United States District Court, S.D. New York
August 25, 2005.
AGFA GEVAERT AG, AGFA CORPORATION, and FORTIS INSURANCE COMPANY, N.V., Plaintiffs,
TMM LINES LIMITED, LLC, CP SHIPS, and HAPAG-LLOYD CONTAINER LINE GmbH, Defendants. ALLIANZ MARINE & AVIATION (FRANCE), a/s/o RHOVYL, S.A., Plaintiff, v. LYKES LINES LIMITED, L.L.C. and MAERSK NORFOLK, her engines, tackle, boilers, etc., in rem, Defendants.
The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
OPINION and ORDER
Plaintiffs have commenced separate maritime actions against
Defendants for negligence and breach of contract arising out of
the loss at sea of containers containing photographic materials
and polyvinyl chloride. Defendants now seek partial summary
judgment limiting their liability to $500 per package. Defendants
contend that only 35 packages of photographic materials and 16
packages of polyvinyl chloride were lost. The plaintiffs who
filed suit for the loss of the photographic materials cross-move
for summary judgment declaring that 567 packages were lost, and
that liability should not be limited in any event because the
defendants committed an unreasonable "quasi-deviation." The
polyvinyl-chloride plaintiffs oppose the defendants' motions but
do not cross-move for relief. For the following reasons, all of
the motions are denied.
Plaintiffs Agfa Gevaert AG and Agfa Corporation were the owners
and shippers of the lost photographic materials. (Giuliano Decl.
¶ 2). Plaintiff Fortis Insurance Company, N.V. was the lead
insurer of these materials. (Agfa Compl. ¶ 4). For the purposes
of these motions, these three plaintiffs are collectively
referred to as "Agfa." Plaintiff Allianz Marine & Aviation
(France) has filed suit as the subrogated underwriter of Rhovyl, S.A. ("Rhovyl"), the owner and shipper of the lost
polyvinyl chloride. (Allianz Compl. ¶¶ 2-3). For the purposes of
these motions, these two plaintiffs are referred to as "Allianz."
Defendants TMM Lines Limited, LLC ("TMM") and Lykes Lines
Limited, L.L.C. ("Lykes") are subsidiaries of Defendant CP Ships.
(Jones Decl. ¶ 1). TMM entered into a bill of lading contract
with Agfa concerning the carriage of the photographic materials;
Lykes entered a bill of lading contract with Allianz concerning
the carriage of the polyvinyl chloride. (TMM Rule 56.1 Stmt.,
Exhs. A & B). Defendant Hapag-Lloyd Container Line Gmbh ("Hapag")
was the time charterer of the M/V Maersk Norfolk ("Norfolk") for
the voyage at issue. (Godemann Aff. at 2). Hapag made space
available aboard the Norfolk for TMM and Lykes containers
pursuant to an Operational Implementing Agreement and
Cross-Charter Party with TMM and Lykes. (Id. at 2, Exh. A).
TMM, CP (defendants in the Agfa action) and Lykes (defendant in
the Allianz action) are represented by the same counsel. By
Memo-Endorsed Order dated October 5, 2004, the Court consolidated
the two actions for the purposes of the TMM, CP and Lykes motion
for partial summary judgment. Hapag (defendant in the Agfa
action) has other counsel and has filed its own motion for
partial summary judgment with essentially the same arguments.
Agfa has cross-moved for summary judgment; Allianz has not. FACTUAL BACKGROUND
On March 3, 2003, at the Port of Rotterdam, Agfa's container of
photographic materials and Allianz's container of polyvinyl
chloride were placed aboard the Norfolk. The next day, the
Norfolk left the Port of Southhampton, its last European port of
call, for a transatlantic voyage to the Port of New York. During
the journey, the mighty Neptune raised a storm and claimed as
booty several of the Norfolk's containers, including Agfa's
container of photographic materials and Allianz's container of
The Agfa and Allianz bills of lading are essentially identical.
