U.S. Court of Appeals for the Sixth Circuit, Ingram Barge Company, LLC v. Zen-Noh Grain Corp., Docket No. 20-5514

 

Transportation of Goods

 

Bill of Lading

 

Negotiable Bill of Lading

 

Demurrage Charges

 

Admiralty

 

Maritime Law

 

Forum Selection Clause

 

Third-Party Beneficiary

 

Contract Drafting

 

Customs

 

 

 

Typically, only parties to a contract are bound to its terms.  This case is no exception.  Zen-Noh Grain Corporation was neither a party to nor consented to Ingram Barge Company’s contract for the transportation of goods (a bill of lading) and thus is not bound to the contract’s forum selection clause. Therefore,  the  district  court  did  not  have  jurisdiction over Zen-Noh, and we AFFIRM the district court’s dismissal for lack of personal jurisdiction.

 

 

Zen-Noh  purchased  shipments  of  grains  from  several  companies. The  sellers  were required to prepay the barge freight and deliver the product to Zen-Noh’s grain trading terminal in Convent, Louisiana.  But the sellers were not required to use any specific company to deliver the goods.  Plaintiff Ingram was chosen. Ingram then issued a contract to the sellers for the transportation of goods—a negotiable bill  of  lading  in  industry  parlance.    A  bill  of  lading  defines  the  relationships  of  the  parties:  the consignor (company arranging shipment); the consignee (company which is owed delivery); and the carrier (company that carries the goods). After the goods have arrived, a consignee presents the  bill  of  lading  to  receive  the  goods.   See Evergreen  Marine  Corp.  v.  Six  Consignments of Frozen Scallops, 4 F.3d 90, 92 n.1 (1st Cir. 1993).  A negotiable bill of lading is a document of title, which is “vested in the holder of the bill.”  Id. at 96.  All the bills issued by Ingram are essentially identical, except two.  In most of these bills: “the grain seller (or affiliate) is the consignor; the consignment is to the order of the consignee; Zen-Noh is included as a ‘notify’ party ‘A/C’ the consignor/consignee; the freight is described as prepaid; and the signature blocks are for Ingram and the consignor/consignee.”  In the two exceptions, Zen-Noh is not mentioned at all or is mentioned in the field for consignee.  Printed on each bill was an agreement to the “Carrier’s Grain Transportation Terms” and a link to the Terms on Ingram’s website.  Importantly, the Terms: (1) purport to bind any entity that has an ownership interest in the goods; and (2) include a forum selection provision selecting the U.S. District Court for the Middle District of Tennessee.

 

(Parties can have multiple roles). 

(“A/C” means “on account of).” 

 

 

Ingram updated its Terms in April 2019.   Ingram alleges that it notified Zen-Noh of the Terms  through  an  email  to  CGB  Enterprises,  Inc.    In  a  declaration,  a  representative  of  Ingram says, “to the best of his knowledge, information and belief,” that “CGB is a company closely connected  with  Zen-Noh  and  Zen-Noh  is  a  part-owner of CGB.”  The representative also  says, again on information and belief, “CGB receives many of Zen-Noh’s consigned grain cargos on the Lower Mississippi River and often acts on Zen-Noh's behalf in commercial dealings related to grain transportation.”  Ingram’s email to CGB was sent prior to the use of the invoices at issue in this case.  About  three  weeks  later,  Zen-Noh “sent an email to Ingram complaining that Zen-Noh had received invoices for which it did not believe it was liable.”  Ingram responded that the invoices were “per the grain contract.”  When Zen-Noh  requested  the  grain  contract  for  its review, Ingram replied with a link to the Grain Transportation terms.  Zen-Noh finally answered that it was “not party to the barge affreightment contract as received in your previous email, and as such, is not liable for nor will be paying these invoices.”  No  one  complains  that  the  grains  were  not  shipped  and  received  by  Zen-Noh.    Instead, Ingram  alleges  it  incurred  costs  that  it  claims  Zen-Noh  must  pay.    Zen-Noh  has  already  paid Ingram demurrage charges—“penalties related to delayed loading or unloading of goods”—but has  not  paid  for  “unrelated  expenses  that  Ingram  incurred  en  route  involving  ‘fleeting,’ ‘wharfage,’ and ‘shifting.’”  Those costs it says it does not owe.  As a result,  Ingram  filed  this lawsuit against Zen-Noh in the Middle District of Tennessee, but the district court dismissed the case for lack of personal jurisdiction.

