Opinion
Case No. C 91-2142 BAC
April 14, 1992, Decided . April 15, 1992, Filed and Entered
Mark O. Kasanin, McCutchen, Doyle, Brown & Enersen, 3 Embarcadero Center, San Francisco, CA 94111, For Plaintiff
George W. Nowell, Law Offices of George W. Nowell, 120 Montgomery Street, Suite 1900, San Francisco, Ca 94104, for Defendants
MEMORANDUM AND ORDER
Plaintiff Phoenix Engineering & Supply Co., Inc. ("Phoenix") claims that cargo that was to be shipped with defendants was damaged prior to loading. Defendants American President Lines, Ltd. ("APL") and Eagle Marine Services, Ltd. ("Eagle Marine") bring this motion under Federal Rule of Civil Procedure 56, requesting that the court grant partial summary judgment in their favor, limiting defendants' liability to the plaintiff, if any, to the amount specified in the applicable bill of lading. Phoenix brings a cross-motion for summary judgment seeking a ruling on the carrier's liability for the cargo damage, and the carrier's inability to limit its liability.
FACTS AND BACKGROUND
Phoenix was the shipper of a certain MVA Power Transformer ("transformer"). The transformer was packaged as one piece and weighed approximately 75,200 pounds. Phoenix secured the services of Totaltrans International ("Totaltrans"), a freight forwarder in San Francisco, to arrange the transportation of the transformer from Rome, Georgia to its ultimate destination in Guam. Totaltrans had been employed by Phoenix with some frequency over the past six years. Totaltrans regularly arranged for the transportation of cargo aboard the vessels of APL, as well as other carriers, and arranged to have the transformer carried by APL in this instance.
Clause 2 of APL's bill of lading expressly incorporates the provisions of the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. §§ 1300 et seq. , and further extends the provisions of COGSA to the periods before loading and after discharge from the ship. COGSA limits a carrier's liability to $ 500.00 per package, or in the case of goods not shipped as packages, per customary freight unit. 46 U.S.C. § 1304(5). The $ 500.00 limitation is also separately stated in Clause 4 of APL's bill of lading.
Totaltrans was aware that APL's bill of lading contained a limitation of liability clause. APL attached declarations which show that Totaltrans' practice was to advise new customers who are not experienced shippers that carriers do limit their liability and that the shipper may wish to obtain cargo insurance for that reason. Totaltrans admits that it would not have specifically mentioned APL's liability limitations to Phoenix because it considered Phoenix an established and experienced shipper.
In the usual course of Totaltrans' business as a freight forwarder, a shipper requests it to arrange the transportation of a particular cargo. Totaltrans uses the information submitted by the shipper and prepares a "master", which serves as an input form for the bill of lading. The master allows the carrier to prepare and issue its bill of lading. After the master is received by the carrier, the bill of lading is processed and sent to the shipper or freight forwarder. This usually happens at or after the time the cargo is loaded onto the vessel.
When a shipper wishes to avoid the liability limitations provisions contained in APL's standard bill of lading, it will instruct its freight forwarder to declare this intention on the face of the master. Phoenix had in its files a copy of APL's Freight Tariff no. 19, FMC-F-No.19, indicating the ad valorem freight rate that would have been applicable to the transformer in this case at the time the shipment in question. Rule No. 11 of the tariff expressly provides that all goods are to be valued at $ 500 per package, or per customary freight unit for goods not shipped as packages, unless the shipper declares the cargo's value and pays the ad valorem rate. fn1 The ad valorem rate is 4% of the total declared value for the cargo, plus the otherwise applicable freight rate.
On February 13, 1990, the transformer was picked up in Rome, Georgia by McGil Special Carriers for carriage by truck to APL's container yard in Oakland, California. The shipment was received by APL on February 20, 1990. On that same day, APL's documentation center in Englewood, Colorado received the completed master submitted by Totaltrans. The master, as described above, included all of the information necessary for APL to produce a bill of lading. APL processed the master according to its usual practice and ultimately issued a bill of lading on February 28, 1990. The bill of lading was prepared based on the information supplied in Totaltrans' master. Phoenix did not instruct Totaltrans to declare a cargo value with respect to the transformer.
On February 22, 1990, after the master had been submitted but before the bill of lading had been formerly issued, the transformer was damaged while being moved shipside for loading. The cargo was being moved at the time by APL's stevedore, Eagle Marine. Under Clause 6 of APL's bill of lading, stevedores are extended all contractual defenses, including the liability limitations, provided to the carrier. Phoenix demanded the full value of the transformer, $ 276,978.00. APL and Eagle Marine asserted the liability limitation contained in APL's bill of lading. Phoenix filed this suit for negligence on July 12, 1991.
DISCUSSION
Section 4(5) of COGSA limits a carrier's liability during shipment for loss or damage to $ 500 per package. Normally the Harter Act, 46 U.S.C. § 190 et seq. , governs a carrier's duties during the preloading phase, while COGSA controls while the goods are aboard ship. However, it is well settled that the carrier may, through its bill of lading, limit its liability consistent with COGSA during the preloading and other phases, without violating the Harter Act. Uncle Ben's International Division of Uncle Ben's, Inc., v. Hapag-Lloyd Aktiengesellschaft, 855 F.2d 215, 217 (5th Cir. 1988), North River Ins. Co. v. Fed Sea/Fed Pac Line, 647 F.2d 985, 987 (9th Cir. 1981), cert den., 455 U.S. 948 (1982).
