Opinion
01 Civ. 3605 (PKL)
February 11, 2003
DONOVAN PARRY McDERMOTT RADZIK, New York, NY, Edward C. Radzik, Esq., Timothy Semenoro, Esq., Attorneys for Plaintiff.
FREEHILL HOGAN MAHAR, LLP, New York, NY, James L. Ross, Esq., William J. Pallas, Esq., Attorneys for Defendants.
OPINION AND ORDER
Plaintiff American Home Assurance Company ("American Home") brings this action as subrogee of Leslie Fay Company, Inc. ("Leslie Fay") against defendants Crowley Ambassador, her engines, boilers, etc., and Crowley American Transport, Inc. (collectively "Crowley"). Pursuant to Rule 56 of the Federal Rules of Civil Procedure, Crowley moves for partial summary judgment limiting damages to $500 based on the package limitation provisions of the Carriage of Goods by Sea Act ("COGSA"). For the following reasons, defendants' motion is granted.
BACKGROUND
The facts in this action are relatively straightforward and, unless otherwise noted, are not in dispute. The following overview is derived from the submissions of the parties and, of course, does not represent findings of fact by the Court.
During the relevant time period, Leslie Fay, a clothing company, had a service contract with Crowley, a shipping company, to ship clothing and other cargo between Central America and the United States at set rates based on the size of the container. Pursuant to this agreement, Crowley was to deliver one forty foot container of garments from El Salvador to Miami, Florida under bill of lading No. SALN0M001861 dated April 30, 2002. The container, provided by Crowley, is identified in the bill of lading as a "rack." A rack, also referred to as a garment on hanger container, is a container "equipped with ropes used for hanging individual pieces of garments." Affidavit of Beresford A. Landers, sworn to on Apr. 11, 2002. The container was loaded or, in the unique parlance of the shipping industry, "stuffed" by the shipper and not by Crowley, and contained 22,355 pieces of garments. According to plaintiff, these garments were prepackaged in sets wrapped in plastic. Neither the bill of lading nor plaintiff in its submissions indicates how many packaged sets were in the container.
"[C]ontainers are large metal boxes resembling truck trailers save for the absence of wheels, roughly 8' high, 8' wide and with lengths up to 40' . . ., capable of carrying hundreds of packages in the normal sense of the term." Mitsui Co., Ltd. v. American Export Lines, Inc., 636 F.2d 807, 816 (2d Cir. 1981) (Friendly, J.). They are normally provided by the carrier and are reused many times. Id. They are "functionally part of the ship," Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 815 (2d Cir. 1971) (Friendly, J.), and are "a modern substitute for the hold of the vessel." Northeast Marine Terminal Co., Inc. v. Caputo, 432 U.S. 249, 270 (1977).
A two-truck convoy from San Bartolo, El Salvador to Santo Tomas de Casitlla, Guatemala, the intended load port, was transporting the container holding Leslie Fay's garments, along with another container not at issue, when armed bandits allegedly hijacked it. Most of the contents of the container were lost. Plaintiff is suing for the value of the unaccounted-for garments, allegedly $400,000.
The face of the bill of lading contains a printed caption that reads "PARTICULARS FURNISHED BY SHIPPER." Under the caption, there are several columns. The first relevant column bears the heading "NO. OF TRLS./CONTS./PKGS/" and is filled in with "1 40FT." The other relevant column, entitled "DESCRIPTION OF CARGO," includes the following information:
TRLS, "CONTS," and "PKGS" are abbreviations for trailers, containers and packages, respectively.
SLAC RACK STC:
2,403 PCS DRESS 9,976 PCS BLOUSE 330 PCS PANT 9,646 PCS SKIRT ______ 22,355 PCS
"SLAC" is short for "shippers load and count," which means that the container was "stuffed" by the shipper. "RACK," as explained supra, refers to a container that has ropes on which to hang garments. "STC" stands for "said to contain," which means that Crowley did not have an opportunity to examine the garments in the container. See Orient Overseas Container Line v. Sea-Land Serv. Inc., 122 F. Supp.2d 481, 483 (S.D.N.Y. 2000). "PCS" is an abbreviation for pieces.
