Yang Mach. Tool Co. v. Sea-Land Service, Inc.

• Decision Date: 30 June 1995
• Docket Number: SEA-LAND,No. 93-17311,93-17311
• Parties: , 95 Daily Journal D.A.R. 8678 YANG MACHINE TOOL CO., Plaintiff-Appellee, v.SERVICE, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1350

58 F.3d 1350

1995 A.M.C. 2153, 95 Daily Journal D.A.R. 8678

YANG MACHINE TOOL CO., Plaintiff-Appellee, v. SEA-LAND SERVICE, INC., Defendant-Appellant.

No. 93-17311.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 15, 1994.

Withdrawn from submission Dec. 20, 1994.

Resubmitted March 16, 1995.

Memorandum Filed March 20, 1995.

Order and Opinion Filed June 30, 1995.

James J. Tamulski, Kaye, Rose, Tamulski & Maltzman, San Francisco, CA, for defendant-appellant.

Robert C. Chiles, Long & Levit, San Francisco, CA, for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California.

Before: FARRIS, BOOCHEVER, and BRUNETTI, Circuit Judges.

ORDER

The memorandum disposition filed March 20, 1995, is redesignated as an authored opinion by Judge Boochever.

OPINION

BOOCHEVER, Circuit Judge:

Yang Machine Tool Company ("Yang Machine") contracted with Sea-Land Service, Inc. ("Sea-Land") to transport two cases of oversized cargo from China to California. The cargo was damaged while being restowed onto a substitute vessel in Japan, and Yang Machine sued for recovery of damages. The district court found that the restowage of the cargo onto the substitute vessel constituted an "unreasonable deviation," and the court granted Yang Machine's motion for summary judgment. Sea-Land appeals the judgment and seeks to limit its liability to $500 per package under 46 U.S.C.App. Sec. 1304(5). We reverse and remand the case to enter judgment for Yang Machine in the amount of $1,000.

FACTUAL AND PROCEDURAL BACKGROUND

Sea-Land is an ocean carrier that regularly carries goods from ports in Asia to the United States. Yang Machine contracted with Sea-Land to transport a large horizontal machining center from China to California. Yang Machine had shipped cargo with Sea-Land over 100 times prior to this particular shipment.

Because the machinery was considered "oversize," as it would not fit in a standard 40' enclosed container, it was shipped in two parts on a "flat rack," a metal pallet with no sides or top. The cargo was secured on the flat rack by steel bands and placed on board the vessel MERCHANT PRINCE. The MERCHANT PRINCE carried the cargo from China to Yokohama, Japan. There the cargo was off-loaded and restowed onto the vessel SEALAND PATRIOT for carriage to California. While the cargo was being reloaded onto the SEALAND PATRIOT, a hoisting cable broke and the cargo was damaged. The shipment was insured, and Yang Machine received payment from its insurance company.

The bill of lading issued by Sea-Land identified only the MERCHANT PRINCE as the carrying vessel. It did not indicate that the cargo would be restowed aboard the SEALAND PATRIOT. Therefore, Yang Machine contends it was led to believe that the MERCHANT PRINCE would sail through to California and the cargo would remain on board that vessel. The bill of lading contained a provision, however, that reserved Sea-Land's right to use other vessels: "Carrier shall have the right, without notice, to substitute or employ a vessel, watercraft, or other means rather than the vessel named herein to perform all or part of the carriage."

The bill of lading also contained a provision which limited Sea-Land's liability to $500 per package of cargo, unless the shipper declared in the space provided on the face of the bill of lading a higher value for the goods. Yang Machine, however, did not declare a higher value for the cargo.

Yang Machine brought suit against Sea-Land for the damage to its cargo. Yang Machine filed a motion for summary judgment seeking $241,700 in damages. Sea-Land filed a cross-motion for summary judgment by which it sought to limit its liability to $1,000 ($500 per package) as authorized by the contract and by 46 U.S.C.App. Sec. 1304(5). The district court found that Sea-Land had committed an unreasonable deviation by restowing the cargo onto the SEALAND PATRIOT and granted Yang Machine's motion for summary judgment, thereby depriving Sea-Land of the $500-per-package limitation. Because there was some confusion over the amount of damages, the parties stipulated to damages in the amount of $200,000, and the district court entered a judgment to that effect. Sea-Land now appeals.

STANDARD OF REVIEW

A grant of summary judgment is reviewed de novo. Viewing the evidence in the light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir.1994). The parties agreed that there were no issues of material fact.

