Opinion
00 Civ. 3497 (JSM)
August 12, 2002
For Plaintiff: Stephen A. Frank, Badiak, Will Ruddy LLP, New York, N.Y.
For Defendants: Edward A. Keane, Mahoney Keane LLP, New York, N.Y.
For Third-Party Defendants: William J. Pallas, Freehill, Hogan Mahar, New York, N.Y.
OPINION AND ORDER
In this action in admiralty, Plaintiff Albany Insurance Company has sued Defendants for damages resulting from the spoliation of cheese transported by Defendant Euroatlantic Container Lines, S.A. ("Defendant") from Uruguay to New York. Plaintiff now seeks partial summary judgment against Defendant on the issue of liability. Defendant cross-moves for summary judgment on Plaintiff's claim and cross-moves for partial summary judgment on its indemnification claims against Maersk, the Third Party Defendant vessel owner.
FACTS
In 1999, five shipments of Uruguayan cheeses were transported from Montevideo to New York pursuant to a purchase order placed by Arthur Schuman, Inc., a New Jersey based cheese importer and distributor insured by Plaintiff. Defendant Euroatlantic was and remains a vessel operating common carrier.
In Uruguay, the shippers prepared the Euroatlantic bills of lading, loaded the cargo into refrigerated containers provided by Defendant, and trucked the cargo to the Port of Montevideo. Pursuant to local trade and custom, the shippers did not set the temperatures on the refrigerated containers prior to presenting the containers to Defendant. However, instructions were sent by the shippers to the vessel regarding the temperature requirements of some of the containers. The parties dispute whether the recipient of those instructions, Safeship, S.A., was in fact an agent of Defendant.
Pursuant to a charter agreement between Defendant and Maersk, the containers were transported to New York on Maersk's vessel. When the containers arrived in New York, it became apparent that the cheese was transported at a temperature well below the required temperature, and though salvageable, the cheese was unfit for its intended use.
DISCUSSION
Plaintiff argues that Defendant is liable because it had a duty to insure that the temperature was set and maintained properly. In support, Plaintiff relies on information about the local custom and trade at the Port and the fact that Defendant's alleged agent received instructions regarding the temperature settings for the containers. Defendant responds that it is not liable because the bills of lading required Plaintiff to set the proper temperature prior to presenting the goods to Defendant. Alternatively, Defendant argues that if it is liable, it is entitled to full indemnification by the vessel owner because the containers were actually handled and transported by Maersk and a carrier has a right to indemnification when the fault lies with the vessel owner. Maersk, the Third Party Defendant, responds that there is no right to indemnification because the charter agreement states that the charterer (Defendant) is responsible and liable for such loss and damage.
The parties do not dispute that this case is governed by the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. App. §§ 1300-1315. COGSA governs the responsibilities of and relationship between the parties to a bill of lading where that document is issued as the contract of carriage. 46 U.S.C. App. § 1300; 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 10-15 (3d Ed. 2001). With respect to the liability of carriers for loss or damage to cargo, COGSA employs a system of burden shifting.
To establish a prima facie case against the carrier, a plaintiff shipper must show that the cargo was damaged while in the carrier's custody. Camient Food, Inc. v. Lloyd Barileiro Companhia de Navegacao, 647 F.2d 347, 351 (2nd Cir. 1981). This can be accomplished by showing that the cargo was delivered to the carrier in good condition but discharged in a damaged condition. Vana Trading Co., Inc. v. S.S. "Mette Skou", 556 F.2d 100, 104 (2nd Cir. 1977). A shipper "who has not proved delivery [to the carrier] in good condition may nevertheless establish a prima facie case for recovery by producing sufficient evidence that the nature of the damage suffered indicated that the damage occurred while the cargo was in the carrier's custody," and was not caused by "any inherent vice of the cargo." Camient Food Inc., 647 F.2nd at 355.
