The opinion of the court was delivered by: Miriam Goldman Cedarbaum, United States District Judge
Ferrostaal, Inc. sues under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 1300 et seq., for cargo damage which it alleges occurred aboard the M/V Tupungato (the "Tupungato") during an ocean voyage from Huachipato, Chile to New Orleans. Plaintiff originally sought to recover from the vessel Tupungato in rem, the charterers F.H. Bertling Reedere GmbH and Bertling Logistics Pool (the "Bertling Defendants"), the technical manager of the vessel, Administradora de Naves Humboldt Ltda., the crewing agent, Hanseatic Shipping Co. Ltd., and the former owner of the vessel, Kourian Shipping, Inc.
Tupungato Inc., the current owner of the vessel, filed a statement of interest and an answer on behalf of the vessel Tupungato pursuant to Fed. R. Civ. P. Supp. C(6). Tupungato Inc. (collectively referred to with the M/V Tupungato as the "Tupungato Defendants") and the Bertling Defendants filed a third party complaint against another charterer in the chain of charterers, Compania Sud Americana de Vapores, S.A. ("CSAV"). CSAV then filed a third party complaint against yet another charterer, Ultrabulk, S.A. Panama.
Pursuant to a stipulation of the parties, the claims against Kourian Shipping Inc., Administradora de Naves Humboldt Ltda., and Hanseatic Shipping Co. Ltd. were dismissed. After trial and pursuant to a stipulation of the parties, the third party complaints of the Bertling Defendants, Tupungato Shipping Inc., and CSAV were also dismissed.
Beginning on May 23, 2006, I conducted a nine day bench trial on Ferrostaal's claims against the Bertling and Tupungato defendants. After considering all of the evidence including the credibility of the witnesses, I make the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a).
This case concerns cold rolled steel coils that traveled aboard ocean vessel, river barge, rail car, and truck bed in a journey from South America to Illinois. Although the coils began the trip in good condition, when the coil packages were opened in Illinois a significant number of the coils were found with rust and physical damage. The central question in the case is where the damage to the steel coils occurred. More specifically, the question is whether the plaintiff can prove by a preponderance of the evidence that the damage occurred while the coils were in defendants' custody, just prior to or during the ocean voyage from Huachipato, Chile to New Orleans.
Ferrostaal, Inc. is a Delaware corporation in the business of buying, importing, and reselling steel products. In June of 2002, Ferrostaal ordered approximately 1200 cold rolled steel coils from a steel mill located in Huachipato, Chile. Ferrostaal shipped the steel coils under seven different bills of lading. Bill of lading number three ("BL3") covered 116 cold rolled steel coils intended for Interstate Steel Company ("Interstate") of Des Plaines, Illinois. Bill of lading number five ("BL5") covered 149 cold rolled steel coils intended for Mars Steel Corporation ("Mars") of Franklin Park, Illinois.
Cold rolled steel coils are produced by taking long, thin sheets of steel and rolling them into tight bundles. Although the coils vary in size and thickness, they weigh an average of several tons each. Interstate planned to use the steel coils to produce ironing boards, while Mars used similar coils to produce steel office furniture. Any rust or physical damage to the steel coils would render the damaged portions unusable for these purposes.
Ferrostaal entered into a charter party with the Bertling Defendants to transport the cold rolled steel coils from Chile to New Orleans. Ferrostaal understood that the cargo would be shipped on a bulk carrier equipped with a natural ventilation system. Generally, bulk carriers are designed to transport bulk cargo, such as grain, wood, and metal, in a small number of very large cargo holds with natural ventilation systems. The Tupungato is a typical bulk carrier, and the vast majority of cold rolled steel coils shipped by sea are shipped aboard similar vessels.
The Tupungato had five cargo holds forward of the engine room. Each cargo hold was approximately 50 feet deep, 50 feet long, and 60 feet wide. The cargo holds were directly below deck and extended the full width of the ship. Holds 3, 4, and 5 were directly above the ship's fuel tanks, while holds 1 and 2 were located above ballast tanks. The cargo holds were separated from one another by a sheet of steel known as a bulkhead. The Tupungato's ventilation system consisted of two pipes leading out of each hold. The pipes had "mushroom" caps to keep out rain and seawater.
All of the steel coils in this case were produced at the Huachipato Mill. The steel was formed into thin sheets, coated with oil as a protection against moisture, and rolled into coils. The coils were then transferred several hundred meters aboard rail cars from the manufacturing building to the warehouse, where each coil was wrapped in water resistant paper. The paper covered all of the exposed steel, and its seams were taped closed. The wrapped coils were covered with galvanized steel which wound around the sides of the coils and covered both ends. The edges of the covers were crimped and held in place by steel bands. When the Tupungato arrived at the Huachipato Mill on October 24, 2002, the steel coils had been slowly arriving at the warehouse for at least two weeks. The last coils arrived at the warehouse the day before they were to be loaded aboard the ship.
To move the coils approximately 500 meters from the warehouse to the dock, the coils were covered with a plastic sheet and moved aboard a railcar. From October 24 until October 30, 2002, all 1200 coils were loaded into holds 2, 3, and 4 of the Tupungato. A clean bill of lading was issued for the coils.
