asserts cross-claims against New York Express, Associated and Goth for indemnity if it is found liable, claiming breach of contract, negligence and breach of warranty of workmanlike conduct and services. Defendants Associated and Goth assert cross-claims against each other and against Nedlloyd and New York Express for indemnity if found liable, claiming breach of contract, negligence and breach of warranty, and Associated also asserts cross-claims against Nedlloyd and Goth for indemnity if it is found liable, claiming fraud. The case was tried before me in 17 days of testimony.
Plaintiff is a manufacturer of high-quality design lace in Calais, an area that has become a worldwide center for the manufacture of design laces. Most of the machines used by plaintiff to make its lace are a type that use a particular loom process known as Leavers and were manufactured by a company named Jardine France ("Jardine") in Nottingham, England until the early 1960s. Since then, the only new Leavers lace machines manufactured in the world have been manufactured by Spowage, Humphreys & Wyer, also of Nottingham. Having built a new plant in 1986 to expand its business, plaintiff wanted to buy additional Leavers machines which were of a 9 1/2 and 10 1/2 "point" size, to make lace out of Lycra. Most of the machines it already had were 12 and 14 point ones, and while 12 point machines could apparently be adapted to make Lycra lace, 14 point ones could not. Plaintiff sought machines that would all be of a similar manufacture so that, in the event repairs were needed on a machine during a job, parts would be interchangeable, allowing plaintiff to continue the work on another machine. Upon learning that Thomas Wilson & Sons, an American lace manufacturer in Port Jefferson, New York, had filed for bankruptcy, plaintiff's general manager Willie Convie visited the Wilson plant on June 6, 1986. Wilson had twenty to twenty-five Leavers machines available for sale, and Convie intended to purchase up to ten. During this trip Convie spoke with Wilson's president and agreed upon a purchase price for ten machines, comprised of two 9 1/2 point Jardine machines and all eight of the 10 1/2 point Jardine machines at this Wilson facility. Convie returned to Wilson's plant on July 11 with plaintiff's foreman who examined the machines and found them to be in good condition. As a result, plaintiff purchased the ten machines, paying $ 22,000 for each of five of the machines (which were missing "bottom bars") and $ 30,000 for each of the others. By Wilson-designated numbers, the machines sold to plaintiff were: 9, 13, 14, 15, 16, 17, 18, 19, 22 and 26.
Plaintiff had no prior experience with transportation of such machines by sea. Convie spoke with John Van der Riet of Expedex B.V., an air freight company owned by the Dutch holding company that also owned plaintiff, and Van der Riet told Convie that Expedex also had no experience with transporting sea cargo and that he would contact a New York freight forwarder for assistance. Van der Riet then asked New York Express, itself an air freight forwarder with no sea cargo experience, to arrange for transportation of the ten machines from Port Jefferson to Calais. Wolfgang Reichel, the principal of New York Express, was given the dimensions of the machines -- each weighs approximately 39,800 pounds and is approximately 7.1 meters long, 2.3 meters wide and 3 meters high -- and Reichel contacted Goth, an international ocean freight forwarder, to arrange for the ocean transportation. To secure freight rates, Goth employee Hans Peter Betschart contacted Nedlloyd and another company, Polish Ocean Lines. Nedlloyd had begun a new service employing "ro-ro" vessels, which featured large ramps for rolling large cargo on and off below decks. Reichel's initial communications with Van der Riet and Betschart anticipated that the machines would simply be placed on flatbed trailers or on platforms known as mafis and wheeled into the ro-ro vessels for below deck stowage. It was subsequently determined that, although the machines were too high to fit in fully enclosed containers, they could nevertheless be placed in open-top containers, i.e., metal containers with floors and sides but no roofs.
It is not disputed that Van der Riet told Reichel to obtain under deck stowage. Tr. 932-36.
Reichel maintains that he conveyed this instruction to Betschart, but Betschart denies that he received any such instruction from Reichel. Betschart admits that he never requested below deck stowage from Nedlloyd, although he testified that, during his negotiations with Nedlloyd salesperson Randy Clayton for shipment of the machines on Nedlloyd's ro-ro vessels in open-top containers furnished by Nedlloyd, Clayton stated that the machines would be stowed below deck. Indeed, the very point of a ro-ro vessel was to facilitate loading large cargo under deck, as Betschart testified was his understanding at the time. Clayton does not recall making such an express statement, although he does say it was his understanding at that time that the machines would be stowed below deck because it would have been "absolutely asinine" and "negligent at best" to put them on deck. Clayton ultimately provided Betschart with a freight rate which covered both the ocean transportation of the ten machines as well as their inland truck transportation from Port Jefferson to the New York pier and from the Le Havre pier to Calais. Betschart was told that the ten containers would be carried on three ro-ro vessels operated by Nedlloyd, the Nedlloyd Rotterdam, the Nedlloyd Rosario and the Nedlloyd Rouen.
