Michigan Court Says No Jurisdiction Over Ship Company in Ford's Suit Over Destroyed Trucks
The U.S. District Court for the Eastern District of Michigan dismissed a breach of contract case against "K" Line RoRo Bulk Ship Management (KRBS), while retaining the two other related defendants, according to an Aug. 8 opinion. In the case, Ford Motor Co. is attempting to recoup $7.2 million in losses for the damage or destruction of 246 trucks in a fire on board a cargo ship that Ford said was operated by KRBS along with Kawasaki Kisen Kaisha (K-Line) and “K” Line America, (KAM) (Ford Motor Company v. Kawakaki Kisen Kaisha et. al., E.D. Mich. # 21-10119).
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U.S. District Court Judge Paul Borman ruled that the court lacked personal jurisdiction over KRBS in the case because it was not a party to the agreement governing the relationship with its parent, K-Line, and Ford. "It cannot be simply that KRBS’s involvement as the technical manager of the Diamond Highway [vessel] at the time of the Ship’s fire near Taiwan alone is sufficient to subject KRBS, a Japanese corporation, to jurisdiction in Michigan, pursuant to a contract between Ford and K-Line," concluded the judge in his dismissal order. The case will proceed with Ford's claims against K-Line and KAM.
KRBS had entered into a ship management agreement with the owner of the Diamond Highway cargo ship to manage the vessel. The agreement delegated the operational and management responsibilities to KRBS and required the firm to provide personnel “fully experienced in handling and operating this size and type of vessel.”
In 2019, Ford entered into a transportation services main agreement (TSA) with K-Line, with KAM executing the agreement and named as a party. That agreement set general terms between K-Line and Ford for the transportation of Ford vehicles on K-Line-owned or -chartered vessels. The agreement included a forum selection clause, which stated that any litigation "will be filed only in the courts of the country in which the Buyer has its principal place of business," adding that if that was in the U.S., the parties will "irrevocably submit to the exclusive jurisdiction of: (1) the United States District Court for the Eastern District of Michigan, Southern Division in Detroit."
Borman noted that although KRBS has no contact with Michigan, personal jurisdiction is a waivable right. Michigan’s general personal jurisdiction statute for corporations allows courts to rule over a corporation if it has consented to personal jurisdiction, such as by signing a forum selection agreement.
Ford argued that K-Line consented to personal jurisdiction in Michigan through the 2019 TSA and that KRBS, although not a signatory, was bound by the forum selection clause between Ford and K-Line because KRBS’s conduct is “closely related” to the parties’ contractual dispute and because of KRBS’s close relationship to K-Line.
Borman noted that there is no definitive ruling as to when a party to a contract can seek to bind a non-party to a forum selection clause and that circuit courts are split on the issue. The main consideration "is whether the non-signatory should have reasonably foreseen that he might be required to appear in another jurisdiction," Borman said. "Ford’s theory would make KRBS subject to a forum selection clause in every contract K-Line enters with another company for the transport of cargo on a ship KRBS manages, without KRBS ever seeing those contracts," the judge ruled.
KRBS meanwhile, argued that it isn't a subcontractor of K-Line and was only party to the 2013 agreement with Diamond Highway and not the 2019 TSA. Borman found KRBS's argument persuasive, saying that its involvement came only from its management of the vessel. The forum selection clause was signed six years later and KRBS did not negotiate or sign that agreement, nor is it mentioned in it.