Cincinnati Milacron, Ltd. v. M/V American Legend

Decision Date25 February 1986
Docket NumberNo. 85-1183,85-1183
Citation784 F.2d 1161
PartiesCINCINNATI MILACRON, LTD., Appellant, v. M/V AMERICAN LEGEND, her engines, boilers, etc., and United States Lines, Inc., Appellees.
CourtU.S. Court of Appeals — Fourth Circuit

James D. Skeen (David W. Skeen, Constable, Alexander, Daneker & Skeen, Baltimore, Md., on brief), for appellant.

John H. West, III (Roann Nichols, Ober, Kaler, Grimes & Shriver, Baltimore, Md., on brief), for appellees.

Before PHILLIPS and ERVIN, Circuit Judges, and McMILLAN, District Judge for the Western District of North Carolina, sitting by designation.

ERVIN, Circuit Judge:

In this admiralty case, Cincinnati Milacron, Ltd., appeals the ruling of the district court which limited the liability of United States Lines, Inc. (U.S. Lines), for cargo damage to $1,000 under Sec. 4(5) of the Carriage of Goods by Sea Act (COGSA) 1, codified at 46 U.S.C. Sec. 1304(5) (1982). Because U.S. Lines failed to carry its burden of proving that it afforded Cincinnati Milacron a fair opportunity to avoid the Sec. 1304(5) liability limitation, we reverse and remand for a determination of actual damages.

I.

In February 1982 Cincinnati Milacron shipped two milling machines from Felixstowe, England, to Baltimore, Maryland, on board the M/V AMERICAN LEGEND, a vessel owned by U.S. Lines. The machines were damaged in transit. Cincinnati Milacron claimed that U.S. Lines was liable for approximately $80,000 damages. U.S. Lines claimed that its liability was limited to $1,000 by the $500 per package limitation of Sec. 1304(5). 2

When the machines were loaded, U.S. Lines issued its short form bill of lading to Cincinnati Milacron. The short form incorporated by reference COGSA 3 and U.S. Lines' long form bill of lading. 4 COGSA, of course, contained the liability limitation of Sec. 1304(5). U.S. Lines' long form bill of lading also contained language substantially similar to Sec. 1304(5). 5 U.S. Lines' tariff on file with the Federal Maritime Commission, incorporated by reference the long form bill of lading and contained language similar to Sec. 1304(5). The short form bill of lading, the only document received by Cincinnati Milacron, did not contain any language similar to Sec. 1304(5).

In June 1983 Cincinnati Milacron sued U.S. Lines for damages in the U.S. District Court for the District of Maryland. The parties filed motions for partial summary judgment, based on the documents described above, on the issues of whether the limitation of Sec. 1304(5) was applicable and whether the machines constituted packages under COGSA. After an initial ruling to the contrary, the district judge granted partial summary judgment for U.S. Lines and ruled that the Sec. 1304(5) limitation applied. On both occasions, the district judge determined that the machines were packages. 6 Accordingly, he ordered that in the event U.S. Lines was found liable, its liability would be limited to $1,000, $500 for each machine. U.S. Lines agreed to the entry of a consent judgment against it; Cincinnati Milacron appealed.

II.

Under COGSA, 7 a carrier's liability for damage to cargo is limited to $500 per package "unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading." 46 U.S.C. Sec. 1304(5). While the language of Sec. 1304(5) could be interpreted to make the operation of the limitation rest solely on the conduct of the shipper, it has not. Before the limitation is effective, "the carrier must give the shipper 'a fair opportunity to choose between higher or lower liability by paying a correspondingly greater or lesser charge.' " Tessler Brothers (B.C.) Ltd. v. Italpacific Line, 494 F.2d 438, 443 (9th Cir.1974) (emphasis added), quoting New York, New Haven & Hartford Railroad Co. v. Nothnagle, 346 U.S. 128, 135, 73 S.Ct. 986, 990, 97 L.Ed. 1500 (1953). Accord Wuerttembergische v. M/V STUTTGART EXPRESS, 711 F.2d 621, 622 (5th Cir.1983); D.B. Trade International, Inc. v. Astromar, 592 F.Supp. 1215, 1218 (N.D.Ill.1984); Chester v. MARITIMA del LITORAL, S.A., 586 F.Supp. 192, 195 (E.D.Wisc.1983); Vegas v. Delta Steamship Lines, Inc., 1982 AMC 595, 597 (S.D.Fla.1980); General Electric Company v. M.V. LADY SOPHIE, 458 F.Supp. 620, 622 (S.D.N.Y.1978); Bumble Bee Seafoods v. S.S. KIKU MARU, 1978 AMC 1586, 1588 (D.Md.1978).

The carrier bears the initial burden of proving fair opportunity. If a fair opportunity can be gleaned from the language of the bill of lading, then the bill of lading is prima facie evidence of fair opportunity and the carrier has met his burden of proof. The burden of proving that a fair opportunity did not exist then is shifted to the shipper. See Komatsu, Ltd. v. States Steamship Company, 674 F.2d 806, 809 (9th Cir.1982). Accord D.B. Trade International, 592 F.Supp. at 1218; Bumble Bee Seafoods, 1978 AMC at 1588.