 

 

Ingram does not allege that Zen-Noh is subject to the court’s jurisdiction through general or specific jurisdiction.  Rather, it relies on a forum selection clause linked to its bills of lading.  And a forum selection clause allows a party to agree “to the jurisdiction of a particular court.”  Preferred  Capital,  Inc.  v.  Assocs.  in  Urology,  453  F.3d  718,  721  (6th  Cir.  2006)  (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S.1 (1972)).  But  a  bill  of  lading  is  a  contract. See Wemhoener  Pressen  v.  Ceres  Marine Terminals Inc., 5 F.3d 734, 738 (4th Cir. 1993).  “When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation.”  Dynamic Worldwide Logistics, Inc. v. Exclusive Expressions, LLC, 77 F. Supp. 3d 364, 373 (S.D.N.Y 2015) (quoting Norfolk S. Ry.  Co.  v.  Kirby,  543  U.S.  14,  22–23  (2004)).    Under  federal  common  law,  these  contracts should be construed “by their terms and consistent with the intent of the parties.”  Id. (quoting Kirby,  543  U.S.  at  31).    As  such,  these  contracts  bind  the  parties  that  negotiated  them.  Wemhoener Pressen, 5 F.3d at 738. Here, Ingram and the grain sellers.  Ingram instead attempts to bind Zen-Noh as a consignee, despite Zen-Noh’s classification on  most  bills  as  a  notify party.   See North  Pennsylvania  R.  Co.  v.  Commercial  Nat.  Bank  of Chicago,  123  U.S.  727,  736–37  (1887)  (recognizing  that  notify  parties  are  distinct  from consignees).    Consignees  are  considered  third-party  beneficiaries  to  bills  of  lading.   Dynamic Worldwide  Logistics,  77  F.  Supp  3d  at  374.    A  bill  can  bind  them,  but  only  with  their  consent.  See Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co., 696 F.3d 647, 655 (7th Cir. 2012); In re M/V  Rickners  Genoa  Litig., 622  F.  Supp.  2d  56,  71  (S.D.N.Y.  2009) opinion adhered  to  on reconsideration,  643  F.  Supp.  2d  553  (S.D.N.Y.  2009) and aff’d sub nom. Chem One, Ltd. V. M/V Rickmers Genoa, 502 F. App’x 66 (2d Cir. 2012).  And a third-party beneficiary can show consent by: (1) filing suit; (2) its course of conduct; or (3) accepting through its agent.4 Zen-Noh did not consent in any of these ways.  So, even if we treat Zen-Noh as a consignee, the terms of the bills do not reach it.

 

 

Lawsuit.    Ingram  sued  Zen-Noh.    So,  Zen-Noh neither “filed a lawsuit under the bill” nor “attempted to benefit from its terms.”  Kawasaki, 696 F.3d at 655. Course  of  conduct.    Zen-Noh did not acquiesce to Ingram’s grain terms over a long period.    Just  the  opposite.    Shortly  after  Zen-Noh  learned  of  the  revised  Terms,  it  informed Ingram that it did not consider itself bound by those terms negotiated by the sellers and Ingram.  Compare APL Co. Pte. Ltd. v. Kemira Water Solutions, Inc., 890 F. Supp. 2d 360, 367 (S.D.N.Y. 2012) (holding that “little past dealings” precludes a finding of acceptance  through  a  course  of conduct) with Sea-Land Service, Inc. v. Landis, No. Civ. A. 94-6153, 1996 WL 4120, at *3 (E.D. Pa. Jan. 3, 1996) (finding acceptance when there was no evidence a defendant rejected the bill’s unchanged terms over a decade-long relationship).  Ingram  highlights  its  longstanding  relationship  with  CGB,  claiming  CGB  is  affiliated with and partially owned by Zen-Noh.  Yet, even if that is true, that relationship is too attenuated to  presume  Zen-Noh’s acceptance.  Ingram also points to  Zen-Noh’s payment of demurrage charges on some of the shipments.  As the district court found, however, those payments may be explained by a separate obligation between Zen-Noh and the sellers.  Indeed, Zen-Noh may have “an  implied  obligation  to  pay  freight  charges  separate  and  apart  from  the  operative  bill  of lading.”  APL  Co.  Pte.  Ltd.,  890  F.Supp.  2d  at  367; see  also  FT  &  T  Consulting,  Inc.  v.  B.O. Astra Management Corp., No. 12-cv-134, 2016 WL 8711085, at *5 (E.D.N.Y. Sept. 30, 2016). Acceptance  by an  agent.    Zen-Noh  and  the  grain  sellers  did  not  have  an  agency relationship. “A basic principle of agency law is that an agency relationship exists only if the agent is acting on behalf of and subject to the control of the principal.”  APL Co. Pte. Ltd, 890 F. Supp.  2d  at  369  (quoting Maersk,  Inc.  v  Neewra,  Inc.,  687  F.  Supp.  2d  300,  329  (S.D.N.Y. 2009)).  Ingram presents no evidence that the grain sellers were “acting on behalf” of Zen-Noh or  under  Zen-Noh’s control when the sellers entered the bills of lading.   Id. at  369  (collecting cases); Kawasaki, 696 F.3d at 655 (“the agency test must fail because the consignee did not have the power to control. . .”); see  also  Baker  v.  LeBoeuf,  Lamb,  Leiby  &  Macrae,  105  F.3d 1102, 1106 (6th Cir. 1997) (holding that counterparties cannot be bound to a third-party contract unless  the  entities  are  so  closely  related  that  being  bound  to  the  contract  becomes  foreseeable).  To  the  contrary,  binding  Zen-Noh in this way would be “inconsistent with the intent of the parties.”  Kirby,  543  U.S.  at  31.    Zen-Noh  paid  for  freight  with  the  expectation  that  the  seller would  bear  the  full  responsibility  for  transport.    In  other  words,  Zen-Noh  sought  to  avoid  a contractual relationship with Ingram.

