Man Ferrostaal, Inc. v. M/V Akili, No. 11-486 (2d Cir. 2012)
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Appellants, the M/V Akili, its owner, and manager, appealed from the district court's judgment holding that it was liable in rem for damage to cargo shipped aboard the vessel. Ferrostaal cross-appealed from the holding that the owner and manager were not liable in personam under a bailment theory. At issue was whether (1) an in rem proceeding rendering the Akili liable for damage to, or loss of, cargo was unavailable in this matter because a vessel was not a "carrier" within the meaning of the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. 30701, and (ii) the free-in-and-out provision in the Voyage Charter Party purportedly absolving the Akili of in rem liability was enforceable. The court held that the first issue was essentially irrelevant because a vessel's in rem liability for damage to cargo existed under maritime common law, not COGSA, for a violation of a carrier's contractual or statutory obligations. The court resolved the second issue against enforcement of the free-in-and-out provision so far as it might be construed to prevent in rem liability of the vessel. In doing so, the court did not decide whether COGSA applied as a matter of law to this voyage because, even if it did not, the Voyage Charter Party's Clause Paramount contractually incorporated the Hague-Visby rules prohibiting a carrier from contracting for a waiver of its obligations regarding damage to cargo. The court also held that there was no in personam liability for the owner and manager where the carriers remained responsible for delivery of the goods and maintained exclusive control and custody over the cargos through agents they hired directly.
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11-0486-cv(L) MAN Ferrostaal, Inc. v. M/V Akili, 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 4 August Term, 2011 (Argued: January 9, 2012 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Decided: December 6, 2012) Docket No. 11-0486-cv(L), 11-0567-cv(XAP) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - MAN FERROSTAAL, INC., Plaintiff-Appellee-Cross-Appellant, v. M/V AKILI, her engines, boilers, tackle, etc., Defendant-Cross-Claimant-Appellant-Cross-Appellee AKELA NAVIGATION CO., LTD., ALMI MARINE MANAGEMENT SA, Defendants-Third-Party Plaintiffs-CrossClaimants-Appellees, SM CHINA CO., LTD., Defendant-Third-Party Defendant-Cross-Defendant. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - B e f o r e: WINTER, KATZMANN, and LYNCH, Circuit Judges. Appeal from a judgment of the United States District Court 26 for the Southern District of New York (Denise Cote, Judge), after 27 a bench trial, holding the M/V Akili liable in rem for damage to 28 cargo shipped aboard the vessel. 29 district court erred in holding that the vessel was liable in 30 rem, and in holding that the Carriage of Goods by Sea Act applied Appellants argue that the 1 1 to the vessel as a carrier under that act. 2 cross-appeals the judgment for failing to hold Almi Marine 3 Management and Akela Navigation Co. liable in personam for the 4 damage under a bailment theory. 5 6 7 8 9 10 11 12 13 14 15 16 17 Man Ferrostaal We affirm. VINCENT M. DEORCHIS, Deorchis & Partners, LLP, New York, NY, for Defendant-Cross-ClaimantAppellant-Cross-Appellee. STEVEN P. CALKINS, Kingsley Kingsley & Calkins, Hicksville, NY, for Plaintiff-Appellee-CrossAppellant. WINTER, Circuit Judge: The M/V Akili, its owner, Akela Navigation Co., and manager, 18 Almi Marine Management, appeal from Judge Cote s decision, after 19 a bench trial, holding the M/V Akili liable in rem for damage to 20 cargo shipped aboard the vessel. 21 district court erred in holding the vessel liable in rem. 22 Ferrostaal ( Ferrostaal ) cross-appeals from the holding that 23 Almi Marine Management ( Almi ) and Akela Navigation Co. 24 ( Akela ) are not liable in personam under a bailment theory. 25 write at length to clarify both the issues and our analysis, 26 which differs somewhat from that of the district court. 27 we affirm. Appellants claim that the 28 2 Man We However, 1 BACKGROUND 2 Ferrostaal s business is accepting orders of steel from 3 customers in the United States, procuring steel from 4 international suppliers, and then arranging for the steel s 5 transportation to the customer. 6 9,960 thin-walled steel pipes, manufactured in China and sold 7 to Ferrostaal pursuant to a purchase order dated March 23, 2006 8 ( Purchase Order ). 