New York Express retained the services also of Associated to place each machine in a container and to secure the individual tarpaulin supplied with the container by Nedlloyd over the top of the container after Associated rigged the machine inside. Convie hired Chris Chambers, Wilson's designer, to help in preparing the ten machines for transport. Chambers wiped down the parts of each machine with oil, placed plastic over the "comb bars" and "working bars" of each machine, placed wood beams over the top of each machine to keep it from rubbing against the tarpaulin, and separately packed the bobbins and carriages in individual boxes after wrapping them in oiled paper and placing plastic over them. After loading, blocking and bracing each machine (with its box of bobbins and carriages) in a container, Associated affixed a tarpaulin to each container by running a wire cord through eyelets in the tarpaulin to grommets which were on the sides of the container near the top and over the doors at the rear of the container. Because each machine was one-and-one-half to two feet overheight, it was not possible to use every eyelet and grommet to cover each container completely, and there were visible gaps between each tarpaulin and the back side of the container.
The first five containers trucked to the pier were loaded on September 29, 1986 onto the Strathconon, a container, not ro-ro vessel chartered by Nedlloyd from Australia Japan. Machines 13, 14, 15 and 16 were stowed below deck; machine 17 was stowed on deck, surrounded on three sides by an upper tier of other containers and in front by the house of the vessel. The next three containers to arrive at the pier, with machines 18, 19 and 22, were stowed on deck the ro-ro Nedlloyd Rosario on October 8. These containers were stowed in the middle of the deck with only one side of them having an upper tier of other containers stacked nearby. The last two containers to arrive at the pier, with machines 9 and 26, were stowed on deck the ro-ro Nedlloyd Rouen on October 20 with an upper tier of other containers near one side and two upper tiers near a second side. The bills of lading for each shipment contained no notation that any of the containers were being carried on deck, although each included a form clause giving Nedlloyd an option of stowing the cargo on deck.
The Strathconon arrived in Le Havre on October 13, and the five containers it carried were delivered to warehouses in Calais on October 17 and 20. Machine 13 (which had been carried below deck) arrived in Calais with the shifting arm of the front spindle of the machine broken, but the tarpaulin was intact. There was a meter-long tear on the tarpaulin on the container with machine 16 (also carried below deck) and apparently some rust on part of the jacquard (the loom mechanism that causes threads to be lifted in the proper succession for producing a programmed design) directly under the tear. The tarpaulin on the container with machine 17 (carried on deck) sustained three holes, and there were traces of oxidation on the jacquard below those holes. The two other machines (stowed below deck) apparently sustained no damage. The Rosario arrived in Le Havre on October 20 and the three containers it carried on deck were delivered to Calais on October 24. The tarpaulin on each was badly ripped and the machines had sustained extensive corrosion damage. Plaintiff notified Nedlloyd of the damage, and on October 24 a joint survey was conducted of the eight machines carried on the Strathconon and Rosario by Jean-Francois Rivenet, a Calais surveyor retained by plaintiff; Rene Galleman, a cargo and marine surveyor retained by Nedlloyd's insurer; Daniel Lecoeur, a representative of Jardine-France S.A. of Calais, now a lace machine repair company; Frans Van Bellen, retained by plaintiff's cargo underwriter; plaintiff's general manager Willie Convie and another employee of plaintiff. The Rouen arrived in Le Havre on November 3. A large portion of the tarpaulin on the container with machine 9 had been ripped loose, and the machine had also sustained corrosion as a result. The tarpaulin on the container with machine 26 had not been damaged and that machine arrived in good condition. Marcel Caraboeuf, representing Nedlloyd's insurer, conducted a survey of the two machines that same day at Le Havre.
The surveyors conducted extensive tests on all the machines for which plaintiff seeks damages and the water found in the containers and concluded that the corrosion by rust and the oxidation pitting that had occurred was a direct result of exposure of the machines' carbon steel to salt water. They also found that the carriages and bobbins that had been separately packed had also been exposed to considerable salt water with concomitant corrosion and pitting to the carriages. During their investigation through January 1987 the surveyors considered obtaining new or reconditioned machines from Spowage, Humphreys & Wyer. The surveyors rejected that option as too expensive, and received an estimate for repairs from Lecoeur of Jardine. At a meeting on January 22, 1987, all of the surveyors discussed the damage that had been sustained and agreed to a final cost of repairs and manufacture of necessary replacement parts to be undertaken by Jardine. They agreed that repairs should begin quickly to stop the corrosive effects of the salt water. Plaintiff explained to the surveyors that extensive work on machines 18, 19 and 9 was required because, due to the intricacy of the machines, the replacement of some parts that were heavily pitted and corroded required that other parts working in unison with them also be replaced. Pursuant to the surveyors' agreement, plaintiff paid Jardine 1,867,357.93 fr. (the equivalent of $ 325,551 at undisputed exchange rates) for repairs and replacements, almost all of which, according to Lecoeur, related to corrosion (with only a small percentage to mechanical damage). These repairs had been completed by the time of trial. In addition, plaintiff contracted with Jardine to manufacture 2,800 replacement carriages, which had not yet been undertaken by the time of trial. The anticipated cost of the new carriages is 1,195,488 fr. ($ 208,418). Based on these sums, plaintiff seeks to recover $ 533,969 in damages.
I. NEDLLOYD IS LIABLE TO PLAINTIFF FOR DAMAGE TO ITS CARGO UNDER COGSA
A. Plaintiff Established a Prima Facie Case
To hold Nedlloyd liable for damage to its cargo under COGSA, plaintiff has the initial burden of establishing a prima facie case by showing that the cargo was delivered in good condition to the carrier's custody but discharged in bad condition. Raphaely Int'l, Inc. v. Waterman S.S. Corp., 972 F.2d 498, 501 (2d Cir. 1992), cert. denied, 507 U.S. 916, 122 L. Ed. 2d 666, 113 S. Ct. 1271 (1993); Westway Coffee Corp. v. M.V. Netuno, 675 F.2d 30, 32 (2d Cir. 1982); Caemint Food, Inc. v. Brasileiro, 647 F.2d 347, 353 n.5 (2d Cir. 1981); Ferrostaal Corp. v. M.V. Singa Wilguard, 838 F. Supp. 757, 767 (S.D.N.Y. 1993). Although bills of lading containing no notations of damage, such as those issued by Nedlloyd in this case, ordinarily establish a presumption of the good condition of cargo at loading, Westway Coffee Corp. v. M.V. Netuno, 675 F.2d at 32; Ferrostaal Corp. v. M.V. Singa Wilguard, 838 F. Supp. at 768, where the condition is not apparent from examination of its container, it is arguable that such a presumption should not be drawn. See Caemint Food, Inc. v. Brasileiro, 647 F.2d at 353-54; David R. Webb Co. v. M/V Henrique Leal, 733 F. Supp. 702, 705 (S.D.N.Y. 1990). However, plaintiff has easily established the elements of a prima facie case without the benefit of the presumption.
With respect to delivery in good condition, prior to plaintiff's purchase of the machines, plaintiff's shop foreman examined them in detail, actually operated them, and found that all were in good mechanical running condition, free of rust and properly maintained. Ex. 270, pp. 30-36. James Rodia, the Wilson plant foreman, testified also that the machines were in working order and free from rust when they were shipped from the plant, Ex. 281, pp. 22-23, 77-78, and Chambers of Wilson testified that the only rust on the machines was slight surface rust that could be removed merely by wiping the machines and that the machines were in good running condition. Ex. 279, pp. 13-14, 19, 23-24. Nedlloyd points to deposition testimony from Ronald Bodell, whose company also purchased machines from Wilson, that his machines were rusty when he picked them up at the plant. Ex. 285, pp. 24-25. However, that testimony provides at best only a speculative basis for determining that plaintiff's machines were not in good condition and does not contradict the testimony of plaintiff's shop foreman, of Rodia and of Chambers about the machines in suit. Moreover, as detailed below, the fact that only those machines whose tarpaulins were badly ripped while on board Nedlloyd's ships suffered significant rust corrosion while machines whose tarpaulins were undamaged suffered no corrosion damage creates an obvious inference that all of the machines were in good condition without rust at the time they were loaded onto Nedlloyd's ships.
With respect to receipt in bad condition, it is especially clear that the extensive corrosion damage to machines 18, 19 and 9 -- to which all but a small portion of the damage claimed by plaintiff pertains -- was caused by their exposure to salt water and salt water spray as the result of the ripping of their tarpaulins while carried on the decks of the Rosario and the Rouen. According to plaintiff's surveyor Rivenet, who examined the damaged machines after their arrival in Calais, the tarpaulins on these three machines were either completely ripped or so extensively ripped from the back of the containers to the front that all or a large portion of each container was uncovered and the contents were directly exposed to the elements. Ex. 272, pp. 27, 36, 41-43. Nedlloyd's own surveyor concurred in Rivenet's opinion that the ripping of the tarpaulins occurred while on board their vessels and prior to their arrival in Le Havre. Ex. 277, pp. 25-26, 127. With respect to these three machines, there was water on the floor of the containers, in the machines themselves and in the cases of bobbins and carriages that had been separately packed in plastic. The water was tested with silver nitrate and found to be salt water. Ex. 272, pp. 34, 38-39, 47-48. See also Tr. 2335 ff. (testimony on use of silver nitrate to determine extent of corrosion by salt water). Rivenet found extensive oxidation on those parts of the machines that were not covered because of the ripped tarpaulins as well as on the bobbins and carriages in those containers. Ex. 272, pp. 32, 37-39, 44. Rivenet's testimony concerning the conditions of those tarpaulins and the rust on the machines, carriages and bobbins was also confirmed by the series of photographs that he took of those machines. Exs. 148-154. Although Nedlloyd contends that the tarpaulin to the container with machine 9 was in good condition but had been loosened because the line was defective, it is clear by examination of the photographs that that tarpaulin was in fact ripped. Ex. 153. It is possible that the damage to these machines was exacerbated by the containers being left in rain after their arrival in Le Havre and prior to truck transport to Calais, see Ex. 277, pp. 63-66, but the machines were still in Nedlloyd's custody at that time.