The following was typed across the bottom of this section of the bill of lading:
"SERVICE CONTRACT NO. 99-16." The bottom of the bill of lading includes the following notation:
In its submissions in connection with this motion, plaintiff states that the service contract between Leslie Fay and Crowley is incorporated by reference into the bill of lading. The service contract provided to the Court, however, is entitled "SERVICE CONTRACT #9911-1001." The only reference to a service contract on the bill of lading is No. 99-16. Neither party has explained this discrepancy. In any event, it is not crucial to the determination of this motion.
"Liability limited unless increased value declared below; all as specified in section 16: Declared value: ________________________________"
No value was entered by the shipper. Clause 16, on the reverse side of the bill of lading, indicates that COGSA's $500 per package limitation applies to the shipment unless the shipper declares the value of the goods and pays a higher shipping rate.
The service contract under which the parties were operating indicates that armed guard service was to be provided in El Salvador to protect Leslie Fay's shipments. According to Patricia Dennehy, director of international operations for Leslie Fay, it was her understanding that this meant an armed guard with a cellular phone would escort each Leslie Fay container, in addition to the normal security provided by Crowley. According to a Crowley report regarding the theft of the container, one guard was accompanying the convoy when the hijacking occurred.
Leslie Fay paid an additional $80.00 per shipment for this service.
DISCUSSION
I. Summary Judgment Standard
A moving party is entitled to summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Holt v. KMI-Continental Inc., 95 F.3d 123, 128 (2d Cir. 1996). The substantive law underlying a claim determines if a fact is material and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When considering the motion, the Court's responsibility is not "to resolve disputed issues of fact but to assess whether there are any factual issues to be tried." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986).
In determining whether genuine issues of material fact exist, the Court must resolve all ambiguities and draw all justifiable inferences in favor of the nonmoving party. See Anderson, 477 U.S. at 255; Holt, 95 F.3d at 129. The moving party bears the burden of demonstrating that no genuine issue of material fact exists. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970); Gallo v. Prudential Residential Serv. L.P., 22 F.3d 1219, 1223-24 (2d Cir. 1994). "[T]he movant's burden will be satisfied if he can point to an absence of evidence to support an essential element of the nonmoving party's claim." Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995). Once the moving party discharges his burden of demonstrating that no genuine issue of material fact exists, the burden shifts to the nonmoving party to offer specific evidence showing that a genuine issue for trial exists.See Celotex, 477 U.S. at 324. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "A `genuine' dispute over a material fact only arises if the evidence would allow a reasonable jury to return a verdict for the nonmoving party." Dister v. Cont'l Group, 859 F.2d 1108, 1114 (2d Cir. 1988) (citing Anderson, 477 U.S. at 248).
II. COGSA and Package Limitation
The statutory force of COGSA only applies after cargo is loaded and before it is discharged from the ship and to shipments between ports in the United States and foreign ports. See 46 U.S.C. § 1301 (e);Seguros "Illimani" S.A. v. M/V Popi P, 929 F.2d 89, 93 (2d Cir. 1991) (Newman, J.). In this case, the loss of the garments occurred before the container was loaded onto the ship and, therefore, COGSA does not applyex proprio vigore. Parties to a bill of lading, however, can, and often do, extend the coverage of COGSA contractually to the time before and after the actual voyage. Such an extension is a valid and enforceable contract term so long as it does not conflict with applicable state law.See Colgate Palmolive Co. v. S/S Dart Canada, 724 F.2d 313, 315-16 (2d Cir. 1983); cf. 46 U.S.C. § 1312 (stating that parties can contract to apply COGSA to shipments between ports in the United States). The bill of lading in the case at bar extends COGSA in this manner and both sides assume, sub silentio, that the extension is valid. The Court sees no reason not to make the same assumption. Cf. Empire Hair Processing Corp. v. S.S. Aconcagua, No. 91 Civ. 0501, 1992 WL 354497, at *3 (S.D.N.Y. Nov. 17, 1992) (Leisure, J.) (applying COGSA to post-discharge period because of contractual agreement of parties).
