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Federal Insurance Co. v. Great White Fleet Ltd.

August 1, 2008


The opinion of the court was delivered by: Gerard E. Lynch, District Judge


Federal Insurance Company ("Federal Insurance"), as insurer and subrogee*fn1 of Yak Pak El Salvador de C.A. and Yak Pak (collectively "Yak Pak"), brings this action against Great White Fleet (US) Ltd. ("GWF") for the value of a shipment of guitar straps and other musical accessories lost while in GWF's agent's possession during the Central American inland portion of a shipment that was to include ocean carriage from Guatemala to Texas. Although discovery is not yet complete, GWF now moves for summary judgment, claiming that a bill of lading issued July 30, 2006, absolves GWF of liability for the loss, and, in the alternative, limits its liability to $500 for the contents of the container. Since the clause absolving GWF of liability is ambiguous, it does not govern here. Moreover, the clause limiting GWF's liability cannot be held to govern at this stage of the case because on the present record a reasonable factfinder could conclude that Yak Pak had neither notice of the clause (or the other terms in the bill of lading) nor an opportunity to declare a higher value and receive extra coverage for the cargo. Therefore, this pre-discovery motion for summary judgment must be denied.


Yak Pak contracted with GWF, a common carrier, for a "door to door" shipment of music accessories from San Salvador, El Salvador to Houston, Texas. Chiquita Logistics Services El Salvador Ltda. ("Chiquita") operated as GWF's agent and helped to arrange the shipment. Prior to the voyage, Chiquita memorialized the details of the shipment in an undated shipping order. (Affidavit of David Mazaroli, dated March 20, 2008, ("Mazaroli Aff.") Ex. A ("Shipping Order").) In San Salvador, Yak Pak loaded the goods into a GWF shipping container and sealed it, and on July 28, 2006, a trucker, acting as GWF's agent, picked up the container. The contemplated shipment was intermodal (or multimodal) in that it included both sea and land components; the trucker was to drive the container to Puerto Barrios, Guatemala, where GWF or an agent was to place it on a ocean tanker and ship it to Freeport, Texas, and then transport it to Houston. However, the container never made it to Puerto Barrios. On July 30, 2006, after the loss of the cargo, GWF issued the bill of lading. (Declaration of Gregory G. Barnett, dated February 19, 2008, ("Barnett Decl.") Ex. 1 ("BOL").)

Defendant claims that the shipment was hijacked. (D. Rule 56.1 Stmt. ¶ 6.) Yak Pak, which had separately insured the cargo through Federal Insurance, sought indemnification, claiming that the container was stolen in transit to Puerto Barrios. (Barnett Decl. Ex. 4.) Federal Insurance indemnified Yak Pak, and then, as a subrogee of Yak Pak, sued GWF for the value of the shipment, claiming that the loss was caused by GWF's negligence.*fn3 The case was filed in state court in California, subsequently removed to federal court, and then transferred to this district.

1. Shipping Order and Bill of Lading

The undated shipping order identifies 2,299 "PKGS," or packages, 249 of which contain "shoulder bags" and 2,050 of which contain "guitar straps," to be shipped in a container. (Shipping Order.) In the "TOTAL $FOB or CIF" column, $72,848.90 is declared. (Id.)*fn4 A reasonable factfinder could conclude that this amount constituted the declared value of the shipment. The front of the bill of lading also describes the shipment as 2,299 boxes -- or packages -- of shoulder bags and guitar straps. (BOL.) Both the bill and the shipping order state that the packages were to be shipped in a GWF container (TRLU 522280-0), a "40Dry" or "40 HC" container (id.; Shipping Order), apparently referring to a forty-foot-long "high cube" shipping container for the storage and transport of dry goods. The bill lists San Salvador as the place of receipt of the shipment; Puerto Barrios, Guatemala as the port of loading; Freeport, Texas as the port of discharge; and Houston, Texas as the place of delivery. (BOL.) In both the bill and the shipping order, the transport was door-to-door. (Id.; Shipping Order.) However, unlike the shipping order, the bill contains no declaration of value; the "Declared Value $" column of the bill was left blank. (BOL.)

The back of the bill contains numerous clauses in small print, none of which appear in the shipping order. Three in particular are relevant to this dispute. Clause Four provides that "[w]here the Carrier has possession and custody of the cargo during any time other than the Ocean Carriage, Carrier's liability shall be governed by COGSA, as amended by this Bill of Lading. . . ." (Id. Clause 4(b).) Clause Nineteen limits the liability of the common carrier and its agents "for any loss or damage to or in connection with the shipment in an amount exceeding U.S. $500 per Package" (id. Clause 19(a)), a fairly standard limitation in the shipping industry. However, the clause goes on to provide that "the container shall be deemed the package for the purpose of the $500 per package limitation" if the shipment is lost during "any portion of the transport other than the Ocean Carriage, or where the Merchant is unable to determine whether the loss and/or damage took place during the Ocean Carriage." (Id. Clause 19(c).) Clause Thirteen limits GWF's liability even further, absolving GWF of liability for cargo loss in certain circumstances, providing that:

In some Central American ports, the Carrier*fn5 or its agents may require the Merchant*fn6 to use certain Inland Carriers*fn7 to safeguard the Carrier's containers. In these instances, the Merchant has the option of unloading their cargo from the Carrier's container or agreeing to use the Inland Carrier arranged by the Carrier or its agents. Should the Merchant agree to use the Inland Carrier arranged by the Carrier or its agents, the Carrier is under no obligation or liability under the bill of lading for any damage or loss to the Shipment during the inland transportation. (BOL Clause 13.)

