag of convenience and that, thus, this factor should be ignored. The district court rejected this argument, stating that “Carbo-trade has failed to offer any evidence that the shipowner selected a flag in order to avoid apрlication of the laws of more stringent countries.” Carbotrade,
We need not decide, however, whether the Star of Alexandria did indeed sail under a flag of convenience, because, even assuming that the district court was correct on this issue, we find that the factors favoring the application of Greek law greatly outweigh this factor. The fact that the allegedly tor-tious act was committed in Greece, as well as the presence of BV, the vessel’s owners, and the vessel’s operating company in that country, give Greece considerably more substantial contacts than the United Kingdom with this dispute. Therefore, we believe that Greek law should apply.
BV contends that we nonetheless should favor the law of the flag in order to create certainty as to which laws apply to claims against classification societies. We disagree. Whatever significance law of the flag may have in cases where the ship or its owner is a
Carbotrade contends that under Greek law, BV’s duty not to engage in negligent misrepresentations extended to Carbotrade. In the district court, Carbotrade submitted a single affidavit from a Greek lawyer, which stated in conclusory fashion that Greek law creates such a duty; the affidavit did not state specifically that Greek law would create a duty from defendants to third parties for negligent misrepresentаtions under these circumstances. Cf. Marc Rich & Co., [1995] 3 All E.R. at 322 (noting that even owners of vessels apparently have never successfully sued a classification society for damages). BV has not yet submitted any proof as to what duty Greek law may or may not impose under these facts. Because we remain uncertain as to what Greek law may require, wé decline at this stage to interpret Greek law as Carbotrade would have us do. In these circumstances, we think the preferable course is to remand this case to the district court to determine in the first instance the parameters of Greek law as they apply to this case.
Finally, we note that the district court erred in concluding that Carbotradé could not, as a matter of law, establish reliance on BV’s representations. The district court reasoned that Carbotrade was aware of the leakage in the wingtanks — because Tsamados, Carbotrade’s surveyor, was aware of it — and had ample opportunity to refuse the vessel under both the charter and the subcharter. Carbotrade,
CONCLUSION
For the foregoing reasons, we vacate the judgment of the district court, and we remand for further proceedings consistent with this opinion.
Notes
. The Lauritzen Court, in discussing the applicability of the place of the contract, noted that “the tendency of the law is to apply in contract matters the law which the parties intended to apply,”
. In actuality, a corporation does not have domicile but instead has citizenship. See Moore v. General Motors Pension Plans,
. Although BV disputes this, it presents no evidence that Caribene was anything other than a shell corporation and instead only takes exception to Carbotrade's reliance on Caribene's Annual Return for 1989 because it is dated four days after the sinking of the Star of Alexandria. We see no relevance to the four day gap in time and note that the return amply supports Carbo-trade’s position.
. Palm Navigation was either a Liberian or a Panamanian company; even its general manager, Athanasios Zachariades, could not remember which. However, Palm Navigation's offices seem to have been located in Greece.
Dissenting Opinion
dissenting:
The majority today abandons “the most venerable and universal rule of maritime law[,] ... which gives cardinal importance to the law of the flag,” Lauritzen v. Larsen,
On April 17, 1989, the MTV' STAR OF ALEXANDRIA sank while en route to the United States from Grеece. The ship was owned by Caribene Investments, Ltd. (“Cari-bene”), a corporation organized under the laws of Gibraltar, a dependency of the United Kingdom (“U.K.”). The ship was registered in Gibraltar and flew a British flag. Under the authority of the Government of Gibraltar, the ship was surveyed for safety construction, safety equipment, load line, radiotelegraphy and pollution prevention, and received appropriate certificates of approval, all of which were issued in London. It also was subject to strict British manning laws, including the requirement that at least one British officer be on board at all times. Its failure to comply with this requirement ultimately led its insurer to deny coverage for cargo losses sustainеd as a result of the ship’s sinking. Moreover, the charter party between Cari-bene and plaintiff, Carbotrade S.p.A (“Car-botrade”), called for disputes to be arbitrated in London. Finally, the accident was investigated by the U.K. Department of Transportation. Despite these extensive contacts between the STAR OF ALEXANDRIA and the U.K., particularly the flying of the U.K. flag, my colleagues conclude that Greek law, rather than U.K. law, governs this dispute. I disagree.
