IN RE: The CONTAINERSHIP COMPANY (TCC) A/S (2020)

SUMMARY ORDER

The Containership Company (“TCC”) appeals from an order and judgment of the District Court (Carter, J.), adopting the proposed findings of fact and conclusions of law of the United States Bankruptcy Court for the Southern District of New York (Garrity, B.J.) and granting summary judgment in favor of the Defendants-Appellees, all of whom contracted with TCC to ship goods on vessels chartered by TCC. TCC brought a single claim for breach of contract against each Defendant-Appellee. We assume the parties’ familiarity with the underlying facts and prior record of proceedings, to which we refer only as necessary to explain our decision to affirm.

In 2010 TCC launched its trans-Pacific container-shipping service between Los Angeles and ports in China. TCC entered into annual contracts with various customers, including the Defendants-Appellees. Most of the contracts were set to expire at the end of April 2011. The contracts required each Defendant-Appellee to ship a specified “minimum quantity commitment” of cargo with TCC during the contract period and provided for liquidated damages for any shortfall. On April 7, 2011, TCC announced that it was “[d]iscontinuing” its trans-Pacific service and cancelling its remaining scheduled sailings. Within days, TCC initiated bankruptcy proceedings, and its corporate parent withdrew all five vessels TCC had chartered, leaving TCC unable to transport goods in accordance with the contracts.

On appeal, TCC primarily argues that the District Court erred in concluding that TCC's discontinuance of its trans-Pacific service relieved the Defendants-Appellees of their remaining minimum quantity commitments pursuant to either the contracts’ termination provision or the contracts’ provision governing a modification or restructuring of service.

For substantially the reasons stated by the District Court in its September 17, 2019 decision and the Bankruptcy Court in its April 29, 2016 proposed findings, we conclude that the contracts’ termination provision relieved each Defendant-Appellee of its remaining minimum quantity commitment.¹ Under the plain language of Term 20 of the contracts, TCC's discontinuance of service constituted a “termination,” which excused all parties from any penalty or further obligation.² Pursuant to that provision, TCC's discontinuance deprived the Defendants-Appellees of the opportunity to fulfill their minimum quantity commitments and thus excused the Defendants-Appellees from complying with those obligations.

We note that TCC also argues that the District Court erred in concluding that the Defendants-Appellees did not breach Term 5 in failing to ship cargo evenly “as far as possible” throughout the contract term.³ But because the contracts do not provide “clear guidelines against which to measure such efforts” to ship goods evenly over the contract term, Strauss Paper Co. v. RSA Exec. Search, Inc., 260 A.D.2d 570, 688 N.Y.S.2d 641, 642 (2d Dep't 1999); see Timberline Dev. LLC v. Kronman, 263 A.D.2d 175, 702 N.Y.S.2d 237, 240–41 (1st Dep't 2000), Term 5 “did not impose any specific, enforceable requirement that the Defendants[-Appellees] ship their goods evenly throughout the term” of the contracts, App'x at 1825.⁴

We have considered TCC's remaining arguments and conclude that they are without merit. For the foregoing reasons, the judgment of the District Court is AFFIRMED.

FOOTNOTES

1.   We agree with the reasons provided by the District Court and the Bankruptcy Court insofar as they relate to the termination provision. Because we affirm the grant of summary judgment to the Defendants-Appellees on this ground, we need not address the alternative arguments that the Defendants-Appellees presented to those courts.

2.   Term 20 provides:Except as otherwise provided, this contract may be terminated by either party without penalty or further obligation to the other party under this contract on thirty (30) day's [sic] notice to other party, provided however, that if the Shipper terminates the contract before the end of the contract period having not tendered the minimum quantity, it shall be liable to pay all liquidated damages provided for in Term 7.

3.   Term 5 provides, in relevant part, that “[t]he Shipper agrees that as far as possible, cargo committed under this contract will be shipped evenly throughout the duration of the contract.”

4.   See generally Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 124 (2d Cir. 2013) (discussing the state of New York law regarding “best efforts”).