All jurisdictions that have considered the question appear to agree that a recitation in the bill of lading of the limited liability language of Sec. 1304(5) is prima facie evidence of fair opportunity. See Komatsu, 674 F.2d at 809; Wuerttembergische, 711 F.2d at 622; D.B. Trade International, 592 F.Supp. at 1219; Vegas, 1982 AMC at 596; General Electric Company, 458 F.Supp. at 622; Bumble Bee Seafoods, 1978 AMC at 1588-89. It is not settled, however, whether the carrier may satisfy its burden of proof by incorporating the language of Sec. 1304(5) into the bill of lading by reference, for example, to COGSA generally. If the carrier could so satisfy his burden, an incorporation by reference of COGSA in the bill of lading would be constructive notice to the shipper of the language of Sec. 1304(5) and thus effect a fair opportunity. This case presents an analogous question: whether a short form bill of lading, which incorporates a long form bill of lading containing Sec. 1304(5) language, would be constructive notice and effect a fair opportunity. This circuit has not addressed such questions. The circuits which have addressed them are in conflict.

The Ninth Circuit has rejected the constructive notice approach and has ruled that merely incorporating by reference COGSA's provisions into the bill of lading is not prima facie evidence of fair opportunity. See Komatsu, 674 F.2d at 809 (also ruling that a tariff on file with the Federal Maritime Commission is not prima facie evidence of fair opportunity, see id. at 811), citing Pan American World Airways, Inc. v. California Stevedore and Ballast Co., 559 F.2d 1173 (9th Cir.1977). Accord D.B. Trade International, 592 F.Supp. at 1218; Chester, 586 F.Supp. at 195; General Electric Company, 458 F.Supp. at 622; Bumble Bee Seafoods, 1978 AMC at 1588-89. While the Ninth Circuit has not considered whether the issuance of a short form bill of lading, which incorporates by reference a long form bill of lading containing Sec. 1304(5) language, is prima facie evidence of fair opportunity, it would likely reject this approach. Implicit in the Ninth Circuit rule is that Sec. 1304(5) language must appear on the face of the bill of lading received by the shipper. See Pan American World Airways, 559 F.2d at 1179; Komatsu, 674 F.2d at 809. Cf. Vegas, 1982 AMC at 597 (specifically ruling that a short form bill of lading, which incorporates a long form bill of lading containing Sec. 1304(5) language, does not afford a fair opportunity).

The Fifth Circuit has accepted the constructive notice approach. In Brown & Root, Inc. v. M/V PEISANDER, 648 F.2d 415, 424 (5th Cir.1981), the court ruled that the incorporation by reference of COGSA in the bill of lading was prima facie evidence of fair opportunity. See also Wuerttembergische v. M/V STUTTGART EXPRESS 711 F.2d 621, 622 (5th Cir.1983) (stating that language regarding the limitation of liability "need not appear on the face of the bill of lading"; ruling that a tariff on file with the Federal Maritime Commission affords a fair opportunity). While not yet considered by the Fifth Circuit, it would also likely find that a short form bill of lading, which incorporates a long form containing Sec. 1304(5) language, is prima facie evidence of fair opportunity.

We reject the constructive notice approach. Congress passed COGSA "to counteract the persistent efforts of carriers, who are the drafters of ocean bills of lading, to insert all embracing exceptions to liability." Tessler Brothers, 494 F.2d at 444. See also Calmaquip Engineering West Hemisphere Corporation v. West Coast Carriers, Ltd., 650 F.2d 633, 639 (5th Cir.1981); Wirth, Ltd. v. S/S ACADIA FOREST, 537 F.2d 1272, 1276-77 (5th Cir.1976). The courts have attempted to effect congressional intent by interpreting Sec. 1304(5) to require carriers to afford shippers a fair opportunity to avoid the limitation of liability of that statute. To allow constructive notice is to emasculate the fair opportunity requirement. Like the Ninth Circuit, we are unwilling to impute the knowledge of limited liability under Sec. 1304(5) to a shipper's employee from a bill of lading which merely refers him to yet another lengthy document where the limitation then is revealed. See Pan American World Airways, 559 F.2d at 1177. 8 While such an approach might alert the "old salt," it does not afford the newcomer or the unsophisticated shipper a fair opportunity to avoid Sec. 1304(5). Moreover, sufficiently affording the shipper a fair opportunity does not place an onerous burden on the carrier. It can be accomplished simply by including language substantially similar to Sec. 1304(5) in the bill of lading issued to the shipper. Therefore, we hold that a short form bill of lading, which incorporates by reference a long form bill of lading containing Sec. 1304(5) language, is not prima facie evidence of fair opportunity. Language which explicitly brings the limitation of Sec. 1304(5) to the attention of the shipper must appear on the face of the bill of lading issued to the shipper. 9...

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