The travels and travails of the STAR OF ALEXANDRIA were truly international in character. In addition to the substantial British contacts present here, the Lauritzen factors suggest that other nations also share an interest in this litigation. The defendant, Bureau Veritas (“B.V.”), is a French corporation with its principal place of business in France. The plaintiff, Carbotrade, is an Italian corporation. Its assignor, Essex Cement, is a New Jersey partnership, and the suit was brought in a United States court. Finally, the vessel sank in international waters. In the light of these facts, the district court concluded that “the Lauritzen factors ‘point indiscriminately to much of the globe.’ ” Carbotrade SpA v. Bureau Veritas,
At the outset, it is pertinent to note that in the district court Carbotrade argued principally for the application of United States law and only “half-heartedly” argued in the alternative that Greek law should govern. Id. My colleagues now insist, however, that the place of the wrongful act plainly favors the application of Greek law. Ante at 91. This statement finds support in neither the facts nor the law. “The place of the wrongful аct is accorded little weight in traditional maritime cases, in which the locality of the ship changes constantly.” Fogleman v. ARAMCO (Arabian Am. Oil Co.),
The law is clear that in a tort action such as this, an actionable wrong does not come into being absent the above-quoted item 4,
Santana, Inc. v. Levi Strauss & Co.,674 F.2d 269 , 272 (4th Cir.1982) (injury is last element of a tort);
Ritchie Enters, v. Honeywell Bull, Inc.,730 F.Supp. 1041 , 1046 (D.Kan.1990) (place where injury suffered generally considered to be where wrong occurred).
“ ‘[I]n actions of negligence damage is of the very gist and essence of the plaintiffs cause.’” Schmidt v. Merchants Despatch Transp. Co.,
I am equally at odds with the majority’s assertion that “[t]he actual owners of the STAR OF ALEXANDRIA, as distinguished from its paper owner, were Greek.” Ante at 92. In the complaint that initiated this litigation, Caribene was described as “owner of the ‘MTV STAR OF ALEXANDRIA.’” When B.V. moved to dismiss the complaint, Carbotrade’s attorney submitted an affidavit in which he described Caribene as “at all material times, a corporation organized and existing by virtue of the laws of the Dependency of Gibraltar and was the registered owner of the M.V. ‘STAR OF ALEXANDRIA.’ ” The chief legal officer of B.V. filed an affidavit in support of B.V.’s motion to dismiss in which he stated that B.V. contracted to class the STAR OF ALEXANDRIA with Caribene, “the vessel’s owner.” These statements never were challenged.
If share ownership is determinative of corporate citizenship, Greece is conspicuous by its absence. Caribene’s 1989 Annual Return showed that it had 400 shares of stock outstanding, one of which was held by Gateway Nominees Ltd., 123 Main Street, Gibraltar, and the remaining 399 by Marissa Investment Trust Inc., 80 Broad Street, Monrovia, Liberia.
In separate orders, District Judges Patterson and Koeltl described Caribene, a corporation organized under the laws of Gibraltar, as the ship’s owner, Judge Patterson in an unpublished opinion and Judge Koeltl at
I am concerned about the facility with which my colleagues “pierce the veil” of Cari-bene’s corporate existence. My colleagues’ assertion that Caribene “was simply a shell corporation,” ante at. 92, is strong language. A shell corporation is a “corporate frame, containing few, if any, assets, kept alive by required filings, generally for future use.” Black’s Law Dictionary 343 (6th ed. 1990); see also 8A Am.Jur.2d Corporations § 738, at 649. Until the STAR OF ALEXANDRIA foundered on April 17,1989, Caribene was its owner. To say that this large, 600 foot, ocean-going cargo vessel of 22,627 gross tonnage with an insured value of $3 million and a chartering rate of $7,800 per day was not a substantial asset would be to blink reality.
My colleagues’ discussion of the “flag of convenience” doctrine, and particularly its possible application to Gibraltar, is both unnecessary and unfounded. According to Athanasios Zachariades, the chief officer of Palm Navigation, which managed the STAR OF ALEXANDRIA, Palm was located in either Liberia or Panama, and none of its shareholders was Greek. The majority cites Zachariades’ testimony to the effect that, if the STAR OF ALEXANDRIA had been required to comply with U.K. law for the manning of vessels, he would have changed the ship’s flag. Ante at 92. The fact is that the vessel did not comply fully with U.K. law, and it is that very lack of compliance that led to this litigation. That, subsequent to the events herein, Palm Navigation may have hoisted other nations’ flags abovе its man
“Ships ... register in flag of convenience countries because those countries subject them to little or no control. Fees and taxes are low, labor regulations and safety standards are minimal, and ship movements are largely unhampered.” Alcoa S.S. Co. v. M/V Nordic Regent,
This Court recently reaffirmed the preeminence of the law of the flag in Sundance, supra, a case factually similar to the one at bar. In Sundance, plaintiffs were the owners of a Bahamian flag ship which sank off the coast of British Columbia. They sued the classification society which had issued certificates representing the vessel’s compliance with international safety standards as well as its own classification rules. Under Bahamian law, the defendants were entitled to immunity in connection with their issuance of certain of the certificates. The district court noted that factors other than the flаg pointed toward many nations and held that, under those circumstances, Bahamian law applied. We affirmed, reemphasizing “the importance of the law of the flag, which ‘overbears most other connecting events in determining applicable law.’ ”
CONCLUSION
The STAR OF ALEXANDRIA was entered in a United Kingdom protection and indemnity association. That company denied coverage for all claims arising out of the STAR OF ALEXANDRIA’S sinking because of Caribene’s failure to comply with the manning requirements of Gibraltar. Thus, the law of the flag already has played a substantial role in the events at issue herein. My colleagues suggest no persuasive reason why the law of Gibraltar should be supplanted now by the law of Greece.
I would affirm.