Commentary: Container chassis lease not a maritime contract

Trac Intermodal sued two trucking companies, claiming they breached a contract by using its chassis to move maritime cargo.

   Chassis lessor Trac Intermodal sued FourHorsemenInc., A&A Exp. Inc. and Ayeah A. Ayesh, who Trac said in court papers it believed was the president or principal of A&A, claiming the defendants owed it at least $384,106 for breaching a maritime contract by using the company’s chassis to move maritime cargo.
   The court said the defendants failed to respond in a timely fashion, and Trac “moved for entry of default and entry of judgment by default.” But the court said before resolving Trac’s motion, it first needed to determine whether it had subject matter jurisdiction.
   It also invited Trac to assert an alternative basis for jurisdiction should it find admiralty jurisdiction lacking, and Trac responded by arguing that the court also had diversity jurisdiction.
   Unpersuaded by Trac’s arguments that it had admiralty jurisdiction (Interpool, Inc. d/b/a Trac Intermodal v. Four Horsemen Inc. et al. U.S. District Court, District of New Jersey. No. 16-2490. Feb. 8), the court vacated writs of maritime garnishment previously issued in Trac’s favor under Supplemental Rule B of the Federal Rules of Civil Procedure, which it said is “a remedy available only under a court’s admiralty jurisdiction.”
   Trac said the defendants took its chassis from equipment pools in various ports, including the Port of Chicago, and had refused to compensate it.
   A Trac executive said the ocean containers transported by the defendants were carried pursuant to bills of lading, which provided for the landing of the ocean import cargo and continuous on-carriage by train to a railhead, and then on Trac’s chassis to the ultimate consignee.
   “It is this court’s understanding that the defendants took plaintiff ’s chassis so that the defendants could transport ocean import cargo pursuant to the final land portion (i.e. from railhead to consignee) of a ‘through’ (i.e. end-to-end transportation) bill of lading,” explained Judge Mary Cooper, who wrote the opinion.
   “The question before the court is thus whether a contract to lease chassis to a carrier so that the carrier may transport cargo from a railhead to a consignee pursuant to a ‘through’ bill of lading provides this court with admiralty jurisdiction.”
   Cooper noted that while federal district courts have original jurisdiction over “any civil case of admiralty or maritime jurisdiction,” the burden of proving that subject matter jurisdiction lies with the plaintiff.
   The U.S. Supreme Court wrote in its 2004 decision Norfolk S. Ry. Co. v. Kirby that “the boundaries of admiralty jurisdiction over contracts…have always been difficult to draw.”
   In that case, an intermodal shipment from Australia to Alabama made it safely to the Port of Savannah, but the cargo was destroyed when the train carrying it derailed en route from Savannah to Huntsville, Ala.
   Looking to the “nature and character of the contract,” the Supreme Court held that the bills of lading were maritime contracts “because their primary objective [was] to accomplish the transportation of goods by sea from Australia to the eastern coast of the United States.”
   According to Cooper, “The rationale of Kirby was that maritime law must accept the modern realities of maritime transportation.
   “Maritime commerce has evolved along with the nature of transportation and is often inseparable from some land-based obligations,” she wrote, quoting the Kirby decision. “The international transportation industry clearly has moved into a new era—the age of multi-modalism, door-to-door transport based on efficient use of all available modes of transportation by air, water and land.”
   “Contracts reflect the new technology, hence the popularity of ‘through’ bills of lading in which cargo owners can contract for transportation across and to inland destinations in a single transaction,” the Supreme Court said. “The popularity of that efficient choice, to assimilate land legs into international ocean bills of lading, should not render bills for ocean carriage non-maritime contracts.”
   “The Supreme Court criticized the ‘spatial approach’ employed by some federal courts when deciding whether transportation contracts for international shipping are maritime in nature,” said Cooper, explaining that “the proper analysis was a conceptual approach.”
   In Kirby, the Supreme Court wrote that “Conceptually, so long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce – and thus it is a maritime contract. Its character as a maritime contract is not defeated simply because it also provides for some land carriage.”
   In the Trac litigation, Cooper ruled the chassis contract was not a bill of lading that included both ocean and landside elements.
   “Rather, it is a contract to use chassis for the movement of cargo that takes place exclusively on land (i.e. from railhead to consignee),” she wrote. “Its primary objective is to provide equipment so that a carrier can accomplish land based transportation. The fact that the defendants were transporting international cargo pursuant to a ‘through’ bill of lading does not change the nature and character of the separate and distinct contract they had with the plaintiff.”
   Trac also argued to the court diversity jurisdiction should apply because Trac and the defendants are citizens of different states and the amount in controversy exceeds $75,000. But the Court said Trac had failed to include any allegations relating to the defendants’ contacts or activities with relation to New Jersey.
   As such, the court said it would issue an order to show cause why it should not deny Trac’s motion for entry of judgment by default for lack of personal jurisdiction and dismiss the lawsuit.