9 Appalachian Oilfield of West Virginia and arranged for it to be 10 11 The cargo at issue here was Ferrostaal in turn sold the pipe to McJunkin shipped to New Orleans. A series of charters and sub-charters of the Akili were 12 executed before the cargo was loaded aboard. On June 19, 2006, 13 Akela time-chartered the Akili to Seyang Shipping, Ltd., which in 14 turn was permitted to sublet the vessel for all or any part of 15 the time covered by the charter (the Time Charter Party ). 16 Time Charter Party specified that all bills of lading issued 17 under the charter would incorporate the General Clause Paramount 18 or U.S. or Canadian Clause Paramount whichever applicable as 19 attached. 1 The Thereafter, Seyang sub-chartered the vessel to S.M. 1 The USA Clause Paramount is a clause designating the Carriage of Goods by Sea Act, or COGSA, as the controlling law with respect to the rights and liabilities of parties to a bill of lading. 3 1 China for the voyage from Shanghai to Houston and then to New 2 Orleans. 3 had executed a part-cargo charter (the Voyage Charter Party ) 4 with Ferrostaal for the carriage of the thin-walled pipes from 5 Shanghai to New Orleans. 6 identify the vessel on which the cargo was to be shipped, stating 7 instead that the ship was TBN -- to be named in landlubbers 8 lingo -- by S.M. China. 9 Prior to chartering the Akili from Seyang, S.M. China The Voyage Charter Party did not The Voyage Charter Party placed responsibility for loss 10 caused by improper or negligent stowage, or discharge, or care 11 of the goods on the Owners of the vessel. 12 specified that [s]towage is to be under the Master s supervision 13 and responsibility as Owners agent. 14 S.M. China. 15 stated that the handling of cargo was to be free of risk . . . 16 to the vessel. 17 It further The Owner was defined as It also contained a free-in-and-out provision that The Voyage Charter Party also contained a Clause Paramount 18 that stated in part, [n]otwithstanding any other provisions in 19 this contract, any claims for loss or damage to cargo shall be 20 governed by the Hague-Visby rules as if comprehensively 21 applicable by law. 22 convention that are in all pertinent respects literally identical 23 to rules established by the Carriage of Goods by Sea Act, 46 The Hague-Visby rules are an international 4 1 U.S.C. § 30701 ( COGSA or the Act ). 2 because the convention requires signatory nations to pass 3 legislation embodying these rules. 4 This is no coincidence A bill of lading was issued by China Ports International 5 Shipping Agency Ltd., as the agent of S.M. China, to Zhongqing, 6 the shipper, and then was transferred to Ferrostaal through 7 banking channels pursuant to the cash against documents term of 8 the Purchase Order. 9 Paramount that incorporated the Hague rules.2 10 The bill of lading contained a Clause The pipe was carried from China to New Orleans aboard the 11 Akili. Upon arrival in New Orleans, it was discovered that the 12 steel pipes had been placed at the bottom of a cargo hold and 2 The Clauses Paramount in the Bill of Lading reads as follows: This Bill of Lading shall be subject to the Hague Rules contained in International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, dated at Brussels the 25th August, 1924, or the corresponding legislation of the flag state of the ship. If the stipulations of the bill of lading are wholly or partly contrary thereto, this bill of lading shall be read as if such stipulation or part thereof, as the case may be, were deleted. Because the contract of affreightment is the Voyage Charter Party for reasons stated infra, the differences between the Voyage Charter Party Clause Paramount and the Bill of Lading Clause Paramount do not affect the disposition of this case. 5 1 damaged when heavier pipes were placed on top. 2 repaired by Houston Tubulars, Inc., which was paid $286,078.32 by 3 Ferrostaal. 4 The pipes were On July 9, 2007, Ferrostaal filed the present action in rem 5 against the Akili and in personam against Akela, Almi, and S.M. 6 China. 7 After a bench trial, Judge Cote held the Akili liable in rem4 and Akela and Almi filed a cross-claim against S.M. China.3 3 Akela and Almi filed a motion to dismiss for lack of personal jurisdiction on January 23, 2009, which was stayed pending trial on the issues of in rem and in personam liability. 