General Elec. Co. Intern. Sales Div. v. S.S. Nancy Lykes

• Decision Date: 20 April 1983
• Docket Number: No. 809,D,809
• Citation: 706 F.2d 80
• Parties: GENERAL ELECTRIC COMPANY INTERNATIONAL SALES DIVISION, Plaintiff-Appellee, v. S.S. NANCY LYKES, her engines, boilers, etc. and Lykes Bros. Steamship Company, Inc., Defendants-Appellants. ocket 82-7709.
• Court: U.S. Court of Appeals — Second Circuit

Page 80

706 F.2d 80

GENERAL ELECTRIC COMPANY INTERNATIONAL SALES DIVISION Plaintiff-Appellee, v. S.S. NANCY LYKES, her engines, boilers, etc. and Lykes Bros Steamship Company, Inc., Defendants-Appellants.

No. 809, Docket 82-7709.

United States Court of Appeals Second Circuit.

Argued Feb. 7, 1983.

Decided April 20, 1983.

Hollis M. Walker, Jr., New York City (Walker & Corsa, New York City, Vera E. Weinberg, Harold V. Higham, New York City, of counsel), for defendants-appellants.

John E. Cone, Jr., New York City (Bigham, Englar, Jones & Houston, New York City, Helen M. Benzie, Lawrence B. Brennan, New York City, of counsel), for plaintiff-appellee.

Before LUMBARD and CARDAMONE, Circuit Judges, and ZAMPANO, District Judge. ^*

LUMBARD, Circuit Judge:

Carrying on its deck three 50 to 52 ton locomotive cabs shipped by General Electric Company International Sales Division ("GE") to Taiwan, the S.S. Nancy Lykes, on a voyage from the Gulf Coast to Kobe, Japan and the Far East, ran into heavy seas and winds soon after leaving the port of San Pedro-Long Beach, California on May 4, 1978. In the early morning of May 5, 1978, two of the locomotive cabs broke their bindings and were washed overboard.

Invoking admiralty jurisdiction, GE commenced this action against the vessel and its owner, Lykes Bros. Steamship Company ("Lykes"), on June 13, 1980. GE asserted that the call at San Pedro was a deviation from the Nancy Lykes' published itinerary and from the customary routes taken by vessels traveling from the Gulf to the Far East via the Panama Canal and that the deviation led to the vessel's encounter with the adverse weather which caused the loss of the locomotive cabs. Arguing that the Nancy Lykes ran a substantially higher risk of adverse weather conditions by proceeding to the Far East from San Pedro rather than along the customary routes to Kobe, GE asserted that the deviation was not reasonable under the circumstances and thus constituted a breach of the contract of carriage under the terms of Sec. 4(4) of the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. Sec. 1304(4) (1976).

On April 15, 1982, after a three day bench trial, Judge Lasker, finding that the vessel's call at San Pedro did not constitute a reasonable deviation allowed by terms of Sec. 4(4) of COGSA, held Lykes liable for the full amount of the loss, including the cost of shipping replacement cabs to Taiwan. ¹ 536 F.Supp. 687 (S.D.N.Y.1982). Essential to this holding was Judge Lasker's determination that the stop of the Nancy Lykes at San Pedro was a deviation which unjustifiably exposed the vessel and its cargo to significantly greater risks of adverse weather, thereby rendering the deviation unreasonable.

Lykes asserts that Judge Lasker erred in finding an unreasonable deviation, and that, in any event, Judge Lasker improperly held that recovery was not limited to the $500 per package liability limitation contained in the contract of carriage and in Sec. 4(5) of COGSA, 46 U.S.C. Sec. 1304(5) (1976).

We agree with Judge Lasker's thorough decision and thus affirm the judgment.

I.

The basic facts are not in dispute. On April 16, 1978, three locomotive cabs manufactured by GE were loaded onto the deck of the Nancy Lykes in New Orleans pursuant to a bill of lading which provided for shipment to Keelung, Taiwan. The locomotive cabs were 56 feet long, 10 feet wide, 13 feet high, and weighed between 50 and 52 tons. The bill of lading, which incorporated the provisions of COGSA, allowed the locomotive cabs, which could not be stowed below deck because of their great bulk, to be secured and stowed on deck. The bill of lading also contained in paragraph 3 a standard "liberties" clause, which defined the scope of the voyage as including "usual, customary, or advertised ports, whether herein named or not, and ports in or out of the advertised, geographical, or usual route or order," and specifically allowed the vessel to "call at any port ... [to] take fuel oil...."

Kobe, Japan was to be the Nancy Lykes' first port of call in the Far East, with an estimated arrival date of May 11, 1978. Prior to departure of the vessel from the Gulf Coast, Lykes decided to send the Nancy Lykes to the port of San Pedro to obtain the more than 12,000 barrels of bunker fuel ("bunkers") necessary to complete the voyage to Kobe.

