Opinion
Civil Action No. 03-1396, SECTION "C" (5).
July 19, 2004
ORDER AND REASONS
This matter comes before the Court on motion for summary judgment filed by LCI Shipholdings, Inc. ("LCI") and cross-motion for summary judgment filed by Fracht FWO AG ("Fracht"). Having considered the record, the memoranda of counsel and the law, the Court has determined that summary judgment in favor of Fracht is appropriate for the following reasons.
Both motions concern the viability of the counterclaim being made by Fracht against LCI. The material facts are undisputed. Fracht is a German freight forwarder which contracted with Muller Weingarten AG ("Muller") to arrange for the shipment of some machinery from Germany. Fracht booked passage for the shipment of some presses to the United States with Forest Lines Inc. ("Forest Lines"), predecessor-in-interest to LCI, through Forest Lines' agent, Herfurth Co Shipping GmBH ("Herfurth"). Herfurth issued a datafreight receipt naming Muller as shipper and Forest Lines as carrier for the presses, which were damaged in transit due to inadequate stowage.
Allianz Versicherungs AG ("Allianz"), an insurance entity, provided coverage to Muller for cargo damage and paid the claim. As subrogee of Muller, Allianz sued Fracht in a German court, which found against Fracht in the full amount of the damages to the freight under its agreement with Muller. Fracht subsequently settled the claim. Fracht now seeks indemnity for the full amount it paid to settle the damage claim. LCI argues that Fracht's recovery is limited to the $500 per package limitation set forth in the Carriage of Goods by Sea Act, 46 U.S.C. § 1300 et seq. ("COGSA"), which had been incorporated into the datafreight receipt.
Fracht's argument is based on a straightforward application of contract and tort law. "[C]ontracts purporting to grant immunity from, or limitation of, liability must be strictly construed and limited to intended beneficiaries, for they `are not to be applied to alter the familiar rules visiting liability upon a tortfeasor for the consequences of his negligence.'" Robert C. Herd Co. V. Krawill Machinery Corp., 359 U.S. 297, 304 (1959), quoting Boston Metals Co. v. The Winding Gulf, 349 U.S. 122, 123-124 (1955) (concurring opinion). (Negligent stevedore not entitled to per-package limitation in absence of language in bill of lading indicating that contracting parties intended to limit that liability.) Herfurth, acting as agent for Forest Lines, listed only Muller as the shipper on the datafreight receipt that incorporated the COGSA package limitation, and the datareceipt receipt itself applies only to the "shipper, consignee and owner" of the goods and "holder" of the receipt. According to Fracht, therefore, there is no basis to impose the per package limitation on it.
Despite the rule that limitations are narrowly construed, LCI argues that the per package limitation in the datafreight receipt applies to all persons making any claim directly or indirectly pertaining to the cargo damage. LCI's argument is not persuasive.
LCI returns to three cases for direct support for its argument that Fracht can be treated as a shipper even though it was not so designated on the datafreight receipt. EMS Industrie SDA v. Polski Towarzystwo Okretowe, 608 F. Supp. 1133 (E.D.N.Y. 1985); Stolt Tank Containers, Inc. v. Evergreen Marine Corp., 1990 WL 199081 (S.D.N.Y.) and Mediterranean Marine Lines, Inc. v. John T. Clark Son of Md., Inc., 485 F. Supp. 1330 (D.Md. 1980). (Rec. Doc. 15, p. 16; Rec. Doc. 22, p. 10; Rec. Doc. 25, p. 18). These cases in themselves do no lend compelling support for LCI's argument, as discussed hereinafter.
In its motion for summary judgment, LCI characterizes Fracht's claim as one for cargo damage, not indemnity, and argues in favor of the per package limitation because there was a "fair opportunity" to declare a higher value and because the was no qualifying deviation. It then argues that "[r]egardless of `who' now asserts the claim for cargo damage," the per package limitation applies. (Rec. Doc. 15, p. 16). This argument relies on EMS and Stolt Tank.
