Petition for Writ of Certiorari — Rationis Enterprises Enterprises, Inc. v. Hyundai Mipo Dockyard Co., Ltd. (No. 06-180)

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06-180 JUL 2 7 2006

wo_°-__ OF FIGE OF THE CLERK

IN THE

Supreme Court of the United States

RATIONIS ENTERPRISES INC. OF PANAMA, et al.,

Petitioners,

HYUNDAI MIPO DOCKYARD CO., LTD., et al.,

- Respondents.

On PETITION FOR A Writ OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Macuate A. MILLER

Counsel of Record

MiLcer & WILLIAMSON, LLC

3150 Energy Centre

1100 Poydras Street

New Orleans, LA 70163

(504) 525-9800

Attorneys for Petitioners

(Additional Counsel Listed on Signature Page)

202256 ce)

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

QUESTIONS PRESENTED FOR REVIEW

- This matter involves a maritime disaster causing massive

damages to numerous parties domiciled in the United States

and around the world (“Petitioners”) when an ocean-going

containership broke in half on a transatlantic voyage en route

to the United States due to negligent lengthening of the vessel

by a Korean shipyard. Applying United States general

maritime law, the United States District Court for the

Southern District of New York entered judgment holding the

Korean shipyard liable for Petitioners’ losses. The United

States Court of Appeals for the Second Circuit (“Panel’’)

reversed the District Court’s judgment on choice-of-law

grounds, finding that Korean law governed Petitioners’

claims.

Rather than remand the action to the District Court for

adjudication of all Korean-law issues, including the threshold

issue of whether the claims were time-barred under Korean

law, the Panel in its decision, sua sponte, summarily ruled

Petitioners’ claims time-barred and dismissed the action.

After Petitioners sought rehearing to show inter alia that the

time-bar ruling nullified Korean law by disregarding

controlling decisions of the Korean Supreme Court, the Panel

denied rehearing, without explanation, in a one-sentence

order. As a result, the Panel acted as a court of first instance

to decide sua sponte a controlling question of Korean law

and then by denying rehearing effectively denied an appeal

from its own time-bar ruling. This fundamentally unfair and

erroneous result presents the following questions for review:

Did the Panel violate 28 U.S.C. § 47, which provides

that “[n]o judge shall hear or determine an appeal from the

decision of a case or issue tried by him” (emphasis supplied),

thereby depriving Petitioners of the right of appeal conferred

by the Judiciary Act and Federal Rule of Appellate Procedure

3, when it (a) first acted as court of first instance to decide,

sua sponte, a controlling tssue of Korean law, and then (b)

by denying rehearing, effectively determined an appeal from

its own decision?

Il.

Did the Panel by disregarding controlling Korean

Supreme Court decisions, violate not only the choice-of-law

principles prescribed by this Court in Lauritzen and Romero,

but also this Court’s rule that lower federal courts, when

applying the chosen law of the relevant state or nation, are

bound by Erie and West to adhere to the decisions of that

state’s or nation’s highest court?!

fil.

Did the Panel wrongly apply the New York “settlor bar

rule” as Substantive Law to bar petitioner timely indemnity

claim contrary to its pending that Korean substantive law

applied to the action?

1. Lauritzen v. Larsen, 345 U.S. 571 (1953); Romero v.

International Terminal Operating Co., 358 U.S. 354, 382-3 (1959);

Erie and Co. v. Tompkins, 304 U.S. 64 (1938); West v. American

Telegraph & Telephone Co., 311 U.S. 223, 236 (1940).

lil

PARTIES TO THE PROCEEDING AND

RULE 29.6 STATEMENT

See Appendices H & I

TABLE OF CONTENTS

Page

Questions Presented for Review ................ i

Parties to the Proceeding and Rule 29.6 Statement . 11

GEER oh ohn 3 89 ee odo VS ed os eas 1V

Fabre Of Cited Autores... cc ccc e eas vi

Table of Appendices et einebtisoue aes xi

I SN ib oe nis oa Freee ohee ne l

SEPP ey eee Per rer peer l

Statement of the Case ......... isa cu I

bee SOUND oe ee is reo cso ]

2. Trial Court Pukecdinan EEEKEERE ERA a 2

3. Appellate Court Proceedings ............ 4

Reasons for Granting the Petition .............. 9

I. The Panel’s Adjudication of This Case in

Violation of 28 U.S.C. § 47 Deprived

Petitioners of Their Statutory Right of Appeal

and of the Fundamental Fairness Required by

the Tous Process Cee . woos cc ews eves. 9

Contents

Page

A. The Panel Violated 28 U.S.C. gga? and

Deprived Petitioners of Their Statutory

Right of Appeal ......... eer 9

B. The Panel’s Handling of This Matter

Lacked the Fundamental Fairness

Required by the Due Process Clause... 11

ll. By Disregarding Controlling Korean

Supreme Court Decisions the Panel Failed to

Follow United States Supreme Court

Decisions Controlling Application of Another

ee ALC CPC eee ee eee we 14

A. The Panel’s Blatant Nullification of

Korean Law Warrants Review ........ 14

B. The Panel Blatantly Ignored and

Nullified Korean Law .............., 17

Se Sy TN Br Pig oe oat Re aE pes 26

lil. The Panel Wrongly Dismissed NOE’S

Indemnity Claim on the Basis of New York

Re ee Gara ae es saitele viwkin ok a wa 4s af:

Conclusion > tof 5 els or 9 4 52 RAN Sk WORE Oe TMG MRE OTR ag ORE 28

TABLE OF CITED AUTHORITIES

Page

FEDERAL CASES

American Intern. Specialty Lines Ins. Co. v. Canal

Indem. Co., 352 F.3d 254 (Sth Cir. 2003) ...... 7

Bankers Trust Co. v. Lee Keeling & Associates, Inc.,

or Foes Be COUR Ue, TOG). ooo vik cnc cee ens 27

Belmac Hygiene, Inc. v. Belmac Corporation,

big a” bg e 2 es) Seep enieemeras 25, 26

Black v. Acme Markets, Inc., 564 F.2d 681 (Sth Cir.

RPT TE ek wake ds bo 50K hues cs eee 22

Bowen v. Georgetown University Hospital, 488 U.S.

CEE, oo use k ba koe bcos 19

Carbotrade S.P.A. v. Bureau Veritas, 99 F.3d 86

ees PE os io ce cx wwe oe 6, 10

Cedric Kushner Promotions, Ltd. v. King, 533 U.S.

i Et BREE Sry Bateran egret Eee Mem RS tae ee: 18

In re Complaint of Rationis Enterprises, Inc. of

Panama, 210 F. Supp. 2d 421 (S.D.N.Y. 2002) ... 3

In re Complaint of Rationis Enterprises, Inc.,

2000 WL 1015918, 2000 U.S. App. LEXIS 10226,

2000 AMC 2613 (S.D.N.Y. 2000) ............ 3

Vii

.<d Authorities

Page

Cremona v. R.S. Bacon Veneer Co., 433 F.3d 617

SE Gs OE bee beep eee R ener rade ee 22

Cummins Engine Co. v. Hyundai Mipo Dockyard Co.,

2003 WL. 203210.(S.D.N.Y. 2003) 2... ..cceers 3

Curley v. AMR Corp., 153 F.3d 5 (2d Cir. 1998) ... 7

Erie and Co. v. Tompkins, 304 U.S. 64 (1938) ..... il

Evitts v. Lacey, 469 U.S. 387 (1985) ............ 1]

Ferrostal, Inc. v. MV SEA PHOENIX, 447 F.3d 212

COP Ge BONE) soa vkbweae eens eat eee 10

Finace One Public Company v. Lehman Brothers

Special Financing, Inc., 414 F.3d 325 (2d Cir.

ar ROE ment Naniinh not VaIHe> § 4 7

Fogel v. Zell, 221 F.3d 955 (7th Cir. 2000) ....... 22

Griffin v. Illinois, 351 U.S. 12 (1956) ........... 1]

Landgraf v. USI Film Products, 511 U.S. 244

bi a) EE EEE PE ee Pe COE Dm rhe 19

Lauritzen v. Larsen, 345 U.S. 571 (1953) ....... passim

Leavitt v. Jane L., 518 U.S. 137 (1996) ......... 14, 15

vill

- Cited Authorities

Page

Meyer v. Holley, 537 U.S. 280 (2003) ........... 18

Minpeco, S.A, v. Conticommodity Services, Inc.,

O77 ©. eae. 191 (5. Y.19CS) .. wees 27

N.L.R.B. v. Amalgamated Clothing Workers of

America, 430 F.2d 966 (Sth Cir. 1970) ........ 12, 13

Niehus v. Liberio, 973 F.2d 526 (7th Cir. 1992) .... 22

Plummer v. Lederle Laboratories, 819 F.2d 349 “

EE Ee 25

In re Rationis Enterprises, Inc. of Panama, 261 F.3d~

I Pe ED. cose vec ccesvecevers 3

In re Rationis Enterprises, Inc. of Panama, 325 F.

eae ay | Ape

Rationis Enterprises Inc. of Panama v. Hyundai Mipo

Dockyard Co., Ltd., 426 F.3d 580 (2d Cir. 2005)

ESS OS Spats l

Raytheon Co. v. Hernandez, 540 U.S. 44 (2003) ... = 18

Romero v. International Terminal Operating Co.,

de saw ee cee seeeeeces passim

U.S. v. Jimenez Recio, 537 U.S. 270 (2003) ....... 18

Cited Authorities

Page

Vimar Seguros y Reaseguros, S.A. M/V Sky Reefer,

SES ik DOI OOEE 445550 sGeuee es eeeeeeenas 25

West v. American Telegraph & Telephone Co.,

FES a BAW LEE kek caw nieces ene il

STATUTES

FRA RE i 0ek deb ekae ats eee 6, 19

PRE © ddd cokse rack kee 94 e REASONED 11

Be rT 66s ed bdo See ee kke ree 11, 8, 9, 10, 11

2 Shi i oo sna ea aces eee l

BP hi 8 NOOR. 44 808 68 eee 9

SOUSA Oe Sr bbs 6 inc es sicne es 2

Pee Goon. Cee, Caw © 1S 0G oie ce che idee edes 27

SECONDARY AUTHORITIES

RESTATEMENT (SECOND) OF THE LAW OF ConrfLICTS § 6

~ Korean Products Liability Act (2000) Art.7 ...... 7,17

Rosees Ciwe Coes Aat. FOO oon 6s cco wh cedcus 28

Cited Authorities

Page

Korean Civil Code Art. 766(2) ................ passim

Korean Supreme Court Judgment, Case no. 78 Da.

beet 5. | nee Pt cuaaenae ene 20

Korean Supreme Court Judgment, Case no. 1A Da.

Bae Os Beds ED hin rn we eke ecsceueseer 20

Korean Supreme Court Judgment, Case no. 81 Da.

DFS (OOM, 2G, SPOT ccc cen cds tevecdstenads 20

Korean Supreme Court Judgment, Case no. 85 Da.

gt AE Sa ae re moe 20

Korean Supreme Court Judgment, Case no. 97 Da.

ee Es SOE ec tee eed cai ees 20

Korean Supreme Court Judgment, Case no. 77 Da.

eC, Es PETE oe cornice eine obs cereus 20

Korean Supreme Court Judgment, Case no. 743

ey OER ce seer che eee ean eran 20

TABLE OF APPENDICES

Appendix A -— Opinion Of The United States Court

Of Appeals For The Second Circuit Decided

I I a org ee ae ee eect

Appendix B — Opinion And Order Of The United

States District Court For The Southern District Of

New York Dated July 9, 2004 ................

Appendix C — Order Of The United States Court

Of Appeals For The Second Circuit Denying

Petition For Rehearing Dated And Filed February

vo RSE ye pray rte Sie Di perde ss ari er rae erm

Appendix D — Letter From Machale A. Miller Of

Miller & Williamson LLC To Clerks Of The

United States Court Of Appeals For The Second

Circuit Dated January 19, 2005 ..............

Appendix E — Declaration Of Byung-Suk Chung ...

Appendix F — Supplemental Declaration Of Byung-

EE ce renwa Guba anu x oie cede ea

Appendix G — Excerpts Of Brief Of Appellants

Hyundai Mipo Dockyard Co., Ltd. And Hyundai

Corporation (Pages 14-21) 2... cc cece eee

Appendix H — List Of Petitioners ..............

xii

Appendices

Appendix I — Rule 29.6 Corporate Disclosure

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see esevatrteerrtFr @eaereswreae € Oe ee.f- e828 eo @e eee ee ee a eS

Appendix L — Letter From Vincent M. Deorchis Of

Deorchis & Partners, LLP To Clerk Of The United

States Court Of Appeals For The Second Circuit

ENE POURED TG, DOGO cosa vce scene nv de-wae

Appendix M — Letter From Edward C. Radzik Of

Donovan, Parry, et al. To Clerk Of The United

States Court Of Appeals For The Second Circuit

ees FONG OF, ROOe <6 0c 00s esc tuedens

]

OPINIONS BELOW

The published Order of the Panel denying rehearing is

reproduced at Appendix “A”. The Opinion and Order of the

Panel in Rationis Enterprises Inc. of Panama v. Hyundai

Mipo Dockyard Co., Ltd., 426 F.3d 580 (2nd Cir. 2005) was

decided on October 17, 2005, and isrep »duced as Appendix

“B”. The published Opinion and Order of the United States

District Court for the Southern District of New. York

(“District Court”) in /n re Rationis Enterprises, Inc. of

Panama, 325 F.Supp.2d 318 (S.D.N.Y. 2004), was filed on

July 9, 2004, and is reproduced as Appendix “C”’.

JURISDICTION

The Panel denied a timely petition for rehearing on

February 27, 2006. On May 18, 2006, Petitioners filed an

application to extend the time to file this petition for a writ

of certiorari. The application was granted on May 22, 2006

by Justice Ginsburg extending the time to file until July 27,

2006. This Court has jurisdiction pursuant to 28 U.S.C.

§1254(1).

STATEMENT OF THE CASE

1. Factual Background

This matter arises out of losses sustained on November

17, 1997 by over 700 cargo owners, most of which are

domiciled in the United States, when the fully-laden container

ship MSC CARLA split in half during a voyage from Europe

to the United States. The casualty occurred when a

circumferential fracture developed in the deck structure near

a defective weld joining a newly-fabricated 15-meter

midbody section to the old body of the vessel when it was

lengthened in Korea.’ That critical weld was negligently

performed by Hyundai Mipo Dockyard, an affiliate and

subcontractor of Hyundai Corporation (collectively

“Hyundai”), when joining the old forebody to the forward

end of the new midbody. None of the Hyundai-created defects

was visible. Neither the vessel owner and operator nor vessel

personnel had reason to anticipate that the vessel would fail.’

The cargo owners were insured by various American and

foreign cargo insurers, who paid their insureds for the losses

resulting from the casualty, thereby becoming subrogated to

the rights of their insureds.

2. Trial Court Proceedings

Rationis and MSC commenced a proceeding on

December 9, 1997, in the District Court seeking exoneration

from or limitation of liability pursuant to the Limitation of

Liability Act (46 U.S.C. §§ 180 et seg.). The owners and

insurers of the hundreds of shipments carried on the MSC

CARLA (“Cargo Interests”) filed claims against Rationis and

MSC. In 1998 Cargo Interests also filed third-party

complaints against Hyundai seeking recovery based on

negligence, strict liability and products liability under

2. MSC CARLA was built in 1979 as a containership. On

February 20, 1984, Hyundai Corporation contracted with Brostrom

Shipping Co., then the owner of the vessel, to lengthen the M/V

Nihon (later sold and renamed MSC CARLA) to carry more

containers. Hyundai Corporation subcontracted the work to its

shipyard, Hyundai Mipo Dockyard, who fabricated the new midbody,

cut the Nihon in half,nserted-the-new 15-meter midbody and welded

the three pieces together. /n re Rationis Enterprises, Inc. of Panama,

325 F.Supp.2d at 321. In 1997 the vessel was owned by Rationis

Enterprises, Inc. (“Rationis”), a Panamanian company, and operated

by Mediterranean Shipping Co. (“MSC”), a Swiss company.

3. 325 F.Supp.2d at 327.

U.S. law. Hyundai answered the pleadings alleging that

unidentified foreign law applied and denying liability.

Additionally, Hyundai commenced two declaratory judgment

actions in Korea seeking exoneration from liability.

On July 21, 2000, the District Court issued an anti-suit

injunction ordering Hyundai to suspend the Korean actions.

In re Complaint of Rationis Enterprises, Inc., 2000 U.S. App

LEXIS 10226, 2000 AMC 2613 (S.D.N.Y. 2000). The Second

Circuit vacated the injunction and directed the trial court

to determine, as a threshold consideration, whether it

had personal jurisdiction over Hyundai. /n re Rationis

Enterprises, Inc. of Panama, 261 F. 3d 264 (2d Cir. 2001).

On remand, after a special hearing, the District Court

concluded that it had jurisdiction. /n re Complaint of Rationis

Enterprises, Inc. of Panama, 210 F. Supp. 2d 421 (S.D.N-Y.

2002). When discovery was completed and the matter was

awaiting trial, Hyundai moved for summary judgment

contending that under the laws of Korea, Sweden or Panama

Cargo Interests could not prevail on any of its liability

theories. On January 27, 2003, the District Court concluded

that Hyundai had waived the right to invoke foreign law

because it had waited too late to specify what foreign law

applied and had identified three different jurisdictions whose

law might apply without selecting any particular one as to

any particular issue. Having found waiver, no choice -of-

law analysis was required. The District Court concluded that

United States law governed all legal issues. Cummins Engine

Co. v. Hyundai Mipo Dockyard Co., 2003 WL 203210

(S.D.N.Y. 2003).