In 1924, industrialized nations met in Brussels to amend the Hague Rules of 1921. See Mitsui, 636 F.2d at 815. The participating countries "recognized the need to reconcile the desire of carriers to limit their potential liability with their vastly superior bargaining power over shippers." Monica Textile Corp. v. S.S. Tana, 952 F.2d 636, 638 (2d Cir. 1991) (McLaughlin, J.). But see Leather's Best, 451 F.2d at 815 ("It is true . . . that the standard arguments about the economic power of the carrier and the weak bargaining position of the consignor may be simply a recitation of an ancient shibboleth, at least as applied to shipments of containers fully packed by the shipper."). To balance these concerns, the Brussels Convention adopted a per-package limitation on liability. Monica Textile, 952 F.2d at 638. These principles were adopted by the United States in 1936 when Congress enacted COGSA. Id.; see also Robert C. Herd Co. v. Krawill Mach. Corp., 359 U.S. 297, 301 (1959) ("The legislative history of the Act shows that it was lifted almost bodily from the Hague Rules of 1921, as amended by the Brussels Convention of 1924.").
Section 4(5) of COGSA limits the liability of carriers to $500 per package "unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading." 46 U.S.C. § 1304 (5). A carrier cannot limit its liability below this statutory minimum. Id. Unfortunately, as numerous cases in this Circuit and others have noted, the statute and its legislative history provides no definition of "package." See, e.g., Monica Textile, 952 F.2d at 638. This absence has vexed courts and parties in far too many cases to count. See Orient, 122 F. Supp.2d at 486 ("If it was the COGSA drafters' purpose to avoid the pains of litigation, they must be rolling in their graves. Myriad courts have struggled with what a COGSA package is." (internal quotations omitted)); In re Maritima Aragua, S.A., No. 89 Civ. 5430, 1992 WL 42256, at *3 (S.D.N.Y. Feb. 21, 1992) ("This omission has lead perhaps to an excess of litigation on the subject. . . . Admiralty judges, lawyers and bill of lading draftsmen have found employment in filling in the gap, or trying to."); Empire Hair, 1992 WL 354497, at *4 ("[C]ourts continually have struggled to shed light on this ambiguous term as modern technology has complicated the shipping business.").
The "container revolution" has further complicated package limitation litigation. Mitsui, 636 F.2d at 816. "It did not take long for the carriers (or their P. and I. Insurers) to realize that if they could persuade the courts to consider a container rather than smaller units stowed inside to be the `package' for purposes of § 4(5) of COGSA," they would save enormous sums of money Id.; see also Allied Int'l American Eagle Trading Corp. v. S.S. "Yang Ming", 672 F.2d 1055, 1058 (2d Cir. 1982) ("Naturally, carriers and their insurers attempted to turn this technological advance into a financial one too, by arguing that containers are `packages' for which shippers can recover only $500."). Judges, however, have recognized the problems involved with these attempts, and have limited shipping companies' ability to claim that the container is the relevant package. See Smythgreyhound v. M/V "Eurygenes", 666 F.2d 746, 748 n. 5 (2d Cir. 1981) (stating that "`a container rarely should be treated as a package'" (quoting Croft Scully Co. v. M/V Skulptor Vuchetich, 508 F. Supp. 670, 678 (S.D.Tex. 1981), aff'd in relevant part, 664 F.2d 1277 (5th Cir. 1982))). That is not to say, however, that a container can never be deemed to be the COGSA package.
The Second Circuit has adopted two rules with regard to package limitation — one rule for container cases and another rule for non-container cases. Monica Textile, 952 F.2d at 640. The Court "has rejected any notion that container and non-container cases were interchangeable," but rather these cases should be treated as "separate lines of authority." Id. A case belongs in the non-container line when neither party contends that the relevant package is the container. The instant action, however, is a container case because Crowley contends that the container is the COGSA package.
In container cases, "if the bill of lading lists the container as a package and fails to describe objects that can reasonably be understood from the description as being packages, the container must be deemed a COGSA package." Binladen BSB Landscaping v. M.V. Nedlloyd Rotterdam, 759 F.2d 1006, 1015 (2d Cir. 1985). However, "when a bill of lading discloses on its face what is inside the container, and those contents may reasonably be considered COGSA packages, then the container is not the COGSA package." Monica Textile, 952 F.2d at 639.
In Binladen, the Second Circuit noted the difference between cases likeMitsui in which the bill of lading "listed not only the number of containers but the number of items qualifying as packages (i.e., connoting preparation in some way for transport), such as `bundles,' `cartons,' or the like," and cases in which the bill of lading does not disclose an alternate package other than the container. Binladen, 759 F.2d at 1013. The Court also noted that there can be circumstances in which cargo is prepared for shipment in such a way that would normally warrant treatment as a package but the failure of the shipper to so indicate on the bill of lading would preclude such treatment. Id. at 1014. The Court cited approvingly Sperry Rand Corp. v. Norddeutscher Lloyd, 1973 AMC 1392, 1398-99 (S.D.N.Y. 1973), in which the bill of lading listed one container as the number of packages and described the contents as 9,500 elective shavers. The evidence presented showed that there were actually 190 cartons, each holding 50 shavers, "stuffed" into the container. However, Judge Lumbard, sitting in the district court by designation, held that the container was the COGSA package because the cartons had not been disclosed on the bill of lading. Id.
The Binladen Court was concerned with certainty, stating:
When a bill of lading specifies the number of containers but does not reveal the number of packages inside, the only certain figure known to both parties is the number of containers being shipped. In such event the carrier cannot be charged with knowledge of whether the container is filled with packages, with unpackaged goods, or with some combination. The carrier should not be expected to assume the risk inherent in such uncertainty, facing liability that might vary by orders of magnitude depending on the exact packaging of goods inside a sealed container, even though this information was not revealed to it by the bill of lading.Binladin, 759 F.2d at 1015.
In the case at bar, the bill of lading lists the container as a package and the description of the garments does not indicate anything regarding preparation for shipment. Plaintiff attempts to avoid the harsh result of limiting the recoverable damages to $500 by arguing that through the course of dealing between Leslie Fay and Crowley, defendants had sufficient notice of the number of packages. Therefore, American Home argues that the Court should find that there were 22,355 packages in the container because the garments were wrapped in plastic.
Even if a course of dealing between parties can substitute for a bill of lading that fails to describe adequately contents that can be considered packages, such an argument is unavailing in the case at bar because, despite plaintiff's protestations to the contrary, there is no indication on the bill of lading exactly how many of these "packages" were in the container. Indeed, to date, plaintiff seems not to know how many plastic-wrapped sets there were. In her affidavit in opposition to this motion, Dennehy states that the garments were packaged in sets but she does not indicate how many of these sets there were. See Affidavit of Patricia Dennehy, sworn to on May 1, 2002, ¶ 10 ("Each garment on hanger . . . was individually packaged in a plastic bag. A set of clothes (e.g. Blouse and skirt or blouse and pants) was individually packaged and shipped as a [garment on hanger]."). She does say that she "believed that . . . thousands of packages of garments were shipped." Id. ¶ 12. This information is simply not sufficient for the shipper at the time, and the Court now, to know how many packages were in the container. This is precisely the type of uncertainty that concerned the Binladen Court.See supra note 7. While the Court appreciates the reluctance of judges to deem containers the COGSA package, there is simply no other viable option in this matter under the case law that has developed in this Circuit. While the alleged plastic wrapping of the sets certainly might have been enough for them to be deemed COGSA packages, the lack of disclosure on the bill of lading of the true number of sets is fatal to plaintiff's argument.
The Court expresses no opinion regarding the general availability of this line of argument.
In its memorandum of law, plaintiff cites to Marcraft Clothes, Inc. v. M/V "Kurobe Maru", 575 F. Supp. 239 (S.D.N.Y. 1983), a case in this district with similar facts as the case sub judice. In that matter, the Court held that each set of garments was a COGSA package. There are significant reasons, however, for the Court not to follow Marcraft. As an initial matter, this Court is not bound by the determination inMarcraft. See In re Oxford Health Plans, Inc., 191 F.R.D. 369, 377 (S.D.N.Y. 2000) ("Principles of stare decisis do not require this Court to give any deference to decisions of another district judge."). Furthermore, the facts of Marcraft are distinguishable. In that case, the description on the bill of lading was quite clear as to the number of garment sets that were "stuffed" in the container, see Marcraft, 575 F. Supp. at 242 ("[T]he bill of lading contained a description of the goods enclosed: `4,400 Sets of Men's Suits with Vest.'"), while in this case there is no indication as to the number of plastic-wrapped sets. Finally, the Second Circuit has seriously questioned whether Marcraft was correctly decided. In Binladen, Court noted that the Marcraft decision does not indicate what number was entered in the packages column of the bill of lading. The Circuit Court went on to say, "If the entry in the `packages' column was `1 container,' . . . we would, absent further information, be inclined to disagree with the decision." Binladen, 759 F.2d at 1015 n. 10. The plaintiff in the instant action states that the Second Circuit gave Marcraft only a "cursory glance" and "did not fully appreciate" the facts of the case. Plaintiffs Brief in Opposition to Defendants' Motion at 9. This Court, however, will not cavalierly assume that Judges Mansfield, Oakes and Newman, the three distinguished judges on the Binladen panel, included a passage in their decision without fully considering its import or gave only a "cursory glance" to a cited opinion.
Carriers must give adequate notice to shippers of the COGSA limitation and "fair opportunity" to declare excess value in order to avail themselves of the statute's protection. Gen. Elec. Co. v. MV Nedlloyd, 81 F.2d 1022, 1028 (2d Cir. 1987). Defendants did so in this action.
III. Deviation
The plaintiff also asserts that defendants' COGSA protection is vitiated by an alleged breach contract. Specifically, plaintiff contends that defendants failed to provide the security agreed to in the service contract. For this proposition, plaintiff cites one case, Oliver Straw Goods Corp. v. Osaka Shosen Kaisha, 47 F.2d 878 (2d Cir. 1931). Oliver Straw was a pre-COGSA unreasonable deviation case, a doctrine that does not apply to the case at bar.
It is established law that an unreasonable deviation from the contract of carnage precludes a carrier from invoking COGSA's $500 package limitation. Sedco, Inc. v. S.S. Strathewe, 800 F.2d 27, 30 (2d Cir. 1986); Iligan Integrated Steel Mills, Inc. v. S.S. John Weyerhaeuser, 507 F.2d 68, 70-73 (2d Cir. 1974). In the Second Circuit, however, this doctrine has been strictly limited to geographic deviation and unauthorized on-deck stowage. Sedco, 800 F.2d at 31; see also Iligan, 507 F.2d at 72; Alternative Glass Supplies v. M/V "Nomzi", No. 97 Civ. 4387, 1999 WL 2870, at *6 (S.D.N.Y. Jan. 4, 1999); Maritima Aragua, 1992 WL 42256, at *2 ("The Second Circuit has made it clear that the doctrine of deviation is not one to be extended."). In this case there is no evidence or allegation of geographic deviation or unauthorized on-deck stowage. As such, the doctrine does not apply and the COGSA limitation is not vitiated.
This limitation has been influenced by the Second Circuit's observation that the doctrine is "arguably inconsistent with COGSA."B.M.A. Indus., Ltd. v. Nigerian Star Line, Ltd., 786 F.2d 90, 92 (2d Cir. 1986). Other circuits have also limited the applicability of the doctrine. See, e.g., SPM Corp. v. M/V Ming Moon, 965 F.2d 1297, 1304 (3d Cir. 1992).
Even if the doctrine does apply, summary judgment may still be appropriate. The service contract simply states that there will be armed guard service. According to the Crowley report, a guard was traveling with the convoy when it was hijacked. Therefore, it is not clear that defendants breached the contract. It is unnecessary for the Court, however, to decide this issue.