Appeal from a decision of the District Court for the Southern District of New York, Duffy, J., granting defendant Global's motion to limit its liability to $8,000. Judgment reversed, and case remanded with directions to enter judgment for plaintiff for the full value of lost oil drums. Judge Van Graafeiland dissents in a separate opinion.
Lumbard, Oakes and Van Graafeiland, Circuit Judges. Van Graafeiland, Circuit Judge, Dissenting.
Plaintiff Colgate Palmolive Company ("Colgate") sued to recover the full value of lost oil drums scheduled to be shipped to France. It now appeals from a judgment of the Southern District of New York denying Colgate's motion for summary judgment and granting defendant Global Terminal and Container Services, Inc's cross-motion to limit its liability to $500 per missing package, pursuant to the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. 1304(5) (1976).*fn1 For the reasons set forth below, we reverse and direct entry of judgment for Colgate in the amount of $116,459.24.
The relevant facts are undisputed. On August 22 and 27, 1979, Colgate delivered a total of 22 drums of spearmint oil to Global Terminal & Containers Services, Inc.'s (Global) terminal in Jersey City, New Jersey. The oil was scheduled to be shipped to LeHavre, France.*fn2 Global had contracted with Dart Containerline Ltd. (Dart) to store the goods until it loaded them aboard Dart ships. Sixteen of these drums were never loaded aboard vessels, and have never been located. Global has offered no explanation for their disappearance.
Global issued dock receipts showing that it received all 22 drums. These receipts explicitly state, in bold type, that they incorporate all terms of the bills of lading issued by Dart.*fn3 By its terms, COGSA applies only from the time when the goods are loaded on shipboard to the time they are discharged from the ship. 46 U.S.C. 1301(e) (1976). The bills of lading, however, each contain a provision that extends application of COGSA to the period "before loading" and "after discharge." One of COGSA's provisions limits the carrier's liability to $500 per package, unless otherwise agreed. 46 U.S.C. 1304(5) (1976).
Colgate sued Dart under admiralty jurisdiction, and joined Global as a defendant under pendent jurisdiction.*fn4 Judge Duffy held valid the clause in Global's dock receipts which incorporated Colgate's agreement in the bill of lading to be bound by COGSA before loading and after discharge. He concluded that since the loss occurred before loading, COGSA's liability limitation applied. Declaring that "plaintiff's argument that the loss of the oil is governed by state law is totally unavailing," he denied Colgate's motion for summary judgment and granted Global's cross-motion to limit its liability to $500 per package, or $8,000.
We disagree with the district court. Parties may contractually extend COGSA's application beyond its normal parameters. When they do so, however, COGSA does not apply of its own force, but merely as a contractual term. In this case, state law, the law of New Jersey, governs and invalidates the contractual limitation of liability upon which Global relies.
The district court cites our decision in Bernard Screen Printing Corp. v. Meyer Line, 464 F.2d 934 (2d Cir. 1972), cert. denied, 410 U.S. 910, 35 L. Ed. 2d 272, 93 S. Ct. 966 (1973), for the proposition that contractual extensions of COGSA are valid. In that case, we approved contractual provisions in a bill of lading that extended to stevedores the $500 liability limitation enjoyed by carriers. We discussed Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 301-03, 3 L. Ed. 2d 820, 79 S. Ct. 766 (1959) in which the Supreme Court held that although COGSA's liability limitation provision did not apply to agents of a carrier, the parties were not precluded from contracting to such limitation. Accord, Carle & Montanari, Inc. v. American Export Isbrandtsen Lines, 275 F. Supp. 76 (S.D.N.Y.), aff'd mem. 386 F.2d 839 (2d Cir. 1967), cert. denied, 390 U.S. 1013, 88 S. Ct. 1263, 20 L. Ed. 2d 162 (1968).
