Sedco, Inc. v. S.S. Strathewe, 1313

Citation800 F.2d 27,1986 AMC 2801
Decision Date25 August 1986
Docket NumberD,No. 1313,1313
PartiesSEDCO, INC., Plaintiff-Appellee, v. S.S. STRATHEWE, her engines, boilers, etc., the Peninsular and Oriental Steam Navigation Company, the Peninsular and Oriental Steam Navigation Company Limited and Strick Line Ltd., Defendants. Appeal of The PENINSULAR AND ORIENTAL STEAM NAVIGATION COMPANY, the Peninsular and Oriental Steam Navigation Company Limited and Strick Line Ltd., Defendants- Appellants. ocket 86-7123.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Anthony J. Pruzinsky, New York City (Alan S. Loesberg, Hill, Rivkins, Carey, Loesberg, O'Brien & Mulroy, New York City, of counsel), for plaintiff-appellee.

Donald Burke, New York City (Keith W. Heard, Kirlin, Campbell & Keating, New York City, of counsel), for defendants-appellants.

Before NEWMAN, PIERCE and MINER, Circuit Judges.

MINER, Circuit Judge:

In this action for loss of value of cargo shipped aboard their vessel, defendants appeal from a judgment entered in the United States District Court for the Southern District of New York after a bench trial before Judge Richard Owen. The district court found that defendants' conduct constituted an unreasonable deviation within the meaning of the Carriage of Goods by Sea Act of 1936 ("COGSA"), 46 U.S.C. Secs. 1300-1315 (1982), thereby voiding the statutory $500 per package limitation of liability and allowing plaintiff cargo owner to recover $182,637.48 in damages. The district court also held that defendants were not entitled to assert the COGSA "restraint of princes" defense. We reverse the judgment to the extent that it does not limit defendants' liability to $500 per package and remand the case with directions to enter judgment in plaintiff's favor for $1,000.

I. BACKGROUND

The dispute in this case arises out of the British government's requisition of the M/V STRATHEWE for use in the Falkland Islands War. The STRATHEWE was owned by defendants-appellants, The Peninsular and Oriental Steam Navigation Company, The Peninsular and Oriental Steam Navigation Company Limited, and Strick Line Limited (collectively referred to as "P & O"). Plaintiff-appellee Sedco, Inc. was both shipper and consignee of eighteen packages of oil drilling equipment shipped in 1982 aboard the STRATHEWE.

In the early part of June, 1982, P & O received the eighteen packages from Sedco in Dubai, U.A.E., to be shipped to Houston, Texas, where Sedco had contracted to sell the equipment for $350,000. Within a few days of the vessel's departure from Dubai, the British Government requisitioned her under its war powers for duty in the Falkland Islands War. The British Government informed P & O:

Your vessel STRATHEWE is required for service in connexion with the Falkland Islands Emergency. Request you instruct your master to proceed to Southampton at best speed discharging present cargo at a port convenient to you subject to minimum delay.

Having determined that Malta was not only on the STRATHEWE's course to Southampton but also on the course of one of its other vessels coming by at a later date en route to the United States, P & O obtained the permission of the British Government to transship the United States-bound cargo aboard the STRATHEWE at Malta. On June 12th, P & O off-loaded Sedco's cargo at Malta along with the other cargo destined for the United States.

Panalpina, Sedco's customs broker in Houston, twice inquired of P & O in July as to the vessel's estimated time of arrival. In both instances, P & O told Panalpina that the cargo would arrive aboard the STRATHEWE on August 24th. On August 4th, P & O informed Panalpina that the cargo in fact had already been discharged at Malta and had been reloaded on the M/V STRATHESK, which had left Malta the day before. The STRATHESK arrived in Houston on August 30th; although Sedco's eighteen pieces of cargo had been off-loaded at Malta and the manifest stated that all eighteen had been reloaded on the STRATHESK, only sixteen pieces actually had been placed aboard the STRATHESK. The remaining two pieces were left on a pier in Malta. An extensive search was conducted for the two missing boxes, but they were not located until 1984, by which time their only value to Sedco was as salvage.

In explanation of the delay in locating the cargo, P & O asserted that the two packages were improperly marked by Sedco and that the manifest, which erroneously noted that eighteen packages had been reloaded on the STRATHESK, caused P & O to focus the search at ports between Malta and Houston.

