Sabah Shipyard Sdn. Bhd. v. M/V Harbel Tapper, s. 97-41417

• Decision Date: 29 June 1999
• Docket Number: Nos. 97-41417,98-40104,s. 97-41417
• Citation: 178 F.3d 400
• Parties: SABAH SHIPYARD SDN. BHD., Plaintiff-Appellee-Cross-Appellant, v. M/V HARBEL TAPPER, in rem; L&C III Ltd.; Industrial Maritime Carriers (Bahamas), Inc.; Intermarine Incorporated, Defendants-Appellants-Cross- Appellees-Appellees. Sabah Shipyard Sdn. Bhd., Plaintiff-Appellant, v. M/V Harbel Tapper, L&C III Ltd.; Industrial Maritime (Bahamas), Inc.; Rohde & Liesenfeld Inc.; Windrose Line; Intermarine Incorporated, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 400

178 F.3d 400

SABAH SHIPYARD SDN. BHD., Plaintiff-Appellee-Cross-Appellant, v. M/V HARBEL TAPPER, in rem; L&C III Ltd.; Industrial Maritime

Carriers (Bahamas), Inc.; Intermarine

Incorporated,

Defendants-Appellants-Cross-

Appellees-Appellees.

Sabah Shipyard Sdn. Bhd., Plaintiff-Appellant, v. M/V Harbel Tapper, L&C III Ltd.; Industrial Maritime

(Bahamas), Inc.; Rohde & Liesenfeld Inc.; Windrose

Line; Intermarine Incorporated,

Defendants-Appellees.

Nos. 97-41417, 98-40104.

United States Court of Appeals, Fifth Circuit.

June 29, 1999.

Alfred Edward Yudes, Jr., Jane M. Freeberg, Watson Farley & Williams, New York City, Mark L. Walters, William C. Bullard, Baker & Botts, Houston, TX, for Sabah Shipyard Sdn. Bhd.

Kevin Patrick Walters, Dimitri Panos Georgantas, Georgantas & Walters, Houston, TX, for M/V Harbel Tapper and L&C III, Ltd.

Katherine D. Mackillop, Scott E. Raynes, Fulbright & Jaworski, Houston, TX, Alfred J. Rufty, III, Harris & Rufty, Machale A. Miller, Miller & Company, New Orleans, LA, for Industrial Maritime Carriers (Bahamas), Inc. and Intermarine Inc.

Appeals from the United States District Court for the Southern District of Texas.

Before REAVLEY, JOLLY and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Defendants Industrial Maritime Carriers (Bahamas), Inc. ("IMB"), Intermarine Incorporated ("Intermarine"), and L&C III Ltd. ("L&C"), appeal the district court's judgment. Plaintiff Sabah Shipyard Sdn. Bhd. ("Sabah") cross-appeals. We reverse and remand for further proceedings.

I

Sabah contracted to sell an electrical power generator to the National Power Company of the Philippines (NAPOCOR). Sabah purchased generating equipment, including a gas turbine engine, in the United States. IMB successfully bid for the business of transporting the equipment from Houston, Texas to Sabah's facilities in Labuan, Malaysia. Accordingly, two booking notes were issued. Each provided for shipment of Sabah's equipment from Houston to Labuan via Singapore. IMB, through its agent Intermarine, issued a bill of lading to Sabah's agent (Rohde & Liesenfeld). The bill of lading provided for shipment aboard the M/V Harbel Tapper ("Harbel Tapper"), which L&C owned. The bill listed Houston as the "port of loading," Singapore as the "port of discharge," and Labuan as the "place of delivery by on-carrier."

When the Harbel Tapper arrived in Singapore, the cargo was temporarily discharged to a barge called the Asia Mariner 5. Later, the barge took on water and developed a list, causing several packages--including the turbine--to slide off the barge and into the harbor. After the accident, the turbine was recovered, but it could no longer be used for Sabah's project with NAPOCOR.

II

Sabah filed an action in admiralty against IMB, Intermarine, and L&C (collectively, "the defendants"), arising under general maritime law and the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. app. §§ 1300-1315. The defendants answered that, among other things, COGSA limited their liability to $500 per package or per unit. See 46 U.S.C. app. § 1304(5). After a bench trial, the district court issued findings of fact and conclusions of law.

The district court found IMB and Intermarine liable for negligence as forwarders, because they (1) took no measures to determine if the Asia Mariner 5 was seaworthy, and (2) stowed the cargo on a barge that was obviously unseaworthy, too small for the cargo, and unlicensed. See Sabah Shipyard SDN. BHD. v. M/V Harbel Tapper, 984 F.Supp. 569, 574 (S.D.Tex.1997). In the alternative, the district court found IMB and Intermarine liable as carriers under the Harter Act, 46 U.S.C. app. §§ 190-196, because they (1) negligently discharged the cargo to an unseaworthy and unsuitable barge, and (2) failed to exercise due diligence to provide a seaworthy barge. See Sabah, 984 F.Supp. at 574-75. The district court also held L&C liable as a carrier under the Harter Act, because it discharged the cargo to an unseaworthy and unsuitable barge. See id. at 575.

