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Court Rejects Argument That Forum Selection Clause Violates COGSA Because Forum Does Not Recognize In Rem Actions

On May 4, 2018, the Third Circuit in Liberty Woods International v. MV Ocean Quartz affirmed the District Court’s dismissal of plaintiff’s action for cargo damages while onboard the MV OCEAN QUARTZ. The dismissal was based on the fact that liability was governed by the carrier’s bill of lading, which contained a foreign forum selection clause for South Korea. The plaintiff appealed, arguing that section 3(8) of the Carriage of Goods by Sea Act (COGSA), which permits in rem suits, invalidates the South Korean forum selection clause because South Korea does not recognize in rem suits.

The court disagreed, stating that under the Supreme Court’s Sky Reefer decision, foreign selection clauses would not lessen carrier lability in violation of COGSA solely because litigating abroad would be more costly and did not otherwise lessen ship liability here. In response to plaintiff’s argument, the Court also held that in rem suits are not substantive rights under COGSA because the Act does not guarantee in rem suits, which are merely a procedural device for pursuing claims. The Court noted a  strong policy reason for concluding that COGSA does not grant a substantive right to in rem relief, because it would invalidate numerous foreign forum selection clauses; the U.S. is one of the few countries that does recognize in rem actions.

This case provides another reminder to carefully consider the terms in bills of lading. Find the decision here.

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