 

 

4 Ingram makes much of Zen-Noh’s status as the “ultimate consignee” or owner of the grain, but neither is synonymous with consent.  See Dynamic Worldwide Logistics, 77 F. Supp. 3d at 374 (“The mere fact that a party is a  consignee  or  third-party  beneficiary  is  insufficient  to  warrant  a  finding  that  the  consignee  was  bound  by  the terms contained in the bills of lading”); APL Co. PTE v. UK Aerosols LTD., No. C 05-0646, 2006 WL 3848784, at *3 (N.D. Cal. Sept. 28, 2006) (finding mere ownership of property does not bind the purchaser to the terms of a bill of lading).

 

 

While  Zen-Noh  is  a  beneficiary of these bills of lading, that “mere fact . . . does not create contractual obligations for that beneficiary.”  Dynamic Worldwide, 77 F. Supp. 3d at 374; see  also  Affiliated  FM  Ins.  Co.  v.  Kuehne  +  Nagel,  Inc.,  328  F.  Supp.  3d  329,  338  (S.D.N.Y. 2018) (declining to enforce a forum selection clause against a third-party  beneficiary).   Instead, Ingram  must  show  Zen-Noh  consented  to  its  bills.    It  has  not.    Accordingly,  we  AFFIRM  the district court’s dismissal.

 

 

 

HELENE N. WHITE, Circuit Judge, dissenting.

 

I respectfully dissent. The  difference  between  negotiable  and  nonnegotiable  bills  of  lading  is  important  in  this case.  “A negotiable bill of lading is a document of title, while a non-negotiable  bill  functions more like a receipt.”  Williston on Contracts § 59:10 (4th ed. 2020). Buyers of highly fungible commodities like grain often choose to resell their grain while it is still in transit from the seller.  Wallingford Bros. v. Bush, 255 F. 949, 950 (8th Cir. 1918).  To transfer title of the still-in-transit grain  to  a  new  buyer,  the  original  buyer  need  only  endorse  the  negotiable  bill  of  lading  and deliver  it  to  the  new  buyer.   Allied  Chem.  Int’l  Corp.  v.  Companhia  de  Navegacao  Lloyd Brasileiro, 775 F.2d 476, 481 (2d Cir. 1985); Susan Beecher, Can the Electronic Bill of Lading Go  Paperless?,  40  Int’l  Law.  627,  631  (2006)  (“the  negotiable  bill  of  lading  is  the  only document which the shipper may not transmit by fax or email”).  The new buyer then  presents the bill to the carrier, who “is responsible for releasing the cargo only to the party who presents the  original  bill  of  lading.  .  .  .  If  the  carrier  delivers  the  goods  to  one  other  than  the  authorized holder  of  the  bill  of  lading,  the  carrier is liable for misdelivery.”  Allied Chem. Int’l Corp., 775 F.2d at 481.  A  nonnegotiable  bill  works  differently.    Goods  sent  by  way  of  a  nonnegotiable  bill  are “nontransferable;  that  is,  John  Doe  cannot,  by  indorsing  that  bill  to  anyone  else,  give  that transferee  the  right  to  receive  the  goods  from  the  carrier.”    Alan  S.  Gutterman, Business Transactions  Solutions §  123:86  (2021).    Because  title  to  the  goods  cannot  be  transferred  mid-shipment  when  using  a  nonnegotiable  bill,  there  is  no  requirement  that the  buyer  present  the original bill of lading at the time it accepts the goods from the carrier.  Pere Marquette Ry. Co. v. Chicago  &  E.  I.  Ry.  Co.,  255  F.  40,  41–42  (7th  Cir.  1918);  David  A.  Bury, Electronic  Bills  of Lading:  A  Never-Ending  Story?,  41  Tul.Mar. L.J. 197, 209 (2016) (“negotiable bills of lading require consignees to present the physical bill of lading to enable the carrier to release the cargo; conversely, non-negotiable alternatives . . . are not burdened by this requirement”).