4 On February 9, 2009, Ferrostaal made an emergency motion to sever the in rem action and transfer it to the Eastern District of Louisiana because the Akili was expected to call at a Louisiana port. The motion was granted. Then, the Owners insurance company wrote a Letter of Undertaking seeking to avoid the arrest. Pursuant to a Stipulation and Consent Order entered by the parties, the in rem action was transferred back to the Southern District of New York, where it was assigned a new case number. Although the in rem and in personam claims were tried together, disposed of by a single opinion and order, and resolved by a combined judgment bearing both case numbers, the two cases were never formally consolidated. Because the Akili filed its notice of appeal only under the docket number of the in personam action, Ferrostaal argues that we lack jurisdiction to consider appellant s arguments insofar as they pertain to the in rem action. We are unpersuaded. The Akili timely filed notice in the district court of its intent to appeal the judgment, order or decree entered by the district court as it pertains to the in rem action. 28 U.S.C. § 2107(a). Ferrostaal received notice of the Akili s intent to appeal, and it claims no prejudice as a result of the Akili s failure to file the notice in both actions or to caption it with both district court case numbers. Accordingly, the Akili s oversight is not fatal to its appeal. See Marrero Pichardo v. Ashcroft, 374 F.3d 46, 54-55 (2d Cir. 2004); Conway v. Village of Mount Kisco, N.Y., 750 F.2d 205, 211-12 (2d Cir. 1984). 6 1 dismissed the claims for in personam liability against Akela and 2 Almi. This appeal and cross-appeal followed. 3 DISCUSSION 4 We review the district court s findings of fact for clear 5 error and its conclusions of law de novo. 6 Transp. Co. v. Wonsild Liquid Carriers Ltd., 190 F.3d 64, 67 (2d 7 Cir. 1999). 8 novo. 9 2001). 10 11 a) Mobil Shipping & Mixed questions of law and fact are reviewed de White v. White Rose Food, 237 F.3d 174, 178 (2d Cir. The Appeal Boiled down, the parties dispute whether: (i) an in rem 12 proceeding rendering the Akili liable for damage to, or loss of, 13 cargo is unavailable in this matter because a vessel is not a 14 carrier within the meaning of COGSA and (ii) the free-in-and- 15 out provision in the Voyage Charter Party purportedly absolving 16 the Akili of in rem liability is enforceable. 17 first issue is essentially irrelevant because a vessel s in rem 18 liability for damage to cargo exists under maritime common law, 19 not COGSA, for a violation of a carrier s contractual or 20 statutory -- COGSA s -- obligations. 21 against enforcement of the free-in-and-out provision so far as it 22 might be construed to prevent in rem liability of the vessel. 23 doing so, we do not decide whether COGSA applied as a matter of 7 We hold that the We resolve the second issue In 1 law to this voyage because, even if it did not, the Voyage 2 Charter Party s Clause Paramount contractually incorporates the 3 Hague-Visby rules prohibiting a carrier from contracting for a 4 waiver of its obligations regarding damage to cargo. 5 U.S.C. § 30701 Note § 3(8). See 46 6 1. The Vessel as a COGSA Carrier 7 COGSA sets out the obligations of carriers involved in the 8 shipment of goods into the United States from international 9 ports. It requires ocean carriers to Properly and carefully 10 load, handle, stow, carry, keep, care for, and discharge the 11 goods carried, id. § 30701 Note § 3(2), and forbids carriers 12 from contracting out of these obligations. 13 3(8); see also Sogem-Afrimet. Inc. v. M/V Ikan Selayang, 951 F. 14 Supp. 429, 442-43 (S.D.N.Y. 1996), aff d, 122 F.3d 1057 (2d Cir. 15 1997) ( COGSA does not permit the carrier to divest itself of the 16 duty to insure the proper stowage of the cargo. ). 17 a carrier to mean the owner, manager, charterer, agent, or 18 master of a vessel, 46 U.S.C. § 30701, including the owner or 19 the charterer who enters into a contract of carriage with a 20 shipper. 21 Id. § 30701 Note § COGSA defines Id. at Note § 1(a). Appellant argues that because a vessel is not a carrier 22 under COGSA, the Akili cannot be liable in rem for damage to, or 23 loss of, cargo. We disagree. COGSA assumes the existence of the 8 1 in rem proceeding rather than creates it. 2 the Act, sets out duties applicable only to carriers but is 3 entitled Responsibilities and Liabilities of Carrier and Ship. 4 (emphasis added). 