Tessler Brothers (BC) Ltd. v. Italpacific Line

• Decision Date: 28 May 1974
• Docket Number: No. 71-3071.,71-3071.
• Citation: 1974 AMC 937,494 F.2d 438
• Parties: TESSLER BROTHERS (B.C.) LTD., Plaintiff-Appellant, v. ITALPACIFIC LINE and Matson Terminals, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

1974 AMC 937, 494 F.2d 438 (1974)

TESSLER BROTHERS (B.C.) LTD., Plaintiff-Appellant, v. ITALPACIFIC LINE and Matson Terminals, Inc., Defendants-Appellees.

No. 71-3071.

United States Court of Appeals, Ninth Circuit.

March 20, 1974.

Rehearing Denied May 28, 1974.

COPYRIGHT MATERIAL OMITTED

John E. Droeger (argued), Hall, Henry, Oliver & McReavy, San Francisco, Cal., for plaintiff-appellant.

Kelly Wooster (argued), J. Stewart Harrison, Robert C. Boehm, Brobeck, Phleger & Harrison, San Francisco, Cal., D. Thomas McCune, Lillick, McHose, Wheat, Adams & Charles, San Francisco, Cal., for defendants-appellees.

Before BARNES, WRIGHT and WALLACE, Circuit Judges.

OPINION

EUGENE A. WRIGHT, Circuit Judge:

This is an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) from a district court decision granting summary judgment in favor of Matson Terminals, Inc., limiting Matson's liability as a stevedore to a maximum of $500, as distinguished from the claimed damage in excess of $14,000. We affirm.

S.N.T.F.L.I. Gonrand delivered to defendant Italpacific Lines in Italy an industrial dry cleaning machine for delivery to Vancouver, B. C. Labor trouble at the destination required delivery instead at Tacoma. At the time of the discharge, appellant Tessler Brothers was the holder in due course of the bill of lading that Italpacific had initially issued to Gonrand. Matson Terminals unloaded the cargo. Tessler Brothers, alleging that Matson damaged the machine in excess of $14,000, sued Italpacific for breach of the contract of carriage, and sued Matson for negligence.

Italpacific and Matson claimed that liability, if any, was limited to $500 under § 4(5) of the Carriage of Goods by Sea Act (COGSA) 46 U.S.C. § 1304(5) and/or the terms of the bill of lading, which contained no declaration of value of the machine. Tessler and Matson moved for summary judgment on the issue of the limitation of Matson's liability to $500. A ruling in Matson's favor prompted this appeal.

Clause 1 of the bill of lading provided that the bill would be subject to the provisions of COGSA, § 4(5) of which provides:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. Emphasis added.

Matson claims that its liability as stevedore is limited under § 4(5) by virtue of clause 21 of the bill of lading.¹ This clause, which purports to extend protections provided for the carrier to those employed by the carrier, is commonly known as a "Himalaya clause."² Matson also claims the benefit of clause 18 of the bill of lading, which contains substantially the same provisions limiting liability as § 4(5).

Tessler raises two principal issues on appeal. It contends, first, that an ocean carrier (Italpacific in this case) cannot extend its own limitation of liability to independent stevedores by using a Himalaya clause in a bill of lading. Secondly, it contends that, even if Himalaya clauses are valid, the bill of lading in this case does not, when strictly construed, extend the limitation of liability to the stevedore. We conclude that both contentions are erroneous.

I THE EXTENSION OF COGSA LIMITATIONS TO STEVEDORES

Whether a stevedore may benefit from the limitation of liability provisions in COGSA or in an ocean bill of lading has been the subject of considerable litigation. In Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 79 S.Ct. 766, 3 L.Ed.2d 820 (1959), the Supreme Court considered the issue in order to resolve an intercircuit conflict.³

In Herd, cargo interests sued a stevedore for damages resulting from the stevedore's dropping of a press being loaded for foreign shipment. Both the COGSA provisions and the applicable bill of lading limited the liability only of the carrier and the ship, making no reference to agents or independent contractors of the carrier. COGSA defines the term "carrier" to include "the owner or the charterer who enters into a contract of carriage with a shipper." 46 U.S.C. § 1301(a). The Supreme Court held that neither the language, the legislative history, nor the environment of the Act shows any intent by Congress to regulate stevedores. 359 U.S. at 302, 79 S.Ct. 766, 3 L.Ed.2d 820.

The Court next considered whether the parties had intended in the bill of lading to limit the stevedore's liability. It found that the bill of lading referred only to the "carrier's liability" and showed no intention to limit the liability of stevedores, an intention that could easily have been expressed.⁴ The Court noted that the unlimited liability of an agent for his own negligence has long been embedded in the law, and anything in derogation of this principle, whether statute or private contract, must be strictly construed.⁵

Tessler mounts a four-pronged attack on the validity of Himalaya clauses. It contends, first, that Herd should not be read to indicate that parties may properly extend limitations of liability to stevedores by clearly expressing their intent to do so in the bill of lading. We reject this contention, as have other courts that have considered it.

