Institute of London Underwriters v. Sea-Land Service, Inc.

• Citation: 881 F.2d 761
• Decision Date: 04 August 1989
• Docket Number: 88-3701,Nos. 88-3700,SEA-LAND,s. 88-3700
• Parties: INSTITUTE OF LONDON UNDERWRITERS and Ferguson and Company, Plaintiff-Appellee, v.SERVICE, INC., and Container Stevedoring Company, Inc., Defendants-Appellants. INSTITUTE OF LONDON UNDERWRITERS COMPANIES, Plaintiff-Appellant, and Ferguson & Co., Plaintiff, v.SERVICE, INC., and Container Stevedoring Co., Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 761

881 F.2d 761

1989 A.M.C. 2516

INSTITUTE OF LONDON UNDERWRITERS and Ferguson and Company, Plaintiff-Appellee, v. SEA-LAND SERVICE, INC., and Container Stevedoring Company, Inc., Defendants-Appellants.

INSTITUTE OF LONDON UNDERWRITERS COMPANIES, Plaintiff-Appellant, and Ferguson & Co., Plaintiff, v. SEA-LAND SERVICE, INC., and Container Stevedoring Co., Inc.,

Defendants-Appellees.

Nos. 88-3700, 88-3701.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted June 8, 1989.

Decided Aug. 4, 1989.

Paul A. Anderson, Madden, Poliak, MacDougall & Williamson, Seattle, Wash., for plaintiffs/appellants/cross-appellees.

Jerome C. Scowcroft, Schwabe, Williamson, Wyatt & Lenihan, Seattle, Wash., for defendants/appellees/cross-appellants.

Appeal from the United States District Court for the Western District of Washington.

Before GOODWIN, Chief Judge, and WRIGHT and NORRIS, Circuit Judges.

GOODWIN, Chief Judge:

While a 45-foot yacht was being unloaded from the cargo ship that had carried it as a deck load from Taiwan to the port of Tacoma, the yacht slipped from its slings and fell into the water. The ultimate issue in the resulting litigation is whether the carrier and the stevedore are liable to the shipper for the actual damage to the yacht (as stipulated), or for the $500 per "package" limitation provided for cargo of undeclared value in the bill of lading.

To decide these issues, we must consider a question that has not previously found a definitive answer in this circuit: In a contract for foreign carriage that incorporates the Carriage of Goods by Sea Act (COGSA), 46 U.S.C.App. Secs. 1300-1315 (1982 & Supp. V 1987), but to which COGSA does not apply ex proprio vigore, what is the effect of otherwise valid contract terms inconsistent with COGSA? We hold that in such a contract, COGSA has the effect of a contractual term only, and inconsistent terms may therefore be given force.

BACKGROUND

COGSA is a statutory scheme passed in 1936 regulating the terms of ocean carriage covered by bills of lading. Ch. 229, 49 Stat. 1213 (1936). COGSA applies only to contracts for foreign carriage, that is, between ports in the United States or its possessions or territories and foreign ports. 46 U.S.C.App. Sec. 1312. The Act itself provides that the parties to a bill of lading can incorporate COGSA's terms in their contract even where COGSA would not apply of its own force. Id. This course may be followed, for example, in the case of bill of lading for domestic carriage, or a bill of lading covering goods not normally within COGSA's scope. The latter sort of bill of lading is at issue here. Because COGSA limits liability for damage to shipped goods to $500 per "package" or customary freight unit (CFU), id. Sec. 1304(5), much litigation has centered on who, apart from those specifically mentioned in the Act, is entitled to this significant limitation, as well as what the terms "package" and "CFU" mean in context. Both of these areas of dispute figure in this case.

The case, brought by the Institute of London Underwriters Companies and Ferguson & Co. (collectively, "the Cargo Interests"), appellants and cross-appellees here, was tried to the court upon documents and an agreed-upon statement of facts. The only issues tried were whether and to what extent the liabilities of appellees/cross-appellants Sea-Land Services, Inc. ("the Carrier") and Container Stevedoring Co., Inc. ("the Stevedore") were limited under COGSA and the bill of lading. The district court ruled, in part, as follows:

5. ... Section 1301(c) of [COGSA] defines goods as wares, merchandise, and articles of every kind, except, live animals and cargo which by contract of carriage is stated as being carried on deck and is so carried. In this instant case, the cradle containing the ... yacht was stowed on deck. Therefore, the $500 package/good limitation of [COGSA] does not apply since items carried on the ship's deck are specifically excluded from [COGSA's] $500 package/goods limitation.