In the meantime, North of England Protection and

Indemnity Association (“NOE”), the liability insurer of

Rationis and MSC, and the Cargo Interests partially settled

the cargo damage claims. NOE in turn filed its own third-

party claim against Hyundai in the limitation proceeding

seeking indemnification for the amounts paid to Cargo

Interests. Thereafter, Cargo Interests and NOE, as partial

assignee and subrogee, (collectively “Petitioners”) jointly

proceeded against Hyundai to recover the full value of the

damage claims.

In April 2003, the case was bifurcated, and the liability

issues proceeded to trial. On July 12, 2004, after a two-week

trial, the District Court, applying United States general

maritime law, issued its findings of fact and conclusions of

law, finding that Hyundai had defectively lengthened the

vessel and were liable to Petitioners based on theories of

negligence, strict liability and products liability. Jn re Rationis

Enterprises, Inc., 325 F.Supp.2d 318 (S.D.N.Y. 2004).

3. Appellate Court Proceedings

Hyundai appealed the District Court’s finding of liability,

specifying eight issues for appeal. One issue questioned

whether Hyundai had waived its right to invoke foreign law;

another what law should apply. No issue designated time-

bar under Korean law.’ Petitioners did not address that topic

in their appellate briefs because Korean time-bar was not a

designated issue. Their arguments were confined to the issues

4. Hyundai’s only designated issue on appeal dealing with

foreign law stated: “Whether the District Court improperly applied

United States law to the claim against HMD and HC in violation of

choice-of-law principles.” Hyundai’s Original Appellate Brief at p.

6. Hyundai, nevertheless, in its appellate brief at p. 19 briefly

mentioned that under Korean law the case was time-barred, citing

only excerpts from English translations of two Korean statutes,

neither of which actually functioned to time-bar the case (See

Appendix “G”).

designated by Hyundai, including waiver and choice of law.

During oral argument, the Second Circuit panel (hereinafter

“Panel”) concentrated on the waiver and choice-of- law

issues, and even instructed the parties to submit post-hearing

and supplemental letter briefs regarding choice of law. Both

parties complied.° The Panel did not request Korean law

authorities for the time-bar issue.

Because the parties had not litigated the application of

any of these foreign law doctrines in the district court and

because time-bar had not been raised as an issue on appeal,

Petitioners reasonably believed they were not required to

address the proper effect of the Korean statutes of limitations

or Hyundai’s myriad other substantive foreign law issues in

their brief to the panel. The central issue framed on appeal

was simply whether the District Court erred in its choice-of-

law analysis. Petitioners could not have been expected to

respond with complete rebuttals and supporting declarations

to the various and sundry substantive issues of four foreign

laws invoked by Hyundai, or its amicus, which were casually

5. Petitioners wrote two supplemental letter briefs on this issue

— De Orchis & Partners’ letter dated January 10, 2005 (Appendix

“L”) and Miller & Williamson LLC’s letter dated January 15, 2005

(Appendix “D”). The latter’s footnote 3 referred to the Declaration

of Korean attorney, Byung-Suk Chung, which stated that the case

was not time-barred. (Appendix “E”) The Chung Declaration was

included in the Cargo Claimants’ Opposition to Motion for Stay

Pending Appeal of the Antisuit Injunctions against Hyundai Mipo

Dockyard Co., Ltd. aad Hyundai Corporation dated November 19,

2004, as Attachment “B” as well as in Donovan Parry McDermott &

Radzik’s letter brief dated February 17, 2005 (Appendix “‘M”) as

Attachment E. Mr. Chung’s declaration ar? his Supplemental

Declaration (Appendix “F”) were included in *»« Special Appendix

to North of England and The Cargo Interests’ Petrmon for Rehearing.

inserted into Hyundai’s brief.° Accordingly, Petitioners did not

address the two sentence topic of time-bar under Korean law

but instead confined their arguments tothe designated appellate

issues which included waiver and choice of law.

The Panel issued its opinion, holding that Hyundai had

complied with its FRCP 44.1 obligation to timely provide notice

of foreign law and reversing the district court’s conclusion that

Hyundai had waived the right to invoke foreign law. The Panel

then conducted the interest analysis mandated by Lauritzen and

Romero, concluding that Korean law applied.

Ignoring the approach used earlier by the Second Circuit in

Carbotrade S.P.A. v. Bureau Veritas, 99 F.3d 86 (2d Cir.

1996), to determine foreign law, the Panel elected not to remand

the case to the District Court for a determination of Korean

law. Instead, without inviting the parties to submit materials on

Korean time-bar or otherwise conforming to the procedures

recommended by the Advisory Committee Notes to Rule 44.1,

the Panel, serving as a de facto court of first instance, erroneously

dismissed the cargo damage claims totaling over $80 million

on the ground that under Korean law the claims were time-

barred three years before the MSC CARLA sank and the cargo

losses occurred. The Panel devoted a solitary, conclusory

sentence devoid of any explanation or analysis to this outcome-

determinative issue citing only two Korean statutes. The Panel

said nothing about the timeliness of NOE’s indemnity claim.

Judgment was then entered against NOE and the Cargo Interests

in favor of Hyundai.

6. For instance, consistent with their longstanding insistence that

Swedish law applies to this case, Hyundai argued that (i) Swedish law

requirements as to establishing causation in tort were not met, (ii) that

Sweden did not recognize products liability claims before 1993, and

(iii) that Swedish vicarious liability law precluded NOE’s recovery.

The Panel’s opinion failed to mention that the Korean

Supreme Court on seven separate occasions during the past

27 years had resolved the time-bar issue diametrically

opposite to the Panel’s ruling and that there were no contrary

decisions by Korea’s highest court .’ The only legal authority

cited by the Panel to support its conclusion was the reference

at footnote 3 of its opinion to unofficial English translations

of extracts from the two Korean statutes, namely Article 7

of the Korean Products Liability Act and Article 766 (2) of

the Korean Civil Code. These articles establish time-bar

periods for products liability and negligence (tort) causes of

action, respectively. On its face one statute is inapplicable

7. Hyundai contended that because Korea is a civil law

jurisdiction, stare decisis is inapplicable. Hyundai’s argument is ill-

founded because: (1) Korean statutes recognize precedent — Art.

7(1)(3) of the Korean Court Organization Act provides that “a prior

holding of the Supreme Court (Grand Bench or Petty Bench) may be

overruled or modified only by plenary decision of the Grand Bench;

(2) Korean decisions cite Korean Supreme Court decisions; and

(3) the Second Circuit in Usatorre v. The Victoria, 172 F. 2d 434,

439 (1949), recognized that “in all civil-law countries, despite

conventional protestation to the contrary, much law is judge-made,

and-the courts are by no means unaffected by judicial precedents....”

Moreover, Korean Supreme Court Justice Kim stated that although

Korea is a civil-law country “decisions of the Korean Supreme Court

are given great deference, and ... are virtually binding on the

subsequent judgment of the Supreme Court and the decisions of lower

Korean courts. Kim Dec. at SPA-2-4-5. Curley v. AMR Corp., 153 F.

3d. 5 (2d. Cir. 1998), and Finance One Public Company v. Lehman

Brothers Special Financing, Inc., 414 F. 3d. 325 (2d. Cir. 2005);

decree that precedent should be treated in the same manner the

foreign country in question does so. See also American Intern.

Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 261 (Sth

Cir. 2003) (Appellate decisions from civil law jurisdiction will not

be ignored without “persuasive data... that the highest court would

decide otherwise....”)

due to its effective date, and the other (as a result of a faulty

English translation) is ambiguous as to the event which

triggers the running of the limitation period.

Petitioners filed a petition for rehearing and

supplemented the record with a special appendix concerning

Korean time-bar law, consisting of declarations from a

Korean law professor and a Korean lawyer, to which were

attached controlling Korean Supreme Court decisions and

commentary. Those materials establish that Petitioners’

claims are not time-barred because (1) the Korean Products

Liability Act was not in effect when the casualty occurred;

(2) the Korean Supreme Court repeatedly has held in

negligence actions with conceptually identical facts to those

of this case that tort claims filed, as these were, within ten

years of the date of the casualty-related damage are not time-

barred; and (3) a textual analysis of Art. 766(2) confirms the

Korean Supreme Court’s ruling that the codal article’s ten-

year prescriptive period commences to run when damage

occurs, not when negligence is committed. Hyundai then

submitted an answer and a supplemental appendix containing

declarations from a Korean lawyer, commentators and a

retired Korean Supreme Court Justice. At the Panel’s request,

Petitioners submitted a reply accompanied by another special

appendix containing supplemental declarations from the

Korean law professor and the Korean lawyer as well as

declarations from two retired Korean Supreme Court Justices,

one of whom presided over one of the seven controlling

Korean Supreme Court decisions.

The petition for rehearing was declined-in a single word

(“DENIED”) (App. C) without a written opinion even though

(1) the Panel had ruled on time-bar as a de facto court of

first instance and then, in violation of 28 U.S.C. § 47, served

as its own review body, effectively depriving Petitioners of

their statutorily-conferred right of appeal; (2) the rehearing

petition was the first and only time Petitioners had presented

extensive and in-depth materials on Korean law; (3) denial

of rehearing signifies that “appellate review” was not

conducted; and (4) the Panel elected to rule diametrically

opposite to the Korean Supreme Court’s resolution of the

time-bar issue as delineated in Petitioners’ special

appendices.

REASONS FOR GRANTING THE PETITION

I. Tue PANEL’S ADJUDICATION OF THIS CASE IN VIOLATION

or 28 U.S.C. § 47 Depriveo PETITIONERS OF THEIR

STATUTORY RIGHT OF APPEAL AND OF THE FUNDAMENTAL

FAIRNESS REQUIRED BY THE DuE Process CLAUSE

A. The Panel Violated 28 U.S.C. § 47 and Deprived

Petitioners of Their Statutory Right of Appeal

As reflected in FRAP. 3, which is grounded in the

Judiciary Act, 28 U.S.C. § 1291, the parties to a civil action

may appeal as a “matter of right” from the judgment of the

District Court as court of first instance. In accordance with

28 U.S.C. § 47 — which provides that “[n]o judge shall hear

or determine an appeal from the decision of a case or an

issue tried by him” — federal judges cannot decide appeals

from cases or issues tried by them. Here, the Panel denied

Petitioners their statutory right to have disinterested judges

decide their appeal by (a) first deciding, sua sponte, the

Korean time-bar issue, and (b) then denying rehearing

without explanation, thereby affirming its own decision in

violation of 28 U.S.C. § 47.

In sum, (1) the District Court did not address much less

decide the Korean time-bar issue; (2) the Panel, foregoing

remand, itself acted as the court of first instance by summarily

deciding that issue; and (3) no independent appellate panel,

composed of disinterested judges not involved with initially

deciding the Korean time-bar issue, has ever reviewed that

decision.

As to the first two points, the Panel, after determining

that the District Court should have applied Korean law, did

not remand the action for a thorough examination of the

contested issue of Korean time bar, as other panels have done

in similar circumstances. See, e.g., Carbotrade, 99 F.3d at

86, and Ferrostal, Inc. v. MV SEA PHOENIX, 447 F.3d 212

(3d Cir. 2006). Instead, the Panel, sua sponte, applied what

it believed to be Korean time-bar law to summarily dismiss

the action. The Korean-time bar issue, however, had not been

decided by the District Court and it had not been an issue on

appeal since it was not any part of the District Court judgment

under review.

As to the third point, and far worse, when Petitioners

petitioned for rehearing and demonstrated that the Korean

Supreme Court, in seven consecutive decisions over 27 years,

had resolved this very time-bar issue in accordance with

Petitioners’ submissions delineating Korean law, the Panel

denied rehearing without explanation.® Doing so effectively

affirmed the Panel’s own decision on the time-bar issue,

thereby violating 28 U.S.C. § 47 and depriving Petitioners

of their statutory right to have disinterested judges decide

8. See footnote 7. Hyundai, in responding to the rehearing petition,

advanced the flawed contention that Petitioners had waived the right to

contest time-bar under Korean law because they had not submitted

materials on that issue. The contention fails because: (1) Hyundai

neglected to designate time-bar as an issue while raising eight other

ones; (2) appellees (Petitioners) are not obliged to designate issues on

appeal; and (3) Petitioners submitted a declaration from Korean attorney

Byung Suk Chung (App. E) and alerted the Panel to its existence in a

post-hearing letter requested by the Panel. (App. D)

whether the Panel’s initial Korean time-bar ruling was

correct. Moreover, by denying Rehearing, the Panel deprived

Petitioners of their statutorily-granted right of appeal.

The short of the matter is that the Panel improperly acted

as court of first instance by summarily deciding the disputed

Korean time-bar i8sue and then as appellate judges by

prohibitedly reviewing their own decision by denying

rehearing without explanation.

Certiorari is necessary because only this Court can step

in to guarantee Petitioners the disinterested appeal that the

Judiciary Act, FRAP. 3, 28 U.S.C. § 47, and fundamental

fairness demands, either by reviewing the Korean time-bar

issue on the merits or by remanding the action to the Court

of Appeals with appropriate directions consistent with

Petitioners’ statutory and due process rights.

B. The Panel’s Handling of This Matter Lacked the

Fundamental Fairness Required by the Due

Process Clause

The Due Process Clause requires that if the legislature

has created a statutory right of appeal, that appeal must be

conducted in accordance with principles of fundamental

fairness. Evitts v. Lacey, 469 U.S. 387 (1985); Griffin v.

Illinois, 351 U.S. 12 (1956). The manner in which the Panel

conducted this appeal was fundamentally unfair and deprived

Petitioners of due process. The problem is two-fold. The

Panel first decided the time-bar issue on a woefully

incomplete record without notice to the parties. It then

worsened matters by disregarding 28 U.S.C. § 47 and denying

rehearing in an unexplained one-sentence order.

The Panel, in its capacity as de facto court of first

instance, violated another due process safeguard of

fundamental fairness by failing to write a reasoned opinion

with citations to appropriate Korean authorities explaining

why Petitioners’ claims were time-barred under Korean law.

Admittedly, appellate court panels are not obliged to write

opinions when disposing of a case. But that rule arose in the

context of panels acting as courts of appeals — not as courts

of first instance. Indeed, Chief Justice Brown for the Fifth

Circuit cautioned that an appellate court should refrain from

writing a well-reasoned opinion only after careful

consideration because a written opinion is a vital safeguard

of fundamental fairness:

A most important function is the writing of

opinions. Opinions are to serve a number of

purposes at least two of which are highly

significant. One is that an articulated discussion

of the factors, legal, factual or both, which lead

the Court to one rather than to another result, gives

strength to the system, and reduces, if not

eliminates, the easy temptation or tendency to ill-

considered or even arbitrary action by those

having the power of almost final review. The

second, of course, is that the very discursive

statement of these articulated reasons is the thing

out of which law — and particularly Judge-made

law — grows.’ (Emphasis supplied)

9. N.L.R.B. v. Amalgamated Clothing Workers of America, 430

F.2d 966, 972 (Sth Cir. 1970). Similar thoughts are expressed in the

treatise, Carrington, D. Meador, M. Rosenberg, Justice ON APPEAL

(1976) at pp. 8-10. where the authors, in discussing due process issues

in connection with an appeal, list as “process imperatives” the need

for the appellate judges to “inform themselves fully on... the law on

which decisions are to be made; and announce their reasons for

decisions,” explaining that (1) the latter imperative serves as an

“essential demonstration that the court did in fact fix its mind on the

(Cont'd)

Judges of first instance are more likely to reach erroneous

results than reviewing appellate judges because the issues

are more finely honed the second time around on appeal as

counsel and judges have additional opportunity to fully

explore the legal issues. Conversely, an appellate court,

precisely because it has the benefit of the trial court’s written

opinion, has a distinct advantage over the court of first

instance which must start from scratch. The instant case

underscores the importance of reasoned opinions. Here, the

Panel was caught in the very snare that the N.L.R.B. (National

Labor Relations Board) case inveighs against, falling prey

to the tendency to an “ill-considered or even arbitrary”

decision that nullified controlling Korean law.

The fact the Panel allowed the parties to submit extensive

materials on Korean law after Petitioners had requested

rehearing makes no difference when the Panel by denying

rehearing effectively affirmed its own time-bar decision as a

court of first instance. What is more, rehearing is not a

de facto appeal. The factors leading a court of appeals to

decide whether or not to grant rehearing differ markedly from

those determining the merits on rehearing. Here, the reasons

why the Panel denied rehearing are wholly unknown. What

is known is that the Panel should not have acted both as court

of first instance and judges reviewing their own decision and

that the Panel should not have disregarded the controlling

Korean law authorities holding that Petitioners’ claims are

not time-barred.

(Cont'd)

case at hand,” (2) “an unreasoned decision ... is difficult or impossible

to accept as an act reflecting systematic application of legal

principles,” and (3) “the necessity of stating reasons not infrequently

changes the results by forcing the judges to come to grips with

nettlesome... issues which “heir normal instincts would otherwise

cause them to avoid.”

Il. By DisREGARDING CONTROLLING KOREAN SUPREME

Court DECISIONS THE PANEL FAILED TO FOLLOW UNITED

STATES SUPREME Court DECISIONS CONTROLLING

APPLICATION OF ANOTHER STATE’S LAw

A. The Panel’s Blatant Nullification of Korean Law

Warrants Review :

Supreme Court review of federal appellate court

decisions addressing issues of foreign law is required

whenever a lower court has disregarded and thereby nullified

the foreign law selected as having the most significant

relationship to the case. As noted in Leavitt v. Jane L., 518

U.S. 137 (1996), while this Court ordinarily does not grant

certiorari to review decisions involving solely state law

issues,'° it has an obligation to do so when federal-court

“nullification” has transpired:

We have summarily set aside unsupportable

judgments involving only individual claims...

Much more is that appropriate when what is at

issue is the total invalidation of a state-wide law...

To be sure, we do not normally grant petitions for

certiorari solely to review what purports to be an

application of state law; but we have done so ...

and undoubtedly should do so where the

alternative is allowing blatant federal-court

nullification of state law. ''

As recognized in Leavitt, Supreme Court review of

blatant federal-court nullification of governing substantive

10. Leavitt was a diversity case thus requiring the lower court

under the Erie-West rule to choose the governing substantive law

and then faithfully apply it. That principle, of course, is equally

applicable when the lower court chooses foreign law.