The Herd court concluded that the stevedore's liability was not limited because no statute limited it and because the stevedore "was not a party to nor a beneficiary of the contract of carriage between the shipper and the carrier, and hence its liability was not limited by that contract." 359 U.S. at 308, 79 S.Ct. at 773. We and other courts interpret this to mean that under certain circumstances parties to a contract of carriage may limit a stevedore's liability, but only if the intent to do so is clearly expressed. Bernard Screen Printing Corp. v. Meyer Line, 464 F.2d 934, 936 (2d Cir. 1972), cert. denied, 410 U.S. 910, 93 S.Ct. 966, 35 L.Ed.2d 272 (1973); Secrest Machine Corp. v. S. S. Tiber, 450 F.2d 285, 286 (5th Cir. 1971); Cabot Corp. v. S. S. Mormacscan, 441 F.2d 476, 478 (2d Cir. 1971), cert. denied, 404 U. S. 855, 92 S.Ct. 104, 30 L.Ed.2d 96 (1971); Dorsid Trading Co. v. S/S Fletero, 342 F.Supp. 1, 6 (S.D.Tex.1972); Carle & Montanari, Inc. v. American Export Isbrandtsen Lines, Inc., 275 F. Supp. 76, 78 (S.D.N.Y.), aff'd mem., 386 F.2d 839 (2d Cir. 1967), cert. denied, 390 U.S. 1013, 88 S.Ct. 1263, 20 L.Ed.2d 162 (1968).

Tessler next contends that seven years before the Supreme Court's opinion in Herd, the Court held void any bill of lading clauses which deprive cargo interests of any portion of their rights against third parties.

In United States v. Atlantic Mutual Insurance Co., 343 U.S. 236, 72 S.Ct. 666, 96 L.Ed. 907 (1952), the Court held invalid "Both-to-Blame" clauses, often contained in the ocean bills of lading. Provisions in COGSA, 46 U.S.C. § 1304(2)(a), and the Harter Act, 46 U. S.C. § 192, took away, under some circumstances, the right of a cargo owner to sue his own carrier for cargo damages caused by the negligent navigation of the carrier's servants or agents. When two negligent vessels collided, however, the cargo owner could still recover from the non-carrying vessel. In a both-to-blame situation, each carrier was liable, vis-a-vis each other, for one-half the total damage, and the non-carrying vessel was entitled to include in the total the sums it had paid to owners of cargo in the carrying vessel. The carrying vessel thus ultimately became responsible for one-half the damage suffered by its cargo. The "Both-to-Blame" clause in Atlantic Mutual granted the carrying vessel the right to recoup those sums from its cargo owners.

The Supreme Court held this clause invalid, prompted by "the controlling rule that without congressional authority carriers cannot stipulate against their own negligence or that of their agents or servants." 343 U.S. at 242, 72 S.Ct. at 669. Given a cargo owner's right to recover from the non-carrying vessel, and the right of that vessel to recover one-half its liability to cargo from the negligent carrying vessel, a stipulation in the bill of lading requiring cargo to indemnify the carrying vessel for sums it paid the non-carrying vessel violated the rule against a carrier stipulating against its own negligence.

Tessler argues that this same reasoning condemns the contractual extension, not authorized by Congress in COGSA, of a limitation of liability to stevedores.

Tessler's argument is off base. True, a carrier cannot immunize itself from responsibility for its own negligence. It may, however, limit the amount of its liability if the limitation is tied to an agreed value of goods, subject to carriage at a specific freight rate, with the cargo owner having the option of declaring and recovering a higher value if it pays a higher rate.

This distinction between a limitation on liability and an exemption from liability is crucial. A limitation, unlike an exemption, does not induce negligence. Compensation for carriage is based on the value of the cargo agreed on by the carrier and the cargo owner and, unless immunized by act of Congress see 46 U.S.C. § 1304(2), a carrier who negligently damages cargo must respond in that value for its negligence. Hart v. Pennsylvania Railroad Co., 112 U.S. 331, 340-341, 5 S.Ct. 151, 28 L.Ed. 717 (1884); The Ansaldo San Giorgio I v. Rheinstrom Brothers Co., 294 U.S. 494, 496-497, 55 S.Ct. 483, 79 L.Ed. 1016 (1935).

Section 4(5) of COGSA 46 U.S.C. § 1304(5) limits a carrier's liability to $500 unless a higher amount is inserted in the bill of lading.⁶ Atlantic Mutual, while invalidating clauses that exempt carriers or their agents from...