U.S. Court of Appeals for the Ninth Circuit, Milos Product Tanker Corp. v. Valero, Docket No. 23-55655

Transportation by Sea

 

Maritime Transportation Contract (or Charter Party)

 

Common Carrier v. Private-Carriage Case

 

Bill of Lading

 

Letter of Indemnity

 

Freight Costs

 

 

-       If a contract allocates freight liability to a nonparty

 

-       For common carriage contracts, the published rate forms an “offer,” which is “accepted” by receipt of the goods under a bill of lading, charter party, or default rules obligating a consignee (about default rules, see Interstate Commerce Act (“ICA”), 49 U.S.C. §§ 101 et seq.; see also 49 C.F.R. §1035.1)

 

 

 

 

Appeal from the United States District Court for the Central District of California.

 

 

Defendant–Appellant Valero Marketing and Supply company (“Valero”) appeals the district court’s grant of summary judgment for Plaintiff–Appellee Milos Product Tanker Corporation (“Milos”). In 2020, Milos transported by sea roughly 40,000 tons of jet fuel belonging to Valero. This transport cost a little over $1,000,000. But after Milos delivered, Valero refused to pay. Valero had already paid freight costs when it bought the fuel from a third company, Koch Refining International PTE Ltd., Co. (“Koch”), and had no intention of paying twice. Koch was also unwilling to pay Milos. Milos’s contract was with a fourth company, GP Global PTE Ltd. on behalf of Gulf Petrochem FCZ (“GP Global”), which arranged the voyage. But GP Global had “experienced financial difficulties” and could not pay. So Milos sued Valero for, relevant here, breach of contract.

 

 

Reviewing de novo, we agree with Valero. Valero was not party to the contract between Milos and GP Global. That contract specifically stated that GP Global would pay freight. Why Valero’s payment for freight to Koch never made it to Milos through GP Global is beyond the scope of this case. And States Marine (States Marine International, Inc. v. Seattle-First National Bank, 524 F.2d 245, 248 (9th Cir. 1975)) does not support an implied obligation for Valero to pay. States Marine modestly extended freight rules established in railroad cases to ocean carriers “operating under tariffs”—that is, from railroad common carriers to ocean common carriers. In both railroad and ocean contexts, common carriers must publish their rates and are subject to default terms of a universal bill of lading. These distinctions permit a presumption that whoever accepts delivery of a shipment from a common carrier understands what they are liable to pay. But in a private-carriage case like this one, notice of shipping costs and default terms cannot be presumed. It was therefore error to find that Valero had an implied obligation to pay under States Marine, and we must reverse.

 

 

(…) The Charter Party authorized the ship captain to sign bills of lading for the cargo. A bill of lading is a document “issued by the shipowner when goods are loaded on its ship, and may, depending on the circumstances, serve as a receipt, a document of title, a contract for the carriage of goods, or all of the above.” Asoma Corp. v. SK Shipping Co., 467 F.3d 817, 823 (2d Cir. 2006). Ordinarily, a carrier like Milos is responsible for releasing cargo only to the party who presents an original bill of lading. See C-ART, Ltd. v. Hong Kong Islands Line Am., S.A., 940 F.2d 530, 532 (9th Cir. 1991).

 

 

(…) On July 14, Valero agreed to purchase the jet fuel from Koch on “cost and freight” (“CFR”) terms. Under CFR terms, the seller arranges and pays for transportation to the port of delivery, while the buyer assumes title and risk of loss as soon as the cargo is loaded onto the carrier at the port of origin. See, e.g., BP Oil Int'l, Ltd. v. Empresa Estatal Petroleos de Ecuador, 332 F.3d 333, 338 (5th Cir. 2003).

 

 