5 maritime law supplies in rem liability coextensive with carrier 6 liability.5 7 Section 3, the crux of The very title of Section 3 thus assumes that Well before enactment of COGSA and its predecessor, the 8 Harter Act, maritime law held ships liable in rem for cargo 9 damage due to improper stowage. The Water Witch, 66 U.S. 494, 10 500 (1862) ( The ship having received the cargo and carried it 11 . . . is estopped to deny her liability to deliver in like good 12 order as received . . . . ); Demsey & Assoc., Inc. v. S.S. Sea 13 Star, 461 F.2d 1009, 1014 (2d Cir. 1972) ( Every claim for cargo 14 damage creates a maritime lien against the ship which may be 15 enforced by a libel in rem. ), abrogated on other grounds by 16 Seguros Illimani S.A. v. M/V Popi P, 929 F.2d 89 (2d Cir. 1991); 17 Pioneer Import Corp. v. Lafcomo, 49 F.Supp. 559, 561-62 (S.D.N.Y. 18 1943), aff d, 138 F.2d 907 (2d Cir. 1943) ( A lien arises against 19 the ship for damage to cargo caused by improper stowage. ); see 20 also Gilmore & Black, The Law of Admiralty § 3-45 at 165 (1957). 5 The only portion of Section 3 that applies directly to ships is Paragraph 8, which prevents parties from contracting around the ship s coextensive liability. § 30701 Note § 3(8), discussed infra. 9 1 In rem liability is derived from a pre-COGSA maritime law 2 doctrine to the effect that, once cargo is aboard a vessel, the 3 vessel is deemed to have impliedly ratified the underlying 4 contract of affreightment and is answerable for nonperformance.6 6 The district court used a combination of maritime law and COGSA to find the Akili liable in rem. See Man Ferrostaal v. M/V Akili, 763 F. Supp. 2d 599, 612 (S.D.N.Y. 2011) ( The Akili, by setting sail with the cargo, is deemed to have ratified the bill of lading, and therefore is liable in rem as a [COGSA] carrier. (emphasis added)). We do not adopt this reasoning. The implied ratification doctrine gives rise directly to in rem liability. It does not render a vessel a carrier under COGSA. See, e.g., Demsey, 461 F.2d at 1015. The ratification doctrine is directly traceable to pre-COGSA maritime law precedent. For example, the seminal implied ratification case, The Esrom, 272 F. 266, 270 (2d Cir. 1921), cites The Schooner Freeman v. Buckingham, 59 U.S. 182 (1855), a case that preceded COGSA and its predecessor, the Harter Act. In Freeman, the Supreme Court stated: [W]hen the general owner [of a vessel] intrusts the special owner with the entire control and employment of the ship, it is a just and reasonable implication of law that the general owner assents to the creation of liens binding upon his interest in the vessel, as security for the performance of contracts of affreightument made in the course of the lawful employment of the vessel. The general owner must be taken to know that the purpose for which the vessel is hired, when not employed to carry cargo belonging to the hirer, is to carry cargo of third persons; and that bills of lading, or charter-parties, must, in the invariable regular course of business be made, for the performance of which the law confers a lien on the vessel. Id. at 190. 10 1 Demsey, 461 F.2d at 1014-15; see also Kraus Bros. Lumber Co. v. 2 Dimon S.S. Corp., 290 U.S. 117, 121 (1933). 3 setting sail with the cargo on board, impliedly ratified the 4 contract of affreightment between S.M. China and Ferrostaal. 5 Freeman, 59 U.S. at 190 (noting that where a shipowner allows a 6 special owner to carry cargo of third persons, the law confers a 7 lien for the performance of bills of lading or charter parties).7 The Akili, by See 8 As between S.M. China and Ferrostaal, the contract of 9 affreightment was the Voyage Charter Party rather than the bill 10 of lading.8 A carrier may not alter its contractual obligations 7 Akili argues that Insurance Company of North America v. S/S American Argosy, 732 F.2d 299 (2d Cir. 1984), demands a different conclusion. It does not. American Argosy governs bills of lading issued by non-vessel operating common carriers ( NVOCCs ), which do not . . . own or charter the ships that actually carry the cargo. Id. At 301. We recognized that the ratification doctrine applies where a bill of lading has been issued by a charterer of the vessel, and decline to extend the doctrine to situations involving NVOCCs. Id. at 303-04. Unlike an NVOCC, S.M. China operated the ship for the purpose of carrying cargo pursuant to a charter agreement, as authorized by the ship s owner, and the ratification doctrine therefore applies. See Freeman, 59 U.S. at 190. 