Opinion
CIVIL ACTION NO. H-00-167
July 16, 2002
MEMORANDUM AND ORDER
Pending is Defendants' Motion for Summary Judgment (Document No. 35). After carefully reviewing the motion, the response, the reply, and the applicable law, the Court concludes that the motion should be denied.
This case is a consolidation of several admiralty claims brought against Texas American Shipping Corporation and Fednav International, Ltd. ("Defendants") for the loss and damage of several foreign aid cargoes shipped from the United States to Africa under twenty-seven bills of lading. Nineteen of the twenty-seven claims are being prosecuted by the United States pursuant to assignments from Catholic Relief Services ("CR8") and World Vision Relief and Development, Inc. ("WVRD"). The remaining eight claims are brought by the United States in behalf of the Agency of International Development. When the vessels arrived in Africa, many of the cargoes were shortlanded, damaged by water contamination, partly spilled from their packaging, and unfit for human consumption. The United States seeks to recover $207,953.37 for the damaged cargoes plus freight charges and pre-judgment interests.
Plaintiff is also pursuing the action in rem against the M/V City of Akaki, M/V Pal Eagle, M/V Caribbean Express I, and M/V Sea Baron.
Defendants move for summary judgment on what they describe as two relatively simple points. First, Defendants contend that the traditional measure of damages, which is based on the commercial values of the cargoes, should not apply to these cargoes because they were not allowed to be sold inasmuch as they were part of the Government's "Food for Peace" program and in that sense removed from "the stream of commerce." Hence, Defendants argue, because the cargoes had no reliably ascertainable commercial market values, Plaintiff's damages should be limited to a pro rata return of the ocean freight paid. Second, Defendants assert that because CRS and WVRD, which received the commodities free of charge from the United States, did not suffer financial losses, the United States therefore cannot recover damages as the assignee of ORS and WVRD.
The United States purchased all of the commodities on the open market, and donated to CR8 and WVRD certain of those commodities for those entities to distribute in Africa. The United States made all arrangements for shipping and paid all freight charges.
Defendants have no authority in support of their position that Defendants' liability should be limited to a pro rata return of freight charges paid. To the contrary, the federal regulation governing the transfer of food commodities under the Food for Peace Program provides that the United States is entitled to recover more than freight charges for lost or damaged commodities donated under the program. See 22 C.F.R. § 211.9 (c)(2) (ii) (B) (2001) . For purpose of carrier liability, 22 C.F.R. § 211.9 (c)(2) (ii) (B) provides that the value of misused, lost, or damaged commodities donated under the program "shall be determined on the basis of the domestic market price at the time and place the misuse, loss or damage occurred, or, in case it is not feasible to obtain or determine such market price, the f.o.b. or f.a.s. commercial export price of the commodity at the time and place of export, plus ocean freight charges and other costs incurred by the U.S. Government in making delivery to the cooperating sponsor." Id. (emphasis added).
Damages of the type sought here were recovered in United States v. Ocean Bulk Ships, Inc., 248 F.3d 331 (5th Cir. 2001), a similar case in which cargoes were damaged during shipments to famine-stricken areas of Africa. The Court of Appeals rendered judgment in favor of the United States for the value of the commodities as set forth in the bills of lading. Id. at 343. The Fifth Circuit held that the calculation of damages based on the stated value of the commodities in the bills of lading was consistent with the Carriage of Goods by Sea Act ("COGSA") because under the Act, a shipper is expressly allowed "to declare the value of its cargo as long as "the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.'" Id. (quoting 46 U.S.C. § 1304 (5) and holding that the inclusion of the cargo's value on the bill of lading evidences a carrier' s acquiescence to the shipper' s declaration).
Defendants' notion that Plaintiff cannot recover the value of the goods because they were destimed for famine relief, could not be sold, and therefore had no ascertainable commercial value, is also implicitly repudiated in United States v. Central Gulf Line, Inc., 747 F.2d 315 (5th Cir. 1984). The defendant there unsuccessfully argued that because the government intended to donate the lost cargo as part of the Food for Peace Program, it was inequitable to award prejudgment interest on the damages. Id. at 320. The Fifth Circuit wrote: "Central Gulf cannot use [the government's] humanitarian orientation to avoid damages otherwise properly awarded." Id. Such is also the case here: Defendants cannot avoid liability for the value of the damaged cargoes simply because the United States was engaged in a humanitarian enterprise.
Likewise, Defendants have no authority to support their position that CR8 and WVRD, private voluntary organizations, would not be entitled to recover damages from a third party for damages to property obtained through donations. Significantly, 22 C.F.R. § 211.9 (c)(2) (ii) (A) specifically provides that for purposes of carrier liability, non governmental cooperating sponsors such as CR8 and WVRD, "shall file notice of any cargo loss and/or damage with the ocean carrier immediately upon discovery of any such loss and/or damage, promptly initiate claims against the ocean carrier for cargo loss and/or damage, [and] take all necessary action to obtain restitution for losses . . . ." 22 C.F.R. § 211.9 (c)(2) (ii) (A). The necessary inference from this regulation is that entities such as CR8 and WVRD are entitled to recover damages from ocean carriers for lost or damaged cargo received under the Food for Peace Program.
Finally, 22 C.F.R. § 211.9 (c)(2)(i) provides that irrespective of transfer of title to the commodities, "if [the Agency for International Development] contracted for the ocean transportation, CCC shall have the right to initiate, prosecute, and retain the proceeds of all claims against ocean carriers for cargo loss and/or damage arising out of shipments of commodities transferred or delivered by CCC hereunder." Id. at § 211.9(c)(2)(i); see also Central Gulf Lines, 747 F.2d at 317-18 (discussing 22 C.F.R. § 211.9 and upholding its validity). Thus, even if Defendants' contention were correct that CR8 and WVRD suffered no losses for which damages may be recovered, the United States, irrespective of any assignments, is entitled to recover damages for the lost and damaged commodities because it arranged for their ocean transportation. See 22 C.F.R. § 211.9 (c)(2)(i).
Order
For the foregoing reasons, it is hereby ORDERED that Defendants' Motion for Summary Judgment (Document No. 35) is DENIED.
The Clerk will enter this Order and send copies to all counsel of record.