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ORION INS. CO., PLC v. THE M/V "HUMACAO"

May 9, 1994

ORION INSURANCE COMPANY, PLC, AS LEAD INSURER, ON ITS OWN BEHALF AND ON BEHALF OF THE OTHER INSURERS SUBSCRIBING TO A CARGO INSURANCE POLICY NO. 90C0944, Plaintiff,
v.
THE M/V "HUMACAO", HER ENGINES, BOILERS, ETC., IN REM, NAVIERAS DE PUERTO RICO, AND PUERTO RICO MARINE MANAGEMENT, INC., Defendants.


Sprizzo


The opinion of the court was delivered by: JOHN E. SPRIZZO

SPRIZZO, D.J.,

 Plaintiff brings this action on a bill of lading against the M/V "Humacao," Navieras De Puerto Rico and Puerto Rico Marine Management, Inc. (collectively the "defendant") to recover for damages allegedly sustained while its goods were being transported aboard defendant's vessel. Plaintiff moves, pursuant to Rule 12(f) of the Federal Rules of Civil Procedure, to strike the third and fifth affirmative defenses from defendant's answer. Without admitting liability, defendant cross-moves for partial summary judgment asserting that its liability, if any, is limited to $ 500 per package. For the reasons that follow, the Court holds that defendant's third affirmative defense shall be stricken, that defendant's fifth affirmative defense shall not be stricken, and that defendant's cross-motion for partial summary judgment shall be granted.

 BACKGROUND

 On or about September 27, 1990, Chevron Chemical Co. ("Chevron") delivered shipping container PRMU 673481, which it had packed and sealed with 42,298 pounds of bulk resin, to non-party Puerto Rico Express Freight, Inc. ("PREF") as freight forwarder and non-vessel-owner-common-carrier ("NVOCC"). *fn1" Defendant's Statement of Material Facts Pursuant to Southern District Rule 3(g) ("Def. 3(g) St.") P 1-2. PREF issued bill of lading NYC 2621-14460 (the "PREF Bill") to Chevron, for the entire carriage of the container from Ridgefield, New Jersey to Las Piedras, Puerto Rico. Plaintiff's Motion to Strike ("Pltf. Mtn.") Exh. B. Thereafter, the container was transported inland from Ridgefield, New Jersey to Port Elizabeth, New Jersey by truckers hired by PREF. Def. 3(g) St. P 2 n.2. At Port Elizabeth, PREF arranged for the carriage of the container to San Juan, Puerto Rico aboard the vessel M/V Humacao, owned and operated by Puerto Rico Maritime Shipping Authority ("PRMSA"). *fn2" The managing agent of PRMSA, Puerto Rico Marine Management, Inc. ("PRMM"), issued bill of lading 360-1408786 (the "PRMM Bill") to PREF, for the carriage of the container from Port Elizabeth to San Juan. Pltf. Mtn. Exh. C.

 At Port Elizabeth, the container was stowed aboard the M/V Humacao in cargo hold number four and on September 29, 1990, the vessel departed for Baltimore, Maryland in order to load further cargo. Pltf. Mtn. Exh. D. In Baltimore, the M/V Humacao completed cargo and ballasting operations, and then departed for Puerto Rico on September 30, 1990. Id. Shortly thereafter, the vessel assumed a pronounced and abnormal list to port, and shifting operations proved ineffectual. Id. Upon inspection of the belowdecks, the crew discovered that several cargo holds were partially flooded with sea water. Id. When it became clear that the vessel's ballast system was incapable of rectifying the list condition, the M/V Humacao was diverted to Norfolk, Virginia, arriving there on October 1, 1990. Id. Upon inspection at Norfolk, it was discovered that cargo hold number four had been submerged in four feet of seawater, which allegedly caused damages in the amount of $ 26,159.72. Id.

 On June 18, 1992, plaintiff, the subrogated leading insurer of the shipment, brought this maritime action on its own behalf and on behalf of all other subrogated subscribing insurers on cargo insurance policy number 90C0944. *fn3" In its answer, filed July 7, 1992, defendant asserted eight affirmative defenses. In its third affirmative defense, defendant asserts that, because there is no privity of contract between the parties, they cannot be held liable on the PRMM Bill. In its fifth affirmative defense, defendant asserts that its liability, if any, is limited to $ 500 for the one large container in which the bulk resin was shipped. Plaintiff moves to strike these affirmative defenses, and defendant cross-moves for partial summary judgment on the issue of damages.