8 The fact that a vessel is operated under charter does not absolve it of in rem liability. Demsey, 461 F.2d at 1014; Pioneer Import, 138 F.2d at 908 ( [T]he maritime lien against the ship . . . obtains whether or not [the ship] was under charter. ). Even if a charterer enters into a contract of affreightment unauthorized by the vessel owner, the vessel is liable in rem for non-performance even if the vessel owner is absolved of in personam liability. See Demsey, 461 F.2d at 1015; see The Water Witch, 66 U.S. at 500 (holding ship liable for improper stowage by charterer despite master s refusal to sign the bill of lading because the ship having received the cargo and carried it to the consignees . . . is estopped to deny her liability to deliver in like good order as received. ). 11 1 to a shipper under a Voyage Charter Party by issuing a bill of 2 lading with different terms, Asoma Corp. v. SK Shipping Co., 467 3 F.3d 817, 823-24 (2d Cir. 2006), albeit when the bill of lading 4 is negotiated to a good faith third party, which did not occur 5 here, the bill governs the third party s rights. 6 Id. at 824. To sum up, even if a vessel is not a carrier within the 7 meaning of COGSA, maritime law renders vessels liable in rem for 8 a carrier s violations of its obligations. 9 COGSA, if applicable, may affect or alter a carrier s obligations 10 and thereby determine the outcome of an in rem proceeding against 11 a carrier s vessel, the in rem remedy is a creature of maritime 12 law, not COGSA. 13 2. 14 15 Therefore, while Enforceability of a Waiver of the Vessel s In Rem Liability The applicability of COGSA in this appeal arises in a second 16 and different context. Appellants argue that the free-in-and-out 17 provision of the Voyage Charter Party relieves the vessel of 18 liability for improper stowage. 19 reads: The free-in and-out provision 20 21 22 23 24 25 26 The cargo to be loaded, stowed, lashed, secured, and dunnaged free of risk and expenses to the vessel in accordance with local regulations for steel cargoes, under deck only. Appellee disagrees with this interpretation of the 27 provision, but we need not resolve that issue in light of our 12 1 disposition. 2 Harter Act, were meant to modify, not displace, in rem liability 3 under maritime law. 4 carriers from contracting out of their obligations under maritime 5 law and out of their vessel s exposure to in rem liability. 6 30701 Note § 3(8). 7 As discussed above, COGSA and its predecessor, the A principal modification was to prohibit § As the classic admiralty treatise states, The general law 8 of maritime carriage made the public carrier of goods by sea 9 absolutely responsible for their safe arrival, with a few 10 exceptions. Gilmore & Black, supra § 3-22 at 139. 11 bill of lading came into general use as a receipt for goods and 12 document of title, [however], shipowners [and other carriers] . . 13 . began to set out on the face of the bill various exceptions 14 [to liability]. 15 stipulations that the carrier was not to be liable even for the 16 results of his own negligence or that of the ship s people. . . 17 Instead of being absolutely liable, irrespective of negligence, 18 [the carrier] enjoyed an exemption from liability, regardless of 19 negligence, as wide as his bargaining position enabled him to 20 contract for. 21 American cargo interests with these exemptions from liability 22 prompted Congress to enact the Harter Act of 1893, the 23 predecessor to COGSA. Id. § 3-22 at 140. Id. § 3-23 at 142. Bills came to include The dissatisfaction of Id. § 3-24 at 142-43. 13 When the 1 COGSA, therefore, prevents international ocean carriers from 2 contracting out of certain specified obligations, including the 3 responsibility to stow cargo properly. 4 Farland, 462 F.2d 319, 327 (2d Cir. 1972); see also § 30701 Note 5 § 3 (setting forth carrier duties); id. Note § 3(8) (preventing 6 carriers and ships from contracting out of the duties set forth 7 therein). 8 incorporated by reference into every bill of lading where COGSA 9 applies. See Nichimen Co. v. M.V. These obligations are deemed as a matter of law to be See § 30701 Note ( Every bill of lading . . . in 10 foreign trade, shall have effect subject to the provisions of 11 this chapter. ); Gilmore & Black, supra § 3-25 at 145. 12 13 14 15 16 17 18 19 20 21 The relevant COGSA provision reads: Any clause . . . in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from . . . obligations provided in this section . . . shall be null and void and of no effect. § 30701 Note § 3(8). The Hague-Visby Convention sets out an identical rule - in 22 haec verba - and the parties here have incorporated the 23 Convention and its rules into the Clauses Paramount of the Voyage 24 Charter Party and the bill of lading. 