IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
D.C. Docket No. 94-06124-CV-NCR
GROUPE CHEGARAY/V. DE CHALUS,
a foreign corporation,
P & O CONTAINERS a foreign corporation,
SEA-LAND SERVICE, INC., a corporation,
WELLS FARGO GUARD SERVICE, INC.
FLORIDA, a corporation,
Appeal from the United States District Court
for the Southern District of Florida
(May 24, 2001)
Before ANDERSON, Chief Judge, CARNES
OAKES, Circuit Judge:
This case involves an eight-ton,
40-foot container filled with perfumes and cosmetics shipped
from France to Florida that mysteriously disappeared while in
a marine terminal at Port Everglades, Florida. The cargo insurer
brought a subrogation action against the carrier, the port terminal
operator, and the port security provider. The carrier and the
terminal operator each brought cross-claims against the security
provider for indemnity and contribution.
In resolving this dispute, this
Court once again navigates through the muddy waters of determining
the meaning of "package" under § 1304(5) of the
Carriage of Goods by Sea Act ("COGSA" or the "Act"),
46 U.S.C. § 1300 et seq. (2000). Subsection 1304(5)1 limits
carrier liability to $500 "per package," but fails
to define the term "package." In this case, the district
court deemed each of the 2,270 cartons, all but two of which
were wrapped onto a total of 42 pallets, a "package"
for purposes of § 1304(5) liability. The court also dismissed
both plaintiff-appellee's claims and appellants' cross-claims
against the security provider.
On appeal, the carrier and port
terminal operator argue (1) that the district court erred in
ruling that the package limitation applied to the 2,270 cartons
instead of to either the one sealed container or, in the alternative,
to the 42 pallets plus two cartons; (2) that the district court
erred in dismissing the insurer's claim against the security
provider; and (3) that the district court erred in denying the
carrier and port terminal operator indemnity from the security
provider. We affirm in part and reverse in part.
Parbel Inc. is a Florida company
that imports L'Oreal products from France. In 1992, Parbel
ordered a shipment consisting of four containers from Parfums
Et Beaute International Et Cie ("Parfums"), which shipped
the order on the Nedlloyd Holland, a ship operated by P&O
Containers, Ltd. ("P&O"). P&O contracted to
deliver the shipment from LeHavre, France, to Parbel's warehouse
in Miami, Florida. After the Nedlloyd Holland arrived at Port
Everglades in Ft. Lauderdale, Florida, the containers were off-
loaded from the ship and stored in a container yard operated
by Sea-Land Service, Inc. ("Sea-Land") until delivery
to the consignee in Miami. Sometime between December 26 and December
28, 1992, one of the containers mysteriously disappeared.
The perfumes and cosmetics in the
missing container were packed into a total of 2,270 shoebox-sized
corrugated cardboard cartons. These small cartons were then consolidated
into 42 larger units, which were bound together with plastic
wrap and packed onto 42 pallets, with two cartons remaining.
Groupe Chegaray/V. De Chalus ("Groupe
Parbel's subrogated insurer, paid for the loss under a cargo
insurance policy and brought a subrogation action against P&O
and Sea-Land (together, "appellants"), as well as Wells
Fargo Guard Service, Inc. ("Wells Fargo"). The district
court found in an omnibus summary judgment order that the number
of packages under COGSA § 1304(5) was 2,270 and that appellants
were jointly and severally liable for Groupe Chegaray's damages
up to $1,134,000.3
After a bench trial, the court also dismissed both Groupe Chegaray's
and appellants' claims against Wells Fargo.
We note at the outset that we review
a grant of summary judgment de novo and the district court's
findings of fact for clear error. SeeLevinson v. Reliance
Std. Life Ins. Co., 245 F.3d 1321, 1324 No. 00-11187, (11th
I. COGSA Claims
COGSA's lineage dates back to 1893
with the Harter Act, which was relied upon by the Hague Rules
in 1921, which were in turn adopted at the International Convention
for the Unification of Certain Rules Relating to Bills of Lading
at the Brussels Convention of 1924. See Laurence B. Alexander,
Comment, Containerization, the Per Package Limitation, and
the Concept of "Fair Opportunity," 11 Mar. Law.