The district court declined to apply COGSA's $500-per-package-or-per-unit limit on liability. As to IMB's and Intermarine's liability as forwarders, the court held that COGSA's $500 limit did not apply to forwarders. See id. at 574. Regarding the defendants' liability under the Harter Act, the district court held that the Harter Act did not provide any limits on liability and that carriers may not limit their liability under the Harter Act. See id. at 575. Finally, the district court held that, even if COGSA applied, a carrier may not invoke COGSA's $500 liability limit if it fails to exercise due diligence to provide a seaworthy vessel. See id.

The district court found actual damages totaling over $13 million. See id. at 573. However, the court ruled that proper treatment of the salvaged turbine parts would have substantially mitigated Sabah's loss, and it reduced the amount of damages accordingly. See id. The district court also rejected Sabah's argument that Sabah was entitled to additional damages stemming from a liquidated-damages clause in its contract with NAPOCOR. See id. at 574.

Based on these findings and conclusions, the district court entered judgment against IMB, Intermarine, and L&C in the amount of $9,125,565.78. See id. at 575. The defendants timely appealed, and Sabah timely cross-appealed.

III

The defendants argue that the district court erred by denying them the $500-per-package-or-per-unit limit on liability afforded to carriers under COGSA. ¹ COGSA provides that a carrier shall not be liable,

"for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package ..., or in the 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."

46 U.S.C. app. § 1304(5). To take advantage of COGSA's limit on liability, however, the carrier must offer the shipper a "fair opportunity" to declare the true value of the shipment and to pay a correspondingly higher shipping rate. See Brown & Root v. M/V Peisander, 648 F.2d 415, 424 (5th Cir.1981); Tessler Bros. (B.C.) Ltd. v. Italpacific Line, 494 F.2d 438, 443 (9th Cir.1974); 2A BENEDICT ON ADMIRALTY § 166 at 16-24 to 16-25 (April 1999) ("BENEDICT"). Thus, under COGSA, the $500 liability limit applies unless (1) the shipper declares a higher value and pays a higher shipping rate, or (2) the carrier does not give the shipper a fair opportunity to declare a higher value. See Wuerttembergische & Badische Versicherungs-Aktiengesellschaft v. M/V Stuttgart Express, 711 F.2d 621, 622 (5th Cir.1983). It is undisputed that neither Sabah nor its agent declared a higher value for the cargo. Sabah does not contend that the defendants denied it a fair opportunity to declare a higher value.

On appeal, the defendants challenge each of the district court's reasons for not applying COGSA's liability limit. First, IMB and Intermarine argue that the district court erred in holding them liable as forwarders, which are not covered by COGSA. Second, the defendants argue that the Harter Act does not prevent application of the $500 liability limit in this case. Third, the defendants argue that COGSA's $500 limit applies even to carriers who fail to exercise due diligence to provide a seaworthy vessel.

In admiralty cases tried by the district court without a jury, we review the district court's legal conclusions de novo. See Nerco Oil & Gas, Inc. v. Otto Candies, Inc., 74 F.3d 667, 668 (5th Cir.1996). We review the district court's factual findings under the clearly erroneous standard. See FED.R.CIV.P. 52(a); Nerco, 74 F.3d at 668. The clearly erroneous standard of review does not apply "to decisions made by district court judges when they apply legal principles to essentially undisputed facts." Walker v. Braus, 995 F.2d 77, 80 (5th Cir.1993).

A

We first address whether the district court erred by holding IMB and Intermarine liable as forwarding agents. They contend that under COGSA, they are carriers, and not forwarding agents. Whether IMB and Intermarine are carriers or forwarders is crucial, because COGSA's liability limit applies only to "carriers." 46 U.S.C. app. § 1304(5); see also Zajicek v. United Fruit Co., 459 F.2d 395, 402 (5th Cir.1972) (holding that the $500 limit does not apply to forwarders).

Under COGSA, "[t]he term 'carrier' includes the owner or the charterer who enters into a contract of carriage with a shipper." 46 U.S.C. app. § 1301(a). A "contract of carriage" is one that is "covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea...." 46 U.S.C. app. § 1301(b). To determine whether a party is a COGSA carrier, we have followed COGSA's plain language, focusing on whether the party entered into a contract of carriage with a shipper. For example, in Pacific Employers Ins. Co. v. M/V Gloria, 767 F.2d 229 (5th Cir.1985), we reasoned that a party is considered a carrier under COGSA if that party "executed a contract of carriage." Id. at 234; see also Bunge Edible Oil Corp. v. M/Vs' Torm Rask & Fort Steele, 949 F.2d 786, 788-89 (5th Cir.1992) (finding that no factual issues existed as to carrier status where party demonstrated that it entered into a contract of carriage with a shipper); Nitram, Inc. v. Cretan Life, 599 F.2d 1359, 1370 (5th Cir.1979) (finding that a party was a carrier under COGSA simply because it entered into a contract of carriage with a shipper); Demsey & Assocs. v. S.S. Sea Star, 461 F.2d 1009, 1014 (2d Cir.1972); Trade Arbed, Inc. v. S/S Ellispontos, 482 F.Supp. 991, 994 (S.D.Tex.1980) ("One principle emerges clearly: whoever enters the contract of carriage with the shipper in a given transaction comes within the definition of a 'carrier' pursuant to Section 1301(a) of COGSA.").

In this case, it is without...