San Pedro, approximately 2,900 miles north of the Panama Canal, was not an advertised port on the Nancy Lykes' published itinerary, and the decision to send the vessel there was never communicated to GE or otherwise made known to the shipping community. Lykes acknowledges that in making the decision to send the Nancy Lykes to San Pedro, it never considered any factor other than the advantage of less expensive fuel prices that had become available at that port in early 1978, and it concedes that there was an ample supply of slightly more expensive bunker fuel at New Orleans and at other ports on the Nancy Lykes' route from the Gulf to the Panama Canal.

In fact, the Nancy Lykes had never before bunkered at San Pedro while voyaging from the Gulf Coast to the Far East, and of Lykes' forty or more vessels, only two had ever previously stopped at San Pedro solely to take on bunker fuel during such a voyage: the S.S. Dolly Thurman on March 22, 1978 and the S.S. Brinton Lykes on March 30, 1978. Moreover, although at least 30 of GE's locomotive cabs had previously been transported by Lykes' vessels to the Far East, GE was not informed of the routes taken by these vessels and had no knowledge whether they called at ports other than those specified in their published itineraries.

Pursuant to Lykes' instructions, the Nancy Lykes, after transiting the Panama Canal, voyaged to San Pedro and there obtained 12,877 additional barrels of bunker fuel. On May 4, 1978, the vessel departed San Pedro on a route that took it to the north of that port and soon encountered rough waters and gale force winds which measured between 8 and 10 on the Beaufort Scale. ² At 0430 on May 5, 1978, two of the three locomotive cabs broke their lashings and were washed overboard within three minutes of each other. The loss occurred at 34? N to 35? N and 121? W, a position close to the California coast. Having suffered no major structural damage, the vessel completed its voyage to the Far East.

Pursuant to its agreement with the Taiwan Railway Administration, the purchaser of the locomotive cabs, GE was required to replace the lost cabs at a cost of $1,709,000, which included $71,000 for ocean freight to Taiwan.

II.

Finding that the Nancy Lykes had engaged in an unreasonable deviation by bunkering at San Pedro, Judge Lasker held Lykes liable for the loss of the locomotive cabs on the basis of Sec. 4(4) of COGSA, 46 U.S.C. Sec. 1304(4) (1976), which 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. [Emphasis in original].

This section clearly implies that any unreasonable deviation is to be treated as a breach of COGSA and the contract of carriage. Nemeth v. General Steamship Corp., 694 F.2d 609, 613 (9th Cir.1982); see also Rosenbruch v. American Isbrandtsen Lines, Inc., 543 F.2d 967, 971 (2d Cir.), cert. denied, 429 U.S. 939, 97 S.Ct. 353, 50 L.Ed.2d 308 (1976); DuPont de Nemours International S.A. v. S.S. Mormacvega, 493 F.2d 97, 101 (2d Cir.1974). Lykes challenges Judge Lasker's finding of an unreasonable deviation for three reasons: (1) the liberties clause in the bill of lading allowed the bunkers call at San Pedro without regard to the terms of Sec. 4(4); (2) the bunkers call was not a deviation; and (3) even if a deviation, the bunkers call was not unreasonable. We see no merit in Lykes' contentions.

A. Effect of the Liberties Clause

Lykes argues that in light of the broad liberties clause contained in paragraph 3 of the bill of lading, the Nancy Lykes' call for bunkers at San Pedro cannot under any circumstances be considered a breach of COGSA or the contract of carriage. In relevant part, the liberties clause provided:

The scope of the voyage herein contracted for shall include usual, customary, or advertised ports, whether herein named or not, and ports in or out of the advertised, geographical, or usual route or order, even though in proceeding thereto the ship may sail beyond the port of discharge, or in a direction contrary thereto, ... or depart from the direct or customary route. The ship may call at any port ... [to] take fuel oil, ... and all of the foregoing are included in the contract voyage.

Reasoning that liberties clauses must be consistent with Sec. 4(4)'s treatment of reasonable and unreasonable deviations, Judge Lasker held that these clauses, like Sec. 4(4), only permit reasonable deviations from the anticipated journey. We agree.

Even before COGSA was enacted in 1936, it was well settled that liberties clauses, though broad in language, were limited in scope. See, e.g., The Willdomino, 300 F. 5, 18 (3d Cir.1924), aff'd sub nom. The Willdomino v. Citro Chemical Co., 272 U.S. 718, 47 S.Ct. 261, 71 L.Ed. 491 (1927); The Blandon, 287 F. 722, 725 (S.D.N.Y.1922). Because liberties clauses refer to the voyage contemplated by the parties, and not to a different voyage determined unilaterally by the carrier, these clauses have long been interpreted to give the carrier only a limited right to deviate when such a deviation is reasonable under all the circumstances. See, e.g., Hellenic Lines, Ltd. v. United States, 512 F.2d 1196, 1206 (2d Cir.1976); The San Giuseppe, 122 F.2d 579, 582-84 (4th Cir.1941); The Willdomino, supra, 300 F. at 18; The Blandon, supra, 287 F....