123, 125-26 (1987). In 1936, Congress adopted the language of
COGSA almost in its entirety. See Monica Textile Corp.
v. S.S. Tana, 952 F.2d 636, 638 (2d Cir. 1991) (citing Robert
C. Herd & Co. v. Krawill Mach. Corp., 359 U.S. 297, 301,
79 S.Ct. 766, 769, 3 L.Ed.2d 820 (1959)); Spartus Corp. v.
S/S Yafo, 590 F.2d 1310, 1315-16 (5th Cir. 1979). Congress
did change liability under § 1304(5) in one significant
respect, however. The international rules limit liability "per
package or unit," whereas § 1304(5) limits it "per
package . . . or in the case of goods not shipped in packages,
per customary freight unit[.]" SeeHartford Fire Ins.
Co. v. Pacific Far East Line, Inc., 491 F.2d 960, 962 (9th
Cir. 1974). Arguably, this change underscores the emphasis that
Congress placed on the "package" as the elemental unit
of liability for § 1304(5) purposes. Despite this emphasis,
Congress neither defined the term in the statute nor left behind
any legislative history to help courts do so. Seeid. at
963; see also Monica Textile, 952 F.2d at 638.
In addition to the lack of statutory
guidance, unforeseeable technological strides in the shipping
industry since 1936 have contributed to the frustration of many
courts attempting to define a COGSA package. Traditionally, shipments
were made by "breakbulk," whereby goods were packaged
into parcels which could be hand-loaded into a vessel's cargo-hold.
See Nancy A. Sharp, Comment, What is a COGSA "Package?",
5 Pace Int'l L. Rev. 115, 117-18 (1993). The advent of the container
in the 1960s revolutionized the shipping industry by enabling
the shipment of massive metal boxes filled with goods that were
often concealed and/or not divided into breakbulk size. Seeid.
Modern containers are able to hold hundreds of "packages"
as the term was probably understood in 1936. The very concept
of a cargo- hold was transformed when vessels were retrofitted
to hold containers, which functionally became part of the ship
itself. SeeLeather's Best, Inc. v. S.S. Mormaclynx, 451
F.2d 800, 815 (2d Cir. 1971); Mitsui & Co., Ltd. v. American
Export Lines, Inc., 636 F.2d 807, 816 (2d Cir. 1981). Thus,
if ever the meaning of a "package" was self-evident,
the container turned it into a puzzle.4 And, of course, there remains consideration
of the decrease in the value of the dollar between 1936, when
COGSA set the $500 amount, and the present.
Moreover, while it is generally
understood that COGSA's liability limitation was originally enacted
in order "to restrain the superior bargaining power wielded
by carriers over shippers[,]" Vegas v. Compania Anonima
Venezolana De Navegacion, 720 F.2d 629, 630 (11th Cir. 1983)
(per curiam), the bulk of modern litigation under § 1304(5)
consists of subrogation actions because cargo shippers, instead
of paying increased freight by declaring the value of what is
shipped, buy insurance from cargo insurers. See Nichimen
462 F.2d at 335 (2d Cir. 1972); Leather's Best, 451
F.2d at 815. As the Second Circuit remarked in Nichimen,
"Most cargo damage actions are really battles between insurers
. . . and there is thus no need for shedding crocodile tears
on behalf of the shipper or consignee." 462 F.2d at 335.
In this case, Parbel chose to buy
full value insurance coverage and to under-declare the value
of its shipment, thereby obtaining the lowest freight rate. By
doing so, Parbel paid approximately $19,000 less in freight than
it would have paid had it declared the containers' actual value.
Appellants argue that because Parbel protected itself by obtaining
insurance coverage, we should resolve any ambiguities in the
contract against Parbel and its subrogated insurer. While it
is true that shippers have a choice when declaring the value
of their shipments and that insurers assume the risk associated
with their services, appellants' argument begs the inescapable
statutory question presented by § 1304(5), which we now
A.Application of COGSA Ex Proprio
Appellants argue that because the
container was lost after it was discharged from the Nedlloyd
Holland, COGSA does not apply ex proprio vigore to the
facts of this case, but only as a contract term. In support of
their argument, they cite to COGSA § 1301(e), which defines
"carriage of goods" to cover the period of time when
the goods are loaded onto the ship to when they are discharged
from the ship. Accordingly, appellants argue that the trial court
erred in applying the legal definition of "package"
under COGSA and that, instead, the court should have applied
the principles of contract interpretation to determine the meaning
that the parties intended to assign to the term "package."
We disagree and find that the bill
of lading is fully subject to the provisions of COGSA. We arrive
at this conclusion for two independent reasons. First, Clause
26(1) of P&O's bill of lading explicitly incorporates COGSA
as "paramount throughout" the time the goods are in
the custody of P&O or its subcontractor at the sea terminal
and until they are delivered to the consignee in Miami.5 Second,
appellants explicitly stipulated the application of COGSA to
the facts of this case in their March 1998 pre-trial stipulation,6 as
well as in each of their April 1995 motions for partial summary
judgment as to the liability limitation under § 1304(5).7
B.Discrepancy Between Shipper's
and Carrier's Bill of Lading
In order to determine what constitutes
the COGSA package, we begin by looking at the bill of lading.
See Hayes-Leger Assocs., Inc. v. M/V Oriental Knight,
765 F.2d 1076, 1080 (11th Cir. 1985) (quoting Binladen BSB
Landscaping v. M.V. "Nedlloyd Rotterdam", 759 F.2d
1006, 1012 (2d Cir. 1985). Here, P&O altered the pro-forma
bill of lading that Parbel's shipping agent, Ocetra, submitted
to P&O along with the containers. Specifically, what Ocetra's
pro-forma bill of lading refers to as "pallets," the
rider to P&O's ON BOARD bill of lading refers to as "packages."
The question is whether P&O's bill of lading is enforceable
as to the description of the pallets as "packages."
We believe that it is.
P&O's ON BOARD bill of lading
MARKS AND NUMBERS NO. OF PKGS.
DESCRIPTION OF PACKAGES AND GOODS
138 PACKAGES COSMETICS
AS DETAILED ON THE ATTACHED RIDER
The rider describes the missing
container as follows:
140' DRY VAN S.T.C. [said to contain]
31 PACKAGES NOS. 43/73ORDER 70187x COSMETICS
11 PACKAGES + 2 CTNS ORDER 70188A
42 PACKAGES STC 2268 CARTONS + 2
Ocetra's pro-forma bill of lading
is almost identical to P&O's rider, except that "packages"
are described in Ocetra's bill of lading as "pallets."
Groupe Chegaray argues that we should
not accept P&O's revised bill of lading as the manifestation
of the parties' contract because by the time the shipper received
a copy of the revision, the goods were already aboard the Nedlloyd
Holland, thus giving the shipper no means by which to reject
the change. Groupe Chegaray also contends that the revision violated
COGSA § 1303(3), which requires, in certain circumstances,
that carriers issue bills of lading reflecting the shipper's
stated representations of the number of shipped packages. Appellants
maintain that it is not only customary for a carrier to issue
the final bill of lading, but that, in this case, Ocetra had
specifically requested a "CLEAN ON BOARD" bill of lading
and voiced no objection when it received the final bill of lading
with the altered language.
It is remarkable that after so many
decades and dollars spent litigating the package liability limitation
clause under § 1304(5), the shipping industry has not yet
settled upon a sound strategy for protecting both parties' interests.
While courts have struggled to modernize the language of §
1304(5), the industry seems to have neglected to do its part.