(…) We begin with the law governing maritime freight liability. It is “well settled” that the party who sends the goods—the “shipper” or “consignor”—is “primarily liable to the carrier for freight charges.” States Marine, 524 F.2d at 247 (citing Louisville & Nashville R.R. Co. v. Cent. Iron & Coal Co., 265 U.S. 59, 67 (1924)). That is true even when a bill of lading purports to impose liability on the receiver of the goods (the “consignee”). Louisville & Nashville R.R. Co., 265 U.S. at 67. After all, “the shipper is presumably the consignor; the transportation ordered by him is presumably on his own behalf; and a promise by him to pay therefor is inferred.” Id. However, a contract or statute may form binding obligations that modify the general rule. See States Marine, 524 F.2d at 247–48. Of the two, a contract may be more significant because statutory default terms only come into play in the absence of a contract. See Louisville & Nashville R.R. Co., 265 U.S. at 65–67. That is natural because parties are generally free to negotiate and assign freight liability however they like. Id. (the shipper’s obligation to pay freight is not “absolute”—a “carrier and shipper are free to contract” as to “when or by whom the payment should be made”). If a contract allocates freight liability to a party, that ends the court’s inquiry. See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 150–51 (2009) (citing 11 WILLISTON ON CONTRACTS § 30:4 (4th ed. 1999)); see also C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 479 (9th Cir. 2000) (citing Fikse & Co. v. United States, 23 Cl. Ct. 200, 204 (1991)); In re Roll Form Prods., Inc., 662 F.2d 150, 154 (2d Cir.1981) (citing Consol. Freightways Corp. v. Admiral Corp., 442 F.2d 56, 62 (7^th Cir. 1971)).

 

 

If a contract allocates freight liability to a nonparty, then the court must determine whether the nonparty consented to be bound under the contract. In re M/V Rickmers Genoa Litig., 622 F. Supp. 2d 56, 71–72 (S.D.N.Y. 2009), aff'd sub nom. Chem One, Ltd. v. M/V Rickmers Genoa, 502 Fed. App’x 66 (2d Cir. 2012). For example, a bill of lading might allocate freight liability to a consignee. But the consignee would not be obligated to pay freight without evidence the consignee consented to be bound under the bill of lading. That evidence can be supplied by context. See, e.g., Ingram Barge Co. v. Zen-Noh Grain Corp., 3 F.4th 275, 279 (6th Cir. 2021). Typically, consignees demonstrate consent to be bound by presenting the bill of lading and accepting the goods under it. See id. at 282 (White, J., dissenting) (citing Neilsen v. Jesup, 30 F. 138, 139 (S.D.N.Y. 1887); Pacific Coast Fruit Distribs. v. Pa. R.R. Co., 217 F.2d 273, 275 (9th Cir. 1954)). Similarly, consignees may show their consent to be bound under a bill of lading by suing on the bill of lading, or by silence in context of longstanding dealings, or by the consignee’s agent negotiating the bill of lading. See Ingram Barge, 3 F.4th at 279. Notice that all these contexts show the consignee is aware of the terms to which they are agreeing.

 

 

If no contract allocates freight liability, courts may still find an implied promise to pay in some circumstances. For example, common carriers must charge publicly posted rates and are subject to default terms of a uniform bill of lading. See Interstate Commerce Act (“ICA”), 49 U.S.C. §§ 101 et seq.; see also 49 C.F.R. §1035.1. In that context, “where the parties fail to agree or where discriminatory practices are present, . . . the ICA's default terms bind the parties.” C.A.R. Transp. Brokerage Co., 213 F.3d at 479 (citing In re Roll Form Prods., Inc., 662 F.2d at 154).

 

 

A narrow reading of States Marine is in harmony with basic principles of contract formation. “The law of private carriage, now primarily charter parties, . . .  is still governed by the principle of freedom of contract.” Common Carriage and Private Carriage, 1 ADMIRALTY & MAR. LAW § 10:3 (6th ed.). Parties to a freight contract, like any other contract, are free to assign liability as they wish, provided their allocation does not run afoul of the law. See Oak Harbor Freight Lines, Inc. v. Sears Roebuck, & Co., 513 F.3d 949, 956 (9th Cir. 2008) (citing Louisville & Nashville R.R. Co., 265 U.S. at 66–67); C.A.R. Transp. Brokerage Co, 213 F.3d at 479. Beyond that, an offer generally must precede acceptance. See 1 WILLISTON ON CONTRACTS § 4:16; RESTATEMENT (SECOND) OF CONTRACTS § 23 (AM. L. INST.1981); see also Schnabel v. Trilegiant Corp., 697 F.3d 110, 121 (2d Cir. 2012). For common carriage contracts, the published rate forms an “offer,” which is “accepted” by receipt of the goods under a bill of lading, charter party, or default rules obligating a consignee. Without a published rate, it would be quite possible for a private consignee’s “acceptance” to precede the “offer” of the private carrier’s rates. And the consignee’s “acceptance” could only demonstrate a meeting of the minds if consignee liability was one of the terms of the transaction.