The Court finds these two cases distinguishable. First, neither involve an indemnity claim. In EMS, the issue of who is a "shipper" for purposes of the bill of lading was not even raised. That court did not discuss the contractual arrangements among the three plaintiffs, the purchaser, and two freight forwarders, who jointly argued that the per package limitation in the bill of lading did not apply because they were not afforded a "fair opportunity" to declare a higher value. The court's finding that, as to the carrier, the per package limitation applied to the three carriers is not particularly helpful. The court's determination that the packaging defendant also be limited in any contribution from the carrier to the per package limitation because it "would frustrate the statutory scheme of liability" stands without legal citation in the opinion.
The Stolt Tank case relies, in turn, on E.M.S. as authority. Stolt Tank involved bills of lading which provided that the carrier shall "in no event" be liable for more than $500 per package "in any action" against the carrier where the third party, Stolt, was defined as a "merchant" under the bill. That argument is not available here in the absence of a factual basis for it in the datafreight receipt. That court also found that "Stolt was to benefit from their eventual delivery to a Stolt Depot in Japan," a circumstance not argued here. Id., at *5.
In LCI's reply to Fracht's opposition to its motion for summary judgment, LCI argues that Fracht's rights lie only in subrogation if Fracht is not a party to the datafreight receipt. LCI argues that "[w]hether Fracht constitutes a `shipper', shipper's agent' or `carrier'," Fracht is nevertheless bound "by the terms of the datafreight receipt because it is "functional equivalent of a shipper" as to LCI. (Rec. Doc. 22, p. 3). LCI repeats the argument that "any claim against Forest Lines is a claim subject to the terms and conditions" of the datafreight receipt" "regardless of `who' asserts the claim," although it cites no case that so holds. (Rec. Doc. 22, pp. 3-4). LCI next undertakes an argument that a freight forwarder that does not issue a bill of lading is not a "carrier" under COGSA, and because "Fracht was Muller's agent, it was "the functional equivalent of the shipper" as to Forest Lines. LCI relies on the Mediterranean Marine case in support. (Rec. Doc. 22, p. 3). Mediterranean Marine involved pre-loading damage to both the goods and the vessel. The freight forwarder there prepared the goods for shipment and delivered them to the terminal for loading. The bill of lading contained language extending the COGSA limitation to others, and there was COGSA language in the stevedoring contract and in a dock receipt. The court did find that, under those circumstances, the freight forwarder was the "agent for [the shipper] and therefore must be considered a `shipper' under the bill of lading." This case does provides some authority for LCI's argument that a "shipper" can include a party not mentioned in the bill of lading, but the authority is lonesome and weak. The court's conclusion is based on a case,Couzens Warehouse Distributors, Inc., 544 F.2d 919 (7th Cir. 1976), in which the court dealt with whether a public warehouseman acting as a freight forwarder without the required permit was a shipper for purposes of applicable tariffs applicable to certain rates under the Interstate Commerce Act. This Court is dealing with a case for indemnity.
In opposition to the cross-motion filed by Fracht, LCI again argues for the broad proposition that "[i]t makes no difference `who' claims against LCI or `how' that claim is characterized . . ." and that "[t]hose who claim against LCI must do so either as one having an interest in the cargo carried under the datafreight receipt or as that person's subrogee." (Rec. Doc. 25, p. 3). LCI then raises some new arguments.
First, LCI argues that Fracht was found to be a carrier in German court only because it stipulated to that status. LCI also argues that because Fracht unsuccessfully argued in favor of being a beneficiary of the per-package limitation contained in the datafreight receipt in Germany, it is precluded from arguing that the limitation does not apply to it as against LCI. The Court disagrees.
Judicial admissions must be distinguished from ordinary evidentiary admissions. A judicial admission is binding upon the party making it; it may not be controverted at trial or on appeal. Judicial admissions are not evidence at all but rather have the effect of withdrawing a fact from contention. Included within this category are admissions in the pleadings in the case, admissions in open court, stipulations of fact, and admissions pursuant to request to admit. Ordinary evidentiary admission, on the other hand, may be controverted or explained by the party. Within this category fall the pleadings in another case, superseded or withdrawn pleadings in the same case, answers to interrogatories, stipulations as to admissibility, as well as other statements admissible under Rule 801(d)(2).
