Groupe Chegaray/V. de Chalus v. P & O Containers

• Decision Date: 24 May 2001
• Docket Number: No. 99-14858,SEA-LAND,99-14858
• Citation: 251 F.3d 1359
• Parties: (11th Cir. 2001) GROUPE CHEGARAY/V. DE CHALUS, a foreign corporation, Plaintiff-Appellee, v. P & O CONTAINERS a foreign corporation,SERVICE, INC., a corporation, Defendants-Cross-claimants-Appellants, WELLS FARGO GUARD SERVICE, INC. OF FLORIDA, a corporation, Defendant-Cross-defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1359

251 F.3d 1359 (11th Cir. 2001)

GROUPE CHEGARAY/V. DE CHALUS, a foreign corporation, Plaintiff-Appellee, v. P & O CONTAINERS a foreign corporation, SEA-LAND SERVICE, INC., a corporation, Defendants-Cross-claimants-Appellants, WELLS FARGO GUARD SERVICE, INC. OF FLORIDA, a corporation, Defendant-Cross-defendant.

No. 99-14858.

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT.

May 24, 2001.

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Florida. D.C. Docket No. 94-06124-CV-NCR

Before ANDERSON, Chief Judge, CARNES and OAKES^*, Circuit Judges.

OAKES, Circuit Judge:

This case involves an eight-ton, 40-foot container filled with perfumes and cosmetics shipped from France to Florida that mysteriously disappeared while in a marine terminal at Port Everglades, Florida. The cargo insurer brought a subrogation action against the carrier, the port terminal operator, and the port security provider. The carrier and the terminal operator each brought cross-claims against the security provider for indemnity and contribution.

In resolving this dispute, this Court once again navigates through the muddy waters of determining the meaning of "package" under § 1304(5) of the Carriage of Goods by Sea Act ("COGSA" or the "Act"), 46 U.S.C. § 1300 et seq. (2000). Subsection 1304(5)¹ limits carrier liability to $500 "per package," but fails to define the term "package." In this case, the district court deemed each of the 2,270 cartons, all but two of which were wrapped onto a total of 42 pallets, a "package" for purposes of § 1304(5) liability. The court also dismissed both plaintiff-appellee's claims and appellants' cross-claims against the security provider.

On appeal, the carrier and port terminal operator argue (1) that the district court erred in ruling that the package limitation applied to the 2,270 cartons instead of to either the one sealed container or, in the alternative, to the 42 pallets plus two cartons; (2) that the district court erred in dismissing the insurer's claim against the security provider; and (3) that the district court erred in denying the carrier and port terminal operator indemnity from the security provider. We affirm in part and reverse in part.

BACKGROUND

Parbel Inc. is a Florida company that imports L'Oreal products from France. In 1992, Parbel ordered a shipment consisting of four containers from Parfums Et Beaute International Et Cie ("Parfums"), which shipped the order on the Nedlloyd Holland, a ship operated by P&O Containers, Ltd. ("P&O"). P&O contracted to deliver the shipment from LeHavre, France, to Parbel's warehouse in Miami, Florida. After the Nedlloyd Holland arrived at Port Everglades in Ft. Lauderdale, Florida, the containers were off-loaded from the ship and stored in a container yard operated by Sea-Land Service, Inc. ("Sea-Land") until delivery to the consignee in Miami. Sometime between December 26 and December 28, 1992, one of the containers mysteriously disappeared.

The perfumes and cosmetics in the missing container were packed into a total of 2,270 shoebox-sized corrugated cardboard cartons. These small cartons were then consolidated into 42 larger units, which were bound together with plastic wrap and packed onto 42 pallets, with two cartons remaining.

Groupe Chegaray/V. De Chalus ("Groupe Chegaray"),² Parbel's subrogated insurer, paid for the loss under a cargo insurance policy and brought a subrogation action against P&O and Sea-Land (together, "appellants"), as well as Wells Fargo Guard Service, Inc. ("Wells Fargo"). The district court found in an omnibus summary judgment order that the number of packages under COGSA § 1304(5) was 2,270 and that appellants were jointly and severally liable for Groupe Chegaray's damages up to $1,134,000.³ After a bench trial, the court also dismissed both Groupe Chegaray's and appellants' claims against Wells Fargo.

DISCUSSION

We note at the outset that we review a grant of summary judgment de novo and the district court's findings of fact for clear error. See Levinson v. Reliance Std. Life Ins. Co., 245 F.3d 1321, 1324 No. 00-11187, (11th Cir. 2001).

