Henley Drilling Co. v. McGee

Decision Date07 February 1994
Docket NumberNos. 93-1543,93-1548,s. 93-1543
Citation36 F.3d 143
Parties, 63 USLW 2213 HENLEY DRILLING COMPANY, Plaintiff, Appellee, v. William H. McGEE and CNA Casualty of Puerto Rico, Defendants, Appellants. HENLEY DRILLING COMPANY, Plaintiff, Appellee, v. MARINE TRANSPORTATION SERVICES, etc. and Luis A. Ayala Colon Sucrs., Inc., Defendants, Appellants. . Heard
CourtU.S. Court of Appeals — First Circuit

Keith A. Graffam, with whom Dario Rivera Carrasquillo, John E. Mudd and Cordero, Miranda & Pinto, Old San Juan, PR, were on brief, for plaintiff.

Jose F. Sarraga, San Juan, PR, for defendant Marine Transp. Services.

Eugene F. Hestres, with whom Bird, Bird & Hestres, San Juan, PR, was on brief, for defendant Luis A. Ayala Colon Sucrs., Inc.

Before TORRUELLA, Circuit Judge, ALDRICH, Senior Circuit Judge, and CYR, Circuit Judge.

CYR, Circuit Judge.

The central question in this case--whether the $500 per-package limit on ocean carriage liability imposed by the Carriage of Goods by Sea Act (COGSA), 46 U.S.C.App. Sec. 1304(5), is applicable to an oil drilling rig--requires the court to consider for the first time the COGSA-related "fair opportunity" doctrine.

I BACKGROUND

Puerto Rico Electric Power Authority (PREPA) contracted with Henley Drilling Company (Henley) to conduct petroleum drilling operations in Puerto Rico. Marine Transportation Services-Sea Barge Group, Inc. (Sea Barge), an ocean carrier, agreed to transport Henley's drilling equipment from Houston to Puerto Rico, and return. PREPA obtained marine cargo insurance on the Henley drilling rig through William H. McGee & Co. (McGee) and CNA Casualty of Puerto Rico (CNA). Following an uneventful southbound voyage, Sea Barge retained a stevedoring contractor, Luis A. Ayala Colon Sucrs., Inc. (Ayacol), to stow the drilling rig aboard the barge for the return trip to Houston. When the barge arrived in Houston, however, Henley's huge drilling rig, valued at $629,000, was nowhere to be found.

Henley sued Sea Barge, Ayacol, McGee, CNA and PREPA in the United States District Court for the District of Puerto Rico. Under the terms of their settlement agreement, PREPA, McGee and CNA were subrogated to the rights of Henley, leaving Sea Barge and Ayacol as the only defendants. In March 1992, Sea Barge and Ayacol moved for partial summary judgment, contending that their liability, if any, could not exceed the $500 per-package/CFU limit imposed by COGSA. 1 Contemporaneously, Ayacol and Sea Barge moved for summary judgment on the further ground that the stowing of the drilling rig aboard the barge for the return trip to Houston was improperly supervised by the marine surveyor retained by PREPA, thereby entitling Ayacol and Sea Barge to exoneration from liability.

A magistrate judge recommended partial summary judgment in favor of Sea Barge and Ayacol, based on a finding that the drilling rig constituted a "package" within the meaning of COGSA Sec. 4(5), for which the maximum liability of the carrier is $500. 2 The magistrate judge did not rule on the summary judgment claim for exoneration. McGee, CNA and PREPA objected to the magistrate-judge's report and recommendation, which the district judge subsequently adopted over their objection. McGee, CNA and PREPA unsuccessfully moved for reconsideration by the district judge. CNA and McGee [collectively: "McGee"] appealed. Ayacol and Sea Barge cross-appealed, challenging the district court order adopting the magistrate-judge's report and recommendation insofar as it failed to grant Ayacol and Sea Barge exoneration from all liability and included no attorney fee award against McGee.

II DISCUSSION
A. The McGee Appeal (No. 93-1543)
1. Summary Judgment Standard

We review a grant of summary judgment de novo. Commercial Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1050 (1st Cir.1993). Summary judgment is appropriate where the record, viewed in the light most favorable to the nonmoving party, reveals no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. Velez-Gomez v. SMA Life Assur. Co., 8 F.3d 873, 874-75 (1st Cir.1993).

2. The COGSA Liability Limitation

Section 1304(5) of COGSA, entitled "Rights and immunities of carrier and ship," provides in relevant part:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package ... or in case of goods not shipped in packages, per customary freight unit ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading....

By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed ... [but] in no event shall the carrier be liable for more than the amount of damage actually sustained.

46 U.S.C.App. Sec. 1304(5) (emphasis added).

The courts generally have required the carrier to afford the shipper a "fair opportunity" to avoid the COGSA "package/CFU" liability limitation through adequate advance notice. See, e.g., Carman Tool & Abrasives, Inc. v. Evergreen Lines, 871 F.2d 897, 899 n. 3 (9th Cir.1989). As this court has not adopted the COGSA "fair opportunity" doctrine, see Granite State Ins. Co. v. M/V Caraibe, 825 F.Supp. 1113, 1118-24 (D.P.R.1993) (noting absence of First Circuit precedent on "fair opportunity" doctrine), we first examine the case law in other jurisdictions.

