REXROTH HYDRAUDYNE B.V., Plaintiff,
v.
OCEAN WORLD LINES, INC., et al., Defendants.
Feb. 14, 2007.
MEMORANDUM OPINION
KAPLAN, J.
This matter is before the Court on defendants’ motion for partial summary judgment capping their liability at $13,500 by virtue of the package limitation contained in the Carriage of Goods by Sea Act (“COGSA”).
46 U.S.C. app. § 1300 (2005) et seq. After this lawsuit was filed, Congress enacted a law “reorganizing and restating the laws currently in the appendix to title 46,” including COGSA’s provisions. Pub.L. 109-304, 120 Stat. 1485 (2006).
Facts
The material facts and, indeed, liability are entirely undisputed.
The Shipment
On October 24, 2000, plaintiff Rexroth Hydraudyne B.V. (“Hydraudyne”) contracted with defendant Ocean World Lines, Inc. (“OWL”), a non-vessel operating common carrier (“NVOCC”), for the transport of a cargo consisting of “27 Packages, being totally one set equipment for a six degrees of freedom motion system for a 1900 beech flight simulator” between Rotterdam, the Netherlands, and the ultimate consignee, TDI, in Englewood, Colorado, via the Port of Houston. OWL in turn contracted with Cosco Container Lines Co., Inc. (“Cosco Shanghai”) to carry the cargo to the Port of Houston. Cosco Shanghai, through its U.S. agent, Cosco North America, Inc. (“Cosco NA”), arranged for inland transport from Houston to Colorado.
The contract of carriage with Cosco Shanghai identified Ocean World Lines GmbH (“OWL GmbH”) as “Shipper” and OWL as “Consignee,” which had the effect of giving OWL GmbH the exclusive right to give instructions concerning the handling of the cargo.
The cargo reached Houston on November 11, 2000. Two days later, Cosco delivered the cargo to its agent and subcontractor, Union Pacific Railroad, for transfer to Denver, where it would undergo customs clearance.
On or before November 20, 2000, Hydraudyne instructed OWL to “hold” the cargo and not to release it to TDI, explaining that TDI had defaulted on financial obligations to Hydraudyne. OWL accepted these instructions and undertook to perform, so Hydraudyne’s instruction became part of the contract of carriage between Hydraudyne and OWL. The instructions were relayed to Cosco Shanghai and Cosco NA by OWL.
The cargo remained at the Union Pacific Railroad Denver Freight Station until January 5, 2001 when it was released improperly by Cosco NA for delivery to TDI, which constituted a breach of the contract of carriage. TDI failed to pay for the cargo.
Plaintiff here sues OWL, Cosco NA, Cosco Americas, Inc., and Cosco Container Lines Americas, Inc. (“CCLA”), and Cosco Shanghai for the loss. Cosco Shanghai admits liability because its agent, Cosco NA, released and delivered the cargo to TDI contrary to OWL’s written instructions not to do so.
The Contracts of Carriage
The cargo was carried under two contracts of carriage executed on the same day, both of which describe the cargo as 27 packages.
The OWL bill of lading incorporated the terms of its tariff. It provided for a $500 per package limitation whenever COGSA is applicable. It provided also that all agents and subcontractors of OWL would have the benefit of all provisions in the bill of lading (a so-called “Himalaya Clause”).
The Cosco Shanghai combined transport bill of lading provided that carriage to or through U.S. ports is subject to COGSA and also contained a Himalaya Clause.
The Cosco Shanghai non-negotiable waybill provided that the shipper accepted all terms and conditions of the combined transport bill of lading including the package limitation.
Discussion
COGSA provides in pertinent part that:
“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 … unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.”
46 U.S.C. app. § 1304(5) (2005).
As it is undisputed that the shipment consisted of 27 packages and that the value of the goods were not declared before the shipment or inserted in the bills of lading, the package limitation appears to limit defendants’ liability. Plaintiff nevertheless resists this conclusion on two grounds.
A. The Carmack Amendment and COGSA
The carriage at issue here involved both ocean and inland segments-ocean from Rotterdam to the Port of Houston, railroad from the Port of Houston to Denver, and presumably truck from Denver to Englewood, Colorado. The Carmack Amendment provides in relevant part:
“(a) A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part shall issue a receipt or bill of lading for property it receives for transportation under this part. That rail carrier and any other carrier that delivers the property and is providing transportation or service subject to the jurisdiction of the Board under this part are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this subsection is for the actual loss or injury to the property caused by-
“(1) the receiving rail carrier;
“(2) the delivering rail carrier; or
“(3) another rail carrier over whose line or route the property is transported in the United States …
“(b) The rail carrier issuing the receipt or bill of lading under subsection (a) of this section or delivering the property for which the receipt or bill of lading was issued is entitled to recover from the rail carrier over whose line or route the loss or injury occurred the amount required to be paid to the owners of the property….”
49 U.S.C. § 11706.
As the loss occurred during the inland portion of the journey, plaintiff argues that the Carmack Amendment applies to the exclusion of COGSA and thus avoids the package limitation. It relies heavily on Sompo Japan Insurance Company of America v. Union Pacific R.R. Co., where the Second Circuit held that the Carmack Amendment applied to the domestic rail portion of a continuous intermodal shipment originating abroad and traveling under through bills of lading and that the ocean carrier could not contractually extend COGSA’s terms to a domestic rail carrier.
456 F.3d 54 (2d Cir.2006).
Sompo Japan is an exceptional instructive opinion that resolved a difficult question concerning the liability of a rail carrier in the circumstances there presented, which in many respects are comparable to those at bar. The short answer to plaintiff’s position, however, is that Sompo Japan addresses the impact of the Carmack Amendment, which applies only to certain rail carriers, to the liability of a rail carrier. But the issue of rail carrier liability is not presented here. The issue in this case is whether an NVOCC or other non-rail carriers are entitled to the benefit of the COGSA package limitation under the parties’ contracts. Nothing in Sompo Japan sheds any light on that question. Indeed, apart from its mistaken reliance on the Carmack Amendment, plaintiff suggests no convincing reason why it should not.
