C. Itoh & Co.(America) v. M/V HANS LEONHARDT, Civ. A. No. 85-5135-I.

• Decision Date: 12 April 1989
• Docket Number: Civ. A. No. 85-5135-I.
• Parties: C. ITOH & CO. (AMERICA), INC., et al. v. M/V HANS LEONHARDT, et al.
• Court: U.S. District Court — Eastern District of Louisiana

719 F. Supp. 479

1990 AMC 733

C. ITOH & CO. (AMERICA), INC., et al. v. M/V HANS LEONHARDT, et al.

Civ. A. No. 85-5135-I.

United States District Court, E.D. Louisiana.

April 12, 1989.

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Francis J. Barry, Jr., Warren G. Greenwood, Jr., Deutsch, Kerrigan & Stiles, New Orleans, La., for plaintiff.

Fred E. Salley, Jack Salley, E. Tucker Gore, New Orleans, La., for defendant.

MENTZ, District Judge.

MEMORANDUM OPINION

A. INTRODUCTION

About October 20, 1984, Hellenic Steel Co., S.A., arranged to ship 1343 packages of steel coils and strips weighing 8746.694 metric tons on board the vessel M/V HANS LEONHARDT for delivery at the ports of Chicago, Detroit, and Windsor/Oshawa. The steel coils and strips were wrapped shortly after rolling and stored in a weather protected warehouse, then transported by truck, covered with tarpaulins, and loaded directly onto the M/V HANS LEONHARDT at Thessaloniki, Greece. The bills of lading contained no exceptions.

Arriving at the St. Lawrence Seaway about November 23, 1984, the Captain was advised of a bridge failure at Valley Field, Quebec, and the cargo destined for Windsor and Detroit was discharged at Montreal¹ on November 30th thru December 2, 1984. The portion consigned to Pinkert Steel at Chicago remained on board and was transported out the St. Lawrence Seaway, along the Atlantic Coast, to be discharged at New Orleans. About December 15, 1984, the 586 black plate steel sheets in coil were discharged at New Orleans and delivered to American Commercial Barge Line Co. (ACBL), barges ACBL 2719, 1323 and 3010. After loading by the stevedore, T. Smith & Son, Inc. (T. Smith), clean bills of lading were issued. On the way to the Ceres terminal at Chicago, ACBL became aware that barge 1323 had approximately 2800 to 3000 gallons of water in the cargo hopper.² As to ACBL 2719 and 3010, some light "salt and pepper" rust was noted upon discharge at Ceres and the damage figure agreed on by Pinkert and the cargo insurers was 10 percent of the 227 non-waterlined coils which were affected (this amounted to 5.8 percent of all 393 non-waterlined coils in the Pinkert shipment).

Discharge began from ACBL 1323 on January 10, 1985. The barge hopper floor was noted to be a bright orange color with ice covering various parts of the floor. Waterlines up to ten inches were noted on the first tier of the coils and a large crack was observed in the hopper. Pinkert Steel rejected all 193 of the "waterlined" or "tidemarked" coils.

The carrier, ACBL, and the owner of ACBL 1323, American Commercial Lines, Inc. (ACL),³ deny any fault or responsibility for the damage to the steel. Defendants contend that ACBL 1323 was staunch and fit and that the damage to the steel resulted from a combination of causes. Defendants allege that the coils were defectively manufactured and inadequately wrapped and that heavy weather in the Atlantic Ocean exposed the coils to saltwater and promoted sweating and condensation. Defendants assert that T. Smith, rather than themselves, is liable for the damage to the steel. Defendants allege that the thirteen-inch crack in the hopper was due to T. Smith's negligent "drop stowing" of the coils, that T. Smith's rough handling of the coils loosened the covers on the cans and caused rips, gouges, and indentations in the steel, and that T. Smith negligently failed to use dunnage or other pallets and placed the coils directly on the hopper floor. Defendants further contend that additional damage occurred after discharge at Ceres because the coils remained unprocessed at the warehouse for eight months before being sold.

ACBL claims all defenses of the Harter Act, 46 U.S.C.App. § 190-196, namely, the defense of act of God and peril of the sea due to alleged condensation wetting on the trip from New Orleans to Chicago and the defenses of improper packaging and inherent vice. ACL claims that it discharged its obligations to any party by providing three seaworthy barges at the commencement of the voyage. ACBL and ACL further claim that pursuant to the terms of the contract of affreightment, enforceable by virtue of the Pomerene Act, 49 U.S.C.App. § 101, plaintiffs' loading of the barges constituted an acknowledgment that the barges were seaworthy and acceptable for loading and that plaintiffs assumed all responsibility for loading and stowage of the coils. ACBL and ACL have filed third-party complaints for indemnity against T. Smith, the vessel, and the vessel charters. Pursuant to Fed.R.Civ.P. 42(b), these third-party claims were severed from the main demand and stayed pending the resolution of plaintiffs' case.

