Komatsu, Ltd. v. States S. S. Co.

Decision Date15 April 1982
Docket NumberNo. 80-3006,80-3006
Citation674 F.2d 806
PartiesKOMATSU, LTD., Komatsu America Corporation, and Nippon Fire & Marine Insurance Co., Ltd., Plaintiffs-Appellees, v. STATES STEAMSHIP COMPANY and American President Lines, Ltd., Defendants-Appellants.
CourtU.S. Court of Appeals — Ninth Circuit

Michael H. Williamson, Madden & Poliak, Seattle, Wash., for defendants-appellants.

David R. Millen, Seattle, Wash., argued, for plaintiffs-appellees; E. C. Biele, Bogle & Gates, Seattle, Wash., on brief.

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

Before WALLACE and TANG, Circuit Judges and STEPHENS, * District Judge.

TANG, Circuit Judge:

This is an interlocutory appeal pursuant to 28 U.S.C. § 1292(a)(3) from a partial summary judgment denying the appellants the benefit of the $500 per package liability limitation contained in section 4(5) of the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 1304(5) (1976). We affirm.

The facts are not in dispute. Komatsu, Ltd. contracted with States Steamship Company ("States") to ship a tractor aboard the S.S. COLORADO from Kobe, Japan to Seattle, Washington. States issued its regular form ocean bill of lading for the carriage of the tractor. Komatsu, Ltd. endorsed the bill and sent it to Komatsu America Corporation for negotiation when the tractor arrived. Before Komatsu America could present the bill to States, the tractor was damaged while being unloaded at Seattle by the stevedore, American President Lines, Ltd. ("APL"). The tractor was declared a constructive total loss and later sold for salvage at one-fourth its invoice value.

Komatsu, Ltd., Komatsu America, and the cargo insurance underwriter, Nippon Fire & Marine Insurance Co., Ltd. (collectively, "Komatsu"), alleging that APL damaged the tractor in excess of $16,500, sued States for breach of the contract of carriage and sued APL for negligence. Federal jurisdiction was based in admiralty.

States and APL (collectively, "States") claimed that liability, if any, was limited to $500 under section 4(5) of COGSA, 46 U.S.C. § 1304(5) 1 and under the terms of the bill of lading. 2 On cross-motions for summary judgment, the district court entered partial summary judgment for Komatsu, holding States and APL liable for the damage to the tractor and denying States and APL the benefit of the COGSA § 4(5) damage limitation.

Two issues are raised on appeal: (1) whether an ocean carrier is entitled to the damage limitation in COGSA § 4(5) if it incorporates by reference COGSA into its bill of lading; and (2) whether the filing of a carrier's tariff with the Federal Maritime Commission constitutes constructive notice and fair opportunity to the shipper to avoid the package limitation.

I. The Bill of Lading

Section 4(5) of COGSA limits a carrier's liability to $500 unless the nature and value of the shipped goods is declared by the shipper and inserted in the bill of lading. To guarantee that carriers respect the statutory option to declare a higher value and as a contract principle used in interpreting damage limitations authored by carriers, carriers are permitted to limit liability to an amount less than the actual loss only if the carrier gives the shipper "a fair opportunity to choose between a 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) (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)). 3 Consistent with the longstanding rule that the burden of proof is upon the carrier to demonstrate the validity of a contractual liability limitation, see New Jersey Steam Navigation Co. v. Merchant's Bank, 47 U.S. (6 How.) 344, 382, 12 L.Ed. 465 (1847), the burden of proving "fair opportunity" is initially upon the carrier. Express recitation in a bill of lading of the language contained in COGSA § 4(5) is prima facie evidence that the carrier gave the shipper that opportunity and places the burden on the shipper to prove that such an opportunity did not exist in fact. Tessler, 494 F.2d at 443; Isbrandtsen Co. v. United States, 201 F.2d 281, 285 (2d Cir. 1953).

States claims that it met its evidentiary burden by including in the bill of lading a "Paramount Clause", which indicated that COGSA's provisions governed the parties' contractual relations. 4 States reasons that Komatsu would have discovered the damage limitation contained in section 4(5) and the section's statement that a shipper may raise the damage limitation by declaring a higher value if it had read COGSA's provisions. As the Paramount Clause incorporated all of COGSA's provisions into the bill of lading by reference, States concludes that Komatsu should be charged with constructive notice of the option to declare a higher value. We disagree.

