Orient Overseas Container Line Ltd. v. Crystal Cove Seafood Corp.

• Decision Date: 26 September 2011
• Docket Number: 10 Civ. 3166 (PGG)
• Parties: ORIENT OVERSEAS CONTAINER LINE LTD., Plaintiff, v. CRYSTAL COVE SEAFOOD CORP., Defendant.
• Court: U.S. District Court — Southern District of New York

ORIENT OVERSEAS CONTAINER LINE LTD., Plaintiff, v. CRYSTAL COVE SEAFOOD CORP., Defendant.

10 Civ. 3166 (PGG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: September 26, 2011

ECF CASE

MEMORANDUMOPINION & ORDER

PAUL G. GARDEPHE, U.S.D.J.

Plaintiff Orient Overseas Container Line Ltd. ("Orient") is a commercial carrier that contracted with Defendant Crystal Cove Seafood Corp. ("Crystal") to transport frozen tilapia from Shekou, China to Smyrna, Tennessee. (Cmplt. ¶ 7) The Complaint alleges that Crystal breached the terms of a bill of lading contract by refusing to take delivery of the cargo, and seeks $49,364.20 in demurrage, transportation, and surveying expenses that Orient incurred as a result of Crystal's alleged misconduct. (Id. ¶¶ 8, 12-16, 18, 20) In a counterclaim, Crystal contends that as a result of Orient's alleged breach of its duties under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 30701 et seq., Crystal incurred damages of $67,490.00. (Amended Answer, ¶¶ 20-26)

Crystal now moves for summary judgment on its counterclaim and for an order dismissing Orient's claim. For the reasons stated below, Crystal's motion for summary judgment will be DENIED.

BACKGROUND

Orient contracted with Crystal to transport 3,400 cartons of frozen tilapia fillets from China to Tennessee. The bill of lading provides for the cargo to be loaded at Shekou,China, transported to the port of Long Beach in California, and ultimately delivered in Smyrna, Tennessee. (Def. R. 56.1 Stmt. ¶¶ 1-3; DeGrand Decl., Ex. A (Bill of Lading))¹ United States Cold Storage ("USCS") in Smyrna, Tennessee was designated as the facility to receive the cargo. (Id. ¶ 80)

In China, the tilapia was washed, inspected, and then flash-frozen. (Def. R. 56.1 Stmt. ¶¶ 6, 10-20) The flash-freezing process ensures that the tilapia is frozen as individual fillets, making it easier for the purchaser to use. (Id. ¶¶ 13-14) The cargo was loaded into a 40-foot refrigerated container on July 6, 2009. (Id. ¶¶ 25-26, 30) It is undisputed that when Orient took custody of the tilapia, the fish was in good condition. (Id. ¶ 31)

The bill of lading specifies that the tilapia is to be shipped at -18.0 Celsius (-0.4 degrees Farenheit). (Id. ¶ 1; DeGrand Decl., Ex. A (Bill of Lading)) It is undisputed that when the cargo was loaded into the container, the refrigeration unit was functioning properly and was set at -18.0 Celsius (-0.4 degrees Farenheit). (Id. ¶ 28)

On or about July 30, 2009, during transit, the refrigeration unit in the container failed. (Id. ¶ 33) Orient learned on August 1, 2009, that the refrigeration unit had malfunctioned (id) but did not notify Crystal of the malfunction until August 3, 2009. (Id. ¶¶ 77, 78) A mechanic determined that the "relay board and wiring in the container's [refrigeration] unit was burnt out." (Ng Decl., ¶ 29, Ex. 8)

The temperature data recorder log for the container shows that the temperature inside the container began rising dramatically on the morning of July 30, 2009,. (DeGrand Decl., Ex. C) The log shows that between August 2, 2009 and August 4, 2009, the temperature inside the container ranged from 4.5 degrees Celsius (40.1 degrees Farenheit) to 10 degrees Celsius (50 degrees Farenheit). (Def. R. 56.1 Stmt. ¶ 132) When the cargo arrived for delivery at USCS in Smyrna on August 4, 2009, the fish smelled and the temperature inside the container was 29.8 to 30.3 degrees. USCS refused to accept the container, and expressed concern that "the odor from the product may contaminate the warehouse."² (Def. R. 56.1 Stmt. ¶¶ 98-100; DeGrand Decl., Ex. G)

The temperature data recorder log for the container ends at 9:00 a.m. on August 4, 2009. The last temperature reading was 7.5 degrees Celsius or 45.5 degrees Farenheit. (Def. R. 56.1. Stmt. ¶¶ 128-30) The tilapia remained inside the container with the malfunctioning refrigeration unit until August 6, 2009, when it was transloaded into another container. (Id. ¶¶ 106, 133; Davies Decl., Ex. 1, Ex. 3) On August 7, 2009, Orient again attempted to make delivery at USCS, but the cargo was again rejected. (Greer Decl. ¶ 9)

On August 18, 2009, representatives of Plaintiff, Defendant, and USCS conducted a joint survey of the cargo. (Def. R. 56.1 Stmt. ¶ 34; Davies Decl., Ex. 1, Ex. 3) Orient's surveyor issued a report stating that he had "randomly selected cartons of fish to open for inspection" and "[i]n all instances . . . found varying degrees of freezer burn on the fish. . . . [He] also noted clumping of the fish and in numerous instances discoloration." (Davies Decl., Ex. 1)The surveyors began their inspection at the rear of the container but then "progressed further into [it] and continued to randomly inspect cartons. [Their] findings noted the same conditions as previously sighted." Orient's surveyor went on to state that "the damages sighted appear to be the result of the refrigerated container malfunctioning." (Id.)