I. COGSA Claims

COGSA's lineage dates back to 1893 with the Harter Act, which was relied upon by the Hague Rules in 1921, which were in turn adopted at the International Convention for the Unification of Certain Rules Relating to Bills of Lading at the Brussels Convention of 1924. See Laurence B. Alexander, Comment, Containerization, the Per Package Limitation, and the Concept of "Fair Opportunity," 11 Mar. Law. 123, 125-26 (1987). In 1936, Congress adopted the language of COGSA almost in its entirety. See Monica Textile Corp. v. S.S. Tana, 952 F.2d 636, 638 (2d Cir. 1991) (citing Robert C. Herd & Co. v. Krawill Mach. Corp., 359 U.S. 297, 301, 79 S.Ct. 766, 769, 3 L.Ed.2d 820 (1959)); Spartus Corp. v. S/S Yafo, 590 F.2d 1310, 1315-16 (5th Cir. 1979). Congress did change liability under § 1304(5) in one significant respect, however. The international rules limit liability "per package or unit," whereas § 1304(5) limits it "per package . . . or in the case of goods not shipped in packages, per customary freight unit[.]" See Hartford Fire Ins. Co. v. Pacific Far East Line, Inc., 491 F.2d 960, 962 (9th Cir. 1974). Arguably, this change underscores the emphasis that Congress placed on the "package" as the elemental unit of liability for § 1304(5) purposes. Despite this emphasis, Congress neither defined the term in the statute nor left behind any legislative history to help courts do so. See id. at 963; see also Monica Textile, 952 F.2d at 638.

In addition to the lack of statutory guidance, unforeseeable technological strides in the shipping industry since 1936 have contributed to the frustration of many courts attempting to define a COGSA package. Traditionally, shipments were made by "breakbulk," whereby goods were packaged into parcels which could be hand-loaded into a vessel's cargo-hold. See Nancy A. Sharp, Comment, What is a COGSA "Package?", 5 Pace Int'l L. Rev. 115, 117-18 (1993). The advent of the container in the 1960s revolutionized the shipping industry by enabling the shipment of massive metal boxes filled with goods that were often concealed and/or not divided into breakbulk size. See id. Modern containers are able to hold hundreds of "packages" as the term was probably understood in 1936. The very concept of a cargo-hold was transformed when vessels were retrofitted to hold containers, which functionally became part of the ship itself. See Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 815 (2d Cir. 1971); Mitsui & Co., Ltd. v. American Export Lines, Inc., 636 F.2d 807, 816 (2d Cir. 1981). Thus, if ever the meaning of a "package" was self-evident, the container turned it into a puzzle.⁴ And, of course, there remains consideration of the decrease in the value of the dollar between 1936, when COGSA set the $500 amount, and the present.

Moreover, while it is generally understood that COGSA's liability limitation was originally enacted in order "to restrain the superior bargaining power wielded by carriers over shippers[,]" Vegas v. Compania Anonima Venezolana De Navegacion, 720 F.2d 629, 630 (11th Cir. 1983) (per curiam), the bulk of modern litigation under § 1304(5) consists of subrogation actions because cargo shippers, instead of paying increased freight by declaring the value of what is shipped, buy insurance from cargo insurers. See Nichimen 462 F.2d at 335 (2d Cir. 1972); Leather's Best, 451 F.2d at 815. As the Second Circuit remarked in Nichimen, "Most cargo damage actions are really battles between insurers . . . and there is thus no need for shedding crocodile tears on behalf of the shipper or consignee." 462 F.2d at 335.

In this case, Parbel chose to buy full value insurance coverage and to under-declare the value of its shipment, thereby obtaining the lowest freight rate. By doing so, Parbel paid approximately $19,000 less in freight than it would have paid had it declared the containers' actual value. Appellants argue that because Parbel protected itself by obtaining insurance coverage, we should resolve any ambiguities in the contract against Parbel and its subrogated insurer. While it is true that shippers have a choice when declaring the value of their shipments and that insurers assume the risk associated with their services, appellants' argument begs the inescapable statutory question presented by § 1304(5), which we now address.

A. Application of COGSA Ex Proprio Vigore

Appellants argue that because the container was lost after it was discharged from the Nedlloyd Holland, COGSA does not apply ex proprio vigore to the facts of this case, but only as a contract term. In support of their argument, they cite to COGSA § 1301(e), which defines "carriage of goods" to cover the period of time when the goods are loaded onto the ship to when they are discharged from the ship. Accordingly, appellants argue that the trial court erred in applying the legal definition of "package" under COGSA and that, instead, the court should have applied the principles of contract interpretation to determine the meaning that the parties intended to assign to the term "package."

We disagree and find that the bill of lading is fully subject to the provisions of COGSA. We arrive at this conclusion for two independent reasons. First, Clause 26(1) of P&O's bill of lading explicitly incorporates COGSA as "paramount throughout" the time the goods are in the custody of P&O or its subcontractor at the sea terminal and until they are delivered to the consignee in Miami.⁵ Second, appellants explicitly stipulated the application of COGSA to the facts of this case in their March 1998 pre-trial stipulation,⁶ as well as in each of their April 1995 motions for partial summary judgment as to the liability limitation under § 1304(5).⁷

B. Discrepancy Between Shipper's and Carrier's Bill of Lading

In order...