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FRANCOSTEEL CORP. v. M.V. PAL MARINOS

April 27, 1995

FRANCOSTEEL CORPORATION, Plaintiff, against M.V. PAL MARINOS, her engines, boilers, etc., PAL MARINOS MARINE CO., EUROPE-OVERSEAS STEAMSHIP LINES, N.V. and CASU TRANSPORT LTD., Defendants.

Robert L. Carter, U.S.D.J.


The opinion of the court was delivered by: ROBERT L. CARTER

CARTER, District Judge

 Defendant Pal Marinos Marine Co. ("Pal Marinos") moves for an order pursuant to Rule 56, F.R. Civ. P., granting partial summary judgment limiting the liability of Pal Marinos to $ 500 per package pursuant to the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. App. §§ 1300-1315 (1988). Plaintiff Francosteel Corporation ("Francosteel") cross-moves for an order pursuant to Rule 12(f), F.R. Civ. P., and/or Rule 56(a), F.R. Civ. P., granting partial summary judgment striking Pal Marinos' second affirmative defense insofar as it alleges a $ 500 per package limitation of liability.

 I.

 This action was commenced by plaintiff Francosteel to recover for alleged damage to a shipment of steel coils carried aboard the vessel Pal Marinos, which is owned by defendant Pal Marinos Marine Co. The coils were loaded at Antwerp, Belgium and discharged at various points in the United States. The shipment was carried under several bills of lading, all of which were issued on identical forms by defendant Europe-Overseas Steamship Lines, N.V. ("Eurolines"). *fn1"

 COGSA applies of its own force to "all contracts for carriage of goods by sea to or from ports of the United States in foreign trade," 46 U.S.C. App. § 1312 (1988), and the parties agree that the bill of lading at issue here falls within that category. COGSA limits the liability of carriers of cargo falling under the purview of the act to no more than $ 500 in United States currency per package, but it allows carriers and shippers to set a higher maximum "by agreement." 46 U.S.C. App. § 1304(5) (1988). In the absence of an agreement to the contrary, therefore, the maximum liability to which defendant Pal Marinos can be exposed is $ 500 per package.

 COGSA is based on the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, known as the "Hague Rules." In 1977, a number of states signed the Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, known as the "Visby Amendments," which together with the Hague Rules are known as the "Hague Visby Rules." The Hague Visby Rules amended the Hague Rules by, among other things, raising the carrier liability limitation. The Hague Visby Rules were again amended in 1979 to raise the liability limitation. Parties to bills of lading subject to COGSA often raise the liability limitation above $ 500 by incorporating into their bills of lading the liability limitation provisions of the Hague Visby Rules and their amendments. See, e.g., Daval Steel Prods., a Div. of Francosteel Corp. v. M/V Acadia Forest, 683 F. Supp. 444, 447 (S.D.N.Y. 1988) (Mukasey, J.).

 II.

 Clause 9 of the bill of lading at issue here, the "Paramount Clause," states, "The contract evidenced by this Bill of Lading shall have effect subject to the Hague Rules or Hague Visby Rules as the case may be or any equivalent Rules or amendments thereof only. [sic] (a) if so incorporated by Statutory Instrument in the country in which claims hereunder are properly brought, or (b) to the extent whereby only the rights, liberties, limitations and defences available to the Carrier are incorporated." Clause 11, the "Limitation of Liability" clause, states, "Without prejudice to the foregoing neither the Carrier or the vessel shall in any event be liable for any loss or damage of whatsoever nature to or in connection with the goods in an amount exceeding US $ 500 per package . . . unless the higher value of such goods be inserted in this Bill of Lading . . . ."

 Plaintiff contends that clause 9 expressly incorporates the Hague Visby Rules and, in the alternative, that the bill of lading is ambiguous with respect to whether the Hague Visby Rules are incorporated. Defendant Pal Marinos contends that clause 9 expressly incorporates COGSA.

 The court rejects the contentions of both parties that clause 9 expressly incorporates either COGSA or the Hague Visby Rules and finds that ambiguity exists regarding which rules the bill of lading incorporates. Clause 9 states that the bill of lading "shall have effect subject to the Hague Rules or Hague Visby Rules as the case may be or any equivalent Rules or amendments thereof" (emphasis added), but it does not provide any criteria for determining which of those rules applies. Bills of lading often specify that they are subject to the rules adopted by the country in which the bill of lading was issued or from which the shipment departed, see, e.g., Francosteel v. M/V Deppe Europe, 1990 U.S. Dist. LEXIS 10457, 90 Civ. 1442, 1990 WL 121683, at *1 (S.D.N.Y. 1990) (Patterson, J.); Associated Metals & Minerals Corp. v. M/V Arktis Sky, 1991 U.S. Dist. LEXIS 4194, 90 Civ. 4562, 1991 WL 51087, at *3 (S.D.N.Y. 1991) (Martin, J.), but the instant bill of lading gives no such indication.

 Plaintiff asserts that the Hague Visby Rules must be applied because clause 9 lists them among the rules that may be incorporated. This interpretation is implausible because it ignores the "as the case may be" language. Defendant Pal Marinos asserts that clause 9 provides that the bill of lading shall have effect subject to whatever rules are in effect in the country in which the claims are brought. (Def. Mem. in Supp. of Mot. for Partial Summ. J. at 4.) This interpretation is suspect because "parties to a contract should have the assurance of their potential liabilities at the time of contract, i.e., at the time and place of issuance of the bill of lading." M/V Deppe Europe, 1990 U.S. Dist. LEXIS 10457, 1990 WL 121683, at *3. In the absence of a clear intention to include such uncertainty in a contract, the court is reluctant to read the existence of such an intention into a contract.

 More importantly, as Judge Conboy of this district has found in an unrelated action regarding an identically worded bill of lading, defendant's interpretation is unacceptable because "it renders 9(b) superfluous" -- if clause 9(a) means that the law of the situs state should be applied, then clause 9(b) merely means that the rights, liberties, limitations and defenses of the law of the situs state should be applied. Francosteel Corp. v. M/V Kapetan Andreas G, No. 92 Civ. 0633, 1993 WL 496893, at *2 (S.D.N.Y. 1993) (Conboy, J.). Defendant argues that clause 9(b) functions to extend the rules adopted by the situs state to situations that they would not otherwise cover, for example where the rules of the situs state apply only to outgoing shipments and the shipment at issue was shipped into that state. The court does not find evidence of any such intention in clause 9, however. Clause 9(a) does not state that it should be applied only to those cases in which the shipment is covered by the rules adopted by the situs state, and clause 9(b) does not state that it should be used to extend those rules.

 The bill of lading is further ambiguous because it is unclear when to apply clause 9(a) and when to apply clause 9(b). As plaintiff notes, the two clauses "are not phrased in the subjunctive (i.e., the latter shall apply only if the former does not). Rather, they are phrased in the disjunctive (i.e., either one can apply). (Pl. Mem. in Supp. of ...


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