B. Unreasonable Deviation
The concept of deviation grew out of the pre-COGSA law of marine insurance, in which a carrier’s deviation from its contract voyage would void insurance, making the carrier liable in place of the insurer for loss or damage to the cargo. To protect shippers, contractual limits on carriers’ liability did not apply in cases of such deviation.
See 2 Schoenbaum § 10-32, at 138.
See, e.g., Thyssen, Inc. v. S.S. Fortune Star, 777 F.2d 57, 63-64 (2d Cir.1985) (Friendly, J.).
The survival of this doctrine and its effect on limitations of carrier liability were uncertain after COGSA was enacted in 1936, in part because COGSA refers to “unreasonable deviation” without defining the term or clarifying its relationship to COGSA’s limitation of carrier liability to the $500 per package in Section 4(5). Case law has filled in the gaps.
49 Stat. 1207 (1936).
Section 4(4) provides:
“Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be 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) (2005).
See 46 U.S.C. app. § 1304(5) (2005) (“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 … unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.”).
Although once in doubt, the consequences of finding that a carrier made an “unreasonable deviation” are now well established in the Second Circuit: the carrier is barred from invoking the $500 COGSA limitation of liability. 0
0. See SNC S.L.B. v. M/V Newark Bay, 111 F.3d 243, 248 (2d Cir.1997); Sedco, Inc. v. S.S. Strathewe, 800 F.2d 27, 30 (2d Cir.1986); Iligan Integrated Steel Mills, Inc. v. S.S. John Weyerhaeuser, 507 F.2d 68, 70-71 (2d Cir.1974), cert. denied, 421 U.S. 965 (1975); Encyclopedia Britannica, Inc. v. S.S. H.K. Producer, 422 F.2d 7, 18 (2d Cir.1969), cert. denied, 397 U.S. 964 (1970); Jones v. The Flying Clipper, 116 F.Supp. 386, 387 (S.D.N.Y.1953). But see Atlantic Mut. Ins. Co. v. Poseidon Schiffahrt, 313 F.2d 872, 874-75 (7th Cir.1963), cert. denied, 375 U.S. 819 (1963).
What qualifies as an “unreasonable deviation” is more complex. The term originally referred to a “carrier’s departure from the required geographic route,” 1 but some courts have extended the doctrine to some non-geographic deviations from the contract.2 Beyond the core category of a ship’s geographic deviations, the Second Circuit has applied the doctrine to unauthorized on-deck stowage of cargo.3 Nonetheless, it has declined to extend it to unseaworthiness of a vessel, even if known to the vessel’s owner,4 or to nondelivery of goods even when that nondelivery is criminal.5 In Sedco v. S.S. Strathewe,6 on which the defendant relies, the Circuit went so far as to state that “unreasonable deviation” is limited to two circumstances: “geographic deviation and unauthorized on-deck stowage.” 7
1. 2A Benedict on Admiralty § 123, at 12-13 (7th ed. Mar.2000) (hereinafter Benedict); see also, e.g., The Willdomino v. Citro Chem. Co., 272 U.S. 718 (1927).
2. See 2A Benedict § 123, at 12-12.
3. Encyclopedia Britannica, Inc. v. S.S. H.K. Producer, 422 F .2d 7, 18 (2d Cir.1969), cert. denied, 397 U.S. 964 (1970); see also Jones v. The Flying Clipper, 116 F.Supp. 386, 387-88 (S.D.N.Y.1953).
4. See Iligan Integrated Steel Mills, Inc. v. S.S. John Weyerhaeuser, 507 F.2d 68, 72-73 (2d Cir.1974) (alternative ground for decision), cert. denied, 421 U.S. 965 (1975).
5. See B.M.A. Indus., Ltd. v. Nigerian Star Line, Ltd., 786 F .2d 90, 92 (2d Cir.1986) (criminal nondelivery); Italia Di Navigazione, S.p.A. v. M.V. Hermes I, 724 F.2d 21, 22 (2d Cir.1983) (nondelivery).
At least one district court has pointed out the tensions in these cases:
“[T]he law of this Circuit seems to have created an unjust paradox: a carrier who stowes [sic ] cargo on deck without the shipper’s authorization loses COGSA’s per package limitation; and yet, a carrier who recklessly tenders an unseaworthy ship which consequently sinks with all its cargo and crew, gets the benefit of the package limitation. In addition, a carrier who misrepresents the onboard status of the cargo in its bill of lading will lose COGSA’s package limitation, regardless of whether the misrepresentation was fraudulent; and yet, a carrier who fraudulently misrepresents that its ship is seaworthy can successfully benefit from the package limitation.” Complaint of Tecomar S.A., 765 F.Supp. 1150, 1185 n. 95 (S.D.N.Y.1991) (Tenney, J.) (citations omitted).
6. 800 F.2d 27 (2d Cir.1986).
7. Id. at 31.
Against this background, plaintiff offers no persuasive basis for supposing that the erroneous failure to adhere to the delivery “hold” constitutes such a deviation as to deprive defendants of the package limitation. Indeed, the Second Circuit in B.M.A. Indus ., Ltd. v. Nigerian Star Line, Ltd., 8 held that the taking of a bribe to effect a misdelivery does not result in a deviation. A fortiori, a less culpable misdelivery does not do so.
8. 786 F.2d 90.
Conclusion
Defendants’ motion for partial summary judgment limiting their liability to no more than $13,500 is granted.
SO ORDERED.