25 matter of law, the free-in-and-out provision is unenforceable 26 insofar as it is a waiver of in rem liability. 27 damage rules of Hague-Visby apply as a matter of contract, the 28 same result is reached. 14 If COGSA applies as a If the cargo 1 The applicability of either approach, however, is not self- 2 evident. Both COGSA and Hague-Visby contain the following 3 provision: 4 5 6 7 8 9 10 11 12 13 14 15 16 § 30701 Note § 1(b); Hague-Visby Rules, Art. I. 17 sake, we will refer to this provision as the Applicability 18 Provision or Provision . 19 [C]ontract of carriage applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. For convenience With regard to the applicability of COGSA as a matter of 20 law, the Applicability Provision has led to a division among 21 American courts. 22 mention a distinction between public and private carriage, most 23 American courts, including the district court in this case, treat 24 the Applicability Provision as calling for a determination of 25 whether the vessel was engaged in public -- roughly speaking, 26 multiple cargos and shippers -- or private -- again, roughly 27 speaking, a single cargo and shipper -- carriage. 28 Supp. 2d at 609-10; see, e.g., Jefferson Chem. Co. v. M/T Grena, 29 413 F.2d 864, 867 (5th Cir. 1969); Pac. Vegetable Oil Corp. v. Although the provision does not specifically 15 Akili, 763 F. 1 M/S Norse Commander, 264 F. Supp. 625, 627 (S.D. Tex. 1966); J. 2 Gerber & Co. v. SS Sabine Howaldt, 310 F. Supp. 343, 350 3 (S.D.N.Y. 1969), reversed on other grounds, 437 F.2d 580 (2d Cir. 4 1971). 5 distinction is a relic of case law applying COGSA s predecessor, 6 the Harter Act. 7 no mention of the public-private distinction but states only that 8 the Act applies from the moment at which such bill of lading or 9 similar document of title regulates the relations between a As we explained in Nichimen, the public-private carriage 462 F.2d at 327-28. 10 carrier and a holder of the same. 11 COGSA s language includes 1(b). 12 46 U.S.C. § 30701 Note § We have sometimes labored to treat charter parties and bills 13 of lading as proxies for private and public carriage, 14 respectively. 15 F.2d 1183, 1186-87 (2d Cir. 1978) (arguing that the charter 16 arrangements deemed to be outside the reach of COGSA generally 17 involve engagement of the entire vessel by the charterer for the 18 purpose of shipping his own cargo). 19 noted that there is no necessary correlation between public 20 carriage and carriage pursuant to a bill of lading, or private 21 carriage and voyage charter parties. 22 in Nichimen, we declined to treat the applicability of COGSA as 23 turning on whether the vessel was engaged in public or private See, e.g., Madow Co. v. S.S. Liberty Exporter, 569 16 In Nichimen, however, we 462 F.2d at 328. Indeed, 1 carriage, id. at 326-28, finding instead that COGSA applied of 2 its own force because the parties privately agreed that a 3 subsequently-issued bill of lading would govern relations between 4 them. 5 Ltd., 776 F. Supp. 760, 767-68 (S.D.N.Y. 1991) (discussing 6 Nichimen). 7 Id. at 328-29; see Blommer Chocolate Co. v. Nosira Sharon Application of the public-private carriage analysis probably 8 favors appellees, as the district court held, because the voyage 9 here involved multiple cargos and multiple shippers. However, 10 the Fifth Circuit has recently refused to treat carriers that 11 transport multiple shippers cargo as per se subject to COGSA. 12 See Tradearbed Inc. v. Western Bulk Carriers K/S, 374 Fed. App x. 13 464, 473-74 (5th Cir. 2010). 14 applicability of COGSA as turning on which document -- charter 15 party or bill of lading -- governs relations between the 16 litigants. 17 MV, 421 F.3d 295, 297, 307 (5th Cir. 2005). 18 Instead, it treats the See Id. at 374; see also Thyssen, Inc. v. Nobility Based on the governing-instrument standard, appellants 19 argue that COGSA does not apply because the bill of lading here 20 was only a receipt and the Voyage Charter Party - with the free- 21 in-and-out provision - is the governing document. 22 established that a bill of lading issued under a charter party is 23 only a receipt when it remains in the hands of the shipper- 17 It is 1 charterer. See Nichimen, 462 F.2d at 328; see Asoma, 467 F.3d at 2 824. 