By Stephen C. Hanemann

In matters of international trade, a bill of lading often serves as the contract of carriage between a shipper and carrier for transportation of goods. A Himalaya clause is a provision contained in certain bills of lading protecting carrier’s servants, agents, and independent contractors from third-party claims by limiting shipper’s rights to bring suit against carrier only. When courts enforce the Himalaya clause contained in such a bill of lading, carrier’s agents, servants, and independent contractors are generally immune from legal actions brought by the shipper. Global Oil Tools, Inc. v. Expeditors International of Washington, Inc., et al, a recent case out of the Eastern District of Louisiana, illustrates the concept of claim preclusion secondary to Himalaya clause enforcement.

Global Oil Tools, Inc., (“Shipper”) contracted with Expeditors International of Washington, Inc. (“Carrier”) to arrange for the transatlantic shipment of two containers from New Orleans, Louisiana to Constanta, Romania. Carrier booked carriage for the containers aboard the M/V BAVARIA, a ship operated by Hapag-Lloyd. Ports America, a stevedoring company, loaded the containers onto the M/V BAVARIA.

Shipper twice delayed the shipment of goods, but ultimately, due to a miscommunication between Hapag-Lloyd and Ports America, the ship set sail on March 28, 2016 with Shipper’s containers. The containers arrived at Constanta, Romania, on April 23, 2016. On May 27, 2016 Shipper approved Carrier’s issued bill of lading dated March 28, 2016. Shipper had intended to sell its cargo on arrival in Romania, but the sale was never consummated. Shipper filed suit against Carrier, Hapag-Lloyd, and Ports America seeking damages for the allegedly erroneous shipment of goods.

Hapag-Lloyd and Ports America filed motions for summary judgment invoking the application of the Himalaya clause in the bill of lading. While bills of lading are customarily construed against a carrier, the issuing party, contracts for carriage of goods by sea must be interpreted by their terms, consistent with the intent of the parties. In this transaction Carrier’s bill of lading, by inclusion of a clause paramount, incorporated the provisions of COGSA (“Carriage of Goods by Sea Act”). 46 U.S.C. § 30701 note sec., 13. Although COGSA applies of its own force from the time when the goods are loaded on to the ship until the time when they are discharged from the ship, the clause paramount provides that COGSA shall govern before loading as well.

The Himalaya clause in Carrier’s bill of lading stated that Shipper shall make no claim or allegation against any person other than Carrier, including Carrier’s servants, agents, or independent contractors. By approving the bill of lading terms, Shipper entered a covenant not to sue any party involved in the transportation of its containers except for Carrier. Under the simple language of the bill of lading itself, Shipper contractually relinquished any rights it may have had to sue either Hapag-Lloyd or Ports America.

Despite Shipper’s arguments attacking the enforceability of the bill of lading, there exists significant custom under general maritime law in favor of enforcing bills of lading even when executed after the shipment of goods is complete. In holding that the bill of lading and its terms, including the Himalaya clause, applied to Shipper’s shipment, the Court found that the Shipper had sufficient notice of the bill of lading, and that Shipper explicitly approved the bill of lading after the goods arrived in Romania. Following in line with the jurisprudential precedent of the Second Circuit, Fifth Circuit, Ninth Circuit, and U.S. Supreme Court, the Eastern District held that the Himalaya clause in the bill of lading, containing a covenant not to sue Carrier’s subcontractors, was enforceable.  Notwithstanding the inclusion of the Himalaya clause, the Bill of Lading preserved Shipper’s right to sue Carrier, as well as Carrier’s right to sue its subcontractors. Thus, the bill of lading did not violate public policy or any fairness doctrine. Shipper’s covenant not to sue parties other than Carrier precluded Shipper’s right to sue Hapag-Lloyd and Ports America. Thus, Hapag-Lloyd and Ports America were entitled to summary judgment dismissing Shipper’s claims.