 

 

Any implied obligation for private-carrier consignees to pay freight must fit with foundational contract principles. Unlike common-carrier consignees, private-carrier consignees are not presumed to know key terms simply because they receive and accept goods. And they are certainly not expected to know they are liable for freight when an express contract says they are not. Therefore, private-carrier consignees cannot be under the same presumptive obligation to pay freight upon acceptance. A narrow reading of States Marine makes that clear.

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, Sept. 18, 2024, Milos Product Tanker Corp. v. Valero, Docket No. 23-55655, for Publication)

 

Nalwa v. Cedar Fair, S195031

Torts: duty of ordinary care: application of Primary Assumption of Risk to “Nonsport” Recreational Activities“. Although persons generally owe a duty of due care not to cause an unreasonable risk of harm to others (Civ. Code, § 1714, subd. (a)), some activities—and, specifically, many sports—are inherently dangerous.  Imposing a duty to mitigate those inherent dangers could alter the nature of the activity or inhibit vigorous participation.  (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003.)  The primary assumption of risk doctrine, a rule of limited duty, developed to avoid such a chilling effect.  (Ibid.; Knight v. Jewett, supra, 3 Cal.4th at p. 308.)  Where the doctrine applies to a recreational activity, operators, instructors and participants in the activity owe other participants only the duty not to act so as to increase the risk of injury over that inherent in the activity.  (Avila v. Citrus Community College Dist. (2006) 38 Cal.4th 148, 162; Kahn, at p. 1004.); in defendant’s view, a duty to minimize the inherent risk of injury from bumper car rides would “require amusement park operators to eliminate their existing rides and to replace them with rides that are fundamentally different,” contrary to the policy motivating this court’s primary assumption of risk decisions, that of preventing common law tort rules from undermining Californians’ recreational opportunities.  For reasons explained below, we agree with defendant; we agree with the dissenting justice below, and the court in Beninati, that the primary assumption of risk doctrine is not limited to activities classified as sports, but applies as well to other recreational activities “involving an inherent risk of injury to voluntary participants . . . where the risk cannot be eliminated without altering the fundamental nature of the activity.”  (Beninati v. Black Rock City, LLC, supra, 175 Cal.App.4th at p. 658.); the primary assumption of risk doctrine rests on a straightforward policy foundation:  the need to avoid chilling vigorous participation in or sponsorship of recreational activities by imposing a tort duty to eliminate or reduce the risks of harm inherent in those activities.  It operates on the premise that imposing such a legal duty “would work a basic alteration—or cause abandonment” of the activity.  (Kahn v. East Side Union High School Dist., supra, 31 Cal.4th at p. 1003; see also Shin v. Ahn, supra, 42 Cal.4th at p. 492, quoting Dilger v. Moyles (1997) 54 Cal.App.4th 1452, 1455 [“ ‘Holding golfers liable for missed hits would only encourage lawsuits and deter players from enjoying the sport.’ ”]; Avila v. Citrus Community College Dist., supra, 38 Cal.4th at p. 165 [in baseball, recognizing tort liability for hitting the batter with a pitch would tend to deter throwing inside, an essential part of the sport]; Ford v. Gouin, supra, 3 Cal.4th at p. 345 [imposing tort liability for negligence in towing water-skier might well chill participation and “have a generally deleterious effect on the nature of the sport of waterskiing as a whole”]; Knight, supra, 3 Cal.4th at p. 318 [doctrine avoids chilling vigorous participation in sport].)  The doctrine’s parameters should be drawn according to that goal; the policy behind primary assumption of risk applies squarely to injuries from physical recreation, whether in sports or nonsport activities.  Allowing voluntary participants in an active recreational pursuit to sue other participants or sponsors for failing to eliminate or mitigate the activity’s inherent risks would threaten the activity’s very existence and nature.  In thus concluding, we do not “expand the doctrine to any activity with an inherent risk,” as the majority below cautioned.  While inherent risks exist, for example, in travel on the streets and highways and in many workplaces, we agree with the lower court that “the primary assumption of risk doctrine in its modern, post-Knight construction is considerably narrower in its application.”  (See Knight, supra, 3 Cal.4th at pp. 311-312 [primary assumption of risk inapplicable to automobile accidents or medical negligence].)  But active recreation, because it involves physical activity and is not essential to daily life, is particularly vulnerable to the chilling effects of potential tort liability for ordinary negligence.  And participation in recreational activity, however valuable to one’s health and spirit, is voluntary in a manner employment and daily transportation are not. 