Under the column headed "DESCRIPTION OF PACKAGES AND GOODS" in
the Agfa bill of lading, the breakdown of the shipment is as
Order 8042217H2: 348 Karton on 13 Euro-Palette
12 Karton on 1 Euro-Palette
Order 7544511H3: 17 Karton on 1 Euro-Palette
Order 8051133B2: 11 Bulk-Palette on 5 Palette
Order 7549536L3: 60 Karton on 4 Palette
Order 7511401D3: 60 Karton on 2 Pallets
Order 7567407I3: 6 Karton
Order 7569453C3: 15 Karton on 1 Euro-Palette
7 Karton on 1 Euro-Palette
Order 7535091E3: 27 Karton on 1 Euro-Palette (TMM Rule 56.1 Stmt., Exh. A). On the last page of the bill of
lading appears the entry: "35 SSC/NVE SHIPPED ON BOARD FREIGHT
PREPAID 567 CARTON(S)." (Id.).*fn1
On the Allianz bill of
lading, the relevant descriptions of the shipment are "80 BALES
ON 16 PALLETS POLYVINYL CHLORIDE FIBER" and "80 UNIT(S)." (Id.,
Exh. B). Both bills contain the number "1" in the column headed
"NO. OF PACKAGES." In both cases, this entry signifies that one
container housed the pallets and cartons. Neither Agfa nor
Allianz declared the value of their goods on the faces of their
respective bills of lading. (Rule 56.1 Stmts. ¶¶ 8, 11).
The last page of each bill of lading sets out terms and
conditions of the carriage in a manner that gives new meaning to
the term "fine print." An electron microscope reveals the
following relevant language:
5(a)(2). [I]n the event that this Bill of Lading
covers shipments to or from the United States of
America, then the Carriage of Goods by Sea Act of the
United States ("COGSA") shall be compulsorily
applicable. . . .
11(a). Goods, including Goods packed in Containers by
the Carrier or Merchant, may be carried on deck
without notice to the Merchant. Goods, other than
livestock, stowed in any covered-in-space, or packed
in a Container carrier on deck shall be deemed to be
stowed under deck for all purposes including, where applicable, COGSA
and the Hague Rules.
18(b). In no event shall the carrier be liable for
loss or damage to or in connection with the Goods in
an amount exceeding US $2.50 per kilo, or US $500 per
Package or per shipping unit where the Goods are not
shipped in Packages. If such limitation is
inapplicable under the local law in which an action
is brought, then the Hague Rules (Unamended)
limitation of £100 sterling lawful money of the
United Kingdom per package or shipping unit shall
apply, or alternatively, if the shipment covered by
this Bill of Lading originates in a country where the
Hague-Visby Amendments to the Hague Rules are
mandatorily applicable, Carriers [sic] liability
shall not exceed 2 SDR per kilo or 666.67 SDR per
Package or shipping unit whichever the greater.
(TMM Rule 56.1 Stmt., Exhs. A & B). The $500 per package
limitation of liability in Section 18(b) is identical to that of
the Carriage of Goods by Sea Act ("COGSA") in cases where the
shipper has not declared the nature value of the goods in the
bill of lading. See 46 U.S.C. App. § 1304(5).
Defendants TMM and CP Ships seek partial summary judgment
limiting their liability for the loss of Agfa's photographic
materials to $17,500. They claim that "$500 per Package"
limitation specified in Section 18(b) and COGSA applies because
Agfa did not declare the value of the materials in the bill of
lading. (TMM Br. at 2, 5-6).*fn2 They also claim that Agfa
had only 35 "packages" onboard the Norfolk (29 pallets and 6
loose cartons). (Id. at 9). Defendant Hapag moves for the same relief, citing a "Himalaya Clause" in the Agfa-TMM bill of
lading. (Hapag Br. at 3-6).*fn3 Defendant Lykes seeks
partial summary judgment limiting its liability for the loss of
Allianz's polyvinyl chloride to $8000 ($500 × 16 pallets). (TMM
Br. at 3, 6).
Agfa cross-moves for summary judgment declaring that the $500
per package limit is not applicable because the defendants
committed an unreasonable "quasi-deviation" by stowing the lost
containers on deck instead of below deck. (Agfa Br. at 5-10).
Alternatively, if the Court determines that the $500 limitation
applies, Agfa moves for summary judgment declaring that the
correct number of "packages" is 567, not 35. (Id. at 10-12).
Agfa's cross-motion does not seek a judgment with respect to the
Allianz opposes Lykes's motion for partial summary judgment
without a cross-motion. Allianz contends that if the $500 COGSA
limitation applies, there were 80 "packages" onboard the Norfolk,
not 16. (Allianz Br. at 3-4). Liability therefore would be
$40,000, not $8000. Alternatively, Allianz urges that if the
number of packages is found to be 16, then the $2.50 per kilo limitation in Section 18(b) of the bill of lading should
apply. (Id. at 5). This calculation would result in liability
of $40,007.50. Allianz also reiterates Agfa's argument that the
defendants committed a material quasi-deviation by storing the
lost containers on deck and not below deck. (Id. at 6).