3 relations between the parties. 4 The Fri, 154 F. 333, 336-37 (2d Cir. 1907). 5 have noted, a carrier could alter the terms of the charter party 6 by issuing inconsistent bills of lading. 7 (citing Hellenic Lines, Ltd. v. Embassy of Pakistan, 467 F.2d 8 1150, 1154 (2d Cir. 1972)). 9 becomes the governing instrument only after it is negotiated to a In such a case, the charter party continues to govern See Asoma, 467 F. 3d at 823-24; Otherwise, as we Asoma, 467 F.3d at 824 Therefore, the bill of lading 10 subsequent holder who is not bound by the charter party. 11 see Ministry of Commerce v. Marine Tankers Corp., 194 F. Supp. 12 161, 162-63 (S.D.N.Y. 1960). 13 therefore, would favor appellants theory of this case. 14 Id.; The governing instrument test, The adoption of either the public/private carriage or the 15 governing instrument interpretation of the Applicability 16 Provision might well, therefore, affect the outcome in this 17 matter. 18 because the Voyage Charter Party s Clause Paramount incorporates 19 the Hague-Visby Rules. 20 the Voyage Charter Party provides rules regarding the 21 impermissibility of a waiver of in rem liability - Hague-Visby 22 - identical to those of COGSA. However, we need not resolve the various issues raised Even if COGSA does not apply, therefore, 23 18 1 The Clause Paramount of the Voyage Charter Party reads: 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Notwithstanding any other provisions in this contract, any claims for loss or damage to cargo shall be governed by the Hague-Visby rules as if compulsorily applicable by law, and any other clauses herein repugnant to the Hague-Visby rules shall be null and void and of no force or effect as respects cargo claims. Any clauses in this contract allocating responsibility or risk with respect to loading, stowing, stevedoring, lashing, securing, dunnaging, discharging and delivery shall be deemed to apply only as price terms and shall not be interpreted to alter in any way the responsibilities of the owner and the ship as carriers as defined in the Hague rules as respects claims for cargo loss and damage. In maritime law, a Clause Paramount identifies the law that 21 will govern the rights and liabilities of all parties to the bill 22 of lading, Sompo Japan Ins. Co. Of America v. Union Pac. R.R. 23 Co., 456 F.3d 54, 56 (2d Cir. 2006) abrogated on other grounds by 24 Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S.Ct. 2433 25 (2010), and, therefore, supersedes the free-in-and-out provision. 26 See Asoma Corp. v. M/V Seadaniel, 971 F. Supp. 140, 143 (S.D.N.Y. 27 1997) (finding in a similar case, with similar contractual 28 provisions, that the Clause Paramount governed). 29 Clause Paramount itself states that its provisions govern 30 [n]otwithstanding any other provisions in this contract. 31 32 Indeed, the The Clause Paramount, therefore, incorporates Hague-Visby s prohibitions on waivers of in rem liability into the Voyage 19 1 Charter Party. See Koppers Conn. Coke Co. v. McWilliams Blue 2 Line Inc., 89 F.2d 865, 866 (2d Cir. 1937) (noting that the 3 Harter Act [COGSA s predecessor] could apply where the parties to 4 a charter incorporated it, even in instances where it did not 5 apply of its own force); see also Nichimen, 462 F.2d at 328 6 (finding that parties may render COGSA applicable through 7 contractual arrangements where it does not apply of its own 8 force); see also Thyssen, 421 F.3d at 307(noting that parties may 9 incorporate COGSA into a private carriage agreement using a 10 Clause Paramount). 11 provision might relieve the Akili of liability for improper 12 stowage it is, therefore, of no effect because it is prohibited 13 by Hague-Visby. 14 To the extent that the free-in-and-out A final matter. We noted above a concern that the 15 applicability of Hague-Visby s rules invalidating a waiver of a 16 carrier s obligations was not self-evident. 17 tad of an overstatement, but it might be argued that the Voyage 18 Charter Party s contractual incorporation of Hague-Visby includes 19 the Applicability Provision, thereby requiring us to interpret 20 that provision and address the complexities explored above in the 21 interpretation of the identical provision in COGSA. 22 language of the Clause Paramount in the Voyage Charter Party 23 states that any claims for loss or damage to cargo shall be 20 That was perhaps a However, the 1 governed by the Hague-Visby rules as if cumpulsorily applicable 2 by law. (emphasis added). 