The three machines -- 18, 19 and 9 -- that were stowed on deck and whose tarpaulins were extensively ripped sustained by far the most corrosion. Machine 26, carried on the deck of the Rouen, was the only machine stowed on deck whose tarpaulin was not damaged. That machine suffered no corrosion. The tarpaulin covering the container with machine 22, which was carried on deck the Rosario, was torn at one place at which it rested on a support, and the part of the machine directly under the hole in the tarpaulin was wet and sustained rust damage. Ex. 272, p. 49; Ex. 277, pp. 25-26. However, plaintiff submitted no claim to the surveyors for machine 22 and seeks no recovery for damage to that machine. The tarpaulin on the container with machine 17, carried on the deck of the Strathconon, sustained three holes above the machine's loom, and there were small traces of oxidation on the machine below those holes. According to Rivenet, wind conditions could have caused friction between the tarpaulin and the machine creating the holes. Ex. 272, p. 17. The tarpaulin on the container with machine 16, one of the four carried below deck on the Strathconon, sustained a meter-long tear. While some rust on the part of the jacquard located directly under the tear was found, the possibility that this damage might have occurred before stowage or after unloading hardly rebuts the overwhelming evidence that the severe corrosion damage to machines carried on deck occurred as a result of the on deck stowage. Indeed, the other three machines, stowed below deck, sustained no damage. As will be discussed below, the heavy winds and high waves on the North Atlantic at the time of the voyages, especially given the location and positions in which the containers were stowed and the fact that the tarpaulins did not completely cover the containers owing to the overheight cargo, further confirm that the tarpaulins were ripped and the corrosion to the machines was caused by wind, salt water and sea spray while the machines were being transported on Nedlloyd's decks.
Accordingly, I find that plaintiff has established that its cargo was damaged while in Nedlloyd's custody.
B. Nedlloyd Has Not Rebutted Plaintiff's Prima Facie Case
To rebut a prima facie case of liability for damage to cargo, a carrier must come forward with evidence to explain the cause of the damage, showing that the damage resulted from one of the excepted causes set forth under COGSA, 46 U.S.C. § 1304(2). If that burden is met, "the burden return[s] to the plaintiff to show that the carrier's negligence contributed to the damage." O'Connell Mach. Co. v. M.V. "Americana, " 797 F.2d 1130, 1133 (2d Cir. 1986). See also Montedison U.S.A., Inc. v. S/S AL WATTYAH, No. 87 Civ. 8545 (JMW), 1989 WL 165874, 1989 A.M.C. 2287 (S.D.N.Y. Apr. 3, 1989); United States v. Ultramar Shipping Co., 685 F. Supp. 887, 897 (S.D.N.Y. 1987), aff'd, 854 F.2d 1315 (2d Cir. 1988). Notably, the carrier has the duty under COGSA, 46 U.S.C. § 1303(2), to "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried." For the following reasons, I find that Nedlloyd has not met its burden of showing that the damage arose under one of COGSA's excepted causes and that, in any event, Nedlloyd was negligent in stowing the containers on deck in the circumstances of this case and did not meet its duty under § 1303(2) in its stowage or care of the cargo.
1. Sufficiency of Packing
Nedlloyd argues it is not responsible for the damage to plaintiff's cargo because it resulted from "insufficiency of packing," an excepted cause. 46 U.S.C. § 1304(2)(n). Whether packing was insufficient under § 1304(2)(n) depends on whether the cargo was "properly packed for the anticipated voyage." Mobil Sales & Supply Corp. v. M.V. "Banglar Kakoli", 588 F. Supp. 1134, 1141 (S.D.N.Y. 1984). See also Close v. Anderson, 442 F. Supp. 14, 17 (W.D. Wash. 1977) ("packing must be sufficient to withstand normal and reasonably foreseeable events").
After Betschart provided Nedlloyd with the precise dimensions of the machines, Tr. 696-97, 1603; Exs. 1, 2, Ex. 269, p. 31, from which it was clear that the machines would stand one-and-one-half to two feet higher than the sides of Nedlloyd's open-top containers, given the eight-inch platform at the base of those containers, Nedlloyd furnished tarpaulins that would have been able to completely cover the containers only if there had been no overheight cargo and which were adequate here only for transport below deck. Because of this overheight of the machines, it was necessary for plaintiff's packer to skip some eyelets and grommets and to leave readily visible gaps at the top rear of the containers through which water could enter and through which winds could be expected to enter creating a likelihood that the tarpaulins would be ripped if the containers were stowed on deck and expose the cargo to even more water. Tr. 2297-2302.