After a bench trial, Judge Owen found in favor of Sedco for the full amount of its loss, $182,637.48 (the difference between its resale contract price and the salvage price obtained for the equipment). In so holding, Judge Owen found that the COGSA $500 per package limitation of liability, 46 U.S.C. Sec. 1304(5), was inapplicable because P & O's conduct amounted to an unreasonable deviation. Sedco Inc. v. S.S. Strathewe, 630 F.Supp. 120, 122 (S.D.N.Y.1986). In addition, Judge Owen rejected P & O's argument that it was totally immune from liability under COGSA's "restraint of princes" defense, 46 U.S.C. Sec. 1304(2)(g). 630 F.Supp. at 122.

On appeal, P & O contends that deviation heretofore has been limited to "geographic deviation" and "unauthorized on-deck stowage," and therefore that its allegedly negligent conduct in handling Sedco's cargo or failing to inform Sedco of the transshipment at Malta cannot constitute a deviation. Consequently, P & O asserts, its liability should be limited to $1,000. P & O also renews its contention that it is completely immune from liability under the "restraint of princes" defense.

II. DISCUSSION
A. Deviation and Limitation of Liability

COGSA, which expresses adherence to the Hague Rules of 1921, the Brussels Convention of 1924, and the earlier Harter Act of 1893, 46 U.S.C. Sec. 190-196, was enacted to carry over into the international sphere the uniform liability rules governing domestic voyages found in the Harter Act. COGSA strives to achieve this uniformity, in part, by mitigating the common law liability of carriers as insurers. Under section 4(5) of COGSA, 46 U.S.C. Sec. 1304(5), neither the carrier nor the ship may be liable for any loss of or damage to goods in an amount exceeding $500 per package, unless the nature and value of the goods have been declared by the shipper and inserted in the bill of lading. Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 301, 79 S.Ct. 766, 769, 3 L.Ed.2d 820 (1959). We previously have adopted the rule that an unreasonable deviation bars a carrier from invoking COGSA's $500 per package limitation of liability. E.g., Iligan Integrated Steel Mills, Inc. v. S.S. John Weyerhaeuser, 507 F.2d 68, 70-73 (2d Cir.1974), cert. denied, 421 U.S. 965, 95 S.Ct. 1954, 44 L.Ed.2d 452 (1975); Encyclopedia Britannica, Inc. v. S.S. Hong Kong Producer, 422 F.2d 7, 18 (2d Cir.1969), cert. denied, 397 U.S. 964, 90 S.Ct. 998, 25 L.Ed.2d 255 (1970); Jones v. The Flying Clipper, 116 F.Supp. 386, 387-91 (S.D.N.Y.1953); Annot., 67 A.L.R.Fed. 263 (1984). Having recently reaffirmed this rule, B.M.A. Industries, Ltd. v. Nigerian Star Line, Ltd., 786 F.2d 90, 91 (2d Cir.1986) (per curiam); cf. Thyssen, Inc. v. S.S. Fortune Star, 777 F.2d 57, 63-66 (2d Cir.1985) (holding that deviation does not entitle plaintiff to punitive damages), we are not disposed to reconsider its wisdom here. Instead, we need only determine whether P & O's conduct in this case amounted to an unreasonable deviation so as to deprive it of the statutory limitation of liability.

With respect to deviation, COGSA 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. Sec. 1304(4). There is no dispute here that the STRATHEWE's excursion to Malta was a departure from its agreed or usual route and thus constituted a deviation. 1 Moreover, the stop at Malta was "for the purpose of ... unloading cargo" and thus, prima facie, was unreasonable. Dow Chemical Pacific Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 338 (2d Cir.1986). Our inquiry, therefore, must focus on whether P & O adequately rebutted the COGSA presumption of unreasonableness.

The proviso found in section 4(4) of COGSA, which creates the presumption, did not appear in the Hague Convention Rules, but was added by Congress when COGSA was enacted. As a leading admiralty treatise suggests, the proviso's rationale "seems to be that the carrier ought not to be allowed to deviate with no other motive than the increase of his own revenues; thus, the proof required to overcome the prima facie unreasonableness of such a deviation would have to show something more than mere reasonableness from the point of view of the carrier...." G. Gilmore & C. Black, The Law of Admiralty Sec. 3-40, at 179 (2d ed. 1975).

We agree with the district court that the STRATHEWE's deviation to Malta was "reasonable" and "sensible," 630 F.Supp. at 121, and therefore find that P & O met its burden of demonstrating that the deviation to Malta was objectively reasonable. Certainly, that the British Government requisitioned the STRATHEWE and commanded that she discharge her cargo at a convenient port and proceed to Southampton is sufficient by itself to support this finding. Moreover, from the facts presented at trial, it appears that Malta indeed was the most logical port for transshipping the cargo bound for the United States. P & O previously had regularly called at Malta, was familiar with that port, and had an agent there that knew precisely what was necessary to...

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