2. Parties' Contentions

GWF reads these provisions together to mean that it is completely absolved of liability for loss or damage to the cargo arising from land transport to Puerto Barrios, Guatemala, and that its liability is limited to $500 for the entire container during all (other) non-ocean-carriage portions of intermodal transport. GWF acknowledges that, had the loss occurred at some point after the goods were loaded but before they were discharged from the ship, the bill, when read in tandem with the Carriage of Goods by Sea Act, 46 U.S.C. § 30701 note ("COGSA"),*fn8 would prevent GWF from limiting its liability below $500 for each of the 2,299 packages listed on the front of the bill, or $1.1 million for the loss.*fn9

Federal Insurance opposes GWF's motion on three grounds. First, it insists that COGSA (and, in the alternative, other federal law) prevents GWF from contractually absolving itself of liability for negligence. (P. Opp. 3-6, 7-8.) Second, Federal Insurance argues that, as a matter of contract and federal law, the appropriate "package" for all phases of the voyage is not the container (of which there is one), but the box (of which there are 2,299). (Id. at 6-7.) Third, it argues that GWF has failed to demonstrate that Yak Pak knew of the liability limitation and waiver provisions and could have obtained full coverage from GWF at a reasonable charge by declaring the cargo's excess value. (Id. at 8.)

For the reasons set forth below, even assuming the bill of lading is enforceable against Federal Insurance, the liability waver is sufficiently ambiguous that on the present record it cannot be held as a matter of law to absolve GWF of liability for the loss. Moreover, although the bill is best construed to define the relevant "package" as the container for inland carriage, thereby limiting recovery to $500 for the entire shipment, and although such a limitation does not offend otherwise applicable federal law, there is nonetheless a factual dispute regarding whether Yak Pak had notice of these provisions and a reasonable opportunity to secure additional coverage through GWF, which precludes GWF from enforcing the $500 per container liability limitation at this stage in the proceedings. Summary judgment must thus be denied.


I. Summary Judgment Standards

Summary judgment shall be granted if "there is no genuine issue as to any material fact" such that "the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A "genuine issue of material fact" exists if the evidence is such that a reasonable jury could find in favor of the nonmoving party. Holtz v. Rockefeller & Co., 258 F.3d 62, 69 (2d Cir. 2001). In deciding a motion for summary judgment, the Court "resolve[s] all ambiguities and draw[s] all reasonable inferences in the light most favorable to the party opposing the motion," Cifarelli v. Babylon, 93 F.3d 47, 51 (2d Cir. 1996), and does not make any credibility assessments or weigh the evidence, Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996).

Although a party may move for summary judgment "at any time," Fed. R. Civ. P. 56(b), pre-discovery summary judgment is the exception rather than the rule and will be granted "only in the clearest of cases." Kleinman v. Vincent, 1991 WL 2804, at *1 (S.D.N.Y. Jan. 8, 1991); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Moore's Federal Practice, ¶ 56.15[5] at 56-308 n. 28 (1993 & Supp. 1994). Under Fed. R. Civ. P. 56(f), a pre-discovery summary judgment on a properly supported record may nonetheless be inappropriate where the party opposing it shows that due to inadequate discovery it cannot "present facts essential to justify [his] opposition" that could be uncovered by additional discovery. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n. 5 (1986). In deciding whether to grant summary judgment on such a record, a court must consider:

(1) whether the lack of discovery was in any way due to fault or delay on the part of the non-movant; (2) whether the non-movant filed a sufficient Rule 56(f) affidavit explaining: (i) what facts are sought and how they are to be obtained, (ii) how those facts are reasonably expected to create a genuine issue of material fact, (iii) what effort the affiant has made to obtain them, and (iv) why the affiant was unsuccessful in those efforts; and (3) whether the non-movant provided any basis for its belief that further discovery would alter the outcome of the summary judgment motion.

Wells Fargo Bank Northwest, N.A. v. Taca Int'l Airlines, S.A., 247 F. Supp. 2d 352, 360 (S.D.N.Y. 2002), citing Berger v. United States, 87 F.3d 60, 65 (2d Cir. 1996); Meloff v. New York Life Ins. Co., 51 F.3d 372, 375 (2d Cir. 1995).

II. Scope of Maritime Jurisdiction and Federal Common Law

"When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation." Norfolk S. Ry. Co. v. James N. Kirby, Pty Ltd., 543 U.S. 14, 22-23 (2004), citing Kossick v. United Fruit Co., 365 U.S. 731, 735 (1961). "[S]o long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce -- and thus it is a maritime contract," regardless of whether "it also provides for some land carriage." Kirby, 543 U.S. at 27; accord Sompo Japan Ins. Co. v. Union Pacific R.R. Co., 456 F.3d 54, 71 n.17 (2d Cir. 2006). The bill here required a "substantial" sea voyage from Guatemala to Texas, and as there is no suggestion that the case is "inherently local," it is therefore a maritime contract governed by federal law, including federal common law. Federal common law "plays a more prominent role in the maritime context than in others . . . [but] nevertheless only applies in the absence of a relevant statute." Sompo, 456 ...

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