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SUMITOMO CORP. OF AMERICA v. M/V "SIE KIM'

August 27, 1985

SUMITOMO CORPORATION OF AMERICA, Plaintiff,
v.
M/V "SIE KIM', her engines, boilers, etc., and against, COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO and SABAH PACIFIC SHIPPING CO., S.A., Defendants. COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO, Defendant/Third-Party Plaintiff, v. ATLANTIC & GULF STEVEDORES, INC., Third-Party Defendant



The opinion of the court was delivered by: GAGLIARDI

HONORABLE LEE P. GAGLIARDI, SENIOR UNITED STATES DISTRICT JUDGE

Plaintiff Sumitomo Corporation of America ("Sumitomo America") commenced this action in admiralty against Defendant Companhia de Navegacao Lloyd Brasileiro ("Lloyd") to recover for damages to a cargo of steel pipe carried from Brazil to Texas by Lloyd on the M/V Sie Kim. Lloyd has entered an indemnification claim against Atlantic & Gulf Stevedores, Inc., the discharging stevedores at Houston, Texas. The parties have submitted numerous deposition transcripts and exhibits to the court, along with stipulations and legal memoranda. *fn1" By agreement of the parties, the case was tried on the basis of these submissions. The following constitutes the court's findings of fact and conclusions of law, pursuant to Rule 52(a), Fed. R. Civ. P.

Background

 In 1981, Sumitomo Corporation do Brasil ("Sumitomo Brazil") purchased a quantity of 13 3/8" diameter steel casing pipe from Confab Industrial S.A. ("Confab"), a manufacturer of steel pipe. The purchased pipe was of two types. Some weighed 68 pounds per linear foot ("the 68# pipe"). Some weighed 54.5 pounds per linear foot ("the 54# pipe"). All pipe was designated "R-3," meaning that the pipes could be of random lengths between 37 and 43 feet.

 The pipe purchased by Sumitomo Brazil was sold to Sumitomo America "C&F Houston", for delivery at Houston, Texas. Sumitomo Brazil and Sumitomo America are distinct but related corporate entities. Neither owns stock in the other; the corporations have no directors in common. Both, however, are subsidiaries of Sumitomo Corporation of Japan. Aizawa Dep. 9, 116; Fukukita Dep. 10.

 Sumitomo America in turn contracted to sell the pipe. Through transactions which involved the Chicago and New York offices of Sumitomo America, the 54# pipe was committed for sale to the McJunkin Corporation, an unrelated corporation. McJunkin then committed the 54# pipe for sale to Gulf Fabricating & Supply, Inc. ("Gulf"). In transactions which involved the Chicago and Los Angeles offices, a large quantity of of 68# pipe was sold to Gulf, through W.W. Young Interests, Inc. ("Young"), its parent company. *fn2" Additional Confab pipe was sold to businesses unrelated to Gulf. *fn3"

 All of the pipe purchased from Confab was shipped to Houston, Texas, aboard the M/V Sie Kim. On the relevant bills of lading, Sumitomo Brazil is designated the shipper. Ex. A-1; B-1. Lloyd, the time charterer of the vessel, is designated the ocean carrier. Four on-board bills of lading ("B/L") cover the shipment of Confab pipe. Two of them, nos. 601 and 604, are of little concern here. *fn4" The others, 602 and 603, cover the cargo ultimately destined for Gulf. All of them specify that the shipment is to be "FILO", i.e., free-in, liner-out.

 The pipe transported under Bœ 601-604 was manufactured by Confab in Pindamonhangaba, Brazil, in early August or September, 1981. At that time, the pipes, including their threads, were inspected, and protective rings ("thread protectors") were placed on each end of each pipe by hand. Ferreira Dep. 21, 23. The thread protectors were then hand-tightened, possibly using a wrench, and the pipes were put into open-air storage on wooden fans until late October. Ferreira Dep. 48-49. The storage conditions at Pindamonhangaba were intended to comply with the recommendations of the American Petroleum Institute (the "API") for such pipe. Ferreira Dep. 48. There is no specific evidence concerning the handling of the pipes during their transfer to the storage area or during their transfer from the storage area to the embarkation platform from which they were loaded onto trucks for transport.

 On October 20, 1981, the pipe was placed on trucks for transport to Rio de Janeiro and loading on the M/V Sie Kim. Ferreira Dep. 49. There is no record of any significant damage to the pipe during loading operations at the Confab mill. Ferreira Dep. 24-25. Such records would ordinarily appear if there had been an "accident" during loading. The trucker has no records concerning the shipment's transport to Rio de Janeiro. Della Volpe Dep. 5-7. Upon reaching Rio de Janeiro, the pipe was loaded directly from the trucks onto the M/V Sie Kim. Dos Santos Dep. 11; cf. Della Volpe Dep. 11 (concerning usual practice). An agent of Confab Transport who visually inspected some of the pipe on the trucks before loading recalls no apparent significant damage, but made no records concerning the cargo. Dos Santos Dep. 13, 19, 28-29. A surveyor acting for the shipowner saw some damaged pipes on the trucks and indicated to the ship's Master that the bills of lading should be claused. Valadao Dep. 32, 33. The agent considered the damage to be minor. Ex. 1 at 7; Valadao Dep. 40. Some of the damaged pipes observed may have belonged to Bœ 602 and 603. They also may have belonged to other shipments.

 It was understood between Confab, Sumitomo Brazil, and Lloyd that Confab and Sumitomo Brazil would supervise and pay for the loading, employ the necessary stevedores, and see to it that any necessary dunnage was provided. In Rio de Janeiro, the Confab pipe was loaded and stowed by unionized stevedores employed on behalf of Sumitomo Brazil, but paid by Confab. Miranda Dep. 36, 37. The crane operators were supplied by the Port Authority, as apparently is required, and paid by Confab. Miranda Dep. 25-26, 37. While the stevedores may have acted independently in many respects, they did receive supervision from agents of Confab and Sumitomo Brazil. Dos Santos Dep. 4, 6, 10, 12-14, 26, 29; Miranda Dep. 21-26, 41, 43, 44. Lloyd exerted no control over the manner and method of loading the Confab pipe. The Master of the M/V Sie Kim played a minor role. He determined that there was insufficient space to load all the Confab cargo and issued a statement to that effect. Ex. A-64. He also, through a vague statement whose meaning is unclear, apparently indicated his approval of the final stow. Ex. A-65. *fn5"

 At the time of loading, some difficulty was experienced. In hatches used to stow the Confab cargo, the lower sections were occupied by bundles of smaller steel pipe loaded at a different port (the port of Santos). Miranda Dep. 13-21. The Santos cargo occupied more space than had been anticipated. As a result, the Confab shipment was shortloaded. In addition, in some cases the Santos cargo did not provide a uniform surface upon which to load the Confab cargo (Valadao Dep. 11), so it was necessary to put timbers over the cargo in various locations to level it out. Valadao Dep. 12. Once this was done, it became possible to stow the Confab pipe in a level or very nearly level manner. Ex. 1; Valadao Dep. 15, 17. The Santos cargo may have settled somewhat when the Confab cargo was loaded. Dos Santos Dep. 14, but see Valadao Dep. 16-17. There is no persuasive evidence that this in any way damaged the Confab cargo, however, or that it contributed to any later settling or shifting in the Confab cargo. Compare Ex. 1; Ex. C-8.

 Another problem arose from the varying ("random") lengths of the Confab pipes. By and large, the pipe was stowed in two courses, one fore and one aft in the hatch, each with the pipe parallel to the sides of the vessel. The front ends of the pipes in the "fore" course were placed so that they touched the bulkhead. Similarly, the rear ends of the "aft" course of pipes were placed so that they touched the bulkhead. Had the pipes been of uniform length, this would have left a fairly uniform open space between the two courses, one in which dunnage could have been placed. As it was, the space left open between the two courses of pipe was irregular, with some pipe ends touching, and others overlapping. Ex. 1; Wall Dep. 35, 47, 82. There is no record of any attempt to match longer pipes in the fore course with shorter pipes in the aft course and vice versa. *fn6" Certain pipes banged against the fittings of the ship and the bulkheads during loading. Ex. 1; Valadao Dep. 21, 22, 34, 48. The loading survey report indicates that a large number of pipes received "edge dent" damage during loading at Rio. The listing is such, however, that it is difficult to determine whether damage notations apply to the specific bills of lading at issue. Ex. 1.

 As finally stowed, the Confab pipes were level. Ex. I; Valadao Dep. 8-12, 13, 17. Where two courses of pipes were used, the stow, although level, was irregular in the manner described above. Ex. 1; Butterworth Dep. 17-19. Although some timbers separated Confab cargo from the other cargo, no dunnage separated the individual Confab pipes from one another, or the pipes covered by one bill of lading from pipes covered by another Sumitomo Brazil bill of lading. Hopkins Dep. 32. The only identification of pipes according to the bill of lading number was by colored straps or tape placed on each pipe. Hopkins Dep. 32; ex. 1. The top layer of Confab pipe in each hatch was secured by wires running crosswise across the cargo. Fewer wires were used in hold # 1.

 After loading, the Master of the M/V Sie Kim signed the on-board bills of lading as "clean" bills of lading. Ex. A-1, A-55, B-1, B-63; see also ex. A-65. Bœ 602 and 603, as signed, contained no exceptions with respect to the cargo.

 The voyage from Rio de Janeiro to Houston was uneventful. Ex. 3 (Log Book). There is no evidence that the vessel encountered any unexpected or heavy weather. A record of heavy weather would ordinarily appear in the log had rough weather occurred. Wall Dep. 86-88.