3 rules in question without regard to the proper interpretation of 4 the Applicability Provision. 5 This clearly applies the substantive We also note that courts have read charter parties 6 incorporating COGSA to incorporate the substantive rules of COGSA 7 governing cargo damage claims whether or not the Applicability 8 Provision would normally render COGSA inapplicable. 9 Itochu Int l, Inc. v. M/V Western Avenir, 1997 WL 537698, *5 See e.g., 10 (E.D. La. 1997); Horn v. CIA de Navegacion Fruco, 404 F.2d 422, 11 429 n.6 (5th Cir. 1968); Hartford Fire Ins. Co. v. Calmar 12 Steamship Corp., 404 F. Supp. 442, 445 (W.D. Wash. 1975); cf. 13 Koppers, 89 F.2d at 866. 14 interpretation. 15 contractual incorporation into a charter party or bill of lading 16 is unnecessary. 17 cargo damage without regard to the Applicability Provision makes 18 sense largely as a protection against judicial rulings that the 19 statute and convention are not applicable as a matter of law. 20 b. 21 This seems to us a common sense If COGSA or Hague-Visby apply by force of law, Incorporation of the substantive rules governing The Cross Appeal Ferrostaal argues in its cross-appeal that the district 22 court erred in holding there was no in personam liability for 23 Akela and Almi. We disagree. 21 1 One can recover for damage to cargo under COGSA or under a 2 bailment theory. See Rationis Enters. Inc. of Pan. v. Hyundai 3 Mipo Dockyard, Co., Ltd., 426 F.3d 580, 587 n.3 (2d Cir. 2005). 4 Ferrostaal does not contend it is entitled to recover under the 5 former theory. 6 have been a bailment relationship between the claimant and the 7 ship owner or manager. 8 delivery to the bailee is complete and he has exclusive 9 possession of the bailed property. To prevail under the latter theory, there must A bailment does not arise unless Thyssen Steel Co. v. M/V 10 Kavo Yerakas, 50 F.3d 1349, 1355 (5th Cir. 1995). 11 charterer has taken responsibility for stowage of cargo aboard a 12 ship, the ship owner does not have exclusive possession and 13 cannot be held liable as a bailee. 14 no inference of negligence against the bailee arises if his 15 possession of the damaged bailed property was not exclusive of 16 that of the bailor. 17 Exchange, Inc., 601 F.2d 645, 647 (2d Cir. 1979) (citing Pan-Am. 18 Petrol. Transp. Co. v. Robins Dry Dock & Repair Co., 281 F. 97, 19 107 (2d Cir. 1922)). 20 When a Id. at 1354-55. Therefore, United States v. Mowbray s Floating Equip. Neither Akela nor Almi authorized S.M. China to issue bills 21 of lading on their behalf. Ferrostaal could not have believed 22 such authorization to exist when the bill of lading named only 23 S.M. China as carrier and did not purport to be a document signed 22 1 for the master. 2 ship owner could not be made personally liable when charterer had 3 no actual or apparent authority to so bind it); Yeramex Intern. 4 v. S.S. Tendo, 595 F.2d 943, 948 (4th Cir. 1979) (same).9 5 See Demsey, 461 F.2d at 1015 (finding that The carriers remained responsible for delivery of the goods 6 and maintained exclusive control and custody over the cargos 7 through agents they hired directly. 8 contrary, did not issue receipts for the subject cargo, enter 9 into contracts of carriage with Zhongquing or Ferrostaal, hire Akela and Almi, on the 10 the stevedores, or have any agreement to load or to stow the 11 cargo. 12 109-10 (5th Cir. 2011) (even though the charter s agent had 13 authority to sign bills of lading on behalf of the ship owner, it 14 signed on behalf of the sub-charterer carrier, and that therefore 15 the owner and the charterer were both in possession of the cargo, 16 and thus did not have exclusive control over the cargo). 17 and Almi are, therefore, not liable. See OT Trading, L.P. v. M/V Saga Morus, 641 F.3d 105, 9 Akela Both David Crystal, Inc. v. Cunard Steamship Co., Ltd., 339 F.2d 295 (2d Cir. 1964), and Leather s Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800 (2d Cir. 1971) are relied upon by Ferrostaal for the proposition that a bailment exists even when the cargo has been turned over by a carrier to stevedores, despite non-exclusivity. However, these cases both address the special question of the liability of a carrier to a shipper postdischarge but pre-delivery where the bill of lading is silent as to the exact time at which the carrier s obligations cease. They are, therefore, inapposite. 23 1 CONCLUSION 2 We affirm for the reasons stated. 24
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