30B Wright Miller, Federal Practice Procedure § 7026 (West) (emphasis added). This result seems logical in light of the fact that the German court did not recognize Fracht's entitlement to the per-package limitation. Had it done so, this lawsuit would not likely have been filed.
LCI argues that "[i]f Fracht claims to be the `functional equivalent of a carrier", then it constitutes a `non-vessel operating common carrier.' (NVCCC)," which "is the functional equivalent of a shipper as to Forest Lines." (Rec. Doc. 25, p. 7). Still, no case linking this argument to the applicability of the per package limitation to Fracht is provided. LCI continues with the argument that Fracht acted as agent for Muller in arranging the shipment and knew that the COGSA terms would be in the bill of lading and, therefore, if a "fair opportunity" was afforded, the per package limitation apples to Fracht. Again, no authority for application in this matter is provided. It should be noted that the datafreight shipper designation does not include the shipper's agents, and likewise there can be no serious argument that Muller was Fracht's agent in any respect, either.
LCI then argues that the booking confirmation between Fracht and Herfurth was "merged" into the datafreight receipt contract of carriage between Muller and Forest Lines, which therefore binds Fracht to the per package limitation. In support of this argument, LCI cites West India Industries, Inc. v. Tradex, Tradex Petroleum Services, 664 F.2d 946 (5th Cir. 1981). In that case, however, the same parties that entered into the preliminary contract were listed on the bill of lading. Again, even if Fracht was acting as agent for Muller in arranging the shipment with Herfurth, there is no allegation that Muller, listed alone as the shipper on the datafreight receipt, was ever acting as agent for Fracht. See James N. Kirby Ltd. v. Norfolk Sourthern Railway Co., 300 F.3d 1300 (11th Cir. 2002).
LCI again argues that because Fracht is not a party to the datafreight receipt it can only sue LCI as subrogee. This time, LCI argues that tort indemnity is not available to Fracht because Fracht and Forest Lines "both share the identical basis for liability for the cargo damage in this case — namely, the vicarious liability for the statutory non-delegable duty imposed on the carrier to properly load, stow and secure the cargo." (Rec. Doc. 25, p. 15). However, Fracht's liability is based on its contract with Muller and, while LCI's argument is based on Forest Lines' contract with Muller, Fracht's claim against LCI is based in tort and derived by its status as carrier. Cities Service Co. v. Lee-Vac, Ltd., 761 F.2d 238 (5th Cir. 1985). LCI finally argues that Forest Lines does not owe a warranty of workmanlike performance to Fracht and even if it does, any claim would be a cargo claim subject to the datafreight receipt. LCI concludes with citation to the EMS and Stolt Tank cases for the overriding proposition that Fracht's indemnity claim is limited by the per-package limitation defense.
The Court had construed the issue raised by LCI to be not whether Fracht would be entitled to tort indemnity due to the undisputably improper stowage, only whether this liability should be limited to the COGSA per package limit.
The Court cannot ignore the clear guidance given by the Supreme Court in Herd:
Under the common law as declared by this Court, petitioner was liable for all damages caused by its negligence unless exonerated therefrom, in whole or in part, by a constitutional rule of law. No statute has limited its liability, and it was not a party to nor a beneficiary of the contract of carriage between the shipper and the carrier, and hence its liability was not limited by that contract. It follows that petitioner's common-law liability for damages caused by its negligence was in no way limited, and the judgment below so holding was correct and must be affirmed.Id., at 772-773. There is a greater comfort level in continuing to strictly construe contracts which limit liability, especially in a situation where, as here, the parties are sophisticated and the active fault lies with the foreign stevedore, which was retained by LCI, not Fracht.
In this regard, the Court finds persuasive the analysis undertaken and result reached in the two primary cases cited by Fracht, Victoria Sales Corp. v. Emery Air Freight, Inc., 917 F.2d 705 (2d Cir. 1990) and American Home Assurance, Inc. v. Internaves Shipping Corp., 985 F. Supp. 1154 (S.D.Fla. 1997).
Accordingly,
IT IS ORDERED that the motion for summary judgment filed by LCI Shipholdings, Inc. is DENIED and the cross-motion for summary judgment filed by Fracht FWO AG is GRANTED. Counsel shall advise the Court in writing of the status of the remaining claims and/or parties within five days.