I. LEGAL STANDARDS
A. Summary Judgment
The Court may grant a motion for summary judgment under Rule 56
if the entire record demonstrates that "there is no genuine issue
as to any material fact and . . . the moving party is entitled to
judgment as a matter of law." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 250 (1986). When viewing the evidence, the Court
must "assess the record in the light most favorable to the
non-movant and . . . draw all reasonable inferences in its
favor." Delaware and Hudson Ry. Co. v. Consol. Rail Corp.,
902 F.2d 174, 177 (2d Cir. 1990). "[A]t the summary judgment stage
the judge's function is not himself to weigh the evidence and
determine the truth of the matter but to determine whether there
is a genuine issue for trial." Anderson, 477 U.S. at 249. A
genuine issue of fact arises if the non-moving party "present[s]
evidence from which a jury might return a verdict in his favor."
Id. at 257. B. The Carriage of Goods by Sea Act
Under Section 5(b) of the bills of lading, COGSA is "compulsory
applicable" to the shipments at issue. The statute addresses two
concepts central to these motions: deviation and limitation of
liability. On deviation, COGSA provides:
Any deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall
not be deemed an infringement or breach of this
chapter or of the contract of carriage, and the
carrier shall not be liable for any loss or damage
resulting therefrom: Provided, however, That if the
deviation is for the purpose of loading or unloading
cargo or passengers it shall, prima facie, be
regarded as unreasonable.
46 U.S.C. App. § 1304(4). COGSA also contains a provision
addressing limitation of carrier liability:
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 lawful money of the
United States, or in case of goods not shipped in
packages, per customary freight unit . . ., unless
the nature and value of such goods have been declared
by the shipper before shipment and inserted in the
bill of lading. . . .
By agreement between the carrier, master, or agent of
the carrier, and the shipper another maximum amount
than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than
the figure above named.
Id. § 1304(5). Section 18(b) of the Agfa/Allianz bills of
lading essentially tracks the $500 per package limitation of
liability in the first paragraph of Section 1304(5) of COGSA. II. MOTIONS FOR PARTIAL SUMMARY JUDGMENT
A. Whether Section 18(b) is Ambiguous
The Court first addresses whether partial summary judgment
limiting Lykes's liability to $500 per package is warranted.
Allianz accepts the $500 per package limitation as long as the
count is 80 packages ($40,000 liability). Allianz points out,
however, that Section 18(b) of the bill of lading contains an
alternate formula for computing liability: $2.50 per kilo. If
there are only 16 packages, as Lykes contends, Allianz wants to
apply the $2.50 per kilo formula ($40,007.50 liability). Allianz
contends that the limitation of liability in Section 18(b) to "US
$2.50 per kilo or US $500 per package" is ambiguous and should be
construed in its favor and against Lykes.*fn4
The carrier is not entitled to limit liability below' the
actual loss sustained without notice to the shipper. "[O]nly by
granting its customers a fair opportunity to choose between
higher and lower liability by paying a correspondingly greater or
lesser charge can a carrier lawfully limit recovery to an amount
less than the actual loss sustained." New York, N.H. and
Hartford R. Co. v. Nothnagle, 346 U.S. 128, 135 (1953). The
carrier must make a prima facie showing under the bill of lading
that notice of the limitation was given to the shipper. See General Electric Co. v. M/V Nedlloyd, 817 F.2d 1022, 1029 (2d
Cir. 1987). If the carrier succeeds, the burden shifts to the
shipper to show that fair opportunity did not exist. Id.