Having said that nothing in COGSA or its legislative history precludes parties from agreeing to extend its coverage to situations other than those where it would normally apply, it does not follow that any such resulting contractual provision is necessarily valid. In Pannell v. U.S. Lines Co., 263 F.2d 497, 498 (2d Cir. 1959), COGSA was incorporated into a bill of lading. We stated that "where a statute is incorporated by reference its provisions are merely terms of the contract evidenced by the bill of lading." That being so, we favored a specific definition of the term "package" that appeared in the bill of lading over an inconsistent definition in COGSA. This rule has been followed consistently by other circuits. See North River Insurance Co. v. Fed Sea/Fed Pac Line, 647 F.2d 985, 989 (9th Cir. 1981) (foreign jurisdiction clause valid when COGSA applies only as contract term); Ralston Purina Co. v. Barge Juneau & Gulf Carribean Lines, 619 F.2d 374, 375 (5th Cir. 1980) (parties' agreement to one year limitation on suit prevails over COGSA provision); Commonwealth Petrochemicals Inc. v. S/S Puerto Rico, 607 F.2d 322, 325 (4th Cir. 1979) (specific definition of "package" in bill of lading controls over definition in COGSA); P.P.G. Industries, Inc. v. Ashland Oil Co., 527 F.2d 502, 507 (3d Cir. 1975) (parties could have extended, but neglected so to do, COGSA's statute of limitations provision to agent of carrier).
Thus, in this case COGSA does not apply of its own force as a statute, but merely as a contractual term in the bill of lading. We disagree with the district court's assertion that state law is "totally unavailing." We see no reason to deviate from our holding in Leather's Best v. S.S. Mormaclynx, 451 F.2d 800, 808 (2d Cir. 1971), that an action against a terminal for negligent loss of cargo is not within federal maritime jurisdiction, but is a state claim governed by state law. Since state law governs, provisions of COGSA incorporated by contract can be valid only insofar as they do not conflict with applicable state law.*fn5
In deciding this pendent claim, of course, the district court must act in the same manner as would a New York state court, Erie Railroad Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938), and this rule applies to conflicts rules as well, Klaxon Co. v. Stentor Electric Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Here, plaintiffs allege that the oil was lost due to defendants' negligence. Since the loss occurred in New Jersey, a New York court would apply New Jersey law. Babcock v. Jackson, 12 N.Y.2d 473, 483, 240 N.Y.S.2d 743, 750-51, 191 N.E.2d 279 (1963) ("where the defendant's exercise of due care . . . is in issue, the jurisdiction in which the allegedly wrongful conduct occurred will usually have a predominant, if not exclusive, concern"); Bartlett v. Short Line Bus System, 330 N.Y.S.2d 945, 946-47, 69 Misc.2d 818, 819-20 (N.Y. Sup. Ct. 1971), aff'd, 331 N.Y.S.2d 340, 38 A.D.2d 1008 (1972).
There is no difficulty in applying New Jersey law to the loss of the 16 drums. We are satisfied that on this record, Global is a warehouseman, and its failure to account for the goods is a conversion under New Jersey law; by New Jersey law in such cases no limitation of liability is effective. Although New Jersey's version of UCC § 7-204, N.J. Stat. Ann. § 12A:7-204(2), allows limitations of liability for warehousemen generally, it declares that "no such limitation is effective with respect to warehouseman's liability for conversion to his own use."
N.J. Stat. Ann. 12A:7-102(1)(h) defines a warehouseman as "a person engaged in the business of storing goods for hire." We have no difficulty in concluding that Global's actions fall within that definition.
First, the drums were delivered several days before they were scheduled to be loaded aboard Dart ships, and were stored by Global. The Container Terminal Services Agreement, executed by Global and Dart, states that "Global is willing to provide . . . for the rendition of stevedoring and terminal services for [Dart's] containers" (emphasis added). Global further agrees to make available to Dart, in addition to berths and staging areas for containers, "such use as may be required of the facilities of Global's adjacent consolidation and distribution shed." In response to Colgate's Interrogatory Number 14, which asks to "state where the goods were located or stored . . .", Global answered "the goods were stored in defendant Global's warehouse."
Nor is there any doubt that Global was compensated for these various services. The Container Services Agreement contains compensation clauses stating that Dart will pay Global on a vessel call basis, as well as a flat fee of $333,333.00 per year, payable in monthly installments.
Thus, we cannot agree with Global's contention that it was only a stevedore since, by its own admission, the goods were lost while stored in its warehouse. Global's Claims Manager himself described the functions of a marine terminal and stevedore in different terms.*fn6 When Colgate contended in its statement under local rule 3(g) that there is no genuine issue of fact as to the issue that "2. Defendant Global Terminal & Container Services, Inc. is a New Jersey corporation . . . doing business as a ...