The Tupungato then sailed to the port of San Vicente, Chile, where it took on cargo of timber. In order to make room for the new cargo, Captain Goran Babic, the Master of the Tupungato, and Oscar Galvez, an agent of CSAV, ordered the steel coils stowed up to four tiers high and relashed.
The Tupungato left San Vicente on November 4, 2002 and began its journey north. The Tupungato stopped in Callao, Peru, on November 8, 2002, where cargo consisting of copper cathodes, various metals, and lumber was loaded into holds 3, 4, and 5. Beginning on November 11, 2002, the Tupungato again sailed north, eventually passing through the Panama Canal and arriving at Milan Street Wharf ("Milan Street") in New Orleans on November 22, 2002. The ventilation log show a low temperature of 14 degrees Celsius and a high temperature of 33 degrees Celsius during the ocean voyage.
While at Milan Street, some of the cargo aboard the Tupungato was discharged. In order to facilitate the cargo discharge, some of the steel coils were shifted from hold 3 to hold 4. The ship then continued on to Mile 105 near New Orleans where many of the steel coils, including those under BL3 and BL5, were loaded aboard river barges bound for the Chicago area.
The river barges were unmanned and unventilated. The barges journeyed up the Mississippi River, into the Illinois and Chicago rivers, and eventually traveled approximately 30 miles across Lake Michigan to Burns Harbor, Indiana. The coils arrived at Burns Harbor on January 4, 2003, and were discharged from the river barges and stored in a warehouse at the Federal Marine Terminal, which had no climate control. From the warehouse, the coils were shipped by truck to their various destinations.
Mars first reported damage to the inner contents of the steel coil packages on February 10, 2003. James McNulty, a marine surveyor hired by plaintiff, conducted damage surveys of the Mars coils. Of the 149 coils Mars received under BL5, McNulty found that 102 coils exhibited various degrees of damage. He concluded that the damage was 50% attributable to rust and 50% attributable to physical damage. Although Mars intended to reject the damaged steel coils, McNulty negotiated for Mars to retain the coils at approximately half of their undamaged price.
Interstate first reported damage to its coils on March 14, 2003. McNulty determined that all 116 coils under BL3 were damaged, and he concluded that 76% of the damage was caused by rust and 24% was physical damage. After negotiation, Interstate also agreed to retain the damaged steel at approximately half of its original price.
The steel coils in this case traveled thousands of miles, were handled numerous times, and were transported by several different methods. At some point between the time they were produced at the Huachipato Mill and the time they were inspected in the Chicago area, 218 of the 265 coils under BL3 and BL5 were damaged by rust, physical impact, or both. Plaintiff's primary theories of how the damage occurred revolve around several distinct events. First, plaintiff contends that the ship was improperly ventilated, resulting in several forms of condensation that thoroughly wetted the cargo. Second, plaintiff argues that the ventilators were left open during a storm which caused seawater to wash into the holds and wet the cargo. Third, plaintiff asserts that the coils were improperly stowed aboard the Tupungato, resulting in physical damage. Fourth, plaintiff maintains the coils were damaged at Milan Street in New Orleans when they were shifted for the unloading of copper cargo.
Under COGSA, plaintiff bears the initial burden of making out a prima facie case that the goods were damaged while in defendants' care. Transatlantic Marine Claims Agency Inc. v. M/V OOCL Inspiration, 137 F.3d 94, 98 (2d Cir. 1998). If met, the burden then shifts to defendants to establish that the damage occurred as a result of one of the statutory exceptions. Atl. Mut. Ins. Co. v. CSX Lines, L.L.C., 432 F.3d 428, 433 (2d Cir. 2005). See 46 U.S.C. app. § 1304(2).
Plaintiff may satisfy its burden by showing that the goods in question were received by the defendants in good condition and off-loaded in damaged condition. Transatlantic, 137 F.3d at 98; Westway Coffee Corp. v. M.V. Netuno, 675 F.2d 30, 32 (2d Cir. 1982).
Typically, a clean bill of lading constitutes prima facie evidence that the goods were received by defendants in good condition. Atl. Mut. Ins. Co., 432 F.3d at 433. "A clean bill of lading does not, however, constitute prima facie evidence of the condition of goods shipped in sealed packages where the carrier is prevented from 'observing the damaged condition had it existed when the goods were loaded.'" Bally, Inc. v. M.V. Zim Am., 22 F.3d 65, 69 (2d. Cir. 1994)(quoting Caemint Food, Inc. v. Brasileiro, 647 F.2d. 347, 352 (2d Cir. 1981)). In such a case, plaintiff must present some further proof. Bally, 22 F.3d at 69.
Similarly, when cargo is shipped in sealed containers and not inspected at the time of discharge, plaintiff may have difficulty presenting direct evidence that the coils were damaged before discharge. In those instances plaintiff can instead show that "the characteristics of the damage suffered by the goods justify the conclusion that the harm occurred while the goods were in the defendant's custody." Transatlantic, 137 F.3d at 99; see also Vana Trading Co. v. S.S. Mette Skou, 556 F.2d 100, 105 n.8 (2d Cir. 1977).
Although each party in this case has framed the standard of proof in a COGSA action in its own favor, in order to make out its prima facie case plaintiff was required to prove by a preponderance of the evidence that the goods were damaged while in defendants' control. ...