Section 18(b) of the bill of lading states that "[i]n no event
shall the Carrier be liable for loss or damage . . . in an amount
exceeding US $2.50 per kilo, or US $500 per package." This
particular sentence does not contain a phrase "whichever is
greater" or "whichever is lesser." Later in Section 18(b),
liability is limited under Hague-Visby to "2 SDR per kilo or
666.67 SDR per Package or shipping unit whichever is
greater."*fn5 TMM contends that the $2.50 per kilo
limitation "was an effort to express the Hague-Visby limitation
of liability of two special drawing rights [2 SDR]" and that "the
$500 per package limitation comes from the language in § 1304(5)
of COGSA." (Jones Decl. ¶ 9). In other words, only the $500 per
package limitation applies where, as here, COGSA applies. Allianz
argues that either formula could apply in this case. The
suggestion is that the phrase "whichever is greater" should be
understood to follow "US $2.50 per kilo, or US $500 per package." The problem with Lykes's position is that Section 18(b) clearly
sets out the Hague-Visby formula: "2 SDR per kilo or 666.67 SDR
per Package . . . whichever is greater." There is no evidence in
the record that US $2.50 per kilo was equivalent to 2 SDR at the
time of contracting. Furthermore, Lykes's reading, while
plausible, injects uncertainty into Section 18(b)'s Hague-Visby
scheme. Under Lykes's approach, a Hague-Visby claimant would be
entitled to 2 SDR per kilo or 666.67 SDR per Package, whichever
is greater, or $2.50 per kilo, but not $500 per Package. This
interpretation muddies the paragraph structure of Section 18(b),
which progresses neatly from U.S. dollars ($2.50 per kilo or $500
per package) to pounds sterling (Hague Rules £100 per package)
to SDR (Hague-Visby 2 SDR per kilo or 666.67 SDR per package).
Where, as here, the shipper does not declare the value of its
goods on the bill of lading, the $500 COGSA ceiling kicks in. 46
U.S.C. App. § 1304(5). The statute is clear, however, that the
parties may agree to raise that ceiling. Id.; see Daval
Steel Prods. v. M/V Acadia Forest, 683 F. Supp. 444, 447
(S.D.N.Y 1988) (Mukasey, J.). The Court cannot say for certain
whether the parties intended to do so when they agreed to the
$2.50 per kilo formula in Section 18(b). The other provisions of
the bill of lading do not resolve the problem, nor does any other
evidence submitted on these motions. As ambiguities in the bill
of lading generally must be construed against the carrier, Allied Chemical
Int'l Corp. v. Companhia de Navegacao Lloyd Brasileiro,
775 F.2d 476, 486 (2d Cir. 1985), Lykes is not entitled to summary
judgment limiting its liability to Allianz to $500 per package.
B. Definition of "Package"
The defendants contend that the Court should grant partial
summary judgment declaring that Agfa placed only 35 "packages" in
their container (29 pallets plus 6 loose cartons), and Allianz
only 16 packages in theirs (16 pallets). Agfa asks the Court to
deny the defendants' motion and grant it summary judgment
declaring that there were 567 packages in the container,
corresponding to the total number of cartons. Allianz urges a
finding of 80 "packages," corresponding to the number of bales on
the 16 pallets, but will accept a finding of 16 "packages" if it
can apply the $2.50 per kilo formula instead of $500 per package.
It is settled that "[t]he question of what constitutes a COGSA
package . . . is largely and in the first instance a matter of
contract interpretation." Allied Chemical, 775 F.2d at 485. The
first step for the Court is to begin with the use of the term
"package" in the bill of lading. Seguros Illimani S.A. v. M/V
Popi P, 929 F.2d 89, 94 (2d Cir. 1991). Here, the column in both
bills of lading headed "NO. OF PKGS." contains the number "1,"
which clearly denotes containers. No one attempts to argue that
Agfa and Allianz shipped only one "package" each. Not having found an answer in the "packages" column, the Court
looks elsewhere in the bill of lading for the parties'
intentions. Seguros, 929 F.2d at 94. In the Agfa bill of
lading, under "DESCRIPTION OF PACKAGES AND GOODS," the typical
descriptions are "348 KARTON on 13 EURO-PALETTE," or "11
BULK-PALETTE ON 5 PALLETE [sic]" or simply "6 KARTON." In the
Allianz bill, the descriptions are "80 BALES ON 16 PALLETS" and
"80 UNIT(S)." This language does not clearly indicate the
parties' intent. See Royal Insurance Co. of America ex rel.
Warner Lambert Co. v. M/V MSC Dymphna, No. 01 Civ. 9164(PKL),
2004 WL 369268 (S.D.N.Y. Feb. 27, 2004) (Leisure, J.). Section
1(i) of the bill of lading states that pallets can be packages:
"Package: includes Container, flat rack, van, trailer, pallet,
tank, or skid. Vehicles, yachts and machinery shall be deemed to
be packages." While this fact leans in favor of the defendants,
Section 1(i) does not compel the conclusion that a "karton" can
never be a package. The evidence outside the bills of lading also
does not conclusively establish the definition of "package" one
way or the other. (See Ryan Decl., Exh. B; Jones Decl., Exh.