Plaintiff's witness Robert A. Raguso is a meteorologist for Bendix Field Engineering which furnishes weather routing services to carriers such as Nedlloyd. Raguso gave credible, knowledgeable testimony that was not rebutted that voyages across the North Atlantic during October should be expected to encounter numerous frontal passages which would create serious gusty conditions. Tr. 85-87, 137-39. He provided calculations of the wind force sustained by each of the three ships and also provided data concerning the sea and swell conditions encountered by each of the vessels. He testified that swell of at least five to six meters, driven by winds as high as Beaufort 7 to 10, would have resulted in heavy sea spray in each case that, especially given the up-and-down motion of a ship in such conditions, could be expected to reach containers on deck despite their being surrounded by other containers. Tr. 79-107, 125-26, 137-39. Raguso testified that had his company been involved with cargo like plaintiff's, notified of sensitive overheight cargo stowed in open-top containers on deck, a safer route to minimize the effects of wind and water would have been recommended. Tr. 52, 58-60, 66; see also Tr. 2302, 2319.
Raguso's testimony was confirmed by some of Nedlloyd's own witnesses. Ole A. Sweedlund, a licensed Merchant Marine officer who was associated in 1986 with Trans Freight Lines and supervised the department that stowed various Trans Freight and Nedlloyd ships, Tr. 2091, 2142, 2158, acknowledged that weather conditions on the North Atlantic in October were quite variable and "you could end up in situations where you have heavy storms and very confused and scattered seas. You could end up, in October, in hurricanes. It's a meteorological nightmare." Tr. 2142. Captain Robert Meurn, co-author of a text on marine cargo operations, acknowledged that winds up to 9 to 10 on the Beaufort scale experienced by the Strathconon on October 3 and 4 were certainly possible during the month of October. Tr. 2235. He confirmed the possibility of ripping of the tarpaulins on overheight open-top containers stowed on deck given the winds and heights of waves that could be encountered in the North Atlantic at the time of the voyages. Tr. 2238. John Boylston, president of a firm that operates two carriers, admitted there is a "good probability of severe weather in October" on the North Atlantic, a "good probability in any open top that the top would be taken off," and thus a "good probability you're going to expose contents to rain or salt water." Tr. 1225-27. Based on such statements, it is clear that even surrounding on deck containers with higher tiers of other containers (which Nedlloyd proffers as a point in its own defense) was not sufficient to do away with the danger of expected levels of wind and sea spray foreseeably causing the tarpaulins on plaintiff's containers to rip and subject their contents to salt water.
In support of its argument that plaintiff is responsible for the damage in this case because of insufficient packing, Nedlloyd offers testimony of Sid Watts, a director of Spowage, Humphreys & Wyer, and testimony of Jack Hughes, a textile engineer who had worked for Spowage and other firms and who had previously shipped 88 Leavers lace machines across the world, concerning steps they took in preparing lace machines for shipment. Nedlloyd argues that to have protected the machines from water damage precautions such as those taken by Watts and Hughes with their own machines should have been taken here. These included procedures that were followed by Chambers in the packing here, such as wrapping the comb bars and points on the machines in plastic and separately wrapping the bobbins and carriages in plastic, as well as additional procedures. The additional precautions described were first wrapping the comb bars and points with cheesecloth soaked in oil and greaseproof paper rather than only wiping them down with oil before wrapping them in plastic; applying a rust protector to the shafts; using extra plastic around the entire machine; and tying an additional tarpaulin around the machine to completely cover it inside the container. Tr. 393-96. Hughes testified such measures could have protected the machines in the event of exposure to water as a result of on deck stowage. Ex. 284, pp. 68-69, 120-24.
I agree that the packing was not sufficient to protect the machines against corrosion resulting from on deck stowage, and additional precautions would have been reasonable and indeed necessary had on deck stowage been anticipated. This is made even more so by the foreseeability of the harsh weather and wind conditions to be encountered on this voyage. However, Nedlloyd has not shown (nor does it argue, except with respect to mechanical damage for which plaintiff does not seek damages herein) that plaintiff's packing was insufficient for purposes of below deck stowage. The determination of whether the packing in this case was insufficient under § 1304(2)(n) for purposes of relieving Nedlloyd of liability to plaintiff therefore turns on whether plaintiff should have reasonably expected on deck stowage. Indeed, it is difficult to believe the machines would have been packed in these open-top containers in the manner in which they were if on deck stowage were at all expected. (It is undisputed that plaintiff's Van der Riet had instructed Reichel of New York Express to obtain under deck stowage.) But the evidence is clear for other reasons that plaintiff did not and reasonably should not have anticipated it.
a. Clean Bills of Lading
When a bill of lading is "clean," a shipper has the right to below deck stowage.
Absent an express agreement by the shipper permitting cargo to be stowed on deck or a general port custom permitting on deck stowage, a shipper is entitled to expect below deck stowage under a clean bill of lading.... To reiterate, a shipper's reasonable expectation on booking cargo for shipment is that it will be stowed below deck, unless the shipper agrees to the contrary or a general port custom permits the above deck stowage.
Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 299 (2d Cir. 1987), cert. denied, 484 U.S. 1042, 98 L. Ed. 2d 860, 108 S. Ct. 774 (1988). See also English Electric Valve Co. v. M/V Hoegh Mallard, 814 F.2d 84, 89 (2d Cir. 1987); Seguros Banvenez, S/A v. S/S Oliver Drescher, 761 F.2d 855, 859 (2d Cir. 1985) ("absent an agreement or an established custom from which consent of the shipper for on-deck stowage may be imputed, a clean bill of lading imports stowage below deck"); Neuenberger Schweizerische Allgemeine Versicherungs-Gesellschaft v. S/S Aldebaran, No. 88 Civ. 1361 (RJW), 1990 A.M.C. 1886, 1989 U.S. Dist. LEXIS 15142 at *11 (S.D.N.Y. Dec. 19, 1989). Thus, in Hojgaard & Schultz A/S v. Transamerican S.S. Corp., 590 F. Supp. 916 (S.D.N.Y. 1984), aff'd, 762 F.2d 990 (2d Cir. 1985), where the shipper had a right to below deck stowage under a clean bill of lading and cargo stowed on deck was damaged, because "plaintiffs' cargo was adequately packed for under deck shipment," the packing was "sufficient" under § 1304(2)(n). Id. at 923.
There is no question that the three bills of lading were, for purposes of stowage below deck, clean, since they did not specify on deck stowage. That the bills of lading contained a form clause giving the carrier the option to stow goods on deck without notice to the shipper
does not alter the conclusion that they were clean or its import for these purposes. See, e.g., Hojgaard & Schultz A/S v. Transamerican S.S. Corp., 590 F. Supp. at 921, where this court explained why such a clause was unavailing to defendant even after the defendant refused to sign a booking note with the words "On Deck" crossed out. As indicated above, the only situations in which on deck stowage may be used are those where the shipper has agreed specifically to it or a general port custom would permit it.
(i) Lack of Agreement
As Nedlloyd argues, plaintiff's freight forwarder Goth could have expressly insisted on below deck stowage and did not do so. Witnesses for Nedlloyd testified that shippers can expressly request below deck stowage, which carriers can then accept or refuse; if refused, the shipper can do whatever it deems necessary, such as further negotiating, acquiescing or going to another carrier. It does not follow, however, that Goth's failure to have expressly requested below deck stowage imports consent to on deck stowage, and the circumstances of this case render the possibility of such implied consent nil.
Betschart of Goth testified that after his initial discussions with Reichel of New York Express in July 1986, he spoke to Sal Colonna of Nedlloyd, giving him the weight and dimensions of the machines, and sought rates for transportation of the machines on flatbed trailers or mafis in ro-ro vessels. Reichel then advised him that the machines were not, as had been thought originally, too wide as well as too high to fit inside containers and that Betschart should therefore request rates based on loading in open-top containers which would better protect the spare parts than flat-bed racks. Tr. 686-92, 866-67. Betschart again contacted Nedlloyd and spoke to Randy Clayton, the salesperson for Nedlloyd who took over the negotiations with Betschart. Tr. 692-93. Betschart again gave the dimensions of the machines and asked for rates based on transportation in containers but open-top ones, since the machines were too high to fit fully in a container and would have to protrude from the top. Tr. 693; Ex. 269, p. 16. According to Betschart, his understanding was that, since the shipments would be on ro-ro ships, "this kind of cargo" would be carried below deck, although he made no specific request for such stowage. Tr. 693-94. He testified that "during one of my conversations with Clayton while we were negotiating the rates, I asked Mr. Randy Clayton where these containers will be loaded, and he told me that this kind of container will be stowed in belly of the vessel." Tr. 696. Clayton testified that he did not recall a discussion with Betschart of where the machines would be stowed, Ex. 269, p. 20, but he also testified that he assumed that the machines would be stowed under deck because, since overheight cargo like these machines could not be overstowed, it would be "absolutely asinine" and "negligent at best" to put such cargo on the top layer of on deck cargo, where "it wouldn't be protected in any way, shape or form from weather." Id.. pp. 20-21. Even if Betschart had expressly asked for under deck stowage, Clayton testified that it is possible that he would not have made a note of it since he would have assumed that the only way to handle such cargo was under deck. Id. p. 23.
Although it was in Betschart's self-interest to claim that Clayton had made the statement he attributes to him, and despite some vagueness on Betschart's part about the immediate context of his question to Clayton, I nonetheless find it likely that Betschart asked such a question and that Clayton made such a statement about below deck stowage. I find it significant that Clayton, while not recalling such an exchange with Betschart, did not deny that it occurred and so emphatically concurred in the position Betschart claims Clayton expressed that below deck stowage was necessary. Indeed, Clayton was so emphatic about his belief and automatic assumption that under deck stowage was the only way to stow these overheight machines in open-top containers that he stated that he might not have specially noted a specific request by Betschart for such stowage, even if it had been made. Under these circumstances, I accept the account of Betschart, who, moreover, was a credible witness. (Clayton was not put on the stand, testifying only by deposition.)
