Sony Magnetic Products Inc. of America v. Merivienti O/Y

• Decision Date: 23 January 1989
• Docket Number: No. 87-7614,87-7614
• Citation: 863 F.2d 1537
• Parties: SONY MAGNETIC PRODUCTS INC. OF AMERICA, Plaintiff-Appellee, v. MERIVIENTI O/Y, d/b/a Finnlines Ltd., Enso Gutzeit O/Y, O/Y Finnlines, Ltd., Atlantic Cargo Services, Strachan Shipping Company, in personam, M/V FINNHAWK, her engines, hull, tackle, appurtenances, etc., in rem, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1537

863 F.2d 1537

1989 A.M.C. 1259

SONY MAGNETIC PRODUCTS INC. OF AMERICA, Plaintiff-Appellee, v. MERIVIENTI O/Y, d/b/a Finnlines Ltd., Enso Gutzeit O/Y, O/Y Finnlines, Ltd., Atlantic Cargo Services, Strachan Shipping Company, in personam, M/V FINNHAWK, her engines, hull tackle, appurtenances, etc., in rem, Defendants-Appellants.

No. 87-7614.

United States Court of Appeals Eleventh Circuit.

Jan. 23, 1989.

Sidney H. Schell, Mobile, Ala., for defendants-appellants.

Johnstone, Adams, Bailey, Gordon & Harris, Thomas S. Rue, Mobile, Ala., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Alabama.

Before TJOFLAT and KRAVITCH, Circuit Judges, and PAINE ^*, District Judge.

KRAVITCH, Circuit Judge:

Various entities associated with the M/V Finnhawk, a container ship, appeal from a district court order finding them liable under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C.App. Sec. 1300 et seq., for damages sustained to the plaintiff's cargo while being loaded on board the Finnhawk. We affirm.

I. BACKGROUND

Sony Magnetic Products, Inc. of America ("Sony") operates a plant in Dothan, Alabama for the manufacture of magnetic video cassette tapes. In early March of 1982, Sony contacted Page & Jones, a freight forwarder with offices in Mobile, Alabama, to arrange for the transportation of a container of video cassette tapes to England. Page & Jones, through Gas & Equipment Transport, Inc., a non-vessel operating common carrier, reserved space for Sony's cargo with Atlantic Cargo Services on board the Finnhawk.

In mid-March of 1982, at the Dothan plant, Sony packed its cargo of LS-435 and L-830E video cassette tapes into a standard shipping container, measuring 40 feet long by 8 feet wide by 8 feet high. Sony first placed the tapes into 1320 cardboard cartons and then strapped the cartons onto 52 wooden pallets, which were forklifted into the container. Shortly afterwards, Sony delivered the container to Strachan Shipping Company, general agents for Atlantic Cargo Services, at the Alabama State Docks in Mobile, Alabama. When the container was delivered to the dock, Gas & Equipment issued Sony a bill of lading, which had been prepared by Page & Jones. The bill of lading is blank under the heading "No. of Pkgs.," but under the heading "Description of Packages and Goods," it states "1 X 40 foot container STC [said to contain]: 1320 Ctns. Magnetic Tapes (blank)." The bill of lading did not reserve space for designating the value of the cargo, but the attached export certificate showed a value of $424,765.44.

On March 26, 1982, as the Finnhawk's deck crane was lifting the container of Sony's tapes up to the vessel's cargo deck, the hydraulic motor of the crane exploded, or catastrophically failed in some manner Two weeks after the accident, Sony inspected the cargo to more fully assess the damages. Sony's inspectors opened those cartons of tapes that appeared the least damaged and, upon close examination, discovered that even the tapes in these cartons had been damaged. Based upon this inspection of a representative sample of the cargo, Sony concluded that all the tapes were unmarketable as new merchandise and agreed with its underwriter to negotiate for their salvage. Salvage negotiations were unsuccessful, however, because Sony refused to allow the tapes to be marketed as "seconds" with only a nonwarranty sticker on them and without removal of certain embossed marks identifying the tapes as Sony's products. ¹ Sony ultimately purchased the damaged cargo from its underwriter for $65,000 and destroyed the tapes.

causing the container to drop approximately sixty feet to the concrete loading deck below. An immediate, cursory examination of the container suggested that the cargo had been damaged; consequently, Atlantic Cargo Services decided not to load the container of tapes aboard the Finnhawk, but instead stored it in a warehouse at the docks and contacted Sony.