 DISCUSSION

 On a motion for summary judgment, the moving party has the burden of demonstrating "that there is no genuine issue as to any material fact and that [they are] entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); See Adickes v. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). The Court may not resolve disputed issues of fact, see Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987); rather, it must determine whether there are any factual issues to be tried, while resolving all ambiguities in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Where, as here, the relevant facts are undisputed, summary judgment is especially appropriate. See, e.g., In the Matter of the Maritima Aragua, 1992 WL 42256, *2 (S.D.N.Y. 1992).

 Failing to recognize the role of NVOCCs in the shipping industry, defendant argues that, because it contracted with PREF rather than Chevron, there is no privity of contract on which to premise liability under these circumstances. *fn4" Within the shipping industry, NVOCCs operate as "middlemen" by retrieving relatively small shipments from different shippers, and consolidating the resulting load for shipment by a carrier or carriers. See Insurance Co. of North America v. S/S Am. Argosy, 732 F.2d 299, 300-01 (2d Cir. 1984); Prusman Ltd. v. M/V Nathanel, 670 F. Supp. 1141, 1143 (S.D.N.Y. 1987); see also New York Foreign Freight Forwarders and Brokers Ass'n v. Federal Maritime Comm'n, 337 F.2d 289, 292 (2d Cir. 1964) (discussing analogous concept of "freight forwarder" under Interstate Commerce Act), cert. denied, 380 U.S. 910, 13 L. Ed. 2d 797, 85 S. Ct. 893 (1965). In short, the NVOCC is a common carrier with respect to the shippers who employ its services, but with respect to the vessel and her owner, the NVOCC is deemed an agent of the shipper. See Insurance Co. of North America v. M/V Ocean Lynx, 901 F.2d 934, 937 (11th Cir. 1990), cert. denied, 498 U.S. 1025, 112 L. Ed. 2d 667, 111 S. Ct. 675 (1991); S/S Am. Argosy, 732 F.2d at 301; Prusman, 670 F. Supp. at 1143.

 Therefore, under the law of agency, defendant is bound by the PRMM Bill it executed with PREF, an agent acting on behalf of plaintiff. *fn5" See, e.g., Stolt Tank, 962 F.2d 276 (permitting recovery by shipper on bill issued by ocean carrier to common carrier). Thus, the Court must now address the extent of defendant's liability, if any, under the PRMM Bill.

 By its own terms, the U.S. Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. App. § 1300 et seq., allocates the risk of loss for cargo damaged during international transportation under contracts evidenced by bill of ladings. 46 U.S.C. App. § 1300; See Nichimen Co. v. M.V. Farland, 462 F.2d 319, 327 (2d Cir. 1972). However, COGSA does not by its terms apply to the carriage of cargo between a U.S. port, i.e., Port Elizabeth, New Jersey, and a port located in a possession of the United States, i.e., San Juan, Puerto Rico. Nonetheless, where the provisions of COGSA are incorporated into a bill of lading, COGSA applies as fully as if the shipment involved foreign trade. 46 U.S.C. App. § 1312. In the PRMM Bill, Clause 1 provides that the provisions of COGSA are fully incorporated and, in addition, Clause 17 is a $ 500 per package limitation of liability provision substantially similar to section 1304(5) of COGSA. Defendant's Cross-Motion for Summary Judgment ("Def. Mtn.") Exh. 1. Thus, COGSA governs the legal relationship between the parties to this action.

 When enacted in 1936, the central purpose underlying COGSA was to afford protection to shippers against existing inequalities in bargaining power. See Caterpillar Overseas, S.A. v. S.S. Expeditor, 318 F.2d 720, 722 (2d Cir.), cert. denied, 375 U.S. 942 (1963). To that end, section 1304(5) provides that

 
neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $ 500 per package . . . or in case of goods not shipped in packages, per customary freight unit . . . unless the nature and value of such goods have ...

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