Industrial Products Intern., Inc. v. Emo Trans, Inc., 96CA0230

• Decision Date: 30 October 1997
• Docket Number: No. 96CA0230,96CA0230
• Parties: 97 CJ C.A.R. 2547 INDUSTRIAL PRODUCTS INTERNATIONAL, INC., a Colorado Corporation, Plaintiff-Appellee and Cross-Appellant, v. EMO TRANS, INC., a New York Corporation, Defendant-Appellant and Cross-Appellee. . IV
• Court: Colorado Court of Appeals

Page 983

962 P.2d 983

97 CJ C.A.R. 2547

INDUSTRIAL PRODUCTS INTERNATIONAL, INC., a Colorado

Corporation, Plaintiff-Appellee and Cross-Appellant, v. EMO TRANS, INC., a New York Corporation, Defendant-Appellant

and Cross-Appellee.

No. 96CA0230.

Colorado Court of Appeals,

Div. IV.

Oct. 30, 1997.

Rehearing Denied Dec. 26, 1997.

Certiorari Denied Aug. 31, 1998.

Michael F. Deneen, Ethan A. Jacobson, Lakewood, for Plaintiff-Appellee and Cross-Appellant.

James R. Benson, Jr., Denver, for Defendant-Appellant and Cross-Appellee.

Opinion by Judge ROY.

This proceeding involves damage sustained to a shipment of goods from England to the United States. Defendant, Emo Trans, Inc., a freight forwarder, appeals the trial court's judgment awarding damages to plaintiff, Industrial Products International, Inc. We remand for further proceedings.

In November 1991, plaintiff began negotiating the purchase of industrial insulating material from a supplier in Middlewich, England, for resale to a customer in Lumberton, Texas. On January 20, 1992, defendant transmitted to plaintiff an "ocean freight quotation" for shipping the goods in a 20-foot container, "door to door." On January 21, 1992, plaintiff sent a letter to defendant engaging it and requesting information regarding the shipment date and estimated time of arrival.

Both parties understood that the exchange of letters constituted a contract, though defendant asserts there were additional terms later detailed on the reverse side of its invoice. Also, both parties understood that shipping the goods "door to door" meant that they would be placed directly into a dedicated container at the supplier's premises by the supplier and would remain in that container until arrival at the customer's premises. Based on this shipping term, plaintiff advised its supplier to package the rolls of insulation in plastic rather than in cardboard boxes.

Defendant engaged the services of another and unrelated company, Emo Air Cargo, which engaged yet another company, Ware Transport, to pick up the goods from the supplier in England. On the day the goods were picked up, an agent for Emo Air Cargo contacted defendant and advised that it would be cheaper to ship the goods less-than-container-load (LCL), which meant that the goods would be placed in a larger container with other goods. Defendant, believing cost was the paramount consideration to plaintiff and without consulting either plaintiff, the supplier, or plaintiff's customer, immediately advised the agent to ship LCL.

The goods were picked up and loaded loose onto a truck. An agent at the groupage container depot who signed for the goods noted on Emo Air Cargo's delivery form, "some bales open with contents dirty." The goods were then placed into a 40-foot nondedicated container along with other unidentified goods. The container was placed aboard an ocean freighter for transport to Houston, Texas. Upon arrival at Houston, the goods were removed from the container, placed loose on board a truck, and transported to plaintiff's customer in Lumberton, Texas.

Defendant sent an invoice to plaintiff which reflected a lump sum freight charge and a separate customs charge in accordance with the agreement. On the back of the invoice, however, were terms in very small print which, inter alia, limited defendant's liability for goods damaged during shipment to $50 per package. Plaintiff, unaware that the goods had arrived damaged, paid the invoice. Ultimately, the actual cost of shipping the goods exceeded the agreed upon charge and defendant lost money on the transaction.

Plaintiff's customer advised plaintiff that the goods had arrived badly damaged with only three out of thirty rolls being salvageable. Plaintiff brought several claims against defendant, seeking damages for breach of contract, breach of implied warranty, and negligence. The parties filed cross-motions for summary judgment based on affidavits and an agreed statement of facts. The trial court granted defendant's motion in part, ruling that defendant was not a bailee, and denied the remainder of both parties' motions.

Following trial, the trial court entered detailed and comprehensive findings of fact and conclusions of law. The court found that the contract between the parties was evidenced by the exchange of letters between the parties and specified the use of a dedicated container. The court refused to give effect to the limitation of liability terms printed on the back of defendant's invoice because it determined they were not terms to which the parties had agreed.

The court further found that defendant had breached the express terms of the contract by failing to ship in a 20-foot dedicated container but also found that plaintiff had offered insufficient evidence that the breach had caused the damage. The trial court concluded, however, that the Carriage of Goods by Sea Act, 46 App.U.S.C. § 1300, et seq. (1994) (COGSA) and the common law of deviation both applied to the transaction, the former shifting the burden of proof as to the cause of the loss to defendant and the latter resulting in defendant becoming, essentially, an insurer of the goods.

