United States District Court, Southern District of New York
September 13, 1990
ST. PAUL FIRE & MARINE INSURANCE COMPANY, PLAINTIFF,
SEA-LAND SERVICE, INC., DEFENDANT.
The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
OPINION AND ORDER
Defendant Sea-Land Service, Inc. ("Sea-Land") moves for
summary judgment pursuant to Rule 56 of the Federal Rules of
Civil Procedure or, in the alternative, for a $500 per
container limitation on its liability in this maritime loss
action.*fn1 Defendant's motion for summary judgment is based
on the fact, agreed upon at oral argument, that the loss
occurred after the container was discharged from the vessel but
during the period it was in the carrier's control before being
placed in the Customs House for receipt by the consignee.
By opinion and order dated April 24, 1990, 735 F. Supp. 129,
this Court decided a motion for partial summary judgment
against defendant. In that motion, defendant sought to invoke
a clause of its bill of lading for carriage of goods from Port
Everglades, Florida to Rio Haina, Dominican Republic, which
limited defendant's liability to $500 for a single container
said to contain 150 packages freight all kinds. The Court held
that the clause of limitation was inconsistent with the $500
per package limitation which applied ex proprio vigore under
the United States Carriage of Goods by Sea Act ("COGSA"), 46
U.S.C. App. § 1300 et seq., and that defendant was not relieved
"of liability it would otherwise have under COGSA," i.e., the
$500 per package or per customary freight unit limitation as
stated in the statute.
Defendant in this motion relies on the fact that "the loss
occurred after discharge from the vessel while the container
was stored for a week in its terminal at Rio Haina before it
was moved to the Customs Warehouse for unstuffing by the
consignee." Documentary evidence establishes that the seal on
the container was intact when the container was discharged from
the vessel at Rio Haina. The evidence also is undisputed that
upon delivery of the container at the Customs House, the seal
was missing and had been replaced by a thick padlock which had
to be broken open with a hammer.
Defendant argues that COGSA specifically states that the term
"carriage of goods covers the period from the time the goods
are loaded on to the time they are discharged from the ship,"
46 U.S.C. App. § 1301(e) and that, since the missing cargo must
have been stolen while the goods were in the defendant's
custody in the yard where containers are stored prior to being
taken to the Customs warehouse for unstuffing, the bill of
lading clause of limitation of liability to $500 per container
rather than the COGSA $500 per package limitation governs.
Defendant's position is that COGSA does not apply ex proprio
vigore once the goods have been discharged. It cites Pannell v.
United States Lines Co., 263 F.2d 497 (2d Cir. 1959),
Smythgreyhound v. M/V Eurygenes,
666 F.2d 746 (2d Cir. 1981), and Institute of London
Underwriters v. Sea-Land Service, Inc., 881 F.2d 761 (9th Cir.
The plaintiff correctly distinguishes Pannell on the grounds
it dealt with on-deck cargo and, therefore, COGSA did not apply
ex proprio vigore, 46 U.S.C. App. § 1301(c). It distinguishes
Smythgreyhound on the grounds that there, too, COGSA, did not
apply ex proprio vigore since the shipment was not to or from
the United States. Under these cases, the terms of COGSA,
although incorporated into the bill of lading, had no greater
effect than other bill of lading provisions.
The Court declines to apply Institute of London Underwriters,
a Ninth Circuit case in which COGSA did not apply ex proprio
vigore. Furthermore, London Underwriters is not consistent with
precedent in this Circuit and the bill of lading at issue did
not contain the Clause Paramount found here.
In this case, the typed description on the face of the bill
of lading specified one 40 ft. container, No. SEAU-465911-3,
Seal No. OOOO613, said to contain 150 packages freight all
kinds. The terms of the bill of lading printed on its reverse
side contained two provisions leading to this dispute, clauses
1 and 17.
Provision 1, entitled Clause Paramount, reads as follows:
This bill of lading shall have effect subject to
all the provisions of the Carriage of Goods by Sea
Act of the United States of America, approved
April 16, 1936, as if set forth herein. The
defenses and limitations of said Act shall apply
to goods whether carried on or under the deck, to
carriage of goods between U.S. ports, or between
non-U.S. ports, before the goods are loaded on and
after they are discharged from the vessel, and
throughout the entire time the goods are in the
actual custody of Carrier, whether acting as
carrier, bailee or stevedore.