The doctrine thus applies to bumper car collisions, regardless of whether or not one deems bumper cars a “sport.”  Low-speed collisions between the padded, independently operated cars are inherent in—are the whole point of—a bumper car ride.

As she did in Knight and several cases since, Justice Kennard dissents here from application of the primary assumption of risk doctrine. (Dis. opn. of Kennard, J., post, at pp. 1-2.)  In light of the dissenter’s consistent urging that we return to the traditional consent-based assumption of risk defense, it is worth reiterating some of the reasons given in Knight for abandoning that defense in favor of a limited-duty rule.  (See Knight, supra, 3 Cal.4th at pp. 311-313); the traditional rule, resting on a legal fiction that the plaintiff had impliedly consented to the activity’s known risks, would completely bar the plaintiff’s recovery because of his or her unreasonable conduct, putting the defense in severe tension with comparative fault principles adopted in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804.  (Knight, at p. 311.)  In theory, moreover, it could apply to risks beyond those inherent in the activity—even reckless or intentional misconduct, were it shown the plaintiff was aware of the potential for such misconduct—and apply as well to activities far beyond the realm of sports and recreation, such as automobile travel and medical treatment, that carry known risks of injury from others’ negligence.  (Id. at pp. 311-312.)  Finally, the implied-consent theory’s focus on what the individual plaintiff subjectively knew about the nature and magnitude of the risks being encountered subjected defendants to widely disparate liability for the same conduct, and made summary judgment on the basis of assumption of risk very rare, since the defense depended on proof of the particular plaintiff’s subjective knowledge and expectations.  (Id. at pp. 312-313.)  The dissenting opinion here does not persuade us these considerations have lost their force. Bumper car rides like Rue le Dodge are dissimilar to roller coasters in ways that disqualify their operators as common carriers.  “A carrier of persons for reward must use the utmost care and diligence for their safe carriage, must provide everything necessary for that purpose, and must exercise to that end a reasonable degree of skill.”  (Civ. Code, § 2100); riders on Rue le Dodge, in other words, are not passively carried or transported from one place to another.  They actively engage in a game, trying to bump others or avoid being bumped themselves.  The rationale for holding the operator of a roller coaster to the duties of a common carrier for reward—that riders, having delivered themselves into the control of the operator, are owed the highest degree of care for their safety—simply does not apply to bumper car riders’ safety from the risks inherent in bumping.  “The rule that carriers of passengers are held to the highest degree of care is based on the recognition that ‘ “to his diligence and fidelity are intrusted the lives and safety of large numbers of human beings.” ’   (Gomez, supra, 35 Cal.4th at p. 1136.)  A bumper car rider, in contrast, does not entrust the operator with his or her safety from the risks of low-speed collisions; the undisputed facts in the summary judgment record demonstrate defendant was not a common carrier for reward in its operation of Rue le Dodge.  The public policy supporting a higher duty of care for common carriers, therefore, does not apply here and does not preclude application of the primary assumption of risk doctrine; our later decisions establish that under the primary assumption of risk doctrine, operators, sponsors and instructors in recreational activities posing inherent risks of injury have no duty to eliminate those risks, but do owe participants the duty not to unreasonably increase the risks of injury beyond those inherent in the activity.  (Avila v. Citrus Community College Dist., supra, 38 Cal.4th at p. 162; Kahn v. East Side Union High School Dist., supra, 31 Cal.4th at pp. 1003, 1005); the operator of a bumper car ride might violate its “duty to use due care not to increase the risks to a participant over and above those inherent” in the activity (Knight, supra, 3 Cal.4th at p. 316) by failing to provide routine safety measures such as seat belts, functioning bumpers and appropriate speed control, but does not do so by failing to restrict the angle of bumping; conclusion: the risk of injuries from bumping was inherent in the Rue le Dodge ride, and under our precedents defendant had no duty of ordinary care to prevent injuries from such an inherent risk of the activity.  The absence of such a duty defeats plaintiff’s cause of action for negligence as a matter of law.  Plaintiff’s “willful misconduct” cause of action, which (as described by the lower court and in plaintiff’s briefing) rests on a duty to minimize head-on collisions, fails for the same reason.  Finally, in light of our conclusion defendant did not act as a common carrier for reward in operating the bumper car ride, summary judgment was also proper on the cause of action for common carrier liability (Cal. S. Ct., 31.12.2012, Nalwa v. Cedar Fair, S195031).