Nedlloyd is, of course, responsible for any such statement by its sales personnel to its customers, and it cannot hope to make a virtue out of one corporate hand not knowing what the other is doing. The point of the statement in this context is not that it establishes a contractual undertaking to stow below deck but that it reinforces the presumption attaching to the clean bills of lading that were issued by Nedlloyd that there was no consent by plaintiff to on deck stowage and that plaintiff's reasonable expectation was that the machines would be stowed below deck.
(ii) Port Custom or Practice
Nedlloyd contends, on the basis of statements by experts on cargo operations and officers in other companies operating carriers, that on deck stowage of overheight open-top containers is a common practice in the Port of New York. However, as explained below, this testimony did not meet Nedlloyd's burden of establishing that a custom or practice in support of on deck stowage exists in circumstances relevant to this case, i.e., with cargo known to be lace machines; stowed in open-top containers whose tarpaulins could not completely cover them; scheduled for transportation across the North Atlantic at a time of year when heavy winds, high swells and storms are foreseeable; and notwithstanding the obviousness, confirmed by its own salesperson's clear understanding, without even needing to be told, that the machines had to be stowed below deck.
Nedlloyd's argument that on deck stowage was reasonable is based on the following. According to the testimony of Raymond Miller, Marine Operations Manager for Atlantic Container Line, on ships that are specialized for stowing containers, containers (including open-top containers) are ordinarily loaded onto the ship by crane ("loaded on, loaded off" or "lo-lo"). On container ships or on ro-ro ships that are also outfitted with hatches for below deck stowage, such cranes can be used to stow open-top containers either on deck or in specially fitted cell guides below deck through the hatches. However, the Rosario and Rouen were hatchless ro-ros, which meant that below deck stowage of containers would have had to involve use of a mafi or trailer to roll them on and off, a procedure that could have been used but would have involved more time and labor than on deck stowage. Tr. 2092, 2140. Nedlloyd contends that on deck stowage of open-top containers was reasonable on the basis of three general considerations: (1) stowage considerations themselves (whether stowing in a certain way will leave sufficient room for other cargo and whether a stowing plan will affect the ship's speed and balance); (2) port rotation (how much time must be spent in each port or devoted to rearrangement of cargo or driving off as opposed to lifting off cargo); and (3) labor costs.
Even on the basis of these general considerations which routine port custom or practice might take into account (but which glaringly happen to exclude certain key duties set forth in COGSA), there was no adequate basis for Nedlloyd's on deck stowage in the instant case. Approximately 45% of the below deck stowage space was empty on the Strathconon, leaving 244 vacant spots, even after machines 13, 14, 15 and 16 were put there (although machine 17 oddly was put above deck), approximately 30% was empty on the Rouen, and the Rosario was completely empty below deck. Tr. 1192-93; Ex. 280, pp. 54, 115, 139. Since below deck clearance for the Rosario and Rouen is 6.35 meters or about 20 feet, below deck stowage of the containers on mafis would not have presented a problem, especially in view of the amount of space that remained vacant. Tr. 1237. Thus, there was no showing that placement of open-top containers on mafis or trailers to load them below deck on the two ro-ros would have been especially inconvenient, much less that it was unfeasible or that it involved so much time and expense that its avoidance would outweigh "substantially increasing the exposure of [plaintiff's machines] to foreseeable dangers." General Electric Co. Int'l Sales Div. v. S.S. Nancy Lykes, 706 F.2d 80, 86 (2d Cir.), cert. denied, 464 U.S. 849, 78 L. Ed. 2d 145, 104 S. Ct. 157 (1983).
Plaintiff put forward convincing expert testimony disputing the existence of any custom or practice in the Port of New York in favor of on deck stowage of overheight open-top containers absent agreement by the shipper or circumstances not present here. Captain William McManus, Director of Marine Operations for United States Lines from 1979 through 1989, testified that, except for hazardous cargo, it was United States Lines' policy to stow open-top containers with overheight cargo below deck. Tr. 2294-95, 2325. Captain Ivo Knobloch, a marine surveyor and consultant, testified as to the responses of carriers and agencies operating out of the Port of New York to inquiries in a questionnaire he had prepared for. plaintiff about on deck stowage of cargo. The responses reflected a common understanding that open-top containers are "generally" stowed below deck. Ex. 250D. Although only two of the twenty-one respondents answered that they shipped open-top containers on ro-ro vessels, it is noteworthy, given Nedlloyd's arguments that a presumption of on deck stowage of open-top containers is appropriate for such vessels, that the one steamship agency that said it shipped all of its containers on ro-ro vessels answered that its company policy regarding the handling and stowage of open-top containers was "Below Deck Stowage," and the second company, which divided its open-top containers between ro-ro vessels and containerships, stated that both open-top containers in general and open-top containers with cargo that was overheight or "humidity-sensitive" are generally stowed below deck and that, if such open-top containers had to be shipped on deck, the shipper would be informed beforehand. Although Nedlloyd faults this evidence because it is not emphatic (given its recourse to such terms as "generally" and some imprecision about the kinds of ships to which the responses applied), the responses to the questionnaire do nonetheless serve generally to rebut Nedlloyd's claim that there exists a custom or practice in favor of on deck stowage, and it is Nedlloyd who has the burden to make that showing. The questionnaire evidence is, moreover, only one item of proof relevant to the issue among all the others.