All courts which have addressed the matter require the carrier to provide the shipper some notice of the COGSA "package/CFU" liability limitation, differing only as to the type of notice. See id. (examining circuit split as to level of notice required); see generally Michael F. Sturley, The Fair Opportunity Requirement Under COGSA Section 4(5): A Case Study in the Misinterpretation of the Carriage of Goods by Sea Act (Part I), 19 J.Mar.L. & Com. 1, 13-17 (1988) (hereinafter, "Sturley, Part I"); Michael F. Sturley, The Fair Opportunity Requirement (Part II), 19 J.Mar.L. & Com. 157 (1988) (hereinafter, "Sturley, Part II"). The Ninth Circuit is thought to have the more demanding notice requirement, see 2A Ellen Flynn & Gina A. Raduazzo, Benedict on Admiralty Sec. 166, at pp. 16-28 to 16-29 (Michael F. Sturley, contrib. ed. 1993) (hereinafter, 2A Benedict ) (describing "strict" Ninth Circuit standard, citing cases), mandating that the carrier provide the shipper legible written notice of the COGSA "package/CFU" liability limitation in the bill of lading, employing language substantially similar to COGSA Sec. 4(5). See, e.g., Nemeth v. General S.S. Corp., 694 F.2d 609, 611 (9th Cir.1982). Other courts, including the Second, Fourth, Fifth and Eleventh Circuits, simply require that the bill of lading include a "clause paramount" incorporating COGSA by reference. See, e.g., Insurance Co. of N. Am. v. M/V Ocean Lynx, 901 F.2d 934, 939 (11th Cir.1990), cert. denied, 498 U.S. 1025, 111 S.Ct. 675, 112 L.Ed.2d 667 (1991); General Elec. Co. v. MV Nedlloyd, 817 F.2d 1022, 1029 (2d Cir.1987), cert. denied, 484 U.S. 1011, 108 S.Ct. 710, 98 L.Ed.2d 661 (1988); Cincinnati Milacron, Ltd. v. M/V American Legend, 804 F.2d 837, 837 (4th Cir.1986) (en banc) (per curiam), rev'g 784 F.2d 1161 (4th Cir.1986); Brown & Root, Inc. v. M/V Peisander, 648 F.2d 415, 424 (5th Cir.1981). The courts are in agreement that the carrier bears the burden of proving that it has afforded the shipper the requisite "fair opportunity" notice. See, e.g., General Elec., 817 F.2d at 1029; Tessler Bros. (B.C.) Ltd. v. Italpacific Line, 494 F.2d 438, 443 (9th Cir.1974).

Our review leads us to conclude that the bill of lading in this case afforded "fair opportunity" notice sufficient to satisfy whatever essential requirements are imposed by these other courts. Constructive notice was afforded by the "clause paramount" 3 legibly printed on the reverse side of the bill of lading: "This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act...." See Cincinnati Milacron, 804 F.2d at 837 ("clause paramount" provides constructive notice). 4 A more particular notice was contained in the bill of lading "valuation clause":

20. VALUATION. Carrier shall not be liable in any event for any loss, damage, misdelivery or delay with respect to the goods in an amount exceeding $500.00 lawful money of the United States per package, or in the case of goods not shipped in packages, per customary freight unit, unless the nature of the goods and a valuation thereof higher than $500.00 is declared in writing by Shipper on delivery of the goods to Carrier and inserted in the Bill of Lading and extra freight is paid thereon as required by the applicable tariff to obtain the benefit of such higher valuation.

See Carman Tool, 871 F.2d at 899 n. 4 (finding that bill of lading provision substantially similar to that sub judice recited terms of COGSA Sec. 4(5) and thus afforded actual notice); cf. supra pp. 144-45 (quoting 46 U.S.C.App. Sec. 1304(5)). 5

McGee contends that Sea Barge did not demonstrate its entitlement to summary judgment on compliance with the "fair opportunity" requirement because there was competent evidence that Sea Barge failed to offer PREPA ad valorem rates based on the true value of the cargo. Specifically, McGee reiterates its claim below that Sea Barge failed to show that published tariffs were available for a drilling rig on this voyage. 6 McGee relies primarily on the Fifth Circuit's language in Brown & Root:

[T]he circumstances of the case before us do not overcome the prima facie evidence of the opportunity for a choice of rates and valuations ... First, COGSA was expressly incorporated in the bill of lading to thereby bring into play Sec. 4(5). Next, and more significantly, the published tariff which has the effect of law very carefully...

To continue reading

Request your trial
617 cases
  • Orria-Medina v. Metropolitan Bus Authority
    • United States
    • U.S. District Court — District of Puerto Rico
    • 6 Septiembre 2007
    ...and recommendation. Failure to file same within the specified time waives the right to appeal this order. Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir.1994); United States v. Valencia, 792 F.2d 4 (1st Cir. May 16, 2007. 1. The MBA attached various exhibits to its Motion to Di......
  • Manisy v. Maloney
    • United States
    • U.S. District Court — District of Massachusetts
    • 4 Septiembre 2003
    ...S.Ct. 466, 88 L.Ed.2d 435 (1985). Accord Phinney v. Wentworth Douglas Hosp., 199 F.3d 1, 3-4 (1st Cir.1999); Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir. 1994); Santiago v. Canon U.S.A., Inc., 138 F.3d 1, 4 (1st ...
  • United States v. Cordero-Rosario
    • United States
    • U.S. District Court — District of Puerto Rico
    • 18 Mayo 2017
    ...by such objections are precluded upon appeal." Davet v. Maccarone, 973 F.2d 22, 30–31 (1st Cir. 1992) ; see Henley Drilling Co. v. McGee, 36 F.3d 143, 150–51 (1st Cir. 1994) (holding that objections are required when challenging findings actually set out in a magistrate's recommendation, as......
  • Cruz-Baez v. Negron-Irizarry
    • United States
    • U.S. District Court — District of Puerto Rico
    • 8 Marzo 2005
    ...by such objections are precluded on appeal." Davet v. Maccarone, 973 F.2d 22, 30-31 (1st Cir., 1992). See also Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir., 1994)(holding that objections are required when challenging findings actually set out in magistrate's recommendation, ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT