Irby Const. Co., Inc. v. Shipco, Inc.
| Decision Date | 22 September 1982 |
| Docket Number | Civ. A. No. 79-4973. |
| Citation | 548 F. Supp. 1023 |
| Court | U.S. District Court — Eastern District of Louisiana |
| Parties | IRBY CONSTRUCTION CO., INC., Plaintiff, v. SHIPCO, INC., Defendant. |
Herbert M. Hill, Orlando, Fla., for plaintiff.
Robert B. Bieck, Roy C. Cheatwood, New Orleans, La., for defendant.
FINDINGS OF FACT
Plaintiff, Irby Construction Company, Inc., (Irby), is a Mississippi corporation with its principal place of business in Jackson, Mississippi.
Defendant, Shipco, Inc. (Shipco), is a Texas corporation with its principal place of business in Houston, Texas.
The time period relevant to this cause of action is October of 1974 through August of 1975.
Irby, in part through the auspices of the United States Agency for International Development (USAID), obtained a construction contract in Indonesia to install steel power line poles of various sizes. USAID required that Irby ship at least 50% of its materials to Indonesia on American flag carriers. Irby decided to ship the bulk of its material through the Port of New Orleans. One of the American flag carriers serving the Port of New Orleans is Lykes Brothers Steamship Company (Lykes). Irby made arrangements with Lykes to transport the bulk of its material to Indonesia on Lykes vessels and entered into a shippers letter of credit designating Shipco as its freight forwarder.
L. B. Gatewood of Irby, now deceased, contacted Merlin Paddock of Shipco to discuss the possibility of Shipco acting as its freight forwarder in connection with the shipment of Irby supplies through the Port of New Orleans to Indonesia. Mr. Paddock sent Mr. Gatewood a letter dated October 10, 1974, together with a promotional brochure, generally describing Shipco's services as a freight forwarder. As a result of Mr. Paddock's letter and brochure, and a subsequent conversation with Mr. Gatewood at Irby's headquarters in Jackson, Mississippi, Irby, through Mr. Gatewood, designated Shipco as its freight forwarder. Neither Shipco nor Irby entered into a written contract, nor executed any memorandum outlining their conversations or understanding with respect to Shipco's performance of its duties as freight forwarder.
Irby imposed no duties on Shipco in addition to those customarily performed by freight forwarders in New Orleans. Irby did not specifically inform Shipco of the need for the expeditious handling of any specific items necessary for the Indonesian construction project, beyond stating that it wanted all materials to be placed shipboard as quickly as possible. At no time did Irby inform Shipco that it would seek to hold Shipco responsible for any general, special, or consequential damages of any sort flowing from any failure of Irby material to reach its Indonesian construction project by a certain date or arising from any litigation concerning the shipment of Irby material.
Shipco is an independent freight forwarder licensed by the Federal Maritime Commission (FMC) pursuant to 46 U.S.C. § 841b. In exchange for performing freight forwarder services, Shipco charges shippers $20.00 per bill of lading, together with $2.50 for each additional item listed on a single bill of lading. Shipco charged these same rates to Irby in the instant action.
Providing that it complies with 46 U.S.C. § 841b and the FMC regulations promulgated thereunder (46 C.F.R. § 510.24), Shipco receives a commission in the amount of 1.5% of the carrier's charges from the carrier. In the instant action, Shipco complied with those regulations and received commissions from Lykes in the amount of 1.5% of Lykes' carriage charges to Irby.
Shipco, like many freight forwarders, performs services not only for shippers, but carriers as well, and typically deals with many different shippers and carriers at the same time. In its business, Shipco represents no carrier or shipper exclusively. Further, Shipco is not subject to control by either carriers or shippers in the method of performing its duties, although it must abide by applicable carrier and governmental regulations. In the instant action, Shipco did not serve Irby exclusively. Irby exercised no control over Shipco's performance of its duties, beyond informing Shipco that it desired all of its materials to be shipped via Lykes.
Part of Irby's agreement relating to the Indonesian project required Irby to paint all metal power poles with a coating to enhance their useful life. To meet this requirement of the project contract, Irby entered into an agreement on December 14, 1974 with BASF Wyandotte Corp. (BASF) through its local sales agent, Williamson Sales Company (Williamson) (now known as Williamson Distributing Company). This contract was for the purchase and sale of 4,000 gallons of subalox FD-510 paint ("subalox") for $42,000 "F.A.S. vessel New Orleans", on purchase order number 1512. Irby did inform Williamson and BASF of its special prompt need for the paint, and BASF and Irby agreed that the subalox would arrive in New Orleans no later than December 31, 1974. Although the purchase order listed the destination of the paint as "Irby Construction Company c/o Shipco, Inc., 624 Gravier, New Orleans, Louisiana 70130", it also listed "F.A.S. vessel New Orleans" sales terms.
Irby prematurely paid BASF for the subalox on January 27, 1975, without receipt of the "certificate of completion and evidence of delivery" required by purchase order number 1512.
BASF contracted with its agent, Ryder Truck Lines (Ryder), to carry the subalox from the BASF division facilities in New Jersey to the Port of New Orleans. The subalox arrived at Ryder's New Orleans dock on either December 30 or 31, 1974. On arrival of the subalox, Ryder's employee, Charles Rogers, telephoned Shipco and also sent a written arrival notice to Shipco, requesting delivery instructions from Shipco.
Review by Shipco of the arrival notice revealed that the cargo involved was paint. This raised the question in the mind of the manager of Shipco's New Orleans office, Mr. Paddock, as to the "red label" status of the subalox. Ordinarily, such information would be reflected on the face of the arrival notice, but that was not the case in this instance.
Mr. Paddock asked his son, Wayne Paddock, to check the red label issue with Ryder. About January 3, 1975, Wayne called Ryder and was informed that the paint was "red label." Subsequently, still in the first week of January 1975, Mr. Paddock personally called Mr. Rogers at Ryder and asked him to verify whether the paint was "red label." Mr. Rogers informed Mr. Paddock that he had seen the cargo and that it bore "red labels."
The significance of the red label status of the subalox, as defined by the Code of Federal Regulations, is that there are certain restrictions placed on the storage of red label materials on a vessel for shipment. Further, Lykes, with whom the majority of Irby material was being placed for shipment to Indonesia, had a general company policy of not allowing delivery of red label material to its dock prior to 24 hours before loading the cargo onto the vessel. Cargo which was not red label was ordinarily sent directly to the dock by Shipco for storage there until a ship was available upon which it could be loaded.
From this point on, Ryder was in contact with Shipco on several occasions concerning delivery instructions for the subalox. Because the subalox was being treated as red label material, Mr. Paddock had no delivery instructions to give to Ryder since Lykes did not have any vessels with available space for red label or "hazardous" materials at this time.
Mr. Paddock prepared a dock receipt for Lykes on January 6, 1975 and transmitted it to Lykes. Thereafter, Lykes called Mr. Paddock and requested information as to the flash point of the paint. In the meantime, Ryder has sent out "refused and unclaimed notices" of January 13, 1975, and January 20, 1975, to BASF with carbon copies to Shipco. When BASF received the notices, it immediately contacted Mr. Val Guillot at Williamson, the sales agent for BASF in the New Orleans area, because the notices threatened sale at auction of the subalox unless Ryder received delivery instructions promptly. Mr. Guillot called both Ryder and Shipco and received information that the subalox was being treated as "red label." At this time, Mr. Paddock asked Mr. Guillot to furnish him with flash point information for the subalox.
In response to Mr. Paddock's request, Mr. Guillot sent Mr. Paddock "Subalox Coating Technical Data Bulletin" number one which listed the flash point of the subalox as "over 80° Fahrenheit." Mr. Paddock, in turn, transmitted this information to Lykes during the latter part of January 1975. Cargo with a flash point of less than 80° is considered red label (flammable) material and therefore must be so identified. 46 C.F.R. § 146.21-1 (1975). Any cargo with a flash point between 80° and 150° is considered yellow label (combustible) cargo and has to be so labeled. 46 C.F.R. § 146.26 (1975). Nevertheless, Lykes authorities continued to treat the subalox as red label.
On January 20, 1975, Mr. T. Frank Lucroy of Irby had a telephone conversation with Mr. Paddock concerning the subalox. Mr. Lucroy inquired as to why he had received no bill of lading demonstrating that the subalox had been shipped to Indonesia. Mr. Paddock merely advised Mr. Lucroy that the problem was that Lykes had cancelled its January vessel to Indonesia but that the subalox would go out on the next ship. Mr. Lucroy was not advised by Mr. Paddock of any red label problem with the cargo.
During the month of January 1975, Mr. Guillot and/or Harvey Bennet and Jim Kenney of BASF contacted Mr. E. Brown Briggs of Irby and informed Mr. Briggs of the red label problem, the inability of the subalox to get to the docks, and Ryder's threats in its "refused and unclaimed notices" to dispose of...
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