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Man Ferrostaal, Inc v. M/V Akili

January 24, 2011


The opinion of the court was delivered by: Denise Cote, District Judge:


This action arises out of a shipment of thin-walled pipe purchased by plaintiff and shipped aboard the M/V Akili ("Akili") in 2006 from Shanghai, China to New Orleans, Louisiana. Plaintiff MAN Ferrostaal, Inc. ("Ferrostaal") alleges that the pipes were damaged due to improper stowage during transport. A non-jury trial was held in this action on January 20, 2011.

Pursuant to this Court's procedures for non-jury trials, the parties submitted the direct testimony of their witnesses by affidavit and their documentary evidence with the pretrial order. The plaintiff submitted direct testimony by affidavit for witnesses Martin Heyn of Ferrostaal and Severo Calima, a marine surveyor who conducted the discharge and damage surveys of the cargo upon its ultimate arrival in Pennsylvania. In addition, plaintiff has submitted as exhibits the depositions of Steve Drobny of Ferrostaal; Lu Jiangming, the marine surveyor who examined the cargo pre-loading and during loading; and Matthew Salkeld, the marine surveyor who inspected the cargo upon arrival in New Orleans and during discharge to the river barge. The defendants submitted as an exhibit the deposition of Lu Jiangming.

Based on the trial evidence, the following are the Court's findings of fact and conclusions of law issued pursuant to Rule 52 of the Federal Rules of Civil Procedure.


I. The Parties Plaintiff Ferrostaal is a Delaware corporation engaged in the trade and import of iron and steel products into the United States for resale. Since being purchased in 2007, it has operated under the name Coutinho & Ferrostaal, Inc.

Defendants are the Akili, a bulk carrier cargo ship doing business as a merchant vessel in the international common carriage of goods by sea; Akela Navigation Co., Ltd. ("Akela"), the registered owner of the Akili; Almi Marine Management SA ("Almi"), the vessel manager for the Akili at all relevant times; and SM China Co. Ltd. ("SM China"), the voyage charter party for the relevant shipment of cargo. SM China has been dismissed for the plaintiff's failure to serve it. Akela and Almi contest that there is personal jurisdiction over them.*fn1

II. The Business of Ferrostaal In relevant part, Ferrostaal's business is to receive orders of steel from customers in the United States, and to then procure steel from international suppliers and arrange for its transport to the customer. Its biggest source of steel is manufacturers, such as pipe mills, from China, although Ferrostaal procures steel from many other nations as well. When sourcing pipe from China, the goods are sold FOB vessel,*fn2 so Ferrostaal arranges for the transportation by chartering or subchartering a vessel. Ferrostaal typically arranges for a survey of the goods both at the time of loading and unloading to inspect the condition of the material.

III. The Transaction at Issue The subject cargo in this case is 9,960 thin-walled steel pipes manufactured by Zhongqing Petroleum Steel Pipe Co., Ltd. (abbreviated "ZQ" in the shipping and survey materials) in China, and purchased by Ferrostaal for McJunkin Appalachian Oilfield ("McJunkin"), whose business is "pipe coating" in West Virginia, Pennsylvania and Ohio. This steel pipe was grouped into 996 packages under the bill of lading SMAGAL-607-SHNL-03 and was destined for unloading from the Akili at New Orleans, Louisiana.

Ferrostaal executed a part cargo charter with SM China on June 8, 2006 for the carriage of the steel pipe from Shanghai ("Voyage Charter Party"), with a freight rate of "$68.00 per MT FIO S/L/S/D 1-2," meaning that Ferrostaal had responsibility to pay for "cargo to be loaded, stowed, lashed, secured, and dunnaged." The Voyage Charter Party included an "Owners' Responsibility Clause" that put responsibility for loss "caused by improper or negligent stowage, or discharge, or care of the goods" on the "Owners" and specified that "Stowage is to be under the Master's supervision and responsibility as Owners' agent" and "Owners to be responsible for cargo loss and damage according to Hague-Visby rules." The Voyage Charter Party further clarified that the "Owners," not the stevedores, would be responsible for stowage, lashing and securing of cargo. Under the Voyage Charter Party, SM China is defined as the "Owner." All claims for loss or damage to the cargo were to be governed by Hague-Visby rules regardless of any contrary rules in the Charter Party or any bill of lading.*fn3