In Pan American World Airways, Inc. v. California Stevedore and Ballast Co. ("Pan Am"), 559 F.2d 1173 (9th Cir. 1977) (per curiam), this court ruled that merely incorporating COGSA's provisions into a Paramount Clause was not prima facie evidence that a carrier gave the shipper the opportunity to declare a higher value. 5 We stated:

... (W)e reject appellant's argument that an experienced shipper should be deemed to have knowledge of an opportunity to secure an alternative freight rate, and higher carrier liability by reason of his knowledge of COGSA, 46 U.S.C. § 1304(5), made applicable by a "Paramount Clause" in the bill of lading, where such opportunity does not present itself on the face of the bill of lading. The bill of lading is usually a boilerplate form drafted by the carrier, and presented for acceptance as a matter of routine business practice to a relatively low-level shipping employee. We feel that imputing such knowledge of COGSA applicability and provisions to such an employee is an assumption that may go beyond the bounds of commercial realism.

Id. at 1177.

States acknowledges our holding in Pan Am, but urges that it applies only when the bill of lading also contains a clause expressly nullifying one of the rights COGSA confers. We believe that State's interpretation fundamentally misreads Pan Am's facts and holding. Two clauses were at issue in Pan Am. The first clause provided that "in no case" would the carrier assume damage liability in excess of $500 per package. The court held that this clause directly conflicted with COGSA and declared the provision null and void. The court then examined the bill of lading's remaining terms to determine if any other provision gave the shipper an opportunity to declare a higher value. The carrier pointed to the Paramount Clause as such a provision, but the court rejected the contention on the grounds quoted above. The important point is that the court's holding with respect to the adequacy of the Paramount Clause was not dependent or qualified by the court's decision to excise and remove the "in no case" clause from the bill of lading. Given Pan Am, we must conclude that the Paramount Clause is not prima facie evidence that States gave Komatsu a "fair opportunity" to declare a higher value.

States also relies upon Clause 18 of the bill of lading as prima facie evidence that it gave Komatsu a "fair opportunity" to declare a higher value. Clause 18 states:

18. Reference is hereby made specifically to value limitations (46 U.S.Code 1304(5)) and time limitations for filing claim and bringing suit (46 U.S.Code 1303(6)) which shall apply and are incorporated herein by reference.

(Emphasis added).

By referring to the specific statutory section that gives a shipper an option to declare a higher value, the highlighted portion of Clause 18 affords slightly more notice to a shipper than the Paramount Clause considered in Pan Am. It nonetheless falls prey to and is subject to the same defect found fatal in Pan Am. Pan Am requires that the "opportunity" to declare a higher value must "present itself on the face of the bill of lading" to constitute prima facie evidence. Id. at 1177. Clause 18 does not meet this standard. The clause contains only an oblique reference to the contents of a statutory section. Given Pan Am's command that shippers are not to be charged with constructive notice of the minute details of COGSA, we must conclude that this clause is not prima facie evidence that States gave Komatsu a "fair opportunity" to avoid States' limitation of damage liability. 6

II. The Tariff

States contends that Komatsu had constructive notice of the opportunity to declare a higher value because its tariff, filed with the Federal Maritime Commission pursuant to the Shipping Act, 46 U.S.C. § 817(b), includes such a provision. Rule 26 of the tariff states The liability of the carrier as to the value of shipments at the rates herein provided shall be determined in accordance with the clauses of the respective carrier's regular Bill of Lading form. If the shippers desire to be covered for a valuation in excess of that allowed by the carrier's regular Bill of Lading form, the shippers must so stipulate in carrier's Bill of Lading covering such shipments and such additional liability only will be assumed to be the carrier's at the request of the shippers and upon payment of an additional charge of 5.2% ad valorem of the total declared valuation in addition to the stipulated rate on the commodities shipped as specified herein.

The shippers who have elected to show value of the goods on the Bill of Lading shall be deemed to have desired to be covered for the value in excess of that allowed by the carrier's regular Bill of Lading form, and must be assessed the above-mentioned additional charge.

Komatsu argues that even if it can be charged with knowledge of the tariff's terms, the applicability of Rule 26 is dependent upon the bill of lading expressly limiting the carrier's damage liability. It...

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