DISCUSSION

I. No Deviation from the Contract of Carriage

The Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C.App. Secs. 1300-1315, applies to all international cargo shipments which are carried by sea, to or from the United States. COGSA allows carriers to limit their liability to $500 per package of cargo in the event of loss or damage to the cargo. 46 U.S.C.App. Sec. 1304(5). ¹ An exception to this limitation applies, however, if the carrier commits an unreasonable deviation from the contract of carriage. See Nemeth v. General S.S. Corp., Ltd., 694 F.2d 609, 613 (9th Cir.1982). A deviation is "a 'serious departure from the contract of carriage,' exposing the cargo to 'unanticipated and additional risks.' " Id. (citations omitted).

The district court in this case found that Sea-Land's "transshipment" of the cargo, i.e., unloading the machinery from the MERCHANT PRINCE and restowing it onto the SEALAND PATRIOT, constituted a deviation. Sea-Land argues, however, that the transshipment was not a deviation for three reasons: (1) the bill of lading gave notice of Sea-Land's right to use substitute vessels; (2) most courts limit the doctrine of deviation solely to geographic deviations and unauthorized on-deck stowage; and (3) the unadvertised use of substitute vessels is customary in the trade. Because we find that the contract of carriage, or bill of lading, provided notice of Sea-Land's right to use substitute vessels, we conclude that there was no deviation from the contract of carriage. We need not reach Sea-Land's other two arguments.

Clause 3 in the bill of lading provided: "Carrier shall have the right, without notice, to substitute or employ a vessel, watercraft, or other means rather than the vessel named herein to perform all or part of the carriage." The district court stated, however, that notice of Sea-Land's right to transship was not contained in the bill of lading.

Sea-Land presented evidence that other ocean carriers used similar clauses in their bills of lading to notify shippers of the carriers' right to use substitute vessels. Specifically, the bills of lading for three other major carriers, American President Lines, Evergreen Line, and Maersk Shipping, all contained clauses which reserved the right. ² The district court found that these carriers' bills of lading provided adequate notice but that Sea-Land's did not. The court noted, "It would be extremely easy for [Sea-Land] to do what some of the other carriers do, namely, include notice in their bills of lading that during the course of shipment they may transship the goods or use feeder vessels or information that the cargo will be on another vessel during part of its journey."

Sea-Land's bill of lading, however, did provide notice of the right to employ substitute vessels. Clause 3, although not using the word "transshipment," was similar to the provisions found in the bills of lading of the other major carriers which the district court found provided adequate notice. Moreover, Sea-Land's bill of lading provided for the right to use substitute vessels "to perform all or part of the carriage" (emphasis added). Use of a substitute vessel for part of the voyage necessarily encompasses a transshipment. Accordingly, we hold the transshipment was not a deviation from the contract of carriage.

Yang Machine argues, however, that the clause in the bill of lading which reserves the right to use substitute vessels is part of a broad "liberty clause" which is essentially unenforceable because it purports to give the carrier absolute freedom in the manner, method, and mode of transport. ³ Yang Machine contends that if this clause were taken literally, there would be no doctrine of deviation because anything the carrier did would be part of the "contract" voyage, as defined by the broad liberty clause. See 2A Benedict on Admiralty Sec. 125, at 12-29 (1994).

Liberty clauses have been construed strictly to allow only reasonable deviations. They are unenforceable to the extent they authorize unreasonable deviations. See Berkshire Fashions, Inc. v. M.V. Hakusan II, 954 F.2d 874, 885 (3d Cir.1992); General Elec. Co. Int'l Sales Div. v. S.S. Nancy Lykes, 706 F.2d 80, 84 (2d Cir.1983), cert. denied, 464 U.S. 849, 104 S.Ct. 157, 78 L.Ed.2d 145 (1983).

Sea-Land maintains that only the first paragraph of Clause 3 in its bill of lading contains the typical liberty clause and that the second paragraph, which reserves the right to transship, should not be considered part of the liberty clause. Cases dealing with the effect of liberty clauses, however, have referred to clauses which reserve the right to transship as liberty clauses. See, e.g., Berkshire Fashions, 954 F.2d at 878. The "typical" liberty clause, however, generally contains only the language found in the first paragraph of Clause 3. See 2 Thomas J. Schoenbaum, Admiralty and Maritime Law 138 n. 3 (2d ed. 1994).

We find that Sea-Land was entitled to rely on Clause 3 which provided for the use of substitute vessels. The clause was separate from the typical liberty clause found in the first paragraph. Yang Machine was an experienced shipper and had contracted with Sea-Land for shipments of cargo over 100 times prior to this occasion. Yang Machine concedes that on some of these...