 

 

For that reason, the name listed as consignee on a nonnegotiable bill of lading matters a great deal; the carrier must deliver to the named consignee or face liability for misdelivery. Pere Marquette Ry. Co., 255 F. at 41–42. Not so with a negotiable bill. Since a negotiable bill of lading may change hands multiple times mid-shipment, “the consignee or ‘notify party’ designated on the negotiable bill of lading may not necessarily be the holder of the bill at the time and place of delivery,” Evergreen Marine Corp. v. Six Consignments of Frozen Scallops, 4 F.3d 90, 92 n.1 (1st Cir. 1993), and these labels accordingly carry little significance. The holder of the negotiable bill is entitled to “the rights and subject to the liabilities of the original consignee.” United States v. Wells Fargo & Co., 271 F. 180, 182 (2d Cir. 1921). Thus, what matters when dealing with a negotiable bill of lading is who physically presents the bill and accepts delivery of the cargo under it. Allied Chem. Int’l Corp., 775 F.2d at 481. And, because the bill of lading is negotiable, if it purports to bind the consignee to its terms upon acceptance of the goods under it, those who opt to become a party to the transaction by accepting the goods and presenting the bill are bound by its terms.

 

Ingram Barge’s complaint alleges that Zen-Noh became the consignee after the bills of lading were issued, and Zen-Noh does not deny that it physically presented the negotiable bills of lading and accepted delivery of the cargo.

The district court and the majority cite the bills’ identifying Zen-Noh as merely the “notify” party, and not the consignee, as evidence that Zen-Noh was not a party to the bills and did not consent to be bound by the bills’ terms. I disagree with this analysis at a few points. First, Zen-Noh is the named consignee on Bill No. ING 19- 00901. Second, even if Zen-Noh were listed as the notify party on that bill, as it is on all but one of the other bills in this case, the bills of lading were negotiable, which means that any distinction between the “notify” party and the “consignee” evaporated when, as Ingram Barge alleges, Zen-Noh presented the negotiable bills and accepted delivery of the cargo under the bills. See Pac. Coast Fruit Dist. v. Pennsylvania R.R. Co., 217 F.2d 273, 275 (9th Cir. 1954) (party not named in original bill of lading became consignee through its actions). It could not have demanded and accepted the cargo otherwise. See Allied Chem. Int’l Corp., 775 F.2d at 481.

 

True, neither Zen-Noh nor the named consignees bargained for the terms in Ingram Barge’s bills of lading, but, as the majority acknowledges, a bill of lading “can nonetheless bind a non-party buyer where there is consent to be bound.” Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co., 696 F.3d 647, 655 (7th Cir. 2012). The bills of lading in this case clearly stated that “any Consignee hereto is (and will be deemed) bound by Ingram Barge’s Grain Transportation Terms. The surrender of this original Order Bill of Lading . . . properly endorsed is required before the delivery of the shipment.” See, e.g., R. 1-38, PID. 201. Although Zen-Noh told Ingram Barge on June 3, 2019—before accepting any of the cargo at issue here—that it did not believe it was liable for the fleeting, wharfage, and shifting charges Ingram Barge seeks to recoup, that shows only that Zen-Noh was on notice of the terms at issue and nevertheless decided to physically present the bills and accept the cargo under the bills anyway. Absent an express agreement with Ingram Barge to the contrary, Zen-Noh’s conduct in stepping into the shoes of the named consignee and accepting the grain pursuant to the negotiable bills of lading demonstrated consent to the terms of Ingram Barge’s bills of lading. See, e.g., Pac. Coast Fruit Dist., 217 F.2d at 275 (explaining that “receipt and acceptance of the shipment” would be sufficient to bind consignee to terms of a bill of lading that made the consignee liable for shipping charges, and holding that the consignee was bound to the terms of the bill of lading because the consignee’s “unqualified and unequivocal dominion and control of the shipments” was “equivalent to acceptance” of the shipments); Neilsen v. Jesup, 30 F. 138, 139 (S.D.N.Y. 1887) (“The general rule undoubtedly is that the consignee and indorsee of the bill of lading who is owner of the goods and of the bill of lading, and who accepts the goods under the bill of lading, is bound by its terms.”); Gage v. Morse, 94 Mass. (12 Allen) 410, 411 (Mass. 1866) (“The receipt by consignee of the cargo, which was to be delivered upon payment of the freight, would have been evidence of an agreement to receive it upon the terms named in the bill of lading.”). The majority cites no case holding that a party can unilaterally change the terms of a bill of lading under which it demands and accepts delivery of the cargo.

 

The majority contends that neither Zen-Noh’s status as the “ultimate consignee” nor as owner of the grain constitutes consent to the bills’ terms, and that being a mere beneficiary of the bills of lading does not create contractual obligations for Zen-Noh. Each of those propositions standing alone may be correct, but none is squarely applicable here where Zen-Noh was a consignee, owner and beneficiary who also presented the bills and accepted the goods. Indeed, in none of the cases cited by the majority did a consignee physically present a negotiable bill of lading and accept the goods. That factual distinction is critical.

 

Moreover, presentation of the bills and acceptance of the goods is not the only evidence of consent to be bound that can be found in the record. Zen-Noh paid demurrage charges owed under the terms of Ingram Barge’s bills of lading for some of the shipments at issue. Ingram Barge argues that partial payment of demurrage charges pursuant to the bills of lading is evidence of Zen-Noh’s consent to be bound. The majority echoes the district court’s speculation—based on no fact apparent in the record—that those payments “may be explained by a separate obligation between Zen-Noh and the sellers” or were paid pursuant to an implied obligation to pay freight charges. One of those theories may prove to be correct, but dismissing Ingram Barge’s partial-performance argument based on speculation contravenes our admonition that “the pleadings and affidavits submitted must be viewed in a light most favorable to the plaintiff, and the district court should not weigh ‘the controverting assertions of the party seeking dismissal’” when it elects to rule on a Rule 12(b)(2) motion without a hearing or the opportunity for discovery. Air Prod. & Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d 544, 549 (6th Cir. 2007) (quoting Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). At this stage, the district court should have considered Zen-Noh’s partial payment of demurrage charges as evidence of Zen-Noh’s consent to be bound.

 

(In Dynamic Worldwide Logistics, Inc., the consignee failed to present the negotiable bill of lading at the time it accepted the goods, thus never evincing knowledge of the bill of lading’s terms. 77 F. Supp. 3d at 368. Affiliated FM Ins. Co. v. Kuehne + Nagel, Inc. is inapposite, since the third-party beneficiaries were not consignees or owners of the cargo, but subcontractors of the carrier who sought the liability protections of the bill’s Himalaya Clause. 328 F. Supp. 3d 329, 338 (S.D.N.Y. 2018). And in the remainder of the cases cited by the majority, the goods were never accepted by the consignee. Kawasaki Kisen Kaisha, Ltd., 696 F.3d at 652 (goods damaged in train derailment); APL Co. PTE. v. UK Aerosols LTD., No. C 05-0646-MHP, 2006 WL 3848784, at *1 (N.D. Cal. Sept. 28, 2006) (goods were “leaking, dangerous and hazardous” and were destroyed by carrier); APL Co. Pte. v. Kemira Water Sols., Inc., 890 F. Supp. 2d 360, 364, 368 (S.D.N.Y. 2012) (hazardous goods—shipped by nonnegotiable bill of lading with terms the consignee never received—leaked during shipment and were rejected by consignee); In re M/V Rickmers Genoa Litig., 622 F. Supp. 2d 56, 62 (S.D.N.Y.), opinion adhered to on reconsideration, 643 F. Supp. 2d 553 (S.D.N.Y. 2009), and aff’d sub nom. Chem One, Ltd. v. M/V Rickmers Genoa, 502 F. App’x 66 (2d Cir. 2012) (goods were destroyed by an explosion en route).)

 

 

Secondary Sources: Alan  S.  Gutterman, Business Transactions  Solutions § 123:86 (2021)

 

 

 

(U.S. Court of Appeals for the Sixth Circuit, June 28, 2021, Ingram Barge Company, LLC v. Zen-Noh Grain Corp., Docket No. 20-5514, Recommended for Publication)