The Akili was nominated for the purpose of transporting this steel pipe from Shanghai, pursuant to a charter between Akela and non-party Seyang Shipping Ltd ("Seyang") signed on June 19, 2006 ("Time Charter Party") and in effect for a period of four to six months. Pursuant to the Time Charter Party, Seyang chartered out the entirety of the Akili. The Time Charter Party specified that all bills of lading under the charter would incorporate "the General Clause Paramount or U.S. or Canadian Clause Paramount whichever applicable as attached."*fn4

It also provided that the Akili's captain would be under the orders and direction of Seyang and sign bills of lading for cargo. Seyang would load, stow, secure and discharge cargo at their expense from the Akili. In turn, Seyang subchartered the vessel to SM China, with whom plaintiff contracted.

IV. The Survey and Loading of the Subject Cargo in Shanghai Ferrostaal arranged for Lu Jiangming ("Lu"), a marine surveyor in Shanghai with many years of experience as a stevedore, stevedore foreman, and marine surveyor, to conduct the loading port survey of the cargo in Shanghai. Lu had performed cargo surveys in the port of Shanghai for Ferrostaal and other companies since 1995. Ferrostaal sent Lu a packing list for its cargo aboard the Akili, including information about the type and quantity of pipe to be transported. A final packing list was sent to Lu by the Chinese steel mill that supplied the pipe. Lu prepared a survey report dated July 12, 2006, first examining the pipe at the open stowage yard in the port on June 22, 2006, and then attending and examining the process of loading and securing the cargo onboard the Akili.

Lu's inspection of the subject cargo at the open stowage yard found no physical damage other than rusting, unlike some other pipe he surveyed for Ferrostaal that is not at issue in this lawsuit and which did suffer from physical damage before loading. He also noted that the mill did not add orange caps to the ends of most of the pipes, although Lu believes that these caps do not play a function in protecting the pipes from physical damage.

Lu became concerned about the stowing plan from the Akili, which indicated that the pipe at issue here was to be stowed under thicker-walled pipe bound for Houston, Texas. The roughly 1,500 metric tons of thin-walled Ferrostaal pipe were stowed below 2,600 metric tons of non-Ferrostaal pipe. Lu believed that this weight on top of the thin-walled pipes would cause denting of the pipe walls. He also had concerns that the pipe was being stowed in a forward hatch not generally favorable to transporting such long pipe.

On June 23, 2006, before loading commenced, Lu suggested to Captain Zhong, the "supercargo" (an agent of SM China who had authority over cargo loading and stowage), that the thin-walled pipe at issue be loaded on top of the Houston-bound thick-walled pipe. Captain Zhong rejected this suggestion. In Chinese ports, it is customary for the time charterer (for whom Captain Zhong worked) to have authority over loading procedure. As a consequence, Lu did not inform others of his concerns.

The Akili was loaded with the Ferrostaal pipe at Terminal 10 in the port of Shanghai, a terminal that handled lots of pipe shipments at the time, from June 23 to 27, 2006. A Chinese state-owned company that was run by or affiliated with the Shanghai Harbor Bureau conducted the loading of the pipe. Lu testified that he saw no damage done to the pipes during loading in the vessel's cargo holds, and that the ship's officers and supercargo used dunnage between tiers of pipe, including above the bundles of pipe.

Another 729 metric tons was loaded in hold 5 above the subject cargo at the Akili's second loading port in China, Xingang. When the Akili finally set sail on its voyage to the United States, 21% of the total cargo it carried was Ferrostaal's cargo, a subset of which was the thin-walled pipe at issue here.

V. Discharge of the Subject Cargo in New Orleans The Akili had two ports of call to discharge its cargo, the first in Houston, and the second in New Orleans. The Akili arrived in New Orleans on September 2, 2006. The steel pipe at issue was discharged from the Akili in New Orleans onto a barge for transport upriver to Pennsylvania.

Ferrostaal hired surveying firm Capt. I.S. Derrick LLC ("Derrick") to conduct the outturn survey of the cargo, observing the cargo both in the Akili upon arrival and periodically as it was discharged from the vessel. Derrick surveyor Matthew Salkeld ("Salkeld") conducted this survey from September 4 through 8 and September ...

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