Responsabilité civile en droit californien (ses règles peuvent s'appliquer même dans le cas d'une relation contractuelle) : devoir de diligence : application de la théorie du "risque préalablement  assumé" à des activités récréatives non sportives. Précision sinon modification de la jurisprudence californienne. Bien qu'ordinairement chacun soit redevable d'un devoir de diligence qui impose de ne pas provoquer un risque déraisonnable de causer un dommage à autrui, certaines activités, et spécifiquement certains sports, sont intrinsèquement dangereux. Imposer un devoir d'atténuer ces dangers inhérents est susceptible de modifier la nature de l'activité ou d'inhiber une participation vigoureuse. La doctrine du "risque préalablement assumé", qui est une règle impliquant un devoir limité, s'est développée pour éviter de tels effets dissuasifs. Lorsque la doctrine s'applique à des activités récréatives, les opérateurs, les instructeurs et les participants ne doivent aux autres participants qu'un devoir d'agir de manière à ne pas augmenter le risque de dommage corporel au-delà du risque inhérent à l'activité. Selon le défendeur (le parc d'attraction qui met à disposition des pistes d'autos tamponneuses), un devoir à lui imposé de réduire le risque inhérent de se blesser en pratiquant l'auto tamponneuse aurait comme conséquence d'obliger les parcs d'attraction à éliminer ce type d'amusement et de les remplacer par des activités fondamentalement différentes, cela en contradiction avec le raisonnement appliqué par la Cour dans le cas de risque préalablement  assumé, ce raisonnement étant d'éviter que les règles de responsabilité civile de la Common law ne portent préjudice aux opportunité récréatives des Californiens. La Cour accepte ces arguments. La doctrine du risque préalablement  assumé n'est pas limitée aux activités dites sportives, mais s'applique également à d'autres activités récréatives qui impliquent pour les participants, qui pratiquent l'activité de leur plein gré, un risque inhérent de se blesser, cela lorsque le risque ne peut pas être éliminé sans altérer la nature fondamentale de l'activité. Par exemple, tenir un joueur de golf responsable pour un tir manqué n'aurait comme conséquences que d'encourager les procès et d'éloigner les intéressés de cette activité sportive. Cette théorie du risque préalablement assumé est d'application étroite. Elle est par exemple inapplicable en cas d'accident de la circulation ou en cas d'erreur médicale. Mais elle s'applique aux activités récréatives actives, parce que ces activités impliquent une dépense physique et ne sont pas essentielles à la vie quotidienne. L'existence de ces activités récréatives est ainsi particulièrement vulnérable en cas d'application d'une responsabilité pour négligence ordinaire. La doctrine s'applique ainsi à la pratique de l'auto tamponneuse, sans égard au fait que cette activité soit ou non considérée comme un sport. Est donc abandonné le moyen de défense du risque assumé sur une base consensuelle. Ce moyen de défense est ainsi abandonné au profit d'une obligation limitée, ici à charge de l'organisateur des activités d'autos tamponneuses. Il n'est pas opportun de maintenir une telle défense car obtenir un « summary judgment » serait en cas de maintien une tâche presque impossible, et le consentement au risque pourrait s'appliquer de manière extensive à des risques crées intentionnellement ou par négligence fautive, s'il venait à être démontré que l'usager connaissait ces risques. Par ailleurs, l'opérateur d'une activité d'autos tamponneuses ne peut pas être tenu au plus haut degré de diligence tel que celui qui s'applique aux transporteurs de personnes (a common carrier for reward), tels les compagnies aériennes ou les opérateurs de roller coaster. En effet, les participants au jeu des autos tamponneuses ne soumettent pas leurs vies à la diligence de l'opérateur. L'opérateur d'une attraction d'autos tamponneuses peut violer son devoir d'être suffisamment attentif à ne pas augmenter les risques inhérents à l'activité en n'offrant pas les mesures de sécurité de routine, telles que des ceintures de sécurité, des pare-chocs qui fonctionnent, ou un moyen de contrôle de la vitesse. Aucune faute n'est commise en ne réglementant pas l'angle de collision.