11. 518 U.S. at 144-45. (Citations omitted; emphasis supplied)

rules of law — whether federal law, Erie-West selected state

law or Lauritzen-Romero selected foreign law — is vital to

the integrity of the American legal system.

In Leavitt this Court also dispelled any suggestion that a

Second Circuit panel is better poised than the Supreme Court

to decide a Korean-law issue:

Our general presumption that courts of appeals

correctly decide questions of state law reflects a

judgment as to the utility of reviewing them in

most cases, ... not a belief that courts of appeals

have some natural advantage in this domain..."

That general presumption is obviously

inapplicable where the court of appeals’ state-

law ruling is plainly wrong.... (emphasis

supplied).

Courts of appeals certainly have no “natural advantage”

especially when the appellate panel is composed of judges

who are not residents of the state or foreign country whose

law is being applied. As observed in Leavitt:

Finally, the dissent’s appeal to the supposed

greater expertise of courts of appeals regarding

state law is particularly weak (if not indeed

counterindicative) where a Court of Appeals panel

consisting of judges from Oklahoma, Colorado,

and Kansas has reversed the District Court of Utah

on a point of Utah law."

Leavitt emphasizes the vital importance of reviewing

federal appellate court decisions that disregard the law those

courts are obliged faithfully to apply, especially when the

12. Citations omitted; emphasis supplied. 518 U.S. at 145.

13. 518 U.S. at 145

disregarded rule of law has widespread effect, such as a tort

statute of limitations. In responding to the dissent’s plea for

Supreme Court restraint when asked to review federal

appellate court decisions involving state law, the Leavitt

majority stated: “[B]ut it is an odd notion of judicial restraint

that would compel us to cast a blind eye on overreaching by

lower federal courts.” '*

Like the facts in Leavitt, the Panel decision here presents

this Court with an “extraordinary case worth [its] effort of

summary review” because the Second Circuit’s “[Korean]

law ruling is plainly wrong,” and “not sustainable.” 518 U.S.

at 145-46. The Panel nullified a controlling Korean statute

of limitation by rewriting the triggering event from “damage”

to “negligent act.”'° The Panel did so without even referring

to any Korean Supreme Court decisions or providing any

analysis whatsoever of Korean law in its opinion.

The Panel’s refusal to acknowledge the manner in which

the Korean Supreme Court, Korea’s highest court, applies

its country’s time-bar law is so complete that it denied

Petitioners’ rehearing petition in a single word “DENIED,”

without explanation. In one stroke of the pen, the Panel

obliterated nearly three decades of Korean Supreme Court

precedent. And so we are left with the anomalous, indeed

bizarre, result that Petitioners would have prevailed on the

time-bar issue had a Korean court applied Art. 766(2), but

have lost when a United States Court did so.

14. Id. at 145. Judicial restraint undoubtedly undcrlies the

principle articulated in Supreme Court Rule 10(c) informing the Bar

that misapplying state law rarcly serves as a basis for review. Leavitt,

however, teaches that restraint is not appropriate when an appellate

court blatantly nullifies the law.

15. See text at page 20 infra and note 22.

Supreme Court review of blatant federal-court

nullification of governing substantive rules of law, whether

federal law, Erie-West selected state law or Lauritzen-Romero

selected foreign law, is, as recognized in Leavitt, vital to the

integrity of the American legal system. Ours is a country of

laws. Our judges solemnly swear to uphold and apply the

law. If federal Courts of Appeals blatantly disregard the law,

we cease to be a country of laws. The very foundation of our

legal system — and its integrity — is undermined. Once the

infection of disregard resulting in blatant nullification is left

unchecked, the public will lose confidence in the Judicial

Branch. This is not mere rhetoric. If the Supreme Court

allows just a single instance of blatant disregard of law to go

uncorrected, the signal is sent. Slowly but surely, as the rains

erode the mountains, the integrity of our legal system will

collapse as one court after another rules however it sees fit.

The process may take years or even decades but it will take

place, perhaps transparently but more likely imperceptibly,

until momentum is gained and legal chaos sets in.

B. The Panel Blatantly Ignored and Nullified

Korean Law

The Panel’s decision to apply Korean law devoted a

solitary sentence of text and a single footnote to the

determination that Petitioners’ suit was time-barred:

Because Korean law bars the Petitioners and NOE

from recovery against Hyundai due to statutes of

repose, we reverse the District Court’s finding of

liability. '®

The footnote quoted unofficial English translations of two

Korean statutes of limitation — Art. 7 of the Korean Products

Liability Act (2000) and Art. 766(2) of the Korean Civil Code.

16. 426 F.3d at 588. Appendix “B.”

No Korean cases were cited. No analysis or explanation was

provided.

The English translations of both statutes quoted in the

Panel’s footnote raise glaring red flags signaling that

something was amiss. The first red flag consists of the fact

that Korea’s Products Liability Act is dated 2000 — three years

after the MSC CARLA casualty. The Panel, rather than

applying a post-dated statute, should have investigated

whether the statute was retroactive. The Panel neglected to

do so and instead erroneously declared an $80 million case

time-barred on the basis of a statute inapplicable on its face.

The second red flag consists of the fact that the translation

of Art. 766(2) supplied by Hyundai identified “unlawful act”

as the trigger for its 10-year limitation, a term not ordinarily

applicable to a defendant’s acts or omissions in a negligence-

based tort action.'’ Terms such as “negligent act”, “wrongful

act” or “intentional act” normally are used in the context of

a negligence action.

Even if the Panel assumed that the English phrase

“unlawful act” means “wrongful act,” its members

disregarded a third red flag. The phrase “wrongful act” does

not necessarily signify when the negligent act transpired but

instead can signify when the negligent act became unlawful

by causing the damage.'* The Panel was required to determine

the intent of the Korean legislature by consulting Korean

17. “Unlawful act” usually describes criminal acts or violations

of statutes regulating conduct. See Cedric Kushner Promotions, Ltd.

v. King, 533 U.S. 158 (2001) (RICO violation); Raytheon Co. v.

Hernandez, 540 U.S. 44 (2003)(American Disabilities Act); Meyer

v. Holley, 537 U.S. 280 (2003)(Civil Rights Act); U.S. v. Jimenez

Recio, 537 U.S. 270 (2003)(conspiracy).

18. See introductory notes to Chapter 7, Topic | of Restatement

(Second) of the Law of Conflicts at p. 412.

Supreme Court decisions and Korean law experts and,

pursuant to the Advisory Committee Notes to FRCP 44.1,

by seeking input from counsel. But the Panel wholly failed

to do so.

The Panel disregarded those red warning flags. Instead,

as a de facto court of first instance, it dismissed the case

without citing any decisions (Korean or otherwise), offering

any textual analysis of the Korean statutes, or affording

Petitioners’ counsel an opportunity to present Korean law

materials. Fundament fairness sank to its nadir when the

Panel, acting as court of appeals denied rehearing in one

stroke of the pen, notwithstanding that the extensive Korean-

law materials submitted by Petitioners when applying for

rehearing demonstrated beyond doubt that:

1. The Korean Products Liability Act is not retroactive

and thus is inapplicable. That statute was enacted on January

12, 2000 — three years after Petitioners’ claims arose — and

does not state or imply that it is retroactive. To the contrary,

addendum (1) to the statute states, “This act shall enter into

force on July 1, 2000,” indicating prospective application.

Not even Hyundai suggested that the Korean Products

Liability Act was retroactive. In reaching the erroneous

conclusion that the Korean Products Liability Act time-barred

Petitioners’ claims, the Panel ignored Bowen v. Georgetown

University Hospital, 488 U.S. 204, 208 (1988) (“Retroactivity

is not favored in the law”), and Landgraf v. USI Film

Products, 511 U.S. 244, 280 (1994) (A statute presumptively

has only prospective effect).

2. This case is not time-barred. Commencing in 1979 and

extending through 2004 the Korean Supreme Court in seven

consecutive decisions consistently has held that the 10-year time-

bar of Art. 766(2) commences to run only upon the manifestation

of damage (the cargo damage occurring when the MSC CARLA

broke in half) and not when the negligent act occurred

(Hyundai’s faulty welds).'? Indeed, in the Woo Am Shopping

Center case, involving injuries sustained when a shopping center

collapsed during a fire due to defective construction — a

negligence case conceptually identical to the time-bar issue here

~— Korea’s highest Court stated:

In cases of a claim for damages based on tort,

where a period of time has lapsed between the

commission of the unlawful act and the

materialization of the resulting damages, the “date

when the unlawful act was committed,” the

triggering date for the statute of limitations, is

when the potential damage, which had existed in

an unmaterialized state, has actually materialized

thereafter — in other words, the moment in time

when the incurrence of damages becomes real.”°

19. Case no. 77 Da 1894 (Dec. 26, 1979); case no. 743 (July 26,

1974); case no. 78 Da 1192(Oct. 10, 1978); case no. 760 Da 2520 (Feb.

22, 1944); case no. 81 Da 1071 (Nov. 24, 1984); case no. 85 Daka 693

(Oct. 11, 1998); case 97 Da 36613 (May 18, 1998). Yune Dec. 4 110.4

and 5 and 4 12 in Petitioners’ Special App. to Petition for Rehearing;

Yune Supp. Dec. § 17 and 18 in Special App. to Petitioners’ Reply to

Hyundai’s Opposition to Petition for Rehearing; Chung Supp. Dec. 4 9

(SPA-11) in Special App. to Petition for Rehearing. Until 1979 a split

of opinion existed in Korean law as to what event triggered the 10-year

limitation period in Art. 766 (2). One view was that the occurrence of

the negligent act is the trigger — the “Tortious Act or Time of Commission

Theory,” which is the approach adopted by the Second Circuit. The

opposite view was that manifestation of the damage giving rise to the

claim is the trigger — the “Damage Theory”. The Korean Supreme Court

in these decisions selected the latter.

20. 97 Da 36613 (May 8, 1998), the translation of which is

found in Ex. 1 (SPA-2-39) to Yune Supp. Dec. (SPA 2-15) from

Special App. to the Reply to Hyundai’s Opposition.

Woo Am is indistinguishable.”! And the principles enunciated

there establish that the 10-year period of Art. 766(2)

commenced to run on November 27, 1997 when Petitioners’

cargos became damaged as a result of the MCS CARLA’s

splitting in two.

3. The unofficial English translation of Art. 766(2) is

grievously inaccurate; a proper translation does not use as

the trigger the term “unlawful act” but rather the term “tort,”

a concept which, under the Korean Civil Code, consists of a

negligent act causing damage.”

21. Hyundai, in opposing the rehearing petition, introduced a

declaration from former Korean Supreme Court Justice Park that

attempted to distinguish Woo Am as well as a similar lower appellate

court holding on the remarkably in apropos ground that in both the

owner or occupants of a structure attempted to recover damages from

the negligent builder, whereas here the cargo owners attempt to

recover damages from the negligent builder. Park Dec. | 15 of Ex. A

of Hyundai’s Supp. App. The distinction is so unfathomable as to be

embarrassing — a cargo owner’s property occupies a ship no less

than a lessee’s property occupies the leased premises. Equally

remarkable, Justice Park, after acknowledging that since 1979 the

Supreme Court has adhered to the Damage Theory on six other

occasions, tried to circumvent the devastating impact of those

decisions with the cavalierly dismissive statement that “just as

academic views can change .:. so can the case law. Likewise, such is

the case with the Korean Supreme Court.” The obvious flaw in that

statement is that for 2” years the Korean Supreme Court’s opinion

has not changed — not - mention that Justice Park sat on the Woo

Am panel and hence personally endorsed the Time of Damage Theory.

Kim Dec.-4 8 at SPA 2-4.

22. The phrase “unlawful act” is an incorrect translation of the

Korean word “bul-beop-haeng-wi” — the word used in the Korean

text of Art. 766(2). Bul-beop-haeng-wi should have been transiated

as “tort.” A” tort” is defined in Art. 750 of the Korean Civil Code,

(Cont'd)

One conclusion is inescapable. The Panel, by

disregarding these extensive Korean law materials, nullified

Korean law, thereby undermining its decision to apply Korean

law in the first place.

It is one thing for an appellate court, after making a

concerted effort to research the foreign law it has selected,

to ultimately misunderstand that law and, as a consequence,

reach the wrong result. It is quite another for the court to

disregard 27 years of precedent expressed in seven

consecutive opinions of a foreign country’s highest court,

while relying on a demonstrably inaccurate English

translation of a foreign statute to reach the opposite result.

The Panel’s treatment of Korean law is a quintessential

example of the nullification Leavitt prohibits. As

unacceptable as state law invalidation was in Leavitt, so too

Korean law invalidation is impermissible here.

After conducting the requisite Lauritzen-Romero interest

analysis, the Panel selected Korean law. Under Erie and West,

a federal court, when applying another state’s law, is bound

(Cont'd)

which is entitled “Torts” (bu/-beop-haeng-wi), as consisting of an

“unlawful act” (in Korean “wi-beop-haeng-wi”) that causes injury.

The concept of a tort in the Korean Civil Code, as in American law,

therefore, encompasses more than a mere isolated negligent or

unlawful act but additionally requires damage, without which no

‘tort (bul-beop-haeng-wi) can occur. The trigger for Art. 766(2),

namely, a bul-beop-haeng-wi, therefore, is not an unlawful act,

namely, a wi-beop-haeng-wi, but a tort, namely, an unlawful act plus

damage. Cremona v. R.S. Bacon Veneer Co., 433 F.3d 617, 621 (8"

Cir. 2006); Niehus v. Liberio, 973 F.2d 526, 531-2 (7" Cir. 1992);

Fogel v. Zell, 221 F.3d 955, 960 (7" Cir. 2000); Black v. Acme

Markets, Inc., 564 F.2d 681, 685 (5" Cir. 1977)

by the decisions of the selected state’s Supreme Court. The Erie-

West rule equally applies to the decisions of the foreign state

law selected pursuant to the Lauritzen-Romero analysis. The

Panel, however, completely disregarded controlling Korean

Supreme Court decisions. Consequently, the Panel failed to

follow four controlling Supreme Court decisions — Lauritzen,

Romero, Erie, and West.

What is more, conflict of laws is a body of law designed to

ensure that disputes between parties of different states or

countries are resolved under the appropriate body of substantive

law. The modern approach, followed in Lauritzen and Romero,

is based on interest analysis as prescribed in Restatement

(Second) of the Law of Conflicts § 6 — the substantive law of

the country having the greatest interest and most significant

relationship with the parties and the controversy should apply.

Lauritzen instructs that choice of law is designed to achieve

“stability and order” with due respect for “comity, reciprocity

and long-range interest.” 345 U.S. at 582.

Comment (d) to § 6 (2) of the Restatement (Second).of the

Law of Conflicts” emphasizes that proper choice of law is vital

to harmonious international relations:

Needs of the interstate and international systems

Probably the most important function of the choice-

of-law rules is to make the interstate and

international systems work well. Choice-of-law

rules, among other things, should seek to further

harmonious relations between states and to

facilitate commercial intercourse between them.

In formulating rules of choice of law, a state should

have regard for the needs and policies of other states

and of the community of states. (Emphasis Supplied)

23. See also comment b to section 145 (1) of the Restatement.

These very considerations were embraced in Romero:

[W]e must apply those principles of choice of law

that are consonant with the needs of a general

federal maritime law and with due recognition of

our self-regarding respect for the relevant interests

of foreign nations in the regulation of maritime

commerce as part of legitimate concern of the

international community.”

Implicit in the due process, international relations,

comity, and reciprocity considerations inherent in interest

analysis is the requirement that the court, having chosen the

appropriate foreign law, must then correctly apply rather than

disregard the chosen law. Without a mechanism for ensuring

that the chosen law is correctly applied, the entire field of

conflict of laws along with Lauritzen and Romero would be

rendered meaningless.

Such a mechanism, however, does exist. A federal court

exercising diversity jurisdiction, after selecting the

appropriate substantive state law, must adhere to the decisions

of the highest court of that state. As pronounced in West,

when fashioning a corollary to the rule of Erie, “the highest

court of the state is the final arbiter of what is state law” and

when that highest court has spoken, “its pronouncement is

to be accepted by federal courts as defining state law....” The

goal of this rule is “to avoid the maintenance within a state

of two divergent or conflicting systems of law, one to be

applied in the state courts, the other to be availed of in the

federal courts....” 311 U.S. at 236. Indeed, the federal court

“is not free to apply a different rule however desirable it

may believe it to be, and even though it may think that the

state Supreme Court may establish a different rule in some

24. 358 US. at 383.

future litigation.” Jd. at 238. This controlling principle, as

the Second Circuit is fully aware, is necessary to maintain

the integrity of our legal system. See Plummer v. Lederle

Laboratories, 819 F. 2d 349, 355 (2d Cir. 1987), cert. denied,

484 U.S. 898 (1987); Belmac Hygiene, Inc. v. Belmac

Corporation, 121 F. 3d 835, 840 (2d Cir. 1997).

The situation is no different when a federal court,

deciding an international dispute, concludes that foreign law

applies. And for precisely the same reasons that an Erie-West

court is bound by controlling decisions of the chosen state’s

highest court, a Lauritzen-Romero court is obliged to

recognize that the highest court of the selected foreign

country is the final arbiter of its country’s laws and that its

pronouncements must be accepted and applied. Otherwise

the lower court is merely paying lip service to Lauritzen and

Romero.» Under Lauritzen, Romero, Erie, and West a federal

court may not apply a different rule unless the rule of foreign

law is contrary to United States public policy. Yet that is

precisely what the Panel has done.