6. ... Paragraph 17 of Sea-Land Services' bill of lading defines package to include containers, vans or trailers, cargo shipped on skids, cradles, pallets, unitized loads, groups, or assemblages. Sea-Land Services' bill of lading does not 7. [COGSA] also provides a $500 limitation on liability per [CFU] for goods not shipped in packages. The term [CFU] usually refers to the unit of quantity, weight, or measurement of the cargo customarily used as a basis for calculation of the freight rate to be charged.... This court rules as a matter of law that the customary freight unit is the unit upon which the charge for freight is computed. The ... yacht is 45 feet long and Sea-Land appears to calculate freight by a per foot measurement. Since ... 45 multiplied by $500 results in $22,500, Sea-Land Services, Inc.'s liability, calculated ... per [CFU], shall be assessed at $22,500, and not the $500 [per package limitation].

                define goods.  1 Sea-Land Services, Inc., however, incorporates by reference COGSA's terms.  Since COGSA's definition of goods specifically [sic] excludes the ... yacht, Sea-Land services may not rely upon the $500 limitation
                

* * *

* * *

10. ... [P]arties to a contract of carriage [may] limit a stevedore's liability, but only if the intent to do [so] is clearly expressed. Sea-Land Services' Himalaya Clause, paragraph 2 in Sea-Land's bill of lading, will only be invalid, as a matter of law, if it can be proven that the intent to [limit the Stevedore's liability] was not expressed clearly. Upon reviewing the Himalaya Clause in question, this court rules Sea-Land Services' intent to limit [the Stevedore's] liability was expressed clearly.... Thus, [the Stevedore's] liability is also limited to $22,500.

Thus, the district court effectively held that COGSA applied to the shipment, ruling that the liability of the Carrier and Stevedore was limited to $500 per customary freight unit (CFU), and that the yacht comprised 45 CFUs, so that the liability of the Carrier and Stevedore was limited to a total amount of $22,500.

The Cargo Interests appeal two aspects of the ruling: that the incorporation of COGSA into the bill of lading served to limit liability for damage to the yacht, and that the Stevedore, in addition to the Carrier, was benefited by COGSA's limitation. The Carrier and Stevedore together cross-appeal the district court's holding that the yacht comprised 45 CFUs.

We affirm the district court's application of COGSA to limit liability for damage to the yacht, and its extension of the COGSA limitation to the Stevedore. We reverse the judgment, however, because it was based upon the unsupported finding that the yacht comprised 45 CFUs. We hold that under the express terms of the bill of lading, the yacht was a COGSA "package" for purposes of determining limitation of liability.

DISCUSSION

A. Application of COGSA to This Shipment

1. Incorporation of COGSA

It is beyond dispute that COGSA itself does not apply to the on-deck shipment of the yacht. 46 U.S.C.App. Sec. 1301(c) ("The term 'goods' [excludes] ... cargo which by the contract of carriage is stated as being carried on deck and is so carried.") However, the Clause Paramount (paragraph 1) of the bill of lading states,

This bill of lading shall have effect subject to all the provisions of the Carriage of Goods by Sea Act of the United States of America.... The defenses and limitations of said Act shall apply to goods whether carried on or under deck.

(Emphasis added.) It has long been clear that COGSA can be incorporated into a carriage contract even where it would not otherwise govern. See Grace Line, Inc. v. Todd Shipyards Corp., 500 F.2d 361, 371 (9th Cir.1974) (parties may contractually provide for COGSA coverage of carrier's agent).

To say that COGSA has been incorporated into a contract does not, however, exclude further debate. Circuits have taken different approaches to what effect such incorporation should be given. Their analysis generally begins with section 1312:

[A]ny bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea between [any port of the United States or its possessions, and any other port of the United States or its possessions], containing an express statement that it shall be subject to the provisions of this chapter, shall be subjected hereto as fully as if subject hereto by the express provisions of this chapter....

46 U.S.C.App. Sec. 1312. Thus, the Ninth Circuit has held that when parties contract for the application of COGSA to domestic carriage--where otherwise the Harter Act of 1893, 46 U.S.C.App. Secs. 190 et seq. (1982), would apply--all terms inconsistent with COGSA are considered invalid. Pan American World Airways v. California Stevedore & Ballast Co., 559 F.2d 1173, 1175 n. 3 (9th Cir.1977). The Third, Fourth, and Fifth Circuits, on the other hand, have held to the contrary that terms inconsistent with COGSA are given force as contract terms in contracts for domestic carriage. See PPG Inds., Inc. v. Ashland Oil Co.-Thomas Petroleum Transit Div., 527 F.2d 502, 507 (3d Cir.1975); Commonwealth Petrochemicals, Inc. v. S/S PUERTO RICO, 607 F.2d 322, 328 (4th Cir.1979); Ralston Purina Co. v. Barge JUNEAU, 619 F.2d 374, 375-76 (5th Cir.1980).

Though foreign shipments generally are covered by COGSA, COGSA did not govern this shipment of its own force because COGSA excludes deckloads from its definition of "goods." The bill of lading, however, purported to apply COGSA to deckloads. The Second Circuit has considered a case parallel to this case. There, foreign carriage of a yacht shipped on-deck was also involved; consequently, COGSA did not apply ex proprio vigore. The bill of lading stated, in terms similar to those of the instant bill of lading, that "in respect to goods carried on deck ... 'the carrier shall have the benefit of all and the same rights, immunities, exceptions and limitations...