If the plaintiff makes out a prima facie case, the burden shifts to the carrier to show that the loss falls within one of COGSA's statutory exceptions. See 46 U.S.C. App. § 1304. If the carrier can rely on one of the exceptions, "the burden return[s] to the plaintiff to show that the carrier's negligence contributed to the damage." O'Connell Mach. Co. v. M.V. "Americana", 797 F.2d 1130, 1133 (2nd Cir. 1986). See J. Gerber Co. v. S.S. Sabine Howaldt, supra, 437 F.2d 580, 588 (2nd Cir. 1971); Lekas Drivas, Inc. v. Goulandris, 306 F.2d 426, 430 (2nd Cir. 1962).
I. Plaintiff's Prima Facie Case
There is no question that the cheese was damaged when discharged, so Plaintiff's prima facie case turns on whether the cheese was delivered in good condition. "A clean bill of lading is ordinarily prima facie evidence of delivery in good condition." Camient Food Inc., 647 F.2nd at 352; Blommer Chocolate Co. v. Norisa Sharon, Ltd., 776 F. Supp. 760, 768 (S.D.N.Y. 1991). Here, Defendant issued clean bills of lading and Defendant does not argue that, at the time of delivery to the carrier, the cargo suffered from any internal defect of which Defendant could not have been aware when issuing the bills of lading. See id. at 352.
II. Defendant's Rebuttal — 46 U.S.C. App. § 1304(2)(i)
According to 46 U.S.C. App. § 1304(2)(i), a carrier is not liable for loss or damage resulting from an "[a]ct or omission of the shipper or owner of the goods, his agent or representative." Although Defendant does not specifically invoke § 1304(2)(i), Defendant does argue that even if Plaintiff can make out a prima facie case, Defendant is not liable because Plaintiff had the duty of properly setting the container temperature. If Plaintiff did have such a duty, Plaintiff's failure to set the temperature would constitute an omission under § 1304(2)(i), and the burden would shift back to Plaintiff. See Sun Co. Inc. v. S.S. Overseas Arctic, 27 F.3d 1104, 1110 (5th Cir. 1994) (finding § 1304(2)(i) applicable where the shipper had failed to perform its obligation to ensure that goods were loaded at the proper temperature)
Plaintiff argues that according to local trade and custom at the Port of Montevideo, shippers and truckers are forbidden from activating or setting the temperatures on the refrigeration units. According to Plaintiff, instructions are sent to the ship which specify the temperatures at which the containers should be maintained. Plaintiff relies on cases that state the general principles that a carrier is required to know the special characteristics of the cargo, see Atlantic Banana Co. v. M/V "Calanca", 342 F. Supp. 447, 451 (S.D.N.Y. 1972), aff'd 489 F.2d 752 (2nd Cir. 1974), and that a bill of lading is presumed to have been issued subject to custom. See M. Golodetz Export Corp. v. S/S Lake Anja, 751 F.2d 1103, 1109 (2nd Cir. 1985). See also Hearty v. Ragunda, 114 F. Supp. 869, 871 (S.D.N.Y. 1953).
Defendant argues that custom and practice cannot override the clear language of the bills of lading, which state:
If perishable goods requiring special temperature are delivered to the Carrier in a refrigerated container, the Merchant undertakes that the Goods have the temperature provided on the face hereof and that they have been properly stowed and the thermostatic controls have been properly set by him before delivery of the goods to the Carrier.
(Def.'s Notice of Cross Mot., Ex. F.)
Thus, under the bills of lading, it is clear that the duty to set the temperature rested with Plaintiff. Although the quoted section is part of the bill of lading's boilerplate language, it is nevertheless part of the contract and binding on the parties. See Grace Line, Inc. v. Todd Shipyards Corp., 500 F.2d 361, 372 (9th Cir. 1974); see also Allied Chemical, 775 F.2nd at 482 ("[B]ills of lading are contracts of adhesion Furthermore, while Plaintiff is correct that bills of lading are presumed to be issued subject to custom, and that evidence of custom and usage may be used to explain endorsements in the bills of lading, custom and usage cannot be used to contradict the plain terms of the bills of lading. The Delaware, 81 U.S. 579, 603 (1871) ("Evidence of usage . . . may be introduced to explain what is ambiguous, but it is never admissible to vary or contradict what is plain."). Although Plaintiff cites cases in which carriers have been found liable for failing to set cargo temperature in accordance with trade or custom, but none of these cases involve bills of lading with express language to the contrary. Here, as stated previously, Plaintiff's assertion that it is custom for the carrier to set the temperature is in direct conflict with the language of the bills of lading.