The bottom line is that the Panel reached a result

diametrically opposite to the Korean Supreme Court’s

handling of the very same time-bar issue by disregarding

seven Korean Supreme Court decisions unanimously holding

that Art. 766(2) is triggered by manifestation of damage and

not by commission of the negligent act. Indeed, the Panel’s

decision creates the prohibited situation in which two

divergent and conflicting systems of Korean law have been

25. In Vimar Seguros y Reaseguros, S.A. M/V Sky Reefer, 515

U.S. 528, 539 (1995), the court, upon referring the case to arbitration

in Japan noted that if the Japanese tribunal did not correctly apply

United States law this Court retained jurisdiction to overturn that

maverick decision. By the same token this Court should overturn

the Panel’s aberrant application of Korean Law.

created — one applicable when time bar is addressed by a

Korean court and quite another when addressed by a Second

Circuit panel.”* Yet, by virtue of Supreme Court fiat in

Lauritzen, Romero, Erie, and West, the Panel must accept

and apply those seven decisions.”’

C. Supreme Court Rule C Warrants Review

The instant case is analogous to the situation described

in Supreme Court Rule 10(c). The analogy arises in the sense

that, pursuant to Rule 10(c), one of the compelling reasons

for this Court to review an appellate decision occurs when

“a United States court of appeals ... has decided an important

federal question in a way that conflicts with relevant

decisions of this Court.” In the present case the Panel, after

deciding to apply Korean law, failed to decide the matter in

accordance with the very law it selected even though it was

duty-bound under Erie-West to act as a surrogate Korean

court. Inasmuch as the Panel’s interpretation of Korean law

is “irreconcilable with [the Korean Supreme Court’s] own

26. Counsel for Korean manufacturers with potential tort liability

should flock to New York to file declaratory judgment actions so that

the Second Circuit’s maverick rule of Korean law can be applied to

time bar all claims where the negligent act occurred more than ten years

ago.

27. Indeed, this Panel should have heeded the holding in Belmac

where the Second Circuit, after acknowledging that the lower federal

court “must follow the law directed by the Supreme Court of the state

whose law is found applicable,” reversed the District Court because it

“went its own way in restating Florida law.” 121 F. 3d at 841. Belmac

admonished the District Court for following “so-called refinements” to

a Florida Supreme Court decision adopted by lower Florida courts,

observing that “it is not our prerogative to do so” inasmuch as

“the highest court of the state is the final arbiter of what is state law”.

121 F. 3d at 840.

statement on the subject,” this petition for writ of certiorari

should be granted and the Panel’s dismissal reversed.”*

III. The Panel Wrongly Dismissed NOE’S Indemnity

Claim on the Basis of New York Law

NOE filed its third party complaint against Hyundai

approximately two years after having settled with and paid

the Cargo Interests. The panel, in its Order and Opinion (App.

B), held in footnote 2 that NOE’s indemnity claim against

Hyundai was barred under New York’s “settlor bar rule,”

which provides that a co-defendant who is sued in tort may

not recover contribution or indemnity from a co-tortfeasor

after having settled with the claimants.

New York’s settlor bar rule is a substantive statute that

only governs claims subject to New York substantive law.

See New York Gen. Oblig. Law Sec. 15-108; Bankers Trust

Co. v. Lee Keeling & Associates, Inc., 20 F.3d 1092, 1095-

99 (10th Cir. 1994) (applying N.Y.Gen. Oblig. Sec. 15-108

only after conducting a choice of law analysis and

determining that New York law applied); Minpeco, S.A. v.

Conticommodity Servs., Inc., 677 F. Supp. 151, 153 n.3

(S.D.N.Y. 1988) (“The parties to this motion do not dispute

that New York law, and thus N.Y. Gen. Oblig. Sec. 15-108,

applies in this action”).

Putting aside NOE’s contention that the New York settlor

bar rule did not apply in this case because the underlying

claims by the Cargo Interests against NOE were based on

bill-of-lading contracts, and not in tort, the Panel ignored

the fact that it had concluded that Korean law was the

applicable substantive law in this case. Therefore, New York’s

settlor bar rule was inapplicable to NOE’s indemnity claim.

In its petition for rehearing, NOE provided a declaration

from an expert on Korean law, which was never contested

28. 518 US. at 138.

by Hyundai, informing the Panel that Korea did not have

any law similar to the settlor bar rule of New York (Appendix

F 4 13). Moreover, the Korean expert declared that under

Art. 766 of Korean law, indemnity actions are subject to a

10-year time bar period that begins only when the right to

indemnity arises- in this matter when NOE settled with Cargo

Interests (See Appendix F 4 13).

The Panel ignored its own prescription for Korean law

when it resolved to NOE’s indemnity claim. And the Panel

denied rehearing even though all of the evidence on Korean

law provided to the Panel, which was not contested,

established that NOE had a valid and timely indemnity claim

against Hyundai. A clear error on the law, uncontested by

the opposition, is properly within the Court’s power to

reverse.

CONCLUSION

For the foregoing reasons, a writ of certiorar: should

issue. The decision of the Court of Appeals should either be

reversed on the merits or vacated with directions to the Court

of Appeals to ensure that the Korean time-bar and settlor bar -

rule issues are properly adjudicated and the parties’ statutory

rights of appeal are fully protected.

Respectfully submitted,

Vincent M. DeOrcuis MAcHALE A. MILLER

Joun A. OrzeL Counsel of Record

DeOrcuis & PARTNERS, LLP MILier & Wituiamse x, LLC

61 Broadway, 26th Floor 3150 Energy Centre

New York, NY 10006-2802 1100 Poydras Street

(212) 344-4700 New Orleans, LA 70163

(504) 525-9800

JOHN Eric OLSON

THOMAS E. WILLOUGHBY

Hit Rivkins & Haypen LLP

45 Broadway, Suite 1500

New York, NY 10006

(212) 669- 0640

EpwarbD C. RADZIK

Rosert J. PHILLIPS

WILLIAM R. Connor III

McDermott & Rapzik, LLP

WALL STREET PLAZA

88 Pine Street, 21st Floor

New York, NY 10005

(212) 376-6400

JOHN T. LiLuis

THOMAS Murpuy

KENNEDY, LILLis, SCHMIDT

& ENGLISH

75 Maiden Lane, 23rd Floor

New York, NY 10038

(212) 430-0800

RICHARD W. STong, II

Francis M. O’ REAGAN

WaAESCHE, SHEINBAUM &

O’ REGAN

111 Broadway, 4th Floor

New York, NY 10006-1991

(212) 227-3550

RoMAN BaADIAK

Bapiak, WILL & Ruppy

120 Broadway

New York, NY 10271-0079

(212) 376-6767

STEPHEN H. VENGROW

PaTRICK MICHAEL

DeCuar-es, Il

CICHANOWICZ, CALLAN, KEANE,

VENGROW & TEXTOR

61 Broadway, Suite 3000

New York, NY 10006-2802

(212) 344-7042

JAMES M. KENNY

KENNY, STEARNS

& ZONGHETTI

26 Broadway

27th Floor

New York, NY 10004

(212) 422-6111

CHRISTOPHER RALEIGH

WILLIAM K. Broupy

Cozen & O’ CONNOR

45 Broadway Atrium,

16th Floor

New York, NY 10006

(212) 509-9400

Attorneys for Petitioners

APPENDIX

APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

DECIDED OCTOBER 17, 2005

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2004

(Argued: January 4, 2005 Decided: October 17, 2005)

Docket Nos. 04-4267-cv, 04-5572-cv(L),

04-6028-cv(CON)

RATIONIS ENTERPRISES INC. OF PANAMA,

MEDITERRANEAN SHIPPING CO., S.A. OF GENEVA,

Counter-Defendant-Appellee,

NORTH OF ENGLAND PROTECTING AND

INDEMNITY ASSOCIATION,

Consolidated-Plaintiff-Appellee,

HYUNDAI MIPO DOCKYARD CO., LTD.,

Third-Party-Defendant-Appellant,

HYUNDAI CORPORATION,

_ Consolidated-Plaintiff-Appellant.

Appendix A

B.D. PARKER Circuit Judge:

Hyundai Corporation and Hyundai Mipo Dockyard

appeal a judgment, entered following a trial to the United

States District Court for the Southern District of New York

(Owen, J.) arising from the loss of the containership MSC

Carla. They advance a number of contentions, but we do not

reach most of them since we conclude that one—that Korean

law applies and precludes liability—is dispositive. '

BACKGROUND

I. The Lengthening

The evidence at trial established that the containership

MSC Carla (originally called the Nihon) was built in 1972

in Sweden. A Swedish firm, Brostrom Shipping Co. Ltd.

(“Brostrom’”’), initially managed the ship, sailing it under the

Swedish flag. Brostrom used the classification society

Lloyd’s Register (“Lloyd’s”) (an international risk

management organization providing underwriters and

merchants with information on the condition of vessels) to

develop specifications to lengthen the vessel by adding a

fifteen-meter midsection to provide an extra cargo hold. After

receiving bids from several shipyards, Brostrom contracted

with Hyundai Mipo Dockyard in Korea (collectively with

Hyundai Corporation, “Hyundai’) to do the work. Brostrom

and Hyundai agreed English law would govern the work.

1. Hyundai Corporation \and Hyundai Mipo Dockyard also

appeal an anti-suit injunction prohibiting their participation in

parallel litigation in Korea. Because we conclude they are not liable

under the applicable Korean law, we vacate the anti-suit injunction

as moot.

Appendix A

Hyundai manufactured the midsection to Lloyd’s

specifications prior to the Nihon’s arrival in Korea in

September 1984. Just as a midsection is welded into a

bisected car to construct a limousine, the Nihon was

elongated. Lloyd’s inspectors observed the process. The

- welded joints attaching the inserted midsection were visually

inspected, as well as subjected to extensive radiographic tests.

In May 1985, seven months after the ship resumed

sailing, Lloyd’s discovered a fatigue crack and conducted

ultrasonic testing of the welds. The ship returned to Korea.

Hyundai furnished Lloyd’s with a report of certain defects

in the welds and offered to repair them. Lloyd’s determined

the repairs were unnecessary, but marked the Nihon ’s record

with a “condition of class” to ensure that the welds would

continue to be monitored. After subsequent surveys finding

no defect, Lloyd’s reduced the condition of class. After 1985,

Hyundai had no further involvement with the vessel.

II. MSC’s Purchase

The ship was sold four times before being purchased in

1995 by a Panamanian company, Mediterranean Shipping

Co., S.A. (“MSC”), and subsequently was renamed the MSC

Carla. MSC purchased the Nihon in 1995 “as is.” Prior to

the purchase, a Lloyd’s inspector imposed three conditions

of class due to cracks in the starboard tank and corrosion in

the starboard and port tanks. A Lloyd’s work list called for

new steel in several areas. In 1995, and then again in 1996,

MSC requested postponements of the repairs and Lloyd’s

agreed. It is unclear whether the repairs were performed.

Appendix A

Nevertheless, in 1997, during a twenty-five year inspection

of the ship, the conditions of class were removed.

Ilf. The Casualty Voyage

The MSC Carla departed France for the United States in

November 1997. The containership was filled with cargo and

there is conflicting evidence as to whether it was loaded

properly. There were several storms in the North Atlantic,

and it is also debated by the parties whether the MSC Carla

might have been able to avoid them entirely. This sort of

weather is usual for the season and containerships similar to

the MSC Carla normally handle this weather without

incident.

During the voyage, water began splashing over the deck,

possibly seeping into the boat’s front hatches. All three

engines cut. One restarted. As the boat climbed a large wave,

the captain testified that the ship “hogged,” with the front

and aft sections sagging below the middle. The captain heard

a breaking noise carry through the length of the hull and he

noticed the bow light abnormally low.

The ship broke along the weld lines. The crew was soon

airlifted to safety. Six days later the buoyant, dry aft section

was towed to Las Palmas, Canary Islands, where it was

inspected and its cargo salvaged. The flooded front section

sank.

Appendix A

[V. Procedural History

Rationis and MSC, the ship’s owner and operator,

respectively, filed a limitation of liability proceeding in the

Southern District of New York. The almost one thousand

receivers of lost cargo (collectively, the “cargo interests”)

brought third-party complaints against Hyundai based on the

allegedly defective lengthening work. Rationis and MSC’s

liability insurer, North of England Protecting and Indemnity

Association (“NOE”), settled with the cargo interests in 2000

for $16.95 million. (NOE also settled with various cargo

interests separately.) NOE joined the action against Hyundai,

to recover the amounts paid in the settlement.

In the pre-trial proceedings before the District Court,

Hyundai argued, among other things, that the District Court

lacked personal jurisdiction. Hyundai then commenced, in a

Korean court, two declaratory judgments to establish non-

liability. (The first action named and served three cargo

interests and the second action named, but never served, most

of the other nearly one thousand cargo interests). The District

Court then issued an anti-suit injunction, requiring Hyundai

to request a suspension of the Korean action. Hyundai

requested the suspension, but appealed the injunction,

arguing again that the District Court lacked personal

jurisdiction.

We vacated and remanded the anti-suit injunction,

directing the District Court to conduct an evidentiary hearing

as to whether the Court had personal jurisdiction over

Hyundai. Rationis v. AEP/Borden Indus., 261 F.3d 264 (2d

Cir.2001). We also directed the District Court, should it issue

Appendix A

an anti-suit injunction, to heed China Trade & Dev. Corp. v.

M.V. Choong Yong, 837 F.2d 33 (2d Cir.1987) and its progeny

since it had failed to conduct such an analysis before initially

enjoining Hyundai.

On remand, the District Court conducted an evidentiary

hearing on personal jurisdiction and concluded that it had

jurisdiction. Hyundai subsequently moved for summary

judgment, arguing, in part, that the plaintiffs could not prevail

under the laws of either Korea, Sweden or Panama, the

universe of jurisdictions whose laws potentially applied. The

Court denied the motion, concluding that Hyundai had

waived its choice of law defense by failing to select a

particular foreign law until the summary judgment stage. The

Court stressed that, although Hyundai had announced as early

as their answer to the complaint that the “substantive law of

a foreign country governs,” they had delayed through four

years of litigation, until after the completion of discovery,

‘before precisely identifying the applicable foreign law.

In Re Rationis Enters., Inc. of Panama, 2003 WL 203210,

*] (S.D.N.Y.2003). The District Court reasoned that this

alternative pleading style failed to provide the opposing party

with the notice required by Fed. R. of Civ. Proc. 44.1.7 The

Court concluded that Hyundai’s overly expansive formulation

of foreign law prejudiced the plaintiffs. Finding waiver, the

2. Fed. R. of Civ. Proc. 44.1 provides: “A party who intends to

raise an issue concerning the law of a foreign country shall give

notice by pleadings or other reasonable written notice. The court, in

determining foreign law, may consider any relevant material or

source, including testimony, whether or not submitted by a party or

admissible under the Federal Rule of Evidence. The court’s

determination shall be treated as a ruling on a question of law.”

Appendix A

Court saw no need to conduct a choice of law analysis and

proceeded to apply United States law.

The District Court held a bifurcated bench trial. There

Hyundai continued to maintain that it did not waive the choice

of law argument and United States law did not apply. The

major factual disputes centered on whether the deck broke

first as a result of the allegedly faulty welding, or whether

the allegedly corroded bottom collapsed first, as a result of

MSC’s failure to maintain the ship. The parties also disagreed

as to whether the lengthening contract was for the sale of

goods or the provision of services, only the first of which

implicates products liability doctrines. Hyundai, as a nominal

party to the contract, contended that the District Court lacked

personal jurisdiction and that NOE’s claims were barred

under a contribution of settling parties theories. Following

trial, the District Court found Hyundai liable in negligence

and strict liability. Hyundai appeals, raising a host of issues.

We reach only one—the choice of foreign law—because we

conclude it is dispositive. We reverse.

DISCUSSION

I. Standard of Review

The parties dispute the standard of review applicable to

the District Court’s choice of foreign law ruling. Hyundai

takes the position that all choice of law determinations,

including the one presently before us, are questions of law

to be reviewed de novo. NOE and the cargo interests maintain

that, because the district court did not undertake a choice of

Appendix A

law analysis, we should review for abuse of discretion the

district court’s determination that the defense was waived.

The District Court’s determination regarding what

constitutes “reasonable ... notice” under Rule 44.1 and

waiver of the foreign law issue falls within the discretionary

powers of the District Court to supervise litigation. Therefore,

we agree with NOE and the cargo interests that those

threshold determinations should be reviewed for abuse of

discretion. See Pierce v. Underwood, 487 U.S. 552, 558, 108

S.Ct. 2541, 101 L.Ed.2d 490 (1988) (explaining that matters

of discretion should be reviewed for “abuse of discretion”).

As the Ninth Circuit has explained, “[b]ecause Rule 44.1

grants the district court discretion in determining ‘reasonable’

notice, we review the district court’s application of this

standard for abuse of discretion.” DP Aviation v. Smiths

Indus. Aerospace & Defense Sys., Ltd., 268 F.3d 829, 846

(9th Cir.2001). However, once we move beyond the issue of

“reasonable notice,” we will review any determinations

concerning the appropriate choice of law de novo. Curley v.

AMR Corp., 153 F.3d 5, 11 (2d Cir.1998).

II. Pleading Alternative Bodies of Law

Before we conduct the choice of law analysis, we must

resolve whether Hyundai waived the foreign law argument

by simultaneously pleading the applicability of English,

Swedish, Korean, or Panamanian law, and not settling

conclusively on one body of foreign law. We must determine

whether the District Court’s determination that Hyundai

waived this argument was proper. We now clarify that

alternative theories may well suffice as reasonable notice

Appendix A

when, as here, relevant events occurred in multiple foreign

locations and legitimately point to several different applicable

bodies of law. We therefore find that the parties gave proper

Rule 44.1 notice and the applicability of foreign law was not

waived. We hold that the District Court’s decision that notice

was not proper and that therefore Hyundai waived the foreign

choice of law argument exceeded its discretion.