Appellants protest that they are helpless to demand a clear and
explicit statement from shippers as to the number of COGSA packages,
even though it presumably would enable them to calculate an appropriate
surcharge. They claim that charging freight according to the
number of declared COGSA packages is not feasible because the
fixed industry custom is to charge freight by weight and declared
excess value. While we are ill-suited to argue with over one
hundred years of shipping expertise, we remain confounded by
the inefficiencies exemplified in this case. Carriers seem unable
to protect their interests and, the law clearly being in their
favor, shippers seem to have grown too complacent to make their
Fault, nevertheless, does not fall
on the parties alone. COGSA § 1304(5) operates by law and,
while the parties' intent is a factor, it is not determinative
of the meaning of "package" under the statute. Perhaps,
as the Second Circuit noted decades ago regarding § 1304(5),
"this area is one . . . in which the search for predictability
and avoidance of litigation will go on regardless of what we
may do . . . . Until there is a legislative solution. . .the
courts will have to deal with the cases as they arise."
Cameco, Inc. v. S.S. American Legion, 514 F.2d 1291, 1300
(1974), overruled in part by Mitsui, 636 F.2d at
Groupe Chegaray cites to Belize
Trading, Ltd. v. Sun Insurance Co., 993 F.2d 790 (11th Cir.
1993), to support its argument that the description in Ocetra's
pro-forma bill of lading is controlling. In Belize Trading,
the carrier issued a bill of lading listing only the number of
containers under the "Description of Packages and Goods"
column, even though the shipper had submitted a packing list
indicating the number of cartons within each container. Seeid.
at 791. The district court held that the carrier's bill of lading
was controlling for § 1304(5) purposes, but this Court reversed,
stating that the carrier's descriptions were "unilateral
and self-serving" rather than accurate. See id.
The Belize Trading Court
based its decision on two grounds. First, although the court
acknowledged that it is customary in the shipping industry for
carriers to issue bills of lading upon stowing the cargo aboard
the vessels, the carrier in Belize Trading had not issued
its revised bills of lading until "after the [vessel] had
left port and part of its cargo . . . had been lost at sea[.]"
993 F.2d at 791. For this reason, the court found that the shippers
never actually accepted the carrier's bills of lading and, thus,
those bills of lading were unenforceable. Seeid. at 792.
Second, the court noted that the carrier's bills of lading fell
afoul of COGSA § 1303(3).8Seeid.
The facts in this case are quite
different from those in Belize Trading. Here, the cargo
was not loaded aboard the Nedlloyd Holland until December 14,
when P&O issued its bill of lading.9 Ocetra received P&O's revised
bill of lading when the cargo was put aboard the contracted ship,
as is required for CLEAN ON BOARD bills of lading. Ocetra was
anticipating receipt of an ON BOARD bill of lading from P&O.
In fact, it had demanded it. Clearly, Ocetra could not have believed
that its pro-forma bill of lading represented the final manifestation
of the parties' contract. When Ocetra did receive P&O's bill
of lading, it voiced absolutely no objection to the changed language.
Indeed, Ocetra conceded to the changed language through its silence
and inaction coupled with the parties' expectation that P&O
would be issuing a final bill of lading. Although the record
is unclear whether Ocetra could have retrieved its containers
before the Nedlloyd Holland set sail, at the very least it could
have registered opposition. Appellee is estopped from now claiming
that the revision was unacceptable to the shipper at the time.
SeeMitsui, 636 F.2d at 823.
Moreover, unlike in Belize Trading,
this is not a case in which the carrier erased altogether any
mention of the number of cartons from its final bill of lading.
Rather, P&O preserved and detailed all of the relevant information
that Ocetra had submitted, including the number of cartons contained
in the pallets. And, in light of Ocetra's failure to furnish
a proper "Description of Packages," it was perfectly
reasonable for P&O to interpret a "pallet" as a
Finally, we believe that P&O
did not violate § 1303(3) because it was not under an obligation
to list the number of cartons in the bill of lading. Under §
1303(3)(c), a carrier is not bound to state