Plaintiff stresses that it should not be liable because Defendant did not provide the required temperature on the face of the bills of lading. However, as noted in the language of the document — which was in the shippers' possession prior to issuance by Defendant — the shipper is responsible for providing such details on the bills of lading. ("[T]he description of the Goods . . . herein are those furnished by the [shipper] and the Carrier shall not be responsible as to the correctness of the marks, numbers, . . . .") (Def's Notice of Cross Mot., Ex. F.)
Plaintiff argues that maritime law does recognize that a contract's express terms may be modified by port custom, and cites Givaudan Delawana, Inc. v. The Blidjdendijk, 91 F. Supp. 663 (S.D.N.Y. 1950) in support of its position. In Givaudan, the court recognized that the bill of lading gave the carrier the right to ship goods on deck as opposed to below deck and that the carrier could similarly prove this right by custom and practice. Id. at 666. The court noted, however, that the shipper also had the right to prove and rely on custom which required the carrier, when exercising its right to stow goods on deck, to make an affirmative endorsement on the bill of lading indicating that the goods have in fact been stowed on deck. Id. at 666-67. Again, Givuadan and the authorities on which it relies deal with situations where the bill of lading is unclear or where custom supplements the express terms of the bill of lading. These cases do not support the proposition that custom may be used to contradict the clear language of the bill of lading.
Plaintiff also focuses heavily on the fact that the temperature instructions were received by the ship. While the ship did acknowledge receipt of instructions regarding the proper temperature of the containers, such receipt does not modify the contract. Even if the party receiving the instructions was an agent of the carrier (a point that Defendant contests), the Second Circuit has expressed its reluctance to bind a carrier to instructions that would modify a bill of lading where the only affirmative statement by the recipient was that the instructions had been received. In M. Golodetz Export Corp., Plaintiff's agent delivered special temperature instructions to the ship, and the district court held that these became part of the contract of affreightment. M. Golodetz Export Corp., 751 F.2nd at 1109. While the Second Circuit found the carrier bound to those instructions on other grounds, it noted that "it [was] not altogether clear that the carrier, by [merely] `acknowledging receipt' of the instruction, agreed to bind itself by the explicit terms of those specifications." Id. The court concluded that a rule that binds the recipient to each piece of paper received with respect to cargo would be "unworkable," and that if the shipper wanted to bind the carrier to the instructions and modify the contract of affreightment, it "could have chosen more binding language than `Please acknowledge receipt by signature below.'" Id.
At oral argument, Plaintiff asserted that it did not have the option of setting the temperature prior to turning over the cargo to the carrier. There is no evidence, however, that Plaintiff was actively prevented from setting the temperature. Plaintiff's only excuse was that if it had broken with custom and set the temperature, it would have jeopardized future contracts at that port. However, such concerns are not grounds for setting aside the current contract.
Having established that the Plaintiff bore the duty to set the temperature, the burden shifts to the Plaintiff to show concurrent causes of loss in the fault and neglect of the "carrier." J. Gerber Co. v. S.S. Sabine Howaldt, 437 F.2nd at 588. As Plaintiff's has limited its analysis to the prima facie stage of the case, no such concurrent cause has been asserted. Accordingly, Defendant is not liable for the damage to the cargo.
CONCLUSION
For the foregoing reasons, Plaintiff's motion for partial summary judgment is denied and Defendant's cross-motion for summary judgment on Plaintiff's claim is granted. As Defendant has no liability, its cross-motion for partial summary judgment on its indemnification claims against Maersk is denied as moot.