C). In the Agfa Transport Instruction, Agfa listed "35 SSC/NVE"
in Box #6, entitled "Packages," which parrots the Bill of Lading.
(Bathrellos Stmt., Exh. A). Accompanying the Instruction,
however, is a list of the 563 "kartons," as on the Bill of
Lading. (See supra, p. 6, n. 1). While the Court believes
that this evidence also leans in the defendants' favor, the mention of
both packages and cartons precludes a grant of summary judgment.
In Dymhna, on very similar facts, Judge Leisure denied
motions for summary judgment. It is notable that Plaintiff Agfa
and Defendant Hapag both mention Dymphna, but neither party
attempts to distinguish it. (Agfa Br. at 11; Hapag Reply Br. at
6). DCI Mgmt. Group, Inc. v. M.V. Miden Agen, No. 03 Civ.
418(DLC), 2004 WL 1078667 (S.D.N.Y. May 14, 2004), cited in the
defendants' briefs for its holding that a pallet can be a
package, is distinguishable. In DCI, Judge Cote found that the
shipper packed the cartons onto the pallets and wrapped each
pallet in plastic. Id. at *4. Judge Cote also noted that the
shipper's CEO sent a fax that described the shipment as eight
pallets but did not mention cartons. Id. Given these facts,
Judge Cote found that the shipper intended that the pallets be
considered packages.*fn6 The defendants do not call the
Court's attention to analogous facts in this case. (See TMM Br.
at 6-9; Hapag Br. at 3-4). Accordingly, the Court denies summary
judgment to both defendants and plaintiffs on the package issue. C. Unreasonable Quasi-Deviation
Agfa cross-moves for summary judgment declaring that the
defendants cannot limit their liability because they committed an
unreasonable quasi-deviation by stowing the containers on the
Norfolk's deck instead of below deck. "Under the general maritime
law, a vessel is said to `deviate' when it leaves its planned or
customary course or itinerary." SNC S.L.B. v. M/V Newark Bay,
111 F.3d 243, 247 (2d Cir. 1997). Unauthorized on-deck stowage is
a "quasi-deviation." Sedco, Inc. v. S.S. Strathewe,
800 F.2d 27, 31 (2d Cir. 1986).*fn7 In an oft-cited decision, Judge
Weinfeld held that the $500 per package COGSA limitation does not
apply in the event of the carrier's unreasonable deviation.
Jones v. The Flying Clipper, 116 F. Supp. 386, 391 (S.D.N.Y.
1953). The Court of Appeals for the Second Circuit repeatedly has
rebuffed invitations to abandon the Flying Clipper rule. See,
e.g., M/V Newark Bay, 111 F.3d at 250 (2d Cir. 1997); Gen.
Elec. Co. Int'l Sales Div. v. S.S. Nancy Lykes, 706 F.2d 80,
87-88 (2d Cir. 1983).
Agfa contends that its logistics representative instructed TMM
that "the container must unconditionally be stored below deck." (Bathrellos Stmt. ¶ 5).*fn8 Defendant Hapag
contends that Agfa's representative says nothing about sending
the instruction to Hapag. (Hapag Reply Br. at 2-3). TMM's
counters Agfa's logistics representative with a booking
supervisor, who avers that TMM's policy is "to decline such
requests simply because they cannot be guaranteed." (Wouters
Decl. ¶ 3). CP Ships's Antwerp customer services manager echoes
this statement. (Schrauwen Decl. ¶¶ 4-5). The parties also
dispute whether there was enough room on the Norfolk for
below-deck storage of the containers. (Giuliano Decl. ¶ 7;
Bathrellos Supp. Decl. ¶ 2). Finally, Section 11(a) of the bill
of lading undercuts Agfa's position: "Goods, including Goods
packed in Containers by the Carrier or Merchant, may be carried
on deck without notice to the Merchant." Given the obvious
factual disputes, summary judgment for Agfa on the issue of
deviation is inappropriate.
In light of the foregoing, TMM, CP Ships and Lykes's motion for
partial summary judgment is denied. Hapag's motion for partial
summary judgment is denied. Agfa's cross-motion for summary
judgment is denied. The parties are referred to Magistrate Judge
Ellis, who shall fix a discovery schedule. Discovery will be
completed no later than January 6, 2006. The parties are directed to appear for a conference before the
undersigned on January 9, 2006 at 10:00 a.m. in the United States
Courthouse, 500 Pearl Street, Courtroom 20C.
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