Under Ninth Circuit authority, the carrier may take advantage of the liability limitations contained in COGSA if the shipper is given "fair opportunity" to "opt for a higher liability by paying a corresponding greater charge." Nemeth v. General S.S. Corp., 694 F.2d 609, 611 (9th Cir. 1982). The fair opportunity requirement is met by a legible recitation of the provisions of section 4(5) in the carrier's bill of lading. Id. at 611-12. Similarly, the carrier can extend the terms of the liability limitation to other entities which it employs during transporting the shipper's goods (i.e. stevedores) through express written agreement contained in the bill of lading. Taisho Marine & Fire Ins. Co. v. Vessel Glaiolus, 762 F.2d 1364, 1367 (9th Cir. 1985).
Phoenix does not dispute that APL's bill of lading contained a recitation of the essential provisions of COGSA. Instead, Phoenix argues that the bill of lading did not properly constitute notice and an opportunity to opt out because; 1) the bill of lading was not received until after the transformer had been damaged, 2) APL could not rely upon Phoenix's alleged shipping experience because Ninth Circuit law requires an express agreement to limit liability 3) the bill of lading did not comply with the Ninth Circuit standard because it did not, on its face, provide Phoenix with an opportunity to opt out of the liability limitations, and 4) any liability limitations contained in COGSA or the bill of lading did not include APL's stevedore, Eagle Marine.
The court finds that APL's bill of lading does comply with Ninth Circuit standard and that Phoenix was given a fair opportunity to opt out. APL's bill of lading includes all essential elements of COGSA. There is no requirement that the bill of lading be a precise recitation of COGSA. All that is required is that the carrier inform shippers of the liability limitation and the option to opt out of those limitation. Carman Tool & Abrasives, Inc. v. Evergreen Lines, 871 F.2d 897, 901 (9th Cir. 1989). APL's bill of lading fairly meets these requirements.
While some bills of lading do contain boxes in which shippers may insert higher liability amounts, there is no requirement that APL provide a space on the face of the bill of lading to declare a value in order for the fair opportunity requirement to be met. Fireman's Ins. Co. v. SS PRESIDENT EISENHOWER, 1983 A.M.C. 1221, 1222 n.1 (N.D. Cal. 1983) Moreover, the court views such a requirement as putting form over substance. Here, APL's bill of lading expressly indicated Phoenix's right to insert a higher value and pay appropriate ad valorem rates. Moreover, the freight forwarder, Totaltrans, who handled Phoenix's shipment did not indicate a higher value on the master used to input information into the bill of lading.
Phoenix attempts to raise issues of fact regarding the agency relationship between Phoenix and Totaltrans, and Phoenix's knowledge of the terms of APL's bill of lading. The court is unpersuaded by these arguments. It is unnecessary to reach the agency question. As this transaction illustrates, international and domestic shipping transactions are complex. "The parties usually include the seller, one or more freight forwarders, a carrier, a consignee, as well as several banks and insurers." Carman Tool & Abrasives, Inc. v. Evergreen Lines, 871 F.2d 897, 900 (9th Cir. 1989). As the Ninth Circuit noted in Carman Tool, the bill of lading is a negotiable instrument which may be transferred to one of a number of parties whose name does not appear on its face. It would be a substantial burden on the carrier to require it to notify all potentially interested parties of the terms of the bill of lading. Id. at 901. "The underlying premise has always been that, so long as the bill of lading, on its face, provides adequate notice of the liability limit and an opportunity to declare a higher value, the carrier has discharged its responsibility. Parties who do not deal with the carrier directly have a responsibility to obtain a copy of the bill of lading if they have an interest in knowing its terms." Id. (emphasis added)
Phoenix does not suggest that it is an unsophisticated shipper. Nor does Phoenix expressly claim that it has never seen an APL bill of lading. fn2 Phoenix had ample opportunity to avoid the liability limitations contained in APL's bill of lading if it had chosen to do so. Moreover, the fact that Phoenix fully insured the transformer in this case suggests that it "made a knowing a deliberate choice in foregoing the additional cost that would have been incurred in raising the liability limit. . ." Carman Tool, 871 F.2d at 901 n.10.
The court also rejects Phoenix's argument that APL's bill of lading did not expressly extend its terms to Eagle Marine. Plaintiff correctly argues that "Himalaya" clauses are strictly construed and can apply only to the intended beneficiaries if specified in the bill of lading. Taisho Marine, 762 F.2d at 1366. Eagle Marine performed services as an agent for APL while APL's contractual obligations to Phoenix were in force. APL's bill of lading expressly extended its terms to stevedores. Therefore, the court finds that Eagle Marine was an intended beneficiary of APL's "Himalaya" clause.
ORDER
For the foregoing reasons, APL's motion for summary judgment is HEREBY GRANTED,
1. APL's liability is limited to $ 18,800.00.
2. Defendants do not appear to dispute liability; therefore, Phoenix's motion for partial summary judgment is GRANTED as to the issue of defendant's liability. Phoenix's motion is DENIED as to the issue of limitation of liability.
IT IS SO ORDERED.
Dated: April 14, 1992
Barbara A. Caulfield
United States District Judge