Indeed, Nedlloyd's claims were undercut by concessions and qualifications made by its own expert and employee witnesses. Even Miller confirmed that if his company were presented with open-top containers holding overheight cargo with tarpaulins such as those involved in this case for on deck shipment, "We would go and investigate the container. If there is a problem like this, we would get a hold of our traffic people to notify the shipper that this is a problem and what should we do with it," adding that it would be "preferable" to place such a container below deck. Tr. 1795-96. Meurn, while maintaining that stowing an overheight open-top container on deck was a "reasonable" practice, conceded it was not the "preferred" practice and had written in his text on Marine Cargo Operations in 1985 that "open or canvas-top containers must be stowed under deck or at least under another container on deck." Tr. 2210. Meurn further admitted that if an open-top container with overheight cargo on which the tarpaulin was not fully secured were received on board, the officers on the ship whose duty is to assure proper stowage should make a "written exception to the bill of lading" and the shipper should be notified. Tr. 2229-35. Nedlloyd's own terminal manager at Port Elizabeth and a former port captain Bernardus Janse stated that if open-top containers were stowed on deck they "should be covered with other containers in order to give them maximum protection" -- something that is not possible, however, for an open-top container with cargo that is one-and-one-half or two feet overheight -- and "in case there was a possibility to stow them underdeck and that would not create any extra requirement on us, and wouldn't make the operation too difficult, then we would put them underdeck if that was possible." Ex. 280, p. 237. Given the testimony of Nedlloyd witnesses Sweedlund and Boylston on the probability of wind, storms and swells in October on the North Atlantic, yet another qualification to the breadth of any possibly existing custom or practice obviously would be that on deck stowage should not be attempted with overheight cargo in open-top containers whose tarpaulins were incompletely fastened especially during that time of year. Thus, to the extent any custom or practice with respect to on deck stowage can be said to exist even on the basis of the testimony of Nedlloyd's own witnesses, it is one that cautions that such stowage is to be avoided if at all possible and, if not avoidable, undertaken only after deliberation by ship officers responsible for stowage and consultation with or at least notification to the shipper or forwarder. In the case of plaintiff's machines, however, Nedlloyd made no attempt to avoid such stowage or to confer on whether and how to proceed or to notify plaintiff or its freight forwarder Goth.
The two key Second Circuit cases cited by Nedlloyd in connection with its argument do not support it here. In English Electric Valve Co. v. M/V Hoegh Mallard, 814 F.2d 84 (2d Cir. 1987), it was held that on deck stowage of an open-top container holding sensitive electronic equipment damaged by heavy rains and salt water was not an unreasonable deviation for purposes of § 1304(4) of COGSA (see page 41, n.11, below). However, in that case there was clear evidence of previous on deck shipments involving the same shipper and carrier and the same kind of equipment and that it was their normal practice for the shipper to notify the carrier if it wanted its cargo stowed below deck. 814 F.2d at 89. In our case, however, there were no past dealings between Nedlloyd and either plaintiff or its freight forwarder, and indeed Nedlloyd was offering the whole industry a relatively new service. With respect to another reason for the court's holding in English Electric Valve Co. v. M/V Hoegh Mallard pointed out by Nedlloyd, that "the custom and practice in the industry is to carry open top containers on deck when the vessel specifically is designed for such use...based on uncontroverted testimony from witnesses for both parties," id., the case involved shipment from Oakland to England by way of a Pacific Northwest-Northern Europe route and does not establish the custom and practice in the Port of New York. Our case involves a different port, hotly controverted testimony about the existence of any custom or practice there, a voyage across the North Atlantic and a much narrower framing of the relevant questions for that purpose.
O'Connell Mach. Co. v. M.V. "Americana, " 797 F.2d 1130 (2d Cir. 1986), on which Nedlloyd also relies, involved on deck stowage of a machine that had been placed on a flat-rack container which fell from the container and was lost at sea. The Second Circuit found that the proximate cause of the loss was insufficient packing, not the location of the stowage, pointing out that its destruction "resulted not from wind, water or sea spray -- the risks generally associated with deck stowage -- but from slippage and falling." 797 F.2d at 1133. And again, as the court said in "addressing the question of whether [on deck stowage] was reasonable...we look to international custom in the port in question, " id. at 1136 (emphasis added), which in that case was Genoa, Italy where such was the custom for the type of containers involved in that case. Space limitation on the ship was an additional factor not present here. Our case presents the corollary to that case since it involves precisely those risks that are "generally associated with deck stowage."
In sum, plaintiff's expectation of below deck stowage was entirely consistent with the circumstances and, for all the foregoing reasons, Nedlloyd's burden of supporting its argument that the packing of the cargo was insufficient for this anticipated voyage under the meaning of COGSA and provides an "excepted cause" under § 1304(2) has certainly not been sustained.
2. Nedlloyd's Negligence