This action was tried to the Court without a jury on a prior date. At the close of trial, defendants, ACL and ACBL, each moved that an involuntary dismissal be entered in their favor pursuant to Fed.R. Civ.P. 41(b). The Court took defendants' motions under submission. The Court directed the parties to submit post-trial briefs addressing the factual and legal issues raised at trial. Having reviewed the evidence, the briefs submitted by counsel, and the law, the Court now renders its findings of fact and conclusions of law in accordance with Fed.R.Civ.P. 52(a). To the extent any findings of fact are conclusions of law, they are adopted as such; to the extent any conclusions of law are findings of fact, they are so adopted.

B. GOOD ORDER AND CONDITION IN THESSALONIKI

1. Hellenic Steel Company (Hellenic) of Thessaloniki, Greece, sold 586 coils of cold rolled black plate steel to Pinkert Steel Company of Chicago, Illinois, on a CIF⁴ basis pursuant to commercial invoices dated November 1, 1984. The CIF commercial invoice price to Pinkert was $460 per metric ton ($20.87 per hundred weight). C. Itoh & Co. (America), Inc. acted as import "sales/claims agent" for Hellenic.

2. The black plate steel sold to Pinkert was manufactured and rolled in Hellenic's steel plant located on the outskirts of the port of Thessaloniki (approximately 7 kilometers from dockside) during the months of October and November, 1984, under the normal and customary quality control procedures employed by Hellenic.

3. Mr. Zacharias Xiros, Quality Control Manager of Hellenic Steel Company at the time these coils were milled, testified as follows regarding the processing and packaging of the coils. This mill produces cold rolled black plate steel products. The plant was considered to have the most modern equipment in Europe at the time this cargo was shipped. In addition, Hellenic's inspection system was top of the line for European mills. The entire plant is located under one roof. Thus, the steel is protected from the elements at all times.

The processing of the coils is performed in the following manner:

i. Pickling line: The function of the pickling line is to remove rust and scales from the raw material used to manufacture the steel. A quality control inspector examines the raw material as it comes out of the pickling line. If the material is not of sufficient quality for the intended customer when it comes off this line, a distressed material ("DM") ticket is placed on the coil and the coil is re-diverted to another use.

ii. Tandem mill: The tandem mill reduces the thickness of the coils by 75%. The production department looks at one out of every three coils after reduction through the tandem mill (cold reducing mill) to check for rolling marks and other problems with the reduced steel. If indicated, a "DM" ticket is placed on the steel.

iii. Electrolytic cleaning line: The cleaning line removes oil residue from the coils. Light gauge material passes through the electrolytic cleaning line to remove carbon smudges or residual elements left from processing. The operator running the electrolytic cleaning line examines the material as it is cleaned, looking for, among other things, shapes and buckle defects. All coils are checked at this time and defective coils are tagged with a "DM" ticket.

iv. Annealing line: Due to the nature of the operation, the coils are not examined during the annealing process which involves bringing the coils to a very high temperature (650 degrees Celsius) and permitting them to cool slowly. The coils are put in a covered protective atmosphere and heated with burners for approximately 20 hours. The coils are then removed and replaced in a cooling facility.

v. Temper mill: This mill refines the shape and surface texture of the coils. The coils are examined (at high speed) as the material passes through two stands of rollers over which the material is reduced slightly. After tempering, 10 percent of the material is chosen for detailed, close-up inspection by inspectors from the quality control department.

vi. Recoiling line: During the recoiling process, the coil is recoiled for close inspection to determine whether the material is proper for its end use. If a problem is discovered, the inspector places a "DM ticket" on the coil and the coil is re-diverted to another use.

During the recoiling process, the coil may be slit and/or oiled. As per Pinkert's specifications, approximately two-thirds of the coils shipped to Pinkert on the M/V HANS LEONHARDT were dry (not oiled) coils, and approximately one-third of the coils were oiled. All of the coils had a dull finish (30-60 micro inches CLA roughness).⁵ The majority of Hellenic Steel's customers order the coils dry and coils are delivered that way without problems, though the chance of rust is reduced with oiled coils.

vii. After recoiling, the coils are packaged for export. Hellenic Steel Company used packaging type No. 1 on all 586 coils ordered by Pinkert Steel. This requires wrapping the coils air-tight with Hellenic's anti-corrosion wrapping paper (paper treated with a vapor corrosive inhibitor) and masking tape. Anti-corrosion paper protects against rust by neutralizing moisture. The coil is then wrapped in a blue metal packaging can. A metallic ring is placed on both...