Congress passed Rule 44.1 in 1966 to avoid unfair

surprise, to make uniform the permissibility of raising an

issue of foreign law after pleadings where the choice of law

issue became apparent later, and to put to rest the notion that

foreign law is a question of fact that must be proved at trial

and reviewed on appeal only for clear error. While the Rule

requires that the parties give notice of the intent to raise

foreign law, the Advisory Committee’s Notes make clear that

Congress deliberately declined to provide “any definite limit

on the party’s time for giving the notice of an issue of foreign

law.” Fed. R. Civ. P. 44.1 advisory committee’s note, 39

F.R.D. 69, 118 (1966). Congress explained: “The stage which

the case has reached at the time of the notice, the reason

proffered by the party for his failure to give earlier notice,

and the importance to the case as a whole of the issue of

foreign law sought to be raised, are among the factors which

the court should consider in deciding a question of the

reasonableness of a notice.” /d.

It is important to acknowledge that notice under Rule

44.1 differs from argument—notice merely called attention

to the fact that the issue will be raised, whereas argument

lays out, inter alia, the provisions of foreign law, the basis

for its relevance, and the application of the foreign law to

10a

Appendix A

the facts of the case. Indeed, the Advisory Committee

distinguished between notice and “presentation of material

on the foreign law.” Jd. According to a prominent treatise,

“(t]he function of the notice is not to spe)! out the precise

contents of foreign law but rather to infcim the court and

litigants that it is relevant to the lawsuit. Thus a high degree

of specificity is not required.” Charles Alan Wright & Arthur

R. Miller, Federal Practice and Procedure § 2443, (2d

ed.1994). Accordingly, a litigant must provide the opposing

party with reasonable notice that an argument will be raised,

but the litigant need not flesh out its full argument at the

Rule 44.1 stage. In a maritime mass tort such as the case

before us, the choice of law analysis is complex, as well as

highly dependent on facts that may not be adduced until

discovery has proceeded. Indeed, in international disputes

involving parties of sundry allegiances, the eight-factor

choice of law analysis discussed below is rarely well-

managed by bright-line rules, uniform deadlines, or

aggressive findings of waiver. Frequentiy, the proper

determination of foreign law can be a complicated task. Rule

44.1 is intended to assist the court with its work and the

court is, of course, free to enlist the parties in this effort.

Ultimaiely, the responsibility for correctly identifying and

applying foreign law rests with the court.

The question here is not whether Hyundai failed to give

any notice, but rather, whether its alternative pleading

offended Rule 44.1. Although this may force the opposing

party to conduct further research, such additional work in a

maritime mass tort is hardly the undue surprise Rule 44.1

seeks to prevent. Perhaps it is even to be expected, when

shipping goods from Europe to the United States, on a

lla

Appendix A

Swedish ship, modified in Korea, currently owned and

operated by Panamanians. We therefore recognize alternative

pleading of choice of law issues as satisfying the notice

requirements of Rule 44.1. For these reasons, we find

Hyundai’s alternative notice reasonable under Rule 44.1 and

that it is an abuse of the District Court’s discretion to have

held otherwise.

Ill. Choice of Law Analysis

Lauritzen v. Larsen, 345 U.S. 571, 583-92, 73 S.Ct. 921,

97 L.Ed. 1254 (1953), directs us to consider seven factors in

conducting a choice of law interest analysis. Adding another

factor, the Supreme Court announced in Hellenic Lines Ltd.

v. Rhoditis, 398 U.S. 306, 309, 90 S.Ct. 1731, 26 L.Ed.2d

252 (1970), that the Lauritzen factors are “not intended as

exhaustive.” We enumerated the Lauritzen factors in

Carbotrade S.P.A. v. Bureau Veritas, 99 F.3d 86, 90 (2d

Cir.1996): “(1) the place of the wrongful act; (2) the law of

the ship’s flag; (3) the domicile of the injured party; (4) the

domicile of the shipowner; (5) the place of the contract;

(6) the inaccessibility of the foreign forum; (7) the law of

the forum; and (8) the shipowner’s base of operations.”

The law of the ship’s flag at the time of the welding was

Sweden, but at the time of the casualty was Panama.

Generally, we look to the law of the ship’s flag only if the

shipowner is a party:

Whatever significance law of the flag may have

in cases where the ship or its owner is a party and

where other factors fail to point clearly to another

12a

Appendix A

jurisdiction’s law, we see no reason to apply the

law of the flag here in preference to that of another

jurisdiction whose ties are more pertinent to the

dispute, especially given the fact that neither the

ship nor the owner is a party.

Carbotrade, 99 F.3d at 92-93. Here, Brostrom, the shipowner

at the time of the welding, is not a party and Rationis, the

shipowner at the time of the casualty, is also not a party,

having settled without asserting claims against Hyundai. We

therefore do not consider the law of the flag a determinative

factor. For the same reasons, the shipowner’s base of

operations is not a determinative factor here. Another non-

determinative factor is the place of the contract as this case

arises in tort, not contract.? See Carbotrade, 99 F.3d at 91

3. The District Court explained, after finding liability on the

basis of strict liability and negligence theories, that “these claims

arise not in tort but in contract on the basis of bills of lading issued

to the cargo interests.” In re: Rationis Enters., Inc. of Panama, 325

F.Supp.2d 318, 328-29 (S.D.N.Y.2004). The Court stated this as an

explanation for the inapplicability of the Settlor Bar Rule. This is

error because products liability sounds in tort. Cf International Ore

& Fertilizer Corp. v. SGS Control, 38 F.3d 1279, 1284 (2d Cir. 1994);

see also East River Steamship Corp. v. Transamerica Delaval, Inc.,

476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986) (distinguishing

between strict liability claims in tort and warranty claims in contract).

Appellees also argue that the claims were brought in contract

under the Carriage of Goods by Sea Act (““COGSA”), 46 App.

U.S.C.A. § 1304. This is not the case under Second Circuit law.

Indeed, we have explicitly held that a COGSA claim may be a “mixed

tort, contract and bailment cause of action.” Texport Oil Co. v. M/V

(Cont'd)

13a

Appendix A

(“[N]o direct contractual relationship exists between the

plaintiff and the defendant, so the fifth factor—the place of

the contract—is not involved in our analysis.”).

Inaccessibility of a foreign forum also is not relevant, because

a New York court is fully capable of applying foreign law in

this case. See Lauritzen, 345 U.S. at 590, 73 S.Ct. 921 (“There

is not the slightest showing that to obtain any relief to which

[they are} entitled under [foreign] law would require [their]

presence in [a foreign forum] or necessitate [their] leaving

New York.”). Finally, this Court has considered the law of

the forum generally of little relevance in United States courts.

Carbotrade, 99 F.3d at 91 (“[T]he seventh Lauritzen factor—

the law of the forum—is irrelevant here because this litigation

is in the courts of the United States.”).

(Cont’d)

Amolyntos, 11 F.3d 361, 367 (2d Cir.1993) (citation and internal

quotation marks omitted), overruled on other grounds by Wilton v.

Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214

(1995). The Fourth, Fifth, Ninth, and Eleventh Circuits have similarly

held. See Oriente Commercial, Inc. v. American Flag Vessel, 529

F.2d 221, 223 (4th Cir.1975); Associated Metals & Minerals Corp.

v, Alexander's Unity MV, 41 F.3d 1007, 1013-14 (Sth Cir.1995); All

Alaskan Seafoods, Inc. v. M/V Sea Producer, 882 F.2d 425, 430 (9th

Cir.1989) (holding that “[i}f [a contracting party] breached its duty

of care with respect to [another party to the contract] then that breach

of duty can give rise to tort liability irrespective of contract

obligations between the parties.”); Polo Ralph Lauren, L.P. v.

Tropical Shipping & Construction Co., 215 F.3d 1217 (11th

Cir.2000). As the Eleventh Circuit further explained, “COGSA

affords one cause of action for lost or damaged goods which,

depending on the underlying circumstances, may sound louder in

either contract or tort.” Polo Ralph Lauren, 215 F.3d at 1221.

14a

Appendix A

The place of the alleged wrongful act that gave rise to

the liability is Korea, where the welding was performed. The

cargo interests contend that the place of the wrongful act is

the location of the casualty, that is, the Atlantic Ocean. But

we have held that the place of the wrongful act is not where

the vessel sinks, but where the negligence occurs.

See Carbotrade, 99 F.3d at 91. The reason for this rule is not

difficult to discern because it is the state where the negligence

occurs that has the greatest interest in regulating the behavior

of the parties. See Curley, 153 F.3d at 15 (focusing on the

location of the tort and choosing Mexican law, because

Mexico has the greatest interest in regulating the behavior

of the parties).

The citizenship of the injured parties factor is

complicated by incomplete discovery. A good portion of the

cargo interests are United States citizens and a good portion

are European, but the precise breakdown is disputed. It is

clear that the citizenship of NOE, the insurer with the greatest

share of the claims and also the insurer for the shipowner

and ship operator, is the United Kingdom. Furthermore, the

destination of the lost cargo does not dictate the governing

body of law; according to Lauritzen, a nation has a

compelling interest in protecting its nationals, not its imports.

Lauritzen, 345 U.S. at 586, 73 S.Ct. 921. It is simply too

variable and indeterminate to ground the choice of law

analysis in the intended destination of the lost cargo. Even

from the sparse record as to the cargo interests’ countries of

citizenship, this factor steers toward “much of the globe.”

Carbotrade, 99 F.3d at 90 (internal citation omitted).

15a

Appendix A

The citizenship of the defendants, Hyundai, is Korea.

The presence of Hyundai Mipo Dockyard’s counsel and the

affairs Hyundai Corporation conducts with United States

businesses, while critical to a personal jurisdiction analysis,

does not help determine the applicable body of law because

those affairs are wholly unconnected to the events giving

rise to the casualty. “The presence of an office of a defendant

in a particular country might not always be sufficient to tip

this factor in favor of applying the law of that country.”

Carbotrade, 99 F.3d at 91-92 (giving weight to the location

of the defendant’s office only because that office gave rise

to the dispute). The citizenship of the defendants points

without question to Korean law.

Taking these factors together, we find Korean law

applies. The allegiance of the injured parties does not point

conclusively to United States law, because a significant

portion of the injured parties are European. Even if we were

to consider the allegiance of some of the cargo interests as

favoring United States law to some degree, this is balanced

by the allegiance of the defendants, which strongly favors

Korean law. Ultimately, it is the place of the alleged wrongful

act that tips the scale in favor of Korean law, for Korea, with

its extensive shipbuilding business, possesses the greatest

interest and responsibility in regulating the industry.

See Curley, 153 F.3d at 15. Because Korean law bars the

cargo interests and NOE from recovery against Hyundai due

to statutes of repose, we reverse the District Court’s finding

of liability.‘

4. “The right to claim for damages resulting from an unlawful

act shall lapse by prescription .. . if ten years have elapsed from the

(Cont’d)

l6a

Appendix A

CONCLUSION

For the foregoing reasons, we reverse the judgment of

the District Court, vacate the anti-litigation injunction as

moot and remand with instructions to enter judgment in favor

of Appellants.

(Cont'd)

time when the unlawful act was committed.” Korean Civil Act, No.

6591, Ch. V, Art. 766 (2002) (S.Korea). “The right for damages under

{the Product Liability Act] shall be exercised within 10 years from

the date on which a manufacturer supplies a product causing

damage.” Product Liability Act, No. 6109, Art. 7. (2000) (S.Korea).

17a

APPENDIX B — OPINION AND ORDER OF THE

UNITED STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF NEW YORK

DATED JULY 9, 2004

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

97 Civ. 9052 (RO)

In the Matter of the Complaint of:

RATIONIS ENTERPRISES, INC. OF PANAMA,

as Owner, and MEDITERRANEAN SHIPPING CO.

S.A. OF GENEVA, as Bareboat Charterer

of the MSC Carla for Exoneration from or Limitation of

Liability.

OPINION AND ORDER

OWEN, District Judge:

On November 24, 1997, the MSC Carla, a fully-loaded

900 foot containership, was on a voyage from LeHavre to

Boston following a recent month-long dry-docking with a

“Special 25 Year” Survey by Lloyd’s Register at which time

over 100 men did a lot of work on the vessel and Lloyds’

issued a clean certificate of class.

_ The first days of the voyage were uneventful. The Carla

had loaded cargo at various ports such as Hamburg,

Bremerhaven and left LeHavre for Boston on November 21.

The vessel was properly loaded and its stability was

18a

Appendix B

satisfactory. Captain Giuseppe Siviero, an experienced

master, described the Carla as being in good to optimum

condition. On November 24, however, weather conditions

began deteriorating and wind speed increased steadily until

by 4 o’clock that afternoon wind from the west reached force

10 or 11 on the Beaufort Scale, approximately 55 to 72 miles

per hour, with wave heights of 11 to 12 meters. The vessel’s

heading was 250 degrees with seas coming at its starboard

bow at an approximately 20 to 40 degree angle and swells

from a previous storm coming at its port bow from a

southwesterly direction. Thus, approaching from different

directions, the storm waves were confused. At 6 o’clock, the

vessel suddenly rolled heavily—about 25 degrees—several

times and then steadied somewhat. These several rolls, in

addition to tossing and breaking all the dishes in the crew

dining room, caused all three engines—the major center one

and two side engines—to stop running because of lack of oil

pressure. The engineer was shortly able to get the center

engine going and the Carla continued on its 250 degree

course but at minimal speed.

Shortly after regaining power on its central engine, the

Carla encountered the first of at least two large, steep waves.

Captain Siviero (through an interpreter) testified as to what

happed thereafter:

Q. Now what happens after 1830 hours?

* * *

A. Well, of course the first thing we did was we tried

to put a little bit of order because of everything

19a

Appendix B

having been thrown ail over the place, and to try to

put the situation, the conditions was they were prior

to that incident of rolling. And of course the engineer

below was trying to get the two side engines started

again. As we were adjusting and increasing the pitch,

of course we were gaining a little bit more speed. . . .

six maybe seven knots, because it’s only one engine.

We started climbing a wave, and you could see that

the bow light kept coming up and up and up and up,

and I could see that the ship was going up this wave.

. And then what happened?

So I was trying to judge how big this wave was by

the inclination of the ship, and I noticed that the bow

light was lower than where one would expect it to

be in relationship to the pitch of the ship. (Tr. 122-

23).

Then as we started going down the other side of this

wave, ... the ship made a very strange motion as if

it had wanted to screw itself into the wave. . . I heard

a very sharp hit, impact, and of course the noise had

been carried through the hull, but a very sharp

staccato noise, and then going up this second wave,

and I noticed that there was something absolutely

wrong. As a matter of fact my first officer, I noticed

that the bow was going down. The ship was going

up, the bow was going down, and the first officer

was saying we’ ve broken apart, we’ve broken apart

20a

Appendix B

and I was able to see. I immediately ran out to the

wing on the observation wing and what I noticed is

that this part, the bow was actually separating itself

to port, away from the rest of the ship. And we broke

apart. (Tr. 123-24).

Q. When did it break?

A. On the first wave. Here is hogging started, to crack

here. When it go down, the big shock break, go up

again, split. (Tr. 130).

* * *

Q. What happened after that?

A. The wave passed, the impact passed also, went away,

of course. When we went—so, there was the impact.

The impact stopped. The wave passed over us' but

we started going up that wave and that’s when the

ship broke. That’s when it separated, split. (Tr. 129).

* * *

Q. In your opinion, captain, based on being up on the

bridge on November 24th at approximately 1830

hours, at what point did the ship begin to break in

1. The captain testified elsewhere that (“Heavy spraying

reached right up to the glass of the cabin.”]

2la

Appendix B

half in events, over the series of waves that he has

just talked about?

A. I would say that the ship started breaking apart on

top of the first wave. . . . That’s when I believe that

the cracking started.

Q. Captain, exactly why do you think it cracked at that

particular moment, at the top of the first wave?

A. Because we saw that the bow light had started to

lower itself relative to the position where it should

have been, and the line of containers, the surface of

containers was not in line with the containers aft of

them. They had shifted as though they had shifted

position, because they were lower. (Tr. 124).

* * *

The hull of the Car/a broke apart roughly in a complete

circle at or just in front of the welding at the back of a 15

meter elongation section defendant Hyundai Corporation

(“HC”), had built and inserted in its mid section in front of

the bridge some 13 years earlier. The front half of the vessel

moved to port and fortunately the captain was able to turn

the stern half of the vessel (with the rudders) to starboard

and thus avoided hitting the separated forebody. The front

half, over 5 days, slowly filled up with water and sank. The

stern half was towed to Los Palmas Island, the cargo

unloaded, then towed to Gijon, Spain, where it was scrapped.

Going back those 13 years to February 20, 1984, HC,

involved in the ship building services, entered into a ship

22a

Appendix B

elongation contract with the then-owner of the vessel,

Brostrom Shipping Co., Ltd., under which HC, identified as

the “contractor,” undertook to lengthen the NIHON, as the

Carla was then named, by adding approximately 15 meters

length in its middle in accordance with its plans and

specifications annexed to the contract. Bostrom was to pay

HC some $2,000,000 for the work with liquidated damages

under the contract of $25,000/a day for failure to deliver the

vessel by the 25th day delivery date.

HC obtained the builders’ risk insurance. HC did not

perform the work but delegated it to its shipyard, specifically

Hyundai Mipo Dockyard (“HMD”). HMD fabricated the new

midbody section in its shipyard in Ulsan, Korea. It cut the

vessel in half, put in the new midbody which was then joined

by welding to the old aftbody and forebody. In addition to

the work on the NIHON, HMD was more or less

simultaneously doing three other lengthening projects for the

group of which Brostrom was a member, and as to one, the

M/V JUTLANDIA, HMD’s work on that vessel overlapped

with its work on the NIHON by approximately twenty days.

Consequently, from the trial testimony, it appears that the

many labor demands on HMD were causing the JUTLANDIA

to be nine days behind delivery schedule and the NIHON

(now named Carla) three days behind schedule. To avoid or

minimize liquidated damages under the contract, HMD

contracted with quite a number of outside welders to

supplement HMD’s welding staff but their quality, as |

conclude here, had disastrous consequences thirteen years

later.