If this bill of lading is issued in or the goods
are delivered to a locality where there is in
force a compulsorily applicable Carriage of Goods
by Sea Act ordinance or statute similar to the
International Convention for the Unification of
Certain Rules relating to Bills of Lading dated at
Brussels, August 25, 1924, then it is subject to
such Act, ordinance or statute before the goods
are loaded on and after they are discharged from
the vessel and throughout the entire time the
goods are in the actual custody of Carrier,
whether acting as carrier, bailee or stevedore.
Carrier shall be entitled to the full benefit of
all rights and immunity under and all limitations
of or exemptions from liability contained in any
law of the United States or any other place whose
law shall be compulsorily applicable. If any term
of this bill of lading be repugnant to the
Carriage of Goods by Sea Act of the United States
or any other law compulsorily applicable such term
only shall be void to that extent but no further.
This bill of lading shall be construed and the
rights of the parties hereunder determined
according to the laws of the United States.
Provision 17, entitled Valuation, reads as follows:
In the event of loss, damage or delay to or in
connection with goods exceeding in actual value
the equivalent of $500 lawful money of the United
States per package, or in case of goods not
shipped in packages, per shipping unit, the value
of the goods shall be deemed to be $500 per
package or unit, unless the nature and higher
value of goods have been declared by the shipper
herein and extra charged paid as provided in
Carrier's tariff. However, Carrier's liability
shall not exceed the invoice value of the goods.
The word "package" shall include a container used
to ship household goods or Freight All Kinds
shipped under lump sum tariff, a liquid tank or dry
bulk container, van or trailer, and cargo shipped
on a skid, cradle, pallet or unitized load, group
or assemblage. When the U.S. Carriage of Goods by
Sea Act does not apply of its own force to goods
not shipped in packages, the $500 limitation shall
apply to each shipping or customary freight unit or
piece, provided always that any compulsorily
limitation shall apply in place of the $500
limitation. (emphasis added).
The provisions of the Clause Paramount make it clear that
COGSA was intended to apply to the shipment and that this
provision is a controlling provision. The Clause Paramount also
makes clear that the COGSA limitations are to apply as long as
the goods are in the carrier's actual custody, whether acting
as carrier, bailee or stevedore. In Leathers Best, Inc. v. S.S.
Mormaclynx, Inc., 451 F.2d 800
(2d Cir. 1971), the Court found
that where COGSA applied ex proprio vigore, the COGSA
limitations still applied to goods in the carrier's possession
after discharge, even though there was no bill of lading
provision to that effect as there is here. See also Binladen
BSB Landscaping v. M.V. Nedlloyd Rotterdam, 759 F.2d 1006
Cir. 1985); David Crystal, Inc. v. Cunard Steam-Ship Co.,
339 F.2d 295
(2d Cir. 1964).
For the above reasons, defendant's motion is denied. The
Court notes with some trepidation, however, that it is its view
that this Circuit's determination that the $500 per package or
per customary freight unit limitation should not apply to a
container said to contain packages should be re-examined. Cases
seeking to apply the $500 COGSA limitation to containers
pursuant to bills of lading are an all too common experience in
this District, particularly because carriers have drafted bills
of lading with all sorts of terms relating to its applicability
to container shipments and because of the variety of language
and circumstances applying to the issuance of bills of lading.
Despite this Circuit's expressed hopes that the diplomatic
discussion commenced twenty years ago would result in a
resolution of the issue, they have been fruitless. Furthermore,
for reasons of reductions of cost and prevention of theft or
damage, containers have become a "customary freight unit," if
not the customary freight unit.
From this Court's viewpoint, the carrier should not rely on
language seeking to apply the $500 per package COGSA limitation
to containers if the carrier packs and seals the container. On
the other hand, the $500 per container limitation should apply
if the shipper, like the NVOCC (non vessel owning cargo
carrier) here, packs the container. A distinction on this basis
would eliminate fraudulent claims, would reduce litigation
costs, would allow shippers of goods to select carriers
offering the lowest rates of carriage and encourage shippers of
high value goods to pack carefully and insure accordingly.
These litigations are, in truth, between the insurers of the
shipper and the insurers of the carriers. Rosenbruch v.
American Export Isbrandtsen Lines, Inc., 357 F. Supp. 982
(S.D.N.Y. 1973). Instead the district courts are attempting on
motion practice or stipulated facts to make innumerable
distinctions of fact based on language of the bills of lading
in an attempt to achieve what may, or may not be, a just
IT IS SO ORDERED.