Crystal's surveyor issued a report that made similar findings:

the individually frozen Tilapia fillets had obviously thawed at some point in the past and completely refroze together in solid 10-pound blocks. In addition to that, all the Talapia fillets . . . exhibited extensive ice crystals. There was extensive discoloration and obvious freezer burn on most of the fillets observed. . . . After allowing a few selected fillets to thaw gradually and partially, they began to exude a very offensive "fishy" odor. . . .The entire shipment was involved. A good representative sample was surveyed, and adverse conditions were found throughout the container.

(Davies Decl., Ex. 3) Crystal's surveyor concluded that the fish "is not usable as a prime food source" and that it had "no salvage recovery potential." (Id.)

From August 4, 2009, to March 19, 2010, the cargo was stored in an Orient container in Memphis, Tennessee. (Ng Decl., ¶ 19) During this time, the parties argued over who was responsible for the damage to the cargo and what should be done with it. (Ng Decl., Ex. 11,12) Orient seeks container demurrage fees for this period of time. (Cmplt., ¶¶ 13-16) In March 2010, after giving notice to Crystal, Orient sold the cargo for $30,610.00. (Cmplt. ¶ 18; Ng Decl., ¶ 69, Ex. 13)

DISCUSSION

Summary judgment is warranted when the moving party shows that "there is no genuine dispute as to any material fact" and that it "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A dispute about a 'genuine issue' exists for summary judgment purposes where the evidence is such that a reasonable jury could decide in the non-movant's favor." Beyer v. County of Nassau, 524 F.3d 160, 163 (2d Cir. 2008). "'[W]here the nonmoving partywill bear the burden of proof at trial, Rule 56 permits the moving party to point to an absence of evidence to support an essential element of the nonmoving party's claim.'" Lesavoy v. Lane, No. 02 Civ. 10162, 2008 WL 2704393, at *7 (S.D.N.Y. July 10, 2008) (quoting Bay v. Times Mirror Magazines, Inc., 936 F.2d 112, 116 (2d Cir. 1991)).

In deciding a summary judgment motion, the Court "'resolve[s] all ambiguities, and credit[s] all factual inferences that could rationally be drawn, in favor of the party opposing summary judgment.'" Spinelli v. City of New York, 579 F.3d 160, 166 (2d Cir. 2009) (quoting Brown v. Henderson, 257 F.3d 246, 251 (2d Cir. 2001)). However, a "'party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment . . . [M]ere conclusory allegations or denials . . . cannot by themselves create a genuine issue of material fact where none would otherwise exist.'" Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (alterations in original) (quoting Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995)).

I. DEFENDANT IS NOT ENTITLED TO SUMMARY JUDGMENT ON ITS COUNTERCLAIM

The parties agree that Crystal's counterclaim is governed by COGSA, 46 U.S.C. § 30701 et seq.³ See (Pltf. Br. 5; Def. Br. 2) Because there is a material issue of fact as to whether Orient acted with "due diligence to avoid and prevent the harm" to the cargo, see Lekas & Drivas, Inc. v. Goulandris, 306 F.2d 426, 429 (2d Cir.1962), Crystal's motion for summary judgment on its counterclaim will be denied.

A. Applicability of COGSA

COGSA governs all contracts "for the carriage of goods by sea to or from ports of the United States, in foreign trade." 46 U.S.C. § 30701 note. COGSA imposes on ocean carriers a duty to "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried." COGSA § 3(2). The statute applies "from the time when the goods are loaded on to the time when they are discharged from the ship," id. at § 1(e), but the parties may extend its application by contract to cover "the custody and care and handling of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by sea." Id. at § 7; American Home Assur. Co. v. Panalpina Inc., No. 07 Civ. 10947 (BSJ), 2011 WL 666388, at *3 (S.D.N.Y., February 16, 2011) (citing Hartford Fire Ins. Co. v. Orient Overseas Containers Lines, Ltd., 230 F.3d 549, 557 (2d Cir. 2000)).

Here, COGSA was expressly incorporated into the bill of lading and was extended to govern "throughout the carriage by sea and the entire time that the Goods are in the actual custody of the Carrier or its sub contractor . . . or after discharge therefrom as the case may be." (Davies Decl., Ex 19 ("Terms and Conditions of the OOCL bill of lading" at paragraph D))

B. Crystal's Prima Facie Case

In order to recover against a carrier for damage to goods shipped pursuant to a bill of lading governed by COGSA, a shipper "'bears the initial burden of proving both delivery of goods to the carrier . . . in good condition, and outturn by the carrier . . . in damaged condition.'" Transatlantic Marine Claims Agency, Inc. v. M/V OOCL Inspiration, 137 F.3d 94, 98 (2d Cir.1998) (quoting Vana Trading...