23a

Appendix B

Six months after the NIHON’s delivery, it was discovered

that all 76 butt welds to the doubler straps on the deck of the

Carla were deficient and HMD acknowledged to officials at

Lloyd’s Register in early June of 1985 that the outside welders

brought in had done a poor job. The doubler straps referred

to, three on each side of the deck for much of its length, to

be made continuous, were to be welded between each section

with what is called fu// penetration welds. This requirement,

imposed by Lloyd’s Register, was to provide adequate deck

strength especially across the newly-installed midsection.

Normally, it appears HMD’s welders did their work in the

shop which would have made it easy to do a two-sided

transverse butt weld bottom to top. Instead, here, HMD

elected to install the doublers plate by plate onto the deck.

As a result, the welders not being able to come up from the

underside, failed to do “full penetration welds” which

obviously markedly weakened the straps which were there

to strengthen the deck while the vessel would be bending

and turning in waves.’ It also appears that for the 60 HMD

2. At some point, during the warranty period, this problem soon

came to light in an inspection in Pusan. As an HMD witness Man Jin

Yoon testified:

Q. What did you conclude from that inspection report?

A. Well, that inspection report does say that there are lack of

penetration and some slag inclusion.

Q. What’s slag inclusion?

A. Slag is a kind of unnecessary material inside the welding. . . .

(Tr. 1674).

. (Cont’d)

24a

Appendix B

(Cont'd)

This problem, which was communicated somewhat to the

shipowner, was apparently not emphasized, and was indeed played

down and not followed-up by HMD.

THE COURT: Mr. Yoon, I don’t know anything about building

ships so you will forgive me for putting this question to you this

way. But when you have a report of lack of penetration and slag

inclusion do you think of that in terms of it being something that

could put the ship at some risk of damage? Are you troubled when

you see that?

THE WITNESS: That’s purely depends on the size or quantity.

THE COURT: In this case you get a report that these two things-

exist. Docs that make you say, uh-oh, we got a problem on our hands

here?

THE WITNESS: My personal, no, sir.

THE COURT: No. OK. Because then if you said we did, and

you tell the owner this is what we got and the owner doesn’t come

back to you, you then might be saying to yourself, hey, owner, we

called this to your atteation and you got to pay some attention to it.

. Do you feel a duty on yourself to follow up and say why aren’t

you doing anything?

THE WITNESS: Well, as far as I know this matter has been

discussed even before we are at Pusan inspection. So I believe they

have some deep discussion between owners and Lloyd’s as

professional organizations and we waited until they come up to us.

THE COURT: But they don’t come up to you. So at some point

you say well, if it doesn’t bother them it’s not going to bother us

either, right?

(Cont'd)

25a

Appendix B

welders Lloyd’s Register had only one hull surveyor present

and he did not have the ability to observe every weld. One of

HMD’s top vice-presidents acknowledged that HMD’s

quality assurance department did not radiograph all of the

welds to ensure they were of good quality. Instead it appears

HMD decided to only perform random radiographic

inspections which did not catch a number of faulty welds.

How many were missed and unexplained is not clear. This,

in addition to the new doubler joints not being staggered

relative to the joints of the plates of old body part, made it

even weaker (see, infra).

Also, a substantial number of design and construction

flaws were concentrated ‘n a relatively small area. The most

significant of these was a cavity of an undetermined number

of inches in length and irregular in shape where there should

have been solid welding where the deck and the starboard

topside joined at the rear of the inserted section. This should

never have existed. And not only did the cavity increase the

stresses in that area but welding irregularities—high and low

points of welding material inside the cavity—also created

additional points of stress.’

(Cont’d)

THE WITNESS: Yes, at that time personal I was not as work

as project manager and I left this project and returned to my original

position.

THE COURT: So you really don’t know the answer to what I

am asking?

THE WITNESS: No, sir. (Tr. 1676-78).

3. There was no such cavity left on the port side.

26a

Appendix B

Next there was a 7 mm gap from a misalignment of a

sheer strake plate and the deck plate at one point. This

misalignment was purportedly compensated for by the

welders filling the gap with welding material but which,

according to engineering testimony in fact increased stresses

at that point. Further, as mentioned above, in a number of

places there was a failure to have the doubler welds “bridge”

the erection joint weld. In homely terms, this is like a

bricklayer building a brick wall by putting one brick one

exactly on top of another without alternating the bricks. In

some cases there was insufficient beveling on the deck plate,

meaning the HMD workers beveled at a 25 degree angle from

the vertical where drawings specified 45 degrees, which made

it impossible for welders thereafter to fully insert a welding

tool into the crevice for a full penetration weld. Many butt

welds also contained-stag-which. weakened their ability to

bear loads that they were designed to carry.

Joseph Winer testified as an expert for the plaintiffs’

interests and was personally involved in supervising the

lengthening of a number of vessels over the years. He went

aboard the Carla's aft section the moment it was towed to

Los Palmas immediately after the break-up in December 1997

and visited it later four times over a one year period in Gijon,

Spain. He concluded that quality assurance was lacking and

that the inspection practices and procedures were inferior

which permitted defective welds to go uncorrected. He

faultea HMD’s planning, particularly as to the design and

construction of the deck doublers.

Winer, after being very specific about the defects in the

workmanship by HMD’s welders, testified that from the

27a

Appendix B

observations and measurements he made aboard the vessel

the ship failed on deck, and the fracture ran around the

perimeter of the vessel’s hull. He testified:

Q. Which of those two occurred first, crack in the

starboard torsion box structure or failure at the

bottom?

A. The crack in the starboard torsion box structure.

Because the crack under my conclusion traveled

from the box girder, the torsion box down the side

of the ship until it reached that heavy structure which

extends up from the bottom of the ship to five meters

above. That’s coincidental with the turn of the bilge.

And looking at Exhibit 126A, the five meter above

baseline is precisely where the heave structure starts.

As we can see over the side, all the heavy structure

is over here. The heavy structure goes up to this point

here. So the fracture traveled easily down between

the transverse frames. But when it got to this point

it stopped, and I guess the initial hinging point was

the entire lower structure. And then that separated

and not in one motion but I think in several episodes

the crushing of these lower port and starboard bilge

regions occurred and occurred, and the final hinging

caused the tank top to fracture in tension and the

ultimate hinge with the separation of the hull at the

bottom of frame P. (Tr. 774-75).

28a

Appendix B

Winer also testified, confirming the break at the deck,

that the pivoting was at the bottom at the tank top plate;

since across the bottom it was “folded down and broken. . .”

whereas if the break had occurred at the bottom, it would

have been “shoved under”.

Dr. Charles Cushing, another expert witness for plaintiffs

with a substantial background in naval architecture and

marine engineering including supervising more than twenty

conversions of ships by lengthening, personally examined

the rear section of the Carla at Las Palmas and Gijon. He

testified:

So what we have at the outboard edge of the

erection butt—where the two ships, the new

midbody and the old forebody were attached—is

an arrangement represented by this diagram that

shows the fillet weld, a massive amount of

welding as we show in the photograph, a massive

amount of welding that extends over to the region

and connects up with the heat-affected zones of

the fillet welds.

And then, of course, the concentrations that

we have discussed so many times in the last—

yes, the cavity. And then the stress concentrations

that are also caused by the defective welding that

include undercut, overlap, excessive crown, all

of these are stress concentrations.

And, in addition to that, because of the size

of this particular weldment— and it’s pretty

29a

Appendix B

massive—taking the doubler at the top, the deck

and the side, this is a lot of concentrated welding

that creates residual stresses.

When you, as you described earlier, your

Honor, melt the steel and melt the electrodes to

get them to bond together, and then they cool, in

the cooling process they create a lot of internal

stresses. Those are called residual stresses. And

this whole corner where you have very heavy

welding builds up these residual stresses. And

there is no way of knowing the quantity of those

stresses, but it’s known that it’s a high amount.

Added to those residual stresses are the

normal longitudinal bending stresses that a ship

experiences that are in the deck and in the doubler.

There are transverse stresses. The ship is twisting.

There are torsional stresses, and there are shear

stresses in the ship. So this corner, with all of these

concentrations, are expected to carry all of these

different stresses, not only the longitudinal but

the other ones.

And then finally, in this particular corner,

because of the massive amount of material in there

you have what are called triaxial stresses. (Tr. 963-

64).

30a

Appendix B

From personal observation Cushing stated:

_ Well, I think that the most powerful evidence in

the case is obviously the appearance of the fractured

end of the ship. First the appearance of the vessel

across the deck and down the sides, this somewhat

clean break in the ship.

The next would be that when the ship was on

the beach in Gijon, the appearance of the bottom of

the ship with the crushing that existed down at this

hinge but very localized, the absence of this crushing

damage in the open area between the two wing tanks,

in the cargo hold there was an absence of crushing

except for some cell guides which were I think—

which I think can easily be explained by the fact

that there were nearly 100 containers in that hold,

each of them weighing anywhere up to 20 tons,

collapsing.

In making that statement, are you relying on the

visual evidence seen in Plaintiff's Exhibit 213-1?

Yes, sir.

Go on please. I’m sorry.

And then of course, the absence of what could be

the characteristic of wrinkling or crushing along the

sides of the ship in the various photos on the stern

end, and then there were salvor’s photos that are

available that also show a lack of this crushing or

3la

Appendix B

wrinkling up the side of the ship on the forebody.

(Tr. 987-88).

Cushing concluded:

And then of course as you work your way around, there

were very obvious defects as shown in this macro photograph

of overlaps and excessive crowns which are all stress risers.

The massive amount of welding is a stress riser.

But the thing that was to me the most interesting about

this corner here is that this is one of the crucial corners on

the ship. You don’t play around with the top of the sheer

stake. That’s the source of fracture on so many ships, is

problems occurring in this connection and in this corner.

THE COURT: How does that happen? Why is it?

THE WITNESS: Well, this is supposed to be, if I can

mark this, this is supposed to be right out to the side like

this.

THE COURT: I understand. Why if you fill it up with

welding material does it become one of the weakest places

in the vessel?

THE WITNESS: Because there was an obvious misfit

of this plate. What happens in shipyards—

THE COURT: Where is this weakness conveyed to the

vessel because of that?

32a

Appendix B

THE WITNESS: Because in this area, in this whole area

is welding that should have been roll plate of homogenous

characteristic, but instead somebody’s in there filling and

filing and filling adding a lot of residual stress.

THE COURT: But you say this has caused a lot of

problems on a lot of vessels and where does it start breaking

a lot of vessels? .

THE WITNESS: Right here. (Tr. 933-34).

* * *

THE WITNESS: If somebody welds something onto

here and leaves a stress concentration all the Liberty ships—

1 shouldn’t say all, many of the Liberty ships and the T2

tankers during World War II, that was a contributing factor.

They had problems here.

THE COURT: What kind of problem, pick up the weld?

THE WITNESS: Because it is such a constrained and

stressed area, if you had a stress concentration to what is

already a constrained area it triggers the fracture.

THE COURT: I understand, doctor—where does the

fracture occur? ...

THE WITNESS: It occurs usually where the defect is.

If the defect is in the weld here, it will start there. If you

have a sharp corner at the top it will start there. But it is

right wherever the defect is and the concentration 1s.

33a

Appendix B

THE COURT: I’m sorry—I’m not, I can see from what

I have heard from the witnesses so far that if you have bending

and twisting of the vessel and there’s a hole that’s going to

cause all kinds of problems around that hole.

THE WITNESS: Yes, sir. (Tr. 935).

Dr. Cushing concluded clearly that the welding defects

of HMD added residual stresses to the starboard sheer strake

and deck area, and that these “welding defects” were enough

when added to other normal stresses so as to cause the ship

to break in half:

THE WITNESS: Because the process of welding adds

residual stress that could be as high as 50 to 80 percent of

the yield of the material. You are locking in very high stress.

You only have to add another 20 percent to the ship before it

leaves the shipyard in order to have it yield. So by putting

massive amount of welding up here you are putting residual

stresses in there that stay there, and those stresses are locked

in.

THE COURT: When it breaks where does it break?

THE WITNESS: For wherever you put the additional

problem, the additional stress concentration, such as a tip in

the cavity would be stress concentration. Or these excessive

crowns or some of the other welding defects are enough to

add to all of these other things to cause it to fracture.

(Tr. 936).

34a

Appendix B

Plaintiffs’ metallurgist, Dr. John E. Slater, testified as

follows:

Q. Dr. Slater, were there any other defects or flaws that

you observed?

A. Yes, there were, Mr. Olson. And this if you like is a

sort of package. What J have discussed previously

is the fact that there was a lack of penetration in the

doublers that led to fatigue cracking in the doublers.

Now, if you look at the fracture as it runs across

the vessel on the starboard side we note that the deck

fracture specifically in the weld area, which is shown

in 228B, is very close to the fatigue fractures that

occurred in the doublers. In other words, what we

have is a very close juxtaposition between the

doubler butt weld and the deck butt weld.

Now, when we start looking at the deck butt weld

in this failure area which extends a significant

distance in this fracture we note that the weld itself

has failed in a low ductility manner, in quite a brittle

appearing manner, and that the fracture is associated

with the heat effected zone of the weld.

Now, this is an undesirable situation. When you

put a weld in a component you do not want any type

of fracture or anything else to occur actually in the

weld or the weld heat affected zone.

35a

Appendix B

In fact, when a weld procedure is written it is

typical for a tensile test to be performed right across

the weld through inter-bas metal and you want the

fracture to occur in the base metal.

And the fact that we have here a problem with

the weld which is allowing a fracture in a low

ductility manner through the weld heat affected zone

in my opinion is a significant problem here because

it clearly is a plane of weakness the structure.

What I am trying to say is we sort of got a level

of three situations here. We have, first of all, the

doublers that have a lack of penetration; we have

the doublers that failed by fatigue; the doubler weld,

which has now fatigued is very close to the deck

plate weld which itself has a defect in it from the

viewpoint of fracturing in the weld heat affected

zone.

So what you really have is this sort of unholy

trinity if you like of three situations occurring: Bad

welding in the doublers leading to fatigue,

juxtaposition of the butt welds in the doublers, and

the butt weld in the deck and failure of the deck

probably due to stress transfer after the doublers have

already failed in this weld heat affected zone. (Tr.

301-03).

Of confirmatory significance to all of the above were

the existence along the break at the point where the starboard

topside and the deck met (see p. 7, supra) of certain

36a

Appendix B

“chevrons”—like private first-class chevrons—in the tear of

the metal both leading up the topside to the hole and across

the deck to the hole. A number of these chevrons not far

apart from each other, both pointed at where the experts say

the “brittle fractures initiated.”

THE COURT: [interrogating Dr. Slater] You are in effect

telling me that these chevrons are pointing and saying “he

did it, he did it, he did it” right?

* * *

THE WITNESS: Yes. I’m saying that the chevrons are

pointing to an area where those brittle fractures initiated.

THE COURT: Where it started?

THE WITNESS: Yes. (Tr. 318-19).

* * *

THE WITNESS: Well, we know that the chevrons point

back towards the area where that brittle fracture in fact

started. We know that this brittle fracture started on either

side of this area which contains the weld cavity. (Tr. 321).

* * *

THE COURT: And that caused the chevrons?

THE WITNESS: And then the brittle fractures arose and

the chevrons formed. Which is why | call the cavity and the

37a

Appendix B

area around the cavity an initiating point for the fracture.

(Tr. 322).

Even HC’s metallurgist David Hughes acknowledged

that a defect can cause a brittle fracture if the overloaded

conditions are correct.

Given all the foregoing, I am completely satisfied by

more than a fair preponderance of credible evidence that this

vessel broke apart starting at the point of the negligently

created cavity where the starboard topside and the deck met

at the juncture between the back of the HC insert and the

forward edge of the rear section of the vessel. The break

then ran across the deck and down both topsides. This is not

only based on the first hand observations of the captain, but

on all the—for lack of a better overall term—metallurgical

“evidence” that the fracture left behind, i.e., the hole, the

chevrons pointing to the hole, and the absence of wrinkles

or accordion pleats in the topsides, both starboard and port.‘

Virtually none of these serious welding flaws were

visible to anyone—neither metallurgist nor sailor—after the

4. I note that even the Hyundai people in an early {etter dated

February 11, 1999, a senior design manager J.S. Kim stated: “Our

opinion is that it is reasonable to think that the crack in the ship was

initially on the upper part on the basis of above information and our

checking the damaged structure.”

[ further note that this opinion was later backed away from

because the obvious consequence of its validity was that Hyundai

was liable under a number of theories of law for faulty construction

of the insert to the vessel.

38a

Appendix B

vessel left the Hyundai Dockyard in 1984. Obvisusly the

hole in the starboard topside/deck joint was not visible. The

absence of “full-penetration” welds in the deck doublers was

not visible because the shortfall was below the joints and

against the deck, and as to this, HMD had played it down.

Then, there was duplicative and unnecessary welding filler

and quality-damaging slag included in the welding material

which was neither visible nor could it be discovered absent

metallurgical testing, thus obviously not available to those

in charge of operating the vessel. Accordingly this flawed

lengthening insert met its grievously distressing end without

any reason to anticipate it on the part of the owners, the

captain, the mates or seamen, in which while a major storm—

though not unusual—the vessel took a number of unexpected

stresses of some very major rolling and climbing and falling

in conflicting seas with a number of unusual! waves.

The Hyundai defendants, relying mainly on computerized

input from a “finite element analysis” assert the conclusion

that the vessel failed first at the bottom. This is not only

contrary to the captain’s personal observations from the

bridge, see supra°® but, I conclude, had not taken sea

5. The Hyundai defendants, based on the captain’s testimony

that the bow light was still lit when the vessel was going up the

second wave, cuntend that it was the bottom that had come apart

first, for they contend that the wires to light the bow light run under

the deck, not along the bottom. This, however comes_ nowhere near

overcoming all the balance of the captain’s testimony and the well-

documented and photographed evidence of the hull condition

thoroughly supporting the conclusion that the parting was at the deck

first. And I conclude it is not at all unlikely that even if the light

(Cont'd)

39a

Appendix B

conditions into consideration (see Tr. 1556) and completely

disregards the absence of wrinkles, etc. I reject the Hyundai

defendants’ suggestions that the master’s route was

negligently inappropriate; that alleged flaws in the forward

hatch covers were the cause of the eventual sinking of the

bow;’ or that the vessel’s destruction was caused by its being

overloaded.

Under the circumstances, the Hyundai defendants are

liable to the plaintiffs and third-party plaintiffs on principles

of strict liability flowing from § 402A & § 400 of the

Restatement, (Second) of Torts and its successor of § 14 of

the Restatement (Three) for the faulty manufacture and sale

of the lengthening insert in 1984. At the outset, I conclude

that the addition of the insert to the Carla was clearly a “sale”

(Cont'd)

went out after the first wave, the captain, who, in the nerve-wracking

seconds as the vessel was coming apart, was still able to see the

light fixture itself and with this vessel already broken and coming

apart under his feet and before his eyes, could well have remembered

the light as “on” even though as to this detail he was mistaken.

Alternatively it is not at all unlikely that with a 900 foot long vessel

there was enough slack in the wire in the sub-deck conduit to keep it

intact though stretched—and the bow light lit—until the bow section

broke loose and the stern was turned to starboard to avoid hitting it.

There is even some question of whether indeed the bow light wire

ran along the bottom or under the deck. There may be other

explanations in that frantic minute or two—who knows what

happened!

6. The split tearing open the bottom, it is entirely understandable

that over five days enough water would get into the bow sections to

sink it.

40a

Appendix B

and not a repair. A repair generally is where something is broken

and then is fixed. Here the contract was to manufacture a new

elongation section of the vessel and place it in the vessel’s

middle. Nothing was broken or repaired and such ship elongation

was within the normal and continuing course of the Hyundai

_ business calling for the creation of a new section and its

installation. Given this, it was built for sale by Hyundai and

was placed in position and attached in the regular course of

Hyundai business for a given contract price—a sale price. The

failure to properly fabricate the installment to this section is

within this doctrine. Hyundai Corporation and its Hyundai Nipo

Dockyard had a duty to use reasonable care in designing and

manufacturing the product to enable it to avoid foreseeable risk

of injury. Sprung v. MTR Ravensburg, Inc., 99 N.Y.2d 468, 758

N.Y.S.2d 271, 788 N.E.2d 620 (2003). The design and

manufacturing defects cited above were such that in foreseeable

normal use, even though a number of years later, the Hyundai

defendants’ workmanship would fail with the obvious risk of

damage to the vessel and its cargo. See Sears Roebuck and Co.

v. American President Lines, Ltd., 345 F.Supp. 395 (N.D.

Cal.1971).

The Hyundai defendants suggest that the plaintiffs’ warranty

claims fail for lack of privity, but whatever else, that is not the

law in admiralty cases. See Todd Shipyards Corp. v. Turbine

Service, Inc., 467 F.Supp. 1257 (E.D.La.1978); In re American

Export Lines, Inc., 620 F.Supp. 490 (S.D.N.Y.1985). All that

the cargo interest must show and the Court here has so found:’

7. The real tragedy here is that the flaws in the design and

manufacturer were not visible until the vessel broke apart because

of their hidden existence.

4la

Appendix B

(1) that the product was defectively designed or

manufactured; (2) that the defect existed when the

manufacturer delivered it to the purchaser or user;

(3) that the defect is a proximate cause of the

accident.

See American Export Lines, Inc., 620 F.Supp. 490, 517

(S.D.N.Y.1985), and Cigna Property and Casualty Insurance

Co. v. Bayliner Marine, Corp., 1995 WL 125386 (S.D.N_Y.

1995) to identical effect.

The Hyundai defendants are also liable in negligence on

the established facts above, see Sears Roebuck and Co. v.

American President Lines, Ltd., 345 F.Supp. 395, 399

(N.D.Cal.1971).

In defense they assert that the cargo interest claims, to

the extent that there have been insurance settlements, are

barred by a New York principle called the Settlor Bar Rule

which provides in part that: “[a] a tortfeasor who has obtained

his own release from liability shall not be entitled to

contribution from any other person.” NY Gen. Oblig. Law

§ 15-108(c). This is however inapplicable here for these

claims arise not in tort but in contract on the basis of bills of

lading issued to the cargo interests. In addition, these claims

have already been ruled on adversely during the course of

the trial and are therefore no longer before me.

Next, notwithstanding the Hyundai defendants’ claims,

the North of England’s (NOE) Indemnity Claims are proper.

This argument is not only premature, for damage issues have

not yet been tried, but the principle applicable here is

42a

Appendix B

articulated in Atlantic Richfield Co. v. Interstate, 784 F.2d

106, 113 (2d Cir.1986) cert. denied 479 U.S. 817, 107 S.Ct.

75, 93 L.Ed.2d 31 (1986). The necessary showing being only

that of “potential liability”, NOE’s indemnity action meets

this requirement.

I decline to consider the Hyundai interests reraising the

claim of lack of personal jurisdiction of the NOE complaint,

for in the well-over-a-year since that complaint was filed in

May 2002 and the briefing here, the Hyundai interests have

filed and argued a summary judgment motion and participated

in a thirteen day trial before the Court without raising the

jurisdictional issue. I find this to be a waiver of this defense,

particularly against the background of their waffling on the

New York City telephone company listing.

Finally, the Hyundai Corporation endeavors to separate

itself from tort liability on the ground that it had “no role to

play in performing or controlling any of the work done under

the conversion contract,” asserting as to it the mere existence

of a nominal contract status.

This argument fails because HC is a “manufacturer” and ~

“seller” under products liability law regardless of whether

the action is in strict liability or negligence making HC’s

assertion of exculpatory minimai “contractual status”

irrelevant. Further, plaintiffs are proceeding against HMD

and HC under a theory of products liability based on (a) strict

liability and (&) negligence which is:

One engaged in the business of selling or

otherwise distributing products who sells or

43a

Appendix B

distributes as its own a product manufactured by

another is subject to the same liability as though

the seller or distributor were the products .

manufacturer.

But, in addition, undisputedly established on this record,

HC is the party named in the construction contract as the

“contractor” and was the recipient of the agreed-upon price

for the work. HC was the party obliged to pay liquidated

damages if required, and was required to maintain builders’

risk insurance. HC was the party designated in the letter of

commitment and in the refund guarantee. Moreover, aside

from the contract, HC listed itself as the “exporter of record”

on the export declaration. HC held out the elongated vessel

as a product which HC manufactured and sold. Accordingly,

under the Restatement, HC is a manufacturer and seller for

the purposes of plaintiff's and third party plaintiffs’ claims.

Accordingly, all parties are directed to appear before me

on July 26, 2004 at 3:30 p.m. in Courtroom 1106 to schedule

the next steps to the hearing of damage issues against the

Hyundai defendants.

The foregoing constitutes the Court’s findings of fact

and conclusions of law and is So Ordered.

Dated: New York, NY

July 9, 2004

s/ [illegible]

United States District Judge

44a

APPENDIX C — ORDER OF THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

DENYING PETITION FOR REHEARING

DATED AND FILED FEBRUARY 27, 2006

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Date: 2/27/06

Docket Number: 04-4267-cv

Short Title: Rationis Enterprises v.

DC Docket Number: 97-cv-9052

DC: SDNY (NEW YORK CITY)

DC Judge: Honorable Richard Owen

At a stated Term of the United States Court of Appeals

for the Second Circuit, held at the Thurgood Marshall United

States Courthouse, Foley Square, in the City of New York,

on the 27th day of February two thousand six.

Present:

Hon. RALPH K. WINTER,

Hon. SONIA SOTOMAYOR,

Hon. BARRINGTON D. PARKER,

CIRCUIT JUDGES,

04-4267-cv

In re: RATIONIS ENTERPRISES, INC.

A petition for panel rehearing having been filed herein by

the Appellees North of Engiand and the Cargo Interests,

45a

Appendix C

Upon consideration thereof, it is

Ordered that said petition be and it hereby is DENIED.

For the Court,

Roseann B. MacKechnie, Clerk

By: s/ Arthur Heller

Motion Staff Attorney

46a

APPENDIX D — LETTER FROM MACHALE A.

MILLER OF MILLER & WILLIAMSON LLC TO

CLERKS OF THE UNITED STATES COURT OF

APPEALS FOR THE SECOND CIRCUIT

DATED JANUARY 19, 2005

MILLER & WILLIAMSON LLC

3150 Energy Centre

1100 Poydras Street

New Orleans, Louisiana 70163

Telephone: (504) 525-9800

Telefax: (S04) 525-9820

Machale A. Miller Direct dial: (504) 525-9858

e-mail: machale@miller-llc.com

January 19, 2005

Via Telefax: 212-857-8578 and U.S. Mail

Ms. Roseann B. MacKechine

Ms. Tammy Martinez

Clerk of Court

United States Second Circuit Court of Appeals

Thurgood Marshall United States Courthouse

40 Centre Street

New York, New York 10007

Re: Rationis Enterprises, Inc. of Panama et al.

v. Hyundai Mipo Dockyard Co., Ltd., et al.

Docket No. 04-4267-ev

Date of Oral Argument: January 4, 2005

Our File: 98-001

47a

Appendix D

Dear Ms. McKechine and Ms. Martinez:

On January 11, 2005 Weil, Gotshal & Manges replied to

Mr. DeOrchis’ letter to you of January 10. In that letter

counsel for appellants inaccurately present the law relating

to the significance of a CIF sale in identifying the victim in

a tort claim arising out of damage to property. Also, in their

January 9 letter, responding to the court’s inquiries of January

5, counsel for appellants present additional thoughts

regarding the Lauritzen analysis in the process emphasizing

unimportant factors. We write to respond to appellants’

misstatements and to provide additional authorities in

response to the courts’ questions during oral argument.

1. Appellants point out that a sale on CIF terms

addresses risk of loss and that transfer of title depends on

the terms of the sale contracts. The statement is only partially

correct. As a general rule, whenever the sale of goods is on a

CIF basis, title and risk of loss transfer from seller to buyer

at the latest upon delivery of the goods to the carrier.

Madeirense Do Brasil S.A. v. Stulman-Emrick Lumber Co.,

147 F.2d 399, 402 (2d Cir. 1945); Alaska Russian Salmon

Caviar Co. v. M/V MARIT MAERSK, 2000 A.M.C. 2297,

2000 WL 145124 (S.D. N.Y.); Farbwerke Hoeshst A.G. v.

M/V DON NICKY, 589 F.2d 795, 797 (Sth Cir. 1979); York-

Shipley, Inc. v. Atlantic Mutual Ins. Co., 474 F.2d 8, 9 (Sth

Cir. 1973); William B. Branson, Ltd. v. Tropical Shipping &

Construction Co., 598 F.Supp. 680, 681 (S. Fla. 1984). Title

and risk of loss are separate and discrete concepts. The

Uniform Commercial Code “practically pays no attention to

title at all,” the emphasis being on risk on loss. WuHite &

~ SUMMERS, UNIFORM CommerciaAL Cope (4TH Ep. 1995) § 5-1

48a

Appendix D

at p. 249. As between buyer and seller, the party having risk

of loss at the time of the loss is the party injured when the

property becomes damaged or lost during shipment, and, as

held in Alaska Russian, is the injured party entitled to sue.

As set forth in Mr. DeOrchis’ January 10 letter, 90.4% of the

consignees (the CIF purchasers) have a U.S. base of

operations. Accordingly, 90.4% of the victims are U.S.

citizens with a U.S. base of operations, and the vast majority

of the products lost or damaged aboard the MSC CARLA

were destined for the U.S. for distribution into the stream of

commerce here. Consequently, even though the accident and

damage took place on the high seas, the injury in a real sense

was felt in the U.S.'

2. Contrary to the admonition in Rhoditis (398 U.S. at

-308), HMD uses a mechanistic approach to the Lauritzen

analysis in the process overlooking, as recognized in

Carbotrade, that Lauritzen adopts an interest analysis

approach. Carbotrade, however, concluded that law of the

flag is virtually irrelevant in a negligence suit by a time

charterer against a classification society. The distinction is

1. Even though the purchasers/consignees were paid for these

losses by their cargo underwriters, the fact remains that the

purchasers/consignees were the victims. Their cargos were lost or

damaged. They had to explain to their customers why the promised

goods could not be delivered timely or at all. They endured the

adverse impact on their business reputations of failing to deliver the

cargos. Presumably that is why HMD/HC conceded in their brief

that “the insurers’ nationalities are of no import” in determining

choice of law. For an analogous reason, a liability insurer, when

included as a direct action defendant in a diversity suit, takes the

citizenship of its insured for purposes of determining whether

diversity jurisdiction is present.

49a

Appendix D

conceptually sound. Lauritzen was a Jones Act suit by a

seaman against his contractual employer, the shipowner. The

relationship between the parties was a continuing one. The

situation is quite different if a visitor from another state is

injured on the vessel in that his domicile country has an

interest in protecting its injured citizens who have no

permanent relationship with the vessel that might create an

equal or even overriding interest.

3. Choice of law can be difficult in some certain

circumstances but need not be particularly difficult in a

products liability case. Applying the “most significant

relationship” test, espoused by the §§ 6(2) and 145 of the

RESTATEMENT 2D Conf ict oF Laws, the domicile and base of

operations of the victims of the torts of negligence and

products liability create an overriding relationship and the

controlling Lauritzen factor.

4. The jurisprudence recognizes that in a products

liability suit the victim’s domicile usually has the most

significant relationship with the accident and greatest interest

in it. See Colon v. BIC USA, Inc., 199 F.Supp.2d 53 (S.D.N_Y.

2001), and Jn re Air Crash Near Bombay, 531 F. Supp. 1175

(W.D. Wash. 1982). In re Air Crash Near Bombay explicitly

rejected the contention of the U.S. manufacturer defendants

that U.S. law should apply because this country has an interest

in insuring that products made here are manufactured

properly. The interest of the victim’s domicile, which focuses

on protecting its injured domiciliaries, was regarded as

paramount.

50a

Appendix D

5. Other products liability decisions have adhered to that

same principle. Rutherford v. Goodyear Tire and Rubber Co.,

943 F. Supp. 789 (W.D. Ky. 1996), the court applied the law

of the victim’s domicile to a products liability claim involving

an Indiana victim injured in Indiana by the blowout of a tire

manufactured in Ohio on an automobile assembled in

Kentucky. In selecting the law of Indiana as the jurisdiction

having “an overwhelming interest,” the court noted that “the

law of this forum [Kentucky] cannot merely always follow ~

the products of Kentucky corporations wherever they may

cause damage in other jurisdictions.” So too Korean law

cannot follow the products of HMD and HC. In Custom

Products, Inc. v. Fluor Daniel Canada, Inc., 262 F.Supp.2d

767 (W.D. Ky. 2003), the court applied the law of the victim’s

base of operations in a products liability case involving

machinery manufactured in several states, shipped in part

from Kentucky, sold by a corporation with its base of

operations in Kentucky causing injury in Canada to a

Canadian victim including negligent misrepresentation made

in Kentucky. The court applied Canadian law in part because

of the victim’s domicile. In Johnson v. Ford Motor Co., 2003

W.L. 22317425 (N.D. III. 2003), the court applied the law of

the injured party’s domicile in a products liability case having

Illinois plaintiffs, a Michigan defendant and an accident in

Kentucky involving a car manufactured by the defendant in

Kentucky. In selecting Illinois law, the court stated, “It cannot

be reasonably inferred that Ford chose to manufacture

vehicles in Kentucky to obtain the benefit of Kentucky court

laws.” The court did apply Kentucky law relating to the

failure to wear seatbelts because Kentucky has a strong

interest in driver safety within its borders. In Danielson v.

National Supply Co., 2003 W.L. 22332982 (Mn. App. 2003),

Sla

Appendix D

the court again applied the substantive law of the injured

victim’s domicile. These decisions are grounded in the

RESTATEMENT 2D ConFLict OF Laws and, in particular, §§ 6(2)

and 145.’

7. When U.S. courts decide not to apply the law of the

victim’s domicile in a products liability case, the conflict

analysis often revealed that the law of the victim’s domicile

did not allow recovery yet the law of the chosen forum did.

Section 6(2)(c) lists as one factor “the relevant policies of

other interested states and the relative interests of those states

in the determination of the particular issue.” Comment f notes

that “it is fitting that the state whose interests are most deeply

affected should have its local law applied,” but goes on to

observe that the “content of the relevant local law .. . may

be significant in determining whether this state is the state

with the dominant interest.” Comment f then makes clear

that if the substantive law of the other interested state

absolves the defendant from liability (as HMD/HC claim

Korean law does),’ that law should not be applied stating,

2. Subparagraph d of § 6(2) lists as one relevant factor “the

protection of justified expectations.” Comment g notes that in

negligence cases “the parties act without giving thought to the legal

consequences of their conduct nor to the law that may be applied”

so that “the partics have no justified expectations to protect, and

this factor can piay no part in the decision of a choice-of-law

question.”

3. The cargo interests take exception to HMD/HC’s statement

that Korean law defeats the cargo interests’ claims. The affidavit of

Kim & Chang, which accompanies the cargo interests’ appellate brief

replying to HMD/HC’s motion to stay the anti-suit injunction, states

(Cont’d)

52a

Appendix D

“application of the state’s statute or common law rule which

would absolve the defendant from liability could hardly be

justified on the basis of this state’s interest in the welfare of

the injured plaintiff.” E.g., Martin v. Goodyear Tire & Rubber

Co., 61 P.3d 1196 (Wash. App. 2003), and Stupak v. Hoffman-

LaRoche, Inc., 315 F.Supp.2d 970 (E.D. Wis. 2003).

8. During oral argument, counsel for HMD/HC, in an

attempt to create the impression that Sweden has a significant

interest in this casualty, mechanistically invoked the law of

the flag that, although flown when HMD/HC iengthened the

vessel, had not been flown by that ship for well over a decade

before the casualty. To bolster this irrelevant contact (see

Carbotrade; this is not a Jones Act case) HMD/HC contend

that the contract required Swedish approval and compliance

with Swedish regulations citing A-183 and 967. At oral

argument we recall that appellants’ counsel emphasized the

contractual reference to Swedish requirements. But the record

does not support what HMD/HC represent. The cited record

pages are from two provisions in the lengthening contract

that merely state that “[d]rawings which have to be submitted

to the governmental bodies, shall be sent to the OWNER

(Cont'd)

that Korea’s ten year statute of limitations does not begin to run

~ until the defect, which caused the injury, has become manifest. This

suit, therefore, is timely. Moreover, Korea recognizes a cause of

action for negligence as does the U.S. HMD/HC do not suggest that

Korean negligence law differs from that of the U.S. Consequently,

a false conflict exists as to negligence. Furthermore, Korea now

recognizes a products liability cause of action so allowing U.S.

products law to apply hardly can offend Korean legal philosophical

sensibilities.

53a

Appendix D :

after approval by the relevant authority”and that “all trials

required by National Authority Inspection to be carried out.”

But those provisions are nothing more than precautionary

catchalls that kick in only if indeed the parties later discover

that some governmental body (not necessarily Sweden) has

a relevant requirement. Poignantly missing from the record

is even so much as a suggestion that any such Swedish

requirements existed, that any Swedish regulations were

incorporated into the specifications, that Swedish officials

inspected the vessel or that either HMD or HC were aware

of any Swedish regulation. At trial HMD/HC called Bengt

Olofsson, Brostrom’s superintendenf who attended the

lengthening, and he said absolutely nothing about Swedish

regulations or inspections. Tr. 1114-1153, A-650-55, A-1242-

49.

9. Even if in 1984 any Swedish regulations applied,

those contacts afford Sweden no significant interest in a

casualty occurring 18 years later when Sweden had no

connection with the operation, maintenance or repair of the

vessel. Indeed, liability was not based on HMD’s deviating

from specifications. Instead the record is replete with

reference to negligent construction by HMD as well as the

dual failure of HMD to properly inspect its work in progress

and of HC, as the contracting party, to ensure that HMD

properly performed this project that created substantial

danger if not conducted properly. Sweden, therefore, has only

the most attenuated of contacts with this ship and none with

this particular casualty which took place long after the vessel

no longer flew the Swedish flag and which occurred without

any discernible relationship to any Swedish regulations or

inspection requirements.

54a

Appendix D

10. HMD/HC urge application_-of Korean law because

itis the law of the “place of the wrongful act.” HMD/HC are

wrong in their approach to this Lauritzen factor. The

introductory notes to Chapter 7, Topic 1 of RESTATEMENT 2D

ConFLict OF Laws at p. 412, state that the original Restatement

selected the law of the “place of the wrong” for tort claims.‘

This term.was defined in § 377 as “the state where the last

event necessary to make the actor liable for an alleged tort

takes place,” which in turn was regarded as the “state where

the injury occurred.” In any event, in a products case any

interest of the state where the defects were created is

outweighed by the interest of the victims.

11. The victim’s domicile is accorded considerable

weight in a products liability case because of the qualitative

nature of that state’s relationship with the casualty. In the

instant case the victims’ domicile also carries considerable

quantitative weight. As reflected in Mr. DeOrchis’ letter of

January 10, the consignees, who are the purchasers of the

cargo and hence the actual victims, are overwhelmingly

American — 572 consignees have a U.S. base of operations.

Only 61 have a base elsewhere. Although domicile or base

of operations is only one of the Lauritzen factors, the number

of victims should figure into the equation so that this one

factor must be given greater quantitative weight than other

factors, such as HMD/HC’s place of incorporation and

-4. It is unclear whether Lauritzen is referring to the place of

the act or the place where that act causes harm thus becoming a

wrongful act. Section 145(a) of the RESTATEMENT 2D lists both as

factors along with the domiciles of the parties but always with

reference back to §,6(2)_with its focus on the most significant

_ relationship — the victim’s domicile in a products case.

55a

Appendix D

principal place of business, that have only a single contact.

Surely the base of operations of 572 victims should be

accorded far greater weight than the base of operations of 2

defendants.

12. This conclusion is bolstered by the twofold

consideration that (1) for the past 20 years HMD and HC

have had a substantial base of operations in the U.S. with an

office in New Jersey, a Manhattan telephone listing,

$100,000,000 of sales, a $2,500 entertainment budget in the

U.S., a $3,500/month travel budget in the U.S. and 13% of

its revenues generated here (210 F.Supp.2d at 427-29); and

(2) in the lengthening contract they eschewed Korean and

Swedish law in favor of English and New York law.

Very truly yours,

MILLER & WILLIAMSON LLC

Machale A. Miller

MAM:swg

Enclosure

cc: All Counsel (via telefax)

(See attached list)

56a

APPENDIX E — DECLARATION OF

BYUNG-SUK CHUNG

I, Byung-Suk Chung, declare under the penalty of perjury

under the laws of the United States of America that the

following statements are true and correct to the best of my

knowledge:

1. lama partner and the head of the shipping practice group

at the law firm of Kim & Chang, Seyang Building, 223 Naeja-

dong, Chongro-ku, Seoul, Korea. | have been a member of

the Korean bar since 1980. I hold an LLB degree from Seoul

National University in Korea and an LL.M in Maritime Law

from University College, University of London. I was also a

visiting foreign lawyer for six months at the lawfirm of

Haight, Gardner, Poor and Havens (now Holland and Knight)

in New York. The details of my background and experience

are set out in the attached curriculum vitae.

2. I represent 3 of the Cargo Interests, in the Matter of the

Complaint of Rationis Enterprises Inc. of Panama, as Owner,

and Mediterranean Shipping Co., S.A. of Geneva, as Bareboat

Charterer of the M.V. “MSC Carla,” Case. No. 97Civ. 9052

(RO) and related actions and third party actions against

Hyundai Mipo Dockyard (“HMD”) and Hyundai Corporation

(“HC”), in their defence of the Declaratory Judgment Action

filed by HMD (Case No. 98 Kahap 5087, “First Korean

Proceeding”) before the Ulsan District Court in Korea.

3. Under Korean law, if HMD voluntarily withdraws the First

Ulsan Proceeding and the Cargo Interests do not object, the

action will be concluded. This will allow HMD to effectively

dismiss the action without involvement of the Ulsan District

Court If the antisuit injunction presently held against HMD

57a

Appendix E

is later vacated, HMD’s withdrawal will not preclude HMD

from filing a fresh new action at a later date.

4. It is not clear whether or not the Ulsan Di-trict Court will

give res judicata effect to Judge Owen’s decision on liability.

In any event, the Ulsan District Court will net be bound by

Judge Owen’s decision but rather rely on the same as

evidence, which the Ulsan District Court will consider

together with the Other evidences put before it, in order to

make its own decision. :

5. Exhibit 1 to Cargo Interests’ Opposition to Motion to Stay

Pending Appeal of the Antisuit Injunctions against HMD and

HC is a translated copy of a Brief that was submitted by

HMD to the Ulsan District Court on September 25, 2004.

Attached is at copy of the cover page of HMD’s brief bearing

the two rubber stamps of the court certifying that the brief

was (i) submitted to the Ulsan District Court on September

25, 2004 and (ii) received by the document handling

department on September 30, 2004.

6. At the October 1, 2004 hearing before the Ulsan District

Court, the said Court was notified of Judge Owen’s Order

prohibiting HMD from participating in the First Korean

Proceeding. The Ulsan District Court indicated that the Order

was not binding on the Court.

7. There is no statute of limitations for declaratory judgment

actions in Korea that would be applicable to HMD, since

HMD is seeking a declaratory judgment that there is no

liability on its part.

NN Eee

58a

Appendix E

8. There has been no progress on the second Korean

Proceeding (Case No. 99 Kahap 7196) instituted by HMD

against ABC Carpet & Home and 1,002 other cargo interests

(“Second Korean Proceeding”) since filing of the Complaint

by HMD, because HMD has not taken any steps to make

service abroad on the parties named in the Complaint. The

service has to be effected before proceedings can commence.

9. Regarding the First Korean Proceeding, although HMD

initiated the declaratory judgment action seeking

confirmation that there is no liability on its part, the

defendants (that is, 3 of the Cargo Interests (claimants) in

the New York proceedings) shall show that they have a claim

against HMD. In order for the Ulsan District Court to review

and reach a decision on the merits of the case, the filing of

the Complaint must be followed by exchange of pleadings

on the merits and detailed evidences, such as expert opinions,

followed by hearings for witness (factual/expert) testimony

on the existence of the defect and whether or not the liability

for such defect is attributable to HMD.

10. However, as apparent from the submissions made by the

defendants in the First Korean Proceeding, listed below, the

details of the merits of the claim have not yet been addressed.

The photographs in Exhibit 1 could only show the existence

of the defect (but not the cause nor the liability for such

defect) while Exhibits 2 and 3 are in essence to show the

progress of the New York proceedings in support of the

defendants’ motion to seek an adjournment of the First

Korean Proceeding, pending the New York proceedings.

59a

Appendix E

a) Exhibits 1-1 through 7 Photographs of the cracks and the

void spaces showing the welding

defects

b) Exhibit 2 Transcript of Kyung-Soo Lee (an

employee of HMD)

—¢) Exhibit 3 Deposition Plan

11. In sum, there has in essence been no substantial progress

on the merits of the case in the First Korean Proceeding while

the Complaint for the Second Korean Proceeding has not

yet even been served on the defendants. Therefore, both of

the Korean proceedings are nowhere near completion.

12. I have the following comments on the Declaration of

Mr. Hae Duk Jung. |

a) Paragraphs A. | 7), 8) and 9)

While it is correct that there have been 6 hearings and

the submission of 5 and 3 briefs by HMD and the

defendants respectively, I note that only one of the briefs

submitted by each party concerned the merits of the case

in any detail. Further, most of the evidence submitted

by HMD relate to the factual background of the cane. In

respect of HMD’s evidence denying the existence of any

defect or liability on its part, such as Exhibit A-13 (which

I note is a report prepared by HMD internally), the

defendants in the First Korean Proceeding in turn have

to show the defect and the cause to hold HMD liable,

which the defendants have not yet begun to do. Therefore,

while Mr. Jung’s statement creates the impression that

there has been substantial progress in the First Korean

60a

Appendix E

Proceeding, this is not the case since the defendants have

not addressed the merits of the claim in any detail upto

now.

Paragraph A. 1. 10)

The Court has requested the parties to submit any briefs

and evidence before the next hearing, but it is not an

order with a deadline that would preclude the parties

from making farther submissions.

Paragraph 2. 2)

It is incorrect that Kim & Chang refused to accept service

of process of the defendants in the Second Korean

Proceeding for the reason of the difficulties of the large

number of defendants. The reason that Kim & Chang

could not accept service of process for the Second Korean

Proceeding was because it was not authorized to accept

service by the said defendants. As discussed above, the

lack of progress in the Second Korean Proceeding is

wholly due to HMD’s failure to take steps to make

service abroad. The fact that HMD initiated the

declaratory judgment action in Korea against only 3 of

the Cargo Interests in the New York proceedings first

and then later filed another action against the remaining

1,003 Cargo Interests appears to be a deliberate attempt

by HMD to bypass having to make service of process

abroad (like in the First Korean Proceeding) against each

of the large number of defendants, by trying to make

service on the counsel for the defendants in the First

Korean Proceeding.

6la

Appendix E

d) Paragraph 3

Regarding the last sentence of this paragraph, as noted

above, in the case on the merits, the defendants in the First

Korean Proceeding (that is, the 3 Cargo Interests (claimants)

in the New York proceedings) shall show the defect and

that the cause of the defect to hold HMD liable. It is not up

to HMD to decide when all the necessary submissions to

establish the claim have been made in order to bring the

proceeding to a close.

13. Regarding the statute of limitation, Korean law provides

that the applicable time-bar for tort actions is three years from

when the damage and the tortfeasor are discovered by the victim

or ten years from when the tortuous act is committed, whichever

is earlier. However, there are a number of decisions by the

Korean Supreme Court, which provide that in cases where the

defect in question is latent, the ten year statute of limitations

may begin to run when the latent defect becomes patent. I note

that the three-year statute of limitations is not usually relevant

since the victim normally file a lawsuit within three years of

becoming aware of the damage and the tortfeasor. Hence, in the

subject case, we believe that the ten-year statute of limitation

had begun to run when the Vessel broke into two. As noted

in the First Korean Proceeding, to which we had responded to

the above effect.

Dated: November 18, 2004

s/ Byung-Suk Chung

BYUNG-SUK CHUNG

KIM & CHANG

62a

APPENDIX F — SUPPLEMENTAL DECLARATION

OF BYUNG-SUK CHUNG

1, Byung-Suk Chung, declare under the penalty of perjury

under the laws of the United States of America that the

following statements are true and correct to the best of my

knowledge:

1. 1am a partner and the head of the shipping practice group

at the law firm of Kim & Chang, Seyang Building, 223 Naeja-

long, Chongro-ku, Seoul, Korea. I have been a member of

the Korean bar since 1980. I hold an LL.B. degree from Seoul

National University in Korea and an LL.M. in Maritime Law

from University College, University of London. I was also a

visiting foreign lawyer for six months at the law firm of

Haight, Gardner, Poor and Havens (now Holland and Knight)

in New York. The details of my background and experience

are set out in the attached curriculum vitae (Exhibit 1).

2. | have read the October 17, 2005 decision of the United

States Court of Appeals for the Second Circuit in Rationis

Enterprises Inc. of Panama, et al. v. Hyundai Mipo Dockyard

Co., Ltd., et al., Docket nos. 04-4267-cv, 04-5571-cv (L),

04-6028-cv (CON), as well as the Opinion and Order of the

United States District Court for the Southern District of New

York dated July 9, 2004. The cargo interests and North of

England (“NOE”), who are appellees in those appeals, have

asked me to review and comment on the Second Circuit’s

- finding that,

“. . Korean law bars the cargo interests and NOE

from recovery against Hyundai due to statutes of

reponse, ..."

This finding is an incorrect statement of Korean law.

63a

Appendix F

3. The U.S. Second Circuit refers to two Korean statutes of

limitations (incorrectly identified as statutes of repose in the

U.S. Second Circuit’s decision) to support its finding. One

statute is Article 7 of Korea’s Product Liability Act. The

provisions of that Act, however, and in fact the entire Act itself

was only enacted on January 12, 2000, as Law No. 6109, and

took effect as of July 1, 2002, long after the elongated vessel

was delivered. There was no such Act in effect in 1997 when

the vessel broke into two. Therefore, under Korean law, the

said Act and its provisions do not apply to and have no

application to the claims asserted by cargo interests/NOE in the

matter that was on appeal to the U.S. Second Circuit.

4. The other statute of limitations referred to by the U.S. Second

Circuit is Paragraph (2) of Article 766 of the Korean Civil Code.

Article 766 is the Korean statute of limitations for tort actions

in general and the statute of limitations that a Korean court would

apply to the claims asserted by cargo interests/NOE against

Hyundai Mipo Dockyard Co., Ltd. and Hyundai Corporation

(collectively, “Hyundai ) for negligence. No part of Article 766

constitutes a statute of repose.

5. Article 766 states and has so stated since 1958 when the

Korean Civil Code was first enacted:

Article 766 (Prescription in respect of the Right

to Claim for Damages)

(1) The right to claim for damages resulting from

an unlawful act shall lapse by prescription if not

exercised within three years commencing from the

date on which the injured party or his agent by

law becomes aware of such damage and of the

identity of the person who caused it.

64a

Appendix F

(2) The provisions of paragraph (1) shall also

apply if ten years have elapsed from the time when

the unlawful act was committed.'

The earlier to occur of the events set forth in Paragraphs (1)

and (2) of Article 766 applies. In other words, under Article

766, the rights to claim in tort shall be extinguished either

within 3 years of when the damage and tortfeasor both

become known (Paragraph (1)) or within 10 years of when

the “unlawful act” was committed (Paragraph (2)), whichever

comes earlier. At issue in the present case is when the 10-

year period under Paragraph (2) began to run.

6. There have been two interpretations applied to cases where

the damage does not materialize simultaneously with or

shortly after the unlawful act, but materializes after a span

of time from the “unlawful act” itself. These interpretations

differed on when the 10-year period in Paragraph (2) begins

“to run and what is meant by “unlawful act” as used in that

paragraph. One interpretation favored a strict reading, which

considered the 10-year period as starting to run from when

the unlawful act was committed. The other interpretation,

1. Although this English translation of Article 766 is the version

published by the Korea Legislation Research Institute (““KLRI’”) in

2002, I do not believe tunis translation is the most accurate,

particularly with respect to the term “unlawful act.” In view of the

Korean Supreme Court’s established interpretation of Paragraph (2)

of Article 766, “unlawful act” fails to embody or imply the full

purport of the original Korean term (bul-beop-haeng-wi) and could

potentially be misleading. In any event, for the sake of consistency

and convenience, the KLRI’s version of Article 766 and the term

“unlawful act” will be used in this Declaration and all of the exhibits

attached thereto.

~ 65a

Appendix F

however, viewed the 10-year period as commencing from

when the damage caused by the unlawful act materialized, -

rather than from when the unlawful act was committed.

7. In 1979, the Korean Supreme Court, the highest court in

Korea, handed down a decision en bane adopting the second

interpretation and ruling that the 10-year period should be

interpreted as having commenced from when the damage due

to the unlawful act materialized. Since then, the Supreme

Court has maintained this interpretation and application of

Paragraph (2) of Article 766, and lower Korean courts have

likewise followed and applied the same interpretation.

8. One Korean Supreme Court case concerned a building

that collapsed due to a defect in the building’s construction

during a fire that occurred more than 10 years after the

building was erected (Korean Supreme Court decision a.ced

May 8, 1998, case no. 97da36613).. Wer

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