On September 21, 1983, invoking the admiralty jurisdiction of the district court, Sony filed suit in personam against (1) Merivienti O/Y, the manager of the Finnhawk, (2) Enso Gutzeit O/Y and O/Y Finnlines, Ltd., the owners of the Finnhawk, (3) Atlantic Cargo Services, Inc., the charterer and operator of the Finnhawk, and (4) Strachan Shipping Company, general agents for Atlantic Cargo Services. ² Sony also filed suit in rem against the Finnhawk, but never perfected service against the vessel. Sony's complaint, seeking recovery under breach of contract and negligence theories, alleged that the act or omission of one or all of the defendants caused the damage to its video cassette tapes. In their answer, the defendants asserted various defenses under COGSA. Although Sony had not relied upon COGSA in its complaint, it agreed prior to trial that this statute governed the instant action.

After a bench trial, the district court issued a memorandum opinion finding the defendants liable for the damage to Sony's tapes and awarding damages of $424,765.44, the invoice value of the tapes, plus prejudgment interest. 668 F.Supp. 1505. The district court later made minor modifications in its original memorandum opinion, but left intact the awarded damages and interest. This appeal followed.

II. LIABILITY

The first issue on appeal is whether the district court properly imposed liability on the defendants under COGSA for the damage to Sony's video cassette tapes. A shipper establishes a prima facie case under COGSA by proving that the carrier received the cargo in good condition but unloaded it in a damaged condition. Terman Foods, Inc. v. Omega Lines, 707 F.2d 1225, 1227 (11th Cir.1983). A carrier can rebut a shipper's prima facie case by establishing either that it exercised due diligence to prevent the damage to the cargo by properly handling, stowing, and caring for it in a seaworthy ship, 46 U.S.C.App. Sec. 1303(1) & (2), or that the harm resulted from one of the excepted causes listed in section 1304(2). Terman Foods, 707 F.2d at 1227. If the carrier is able to rebut the shipper's prima facie case, the burden then shifts back to the shipper to show that the carrier's negligence was, at the least, a concurrent cause of the loss. Id.

At trial, in an effort to rebut Sony's prima facie case, the defendants attempted to establish that the accident The district court found that the "plaintiff's expert presented the more credible explanation of the catastrophic motor failure" and was "unable to find as a fact that the failure was caused, either directly or proximately, by fatigue cracks or cracks created during the process of manufacturing the pistons." The district court rejected the defendants' theory of the cause of the accident because it failed to explain certain physical evidence that Sony's theory was able to explain. Moreover, the court found that the defendants' "evidence suggesting that the crane was properly maintained at all pertinent times is inconclusive," and was "unable to find that [the Finnhawk's crewmembers] took the steps necessary to insure [the crane's] proper operation on the occasion of the accident which caused plaintiff's loss." Based upon its factual findings, the district court concluded, as a matter of law, that the defendants had not sustained their burden of proving that Sony's loss was caused by a latent defect and consequently had not rebutted Sony's prima facie case under COGSA.

                that caused the damage to Sony's cargo was the result of a latent defect in the motor of the Finnhawk's crane, one of the enumerated exceptions to liability in section 1304(2) of COGSA. 3   In particular, one of the defendants' experts, a metallurgist, testified that microscopic cracks in the pistons of the crane's motor, created during the manufacturing process and aggravated by fatigue, caused the explosion.  According to this expert, the ship's crew could not have discovered these cracks by inspecting the motor.  The defendants' other expert, a marine surveyor, also opined that the accident was caused by a latent defect.  In addition, crewmembers of the Finnhawk maintained that there had been no complaints about or problems with the crane and that it had always been properly maintained and inspected.  In contrast, Sony's expert, also a metallurgist, testified that the central cause of the accident was a malfunctioning stop switch on the crane, a defect about which the defendants either did know or should have known.
                

The defendants maintain that the district court erred in concluding that they did not bear their burden of proving the latent defect defense. ⁴ In so arguing, the defendants do nothing more than point out various inconsistencies and other weaknesses in the testimony of Sony's expert in an attempt to discredit Sony's theory of the cause of the accident. This argument, however, ignores the allocation of burdens of proof outlined in COGSA: Sony did not have to prove that the accident was not caused by a latent defect; instead, to rebut Sony's prima facie case under COGSA, the defendants bore the burden of proving that the accident was the result of a latent defect. As the district court's order made clear, the defendants' evidence failed to establish this crucial fact. The district court explicitly rejected the defendants' theory that the accident was caused by cracks in the motor's pistons and noted the inconclusiveness of the defendants' evidence that the crane was working properly. Having reviewed the record, we conclude that these findings are not clearly erroneous and thus cannot be overturned on appeal. Fed.R.Civ.P. 52(a); McAllister v. United States, 348 U.S. 19, 20, 75 S.Ct. 6,

8, 99 L.Ed. 20 (1954). Except for the evidence that the district court discredited, the defendants offered no proof to support their latent defect defense. Consequently, we affirm the district court's legal conclusion that the defendants failed to rebut Sony's prima facie case under COGSA.

III. DAMA...