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PETER FABRICS v. S.S.B "HERMES" (06/14/85)

June 14, 1985


Appeal and cross-appeal from a judgment of the District Court for the Southern District of New York, J. Edward Lumbard, Senior Circuit Judge, sitting by designation. Defendant Italian Line appeals from the judgment dismissing its third-party complaint and holding it liable to indemnify third-party defendant Massachusetts Port Authority for attorneys' fees and expenses. Third-party defendant Massachusetts Port Authority cross-appeals from the court's reduction of the attorneys' fees sought by its counsel. Modified and affirmed on the appeal; affirmed on the cross-appeal.

Author: Friendly

BEFORE: FEINBERG, Chief Judge, and FRIENDLY and NEWMAN, Circuit Judges.

FRIENDLY, Circuit Judge:

This suit in admiralty was brought in the District Court for the Southern District of New York by Peter Fabrics, Inc. against the Italia di Navigazione Societa per Azioni (Italian Line), as charterer and operator of the S.S. Hermes; Hermes Shipping K.K. Tokyo, owner of the S.S. Hermes; and the S.S. Hermes, to recover for the loss of 97 rolls of fabric being transported by Italian Line on the Hermes from Leghorn, Italy, to Boston, Massachusetts. No appearance was made on behalf of defendants Hermes Shipping K.K. Tokyo or the Hermes, and the action apparently proceeded as if they had never been served with the complaint. Italian Line answered Peter Fabrics' complaint and filed a third-party complaint against Massachusetts Port Authority (Massport), which had agreed to provide terminal and stevedoring services for Italian Line's vessels at the Moran Container Facility in Boston; the third-party complaint alleged that any loss occurred while the shipment was in the care of Massport and was due to Massport's "negligence, breach of contract and/or breach of warranty express or implied...." In a first opinion, reported in 1984 AMC 1685 (1984), Senior Circuit Judge Lumbard, sitting by designation, (1) gave judgment to Peter Fabrics on its complaint after finding that Italian Line had failed to rebut Peter Fabrics' prima facie case of pilferage of the 97 rolls from a container which contained 617 rolls of fabric when it was padlocked, sealed and accepted for transportation in Italy, but only 520 rolls when it was found unlocked and with a broken seal on delivery to the consignee's truckman in Boston, cf. Spencer Kellogg v. S.S. Mormacsea, 703 F.2d 44, 46 (2 Cir. 1983); (2) dismissed Italian Line's third-party complaint against Massport because Italian Line had not established that it delivered a container with 617 rolls of fabric to Boston, thereby putting them within Massport's control; and (3) granted Massport leave to file a counterclaim against Italian Line for indemnification, under a clause in its stevedoring agreement with Italian Line, of the legal expenses incurred by Massport in defending itself. In a supplemental opinion, Judge Lumbard denied Italian Line's motion for a new trial and agreed to hold a hearing on Massport's counterclaim. In a second supplemental opinion, issued after three days of hearings on the counterclaim, he allowed Massport $15,000 in attorneys' fees plus $2,856.56 in expenses for its defense of Peter Fabrics' complaint and Italian Line's third-party complaint, and $3,500 in attorneys' fees plus $727 in expenses incurred proving its claim for attorneys' fees. This award was considerably less than the $28,958 in attorneys' fees and $4,845 in expenses Massport had requested for defending the primary claims, and the $6,230 in attorneys' fees and $1,288 in expenses it had sought for proving its claim for attorneys' fees.

Italian Line has not appealed from the judgment against it in favor of Peter Fabrics. It has appealed the dismissal of its third-party complaint against Massport, the grant of leave to Massport to file a counterclaim, and, assuming that such leave was properly given, the award of attorneys' fees and expenses to Massport. Massport has cross-appealed the court's reduction of its request for attorneys' fees.


The district court reasonably found the facts to be as follows:

The fabrics here at issue, purchased from three Italian mills, were trucked to the warehouse of Albini & Pitigliani, an international freight forwarder, in Prato, Italy, which loaded them into an empty Italian Line container, # ITAU 402767/7, for transportation to Leghorn, Italy. On receipt and twice during loading, counts of the goods received were made at the warehouse and showed 617 rolls. After the fabrics were loaded, the only empty space in the container was an area which could accommodate one or two rolls at the top of each tier. A padlock # 6510, bearing the logo "ALPI," was affixed to the container, which was then trucked to Leghorn. One of the two keys to this padlock was given to the driver, who passed it on to the forwarder's representative at Leghorn, who, in turn, returned it to the forwarder, which transmitted it to its representative in Boston. At Leghorn,, the Italian fiscal police opened and inspected the container but did not count the rolls. The container was relocked and an Italian Line seal, # 21626, was affixed to the door of the container. The container was weighed by an official from the Italian Chamber of Commerce, who recorded a net weight of 15,015 kilos on the bill of lading and dock receipt supplied by Italian Line. This weight corresponded exactly with the sum of the weights listed on the separate packing lists prepared by the three mills from whom the fabrics were purchased. Italian Line then accepted delivery of the container from the freight forwarder's representative and issued a bill of lading calling for shipment aboard the Hermes of one container, # ITAU 402767/7, containing 617 rolls of fabric weighing 15,015 kilos, padlocked with lock # ALPI 6510 and sealed with Italian seal # 21626. The container was stowed on the deck of the Hermes.

The vessel proceeded from Leghorn via Naples and Barcelona to New York, Baltimore, Norfolk and then to Boston before proceeding to its final port of call in St. John's, New Brunswick. There was evidence that at least two other containers stowed on deck were breached at Naples. Sixteen containers unloaded in New York had broken or missing seals; a container unloaded at Baltimore had its seal and padlock missing.

Upon arrival at Boston the Hermes was docked at the Moran facility, which is owned by Massport. Massport's stevedoring at Moran was actually conducted by Bernard S. Costello, Inc. (Costello), which is not a party to this action. The contract between Italian Line and Massport required that the latter should

[c]heck and tally . . . container numbers and seals, provided, however, that [Italian Line] shall provide blank port labels and seals. In the event seals are missing or broken, [Massport] shall notify agent and re-seal, the additional cost of which shall be for [Italian Line's] account.

This check required by the contract was made by William Deering, a Costello employee. Deering's tally sheet for the Hermes showed one discharged container with a missing seal and the number of the Massport seal that resealed the container. The only notation opposite container # ITAU 402767/7 was the letters "LS/CR," indicating the presence of a "crease" or dent on the container's left side. At the trial, the security foreman from the Moran Terminal demonstrated how it is possible to cut a seal and then bend it back and reattach it so that the break would not be detected without a physical or close visual examination; he also testified that the checker did not ordinarily physically check the seal. On the other hand, while Massport was not required to report the presence or absence of padlocks, the testimony showed that if a padlock was present, the standard practice was for the checker to note this on the tally sheet. The trial judge permissibly inferred from the absence of any reference on the tally sheet that the container had been unloaded without a padlock.

From March 4, when it was unloaded from the Hermes, until March 12, 1981, container # ITAU 420767/7 [sic] was stored in a yard at the Moran facility. Only one gate leads into the yard. It is manned by an armed guard 24 hours-a-day and only commercial vehicles with proper documentation are allowed to enter. The yard, covering 30 acres, is surrounded by a 7-foot high fence topped with 2 feet of barbed wire. An armed force patrols the perimeter and an unarmed force the interior of the yard. Guards in a tower approximately 90 feet high oversee the entire yard. Containers are stored door to door, 16 inches apart, so that the doors cannot be opened. The container at issue was stored "three high," which meant that its base was 16 feet off the ground. No break-ins were reported during the period in question.

On March 12, a trucker engaged by Peter Fabrics arrived to pick up the container. When he went to check the container out of the yard, he noticed that it had no padlock, something which, while not unusual for most containers, was not the practice for Peter Fabric's shipments. He also noticed that the seal was broken and looped around the door of the container. The trucker immediately summoned a Moran clerk and a U.S. Customs Officer, who confirmed these observations. When the container was opened, the trucker noticed that a full tier-and-a-half of rolls were missing from the front of the container. The Customs Officer then resealed the container with a Customs seal.

After other events not necessary to recount, the container ended its journey in Gilbertsville, Massachusetts. In the presence of another Customs Officer, a representative of Peter Fabrics cut the still intact Customs seal and opened the container. When ...

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