The court concluded that defendant was liable for damage to the goods because it did not offer sufficient proof that its deviation did not cause the damage. The court awarded plaintiff $19,840.50 in total damages and interest from March 16, 1992. This appeal followed.

I.

Defendant first contends that the trial court erred in concluding that defendant, which was acting as a freight forwarder, was a "carrier" subject to COGSA liability. We conclude that remand for further consideration of this issue is necessary.

COGSA applies to "carriers" who enter into contracts for the carriage of goods by sea to or from U.S. ports. 46 App.U.S.C. § 1300(1994). A "carrier" is defined as "the owner or the charterer who enters into a contract of carriage with a shipper." 46 App.U.S.C. § 1301(a) (1994).

Under COGSA, if cargo is damaged, the shipper or owner need only prove that the cargo was damaged while in the possession of the carrier, and the burden of production then shifts to the carrier to show either its due diligence in preventing the loss or that the loss falls within a statutory exception. 46 App.U.S.C. § 1304 (1994); Sun Co., Inc. v. S.S. Overseas Arctic, 27 F.3d 1104 (5th Cir.1994). The trial court concluded that defendant did not meet this burden.

Courts have struggled to apply COGSA's definition of "carrier" in determining which of the multiple parties typically involved in the shipment of goods overseas is a "carrier" for purposes of COGSA. From this struggle, two general principles have emerged.

First, a carrier is a party with whom the shipper has a contractual relationship, evidenced most often, but not exclusively, by the issuance of a bill of lading. Hyundai Corp. v. Hull Insurance Proceeds of M/V Vulca, 800 F.Supp. 124 (D.N.J.1992), aff'd, 54 F.3d 768 (3d Cir.1995); Hoffmann-LaRoche, Inc. v. M/V TFL Jefferson, 731 F.Supp. 109 (S.D.N.Y.1990); Zima Corp. v. M.V. Roman Pazinski, 493 F.Supp. 268 (S.D.N.Y.1980); Trade Arbed, Inc. v. S/S Ellispontos, 482 F.Supp. 991 (S.D.Tex.1980); Joo Seng Hong Kong Co. v. S.S. Unibulkfir, 483 F.Supp. 43 (S.D.N.Y.1979). Second, for the purposes of COGSA liability, more than one party may be a carrier with respect to a shipment. Hyundai Corp. v. Hull Insurance Proceeds of M/V Vulca, supra; Trade Arbed, Inc. v. S/S Ellispontos, supra; Joo Seng Hong Kong Co. v. S.S. Unibulkfir, supra.

Beyond this, courts have looked to a variety of factors in determining whether a party was a carrier and therefore subject to COGSA. Traditionally, freight forwarders have not been considered carriers. See J.C. Penney Co. v. American Express Co., 102 F.Supp. 742 (S.D.N.Y.1951). More recently, however, courts have developed a list of considerations for determining whether a freight forwarder is a carrier.

Here, the trial court relied primarily on Joo Seng Hong Kong Co. v. S.S. Unibulkfir, supra, in which the plaintiff sought to impose liability for a shortage of soybeans upon the party with which it contracted to ship the soybeans and which had chartered the ocean freighter on the plaintiff's behalf. The defendant there argued that it could not be liable as a carrier because it did not issue the bills of lading. The court disagreed and held that non-signatories to a bill of lading may also be subject to liability as a carrier if there is some evidence connecting the party to the bill of lading. The court explained that the language of COGSA supports a broad definition of the term "carrier," which is consistent with the congressional purpose of alleviating a perceived imbalance of bargaining power between carriers and shippers.

Here, the trial court concluded that defendant was a carrier because it held itself out as a single point contact to ship the goods, it did in fact make all the arrangements for shipping the goods, and it knew plaintiff was relying on it in all respects for shipping the goods. While such conclusions might have been sufficient under Joo Seng Hong Kong, we conclude that two more recent cases must also be considered before defendant's status as a "carrier" may be determined.

In Hyundai Corp. v. Hull Insurance Proceeds of M/V Vulca, supra, the court formulated two tests for determining who is a carrier for purposes of COGSA: an "agency test" and a "practical test." The "agency test" focuses on the bill of lading, that is, who issued the bill of lading, who signed the bill of lading, whose form was used for the bill of lading, and, most importantly, who authorized the bill of lading. Under the "agency test," it is the shipowner or charterer who is most frequently held to be the carrier. In contrast, the "practical test" asks: (1) who was involved in the transportation of the cargo; and (2) who engaged in actions that ultimately caused damage to the cargo.

Even more recently, in Hoffmann-...