 Upon arrival at Houston, the cargo assigned to Bœ 602 and 603 was discharged directly onto the trucks which transported the pipe to Gulf's facility at Breen Road, about 35 miles away. Prior to discharge, the position of the cargo was not significantly different from that at the completion of loading in Rio de Janeiro. Butterworth Dep. 16, 20-24, 61-68; Wall Dep. 42-43, 86-88. The cargo had remained level. See, e.g., ex. C-8. Where the pipe was stowed in two courses, one end of each course remained close to the bulkheads. Rogers Dep. 13; Butterworth Dep. 19; Blackburn Dep. 22. The irregular gap between the two courses persisted. Ex. C-8.

 Some difficulties were experienced at discharge. Discharge was slow, in part because the pipes were not segregated by dunnage according to the bills of lading. Hopkins Dep. 32, 131, 133, 153-54; Blackburn Dep. 37-43; ex. C-8. In this sense, the pipes were "mixed up," since stevedores ordinarily discharge by bills of lading in order to ensure delivery of the proper goods to each customer. Hopkins Dep. 32, 131. Discharge was also made more difficult by the use of the two-course stowing technique with the loose, random-length pipe, where it not only caused an irregular gap or overlap between the fore and aft courses (Rogers Dep. 55; Blackburn Dep. 42), but also necessitated use of break-out wires and painstaking alternation between the fore and aft courses. Rogers Dep. 21. The result was a slow discharge, with "lifts [which] were frequently small." Ex. C-8. The problem was particularly severe in hold #1, which was smaller than the others. Butterworth Dep. 76. Checkers working with the stevedores in the hatches at the time of discharge observed the stow and reported visible damage to a small number of the Confab pipes. Blackburn Dep. Part II, 16-17. 'Exceptions were noted for twelve of the pipes under Bœ 602 and 603. Blackburn Dep. 40; exs. C-16, C-17. Ten of the twelve were expressly labeled "found in stow." Although there is evidence that pipes occasionally will bang against a ship during discharge, there is no convincing proof that such banging took place during this discharge. Blackburn Dep. 33-40; Rogers Dep. 23-28.

 There is no record concerning the truck transport from Houston to Gulf, about 30 miles from the port. Plaintiff and defendant, however, have stipulated that no damage occurred at that time. There is testimony that there was no mishap during unloading at Gulf. Capers Dep. 10-13. However, contrary to custom, there was no inspection for visible damage, though some was seen. Capers Dep. 18-20; Hopkins Dep. 74.

 The pipe delivered to Gulf from the M/V Sie Kim remained at the Gulf facilities at Breen Road for several months. During this time, the pipe was preliminarily inspected by Toplis and Harding, a general marine surveyor, and some obvious damage was noted. Nagy Dep. 16. Considerably later, after an unexplained delay, the cargo received a detailed inspection of the ends, especially the threads, by Coulter-Mustang, a thread inspection service with which ToPlis and Harding subcontracted. Immediately prior to the inspection by Coulter-Mustang, the pipes were handled by employees of two other companies, Down Hole Tubular Inspection, Inc., and Steele Pipe Service. They were employed to remove the protectors from the ends of the pipe and clean the threads by removing the lubricant, so that the threads and any damage would be exposed for testing.

 Until the inspection by Coulter-Mustang was completed, all the pipe was stored at Gulf's Breen Road facility. Much of the pipe which passed inspection was then delivered to Gulf's customers. No witness recalls any mishap or damage to the pipe during storage or during preparation for or conduct of the inspections. Hopkins Dep. 162-165; Capers Dep. 9-11. The pipe was not moved except for inspection purposes. Capers Dep. 9. It is not clear, however, that a record would ordinarily have been made had there been a mishap which led workers to believe they had damaged the material. Hopkins Dep. 165-66.

 At the time of the thread inspection, Down Hole Tubular Inspection, Inc., and Steele Pipe Service made reasonable efforts to remove all the thread protectors, using large wrenches. No machine or power tool was used to remove the protectors. Special techniques to remove protectors are not commonly used in the trade at the time of inspection, since it is very probable that the threads are damaged if a protector can not be removed without the use of a torch, a power tool, or other machine. *fn7" Ferreira Dep. 27; Seo Dep. 30-31; Sirico Dep. 11-12, 43-46.

 Despite their efforts, Down Hole Tubular Inspection, Inc., and Steele Pipe Service were unable to remove protectors on a number of the pipes delivered under Bœ 602 and 603. Most of the stuck protectors were on the "pin" or "male" ends of the pipe, where the protector and threads are on the outside of the pipe and most susceptible to damage. Sirico Dep. 49. These pipes were rejected, as is customary in the industry. Sirico Dep. 11, 32. A number of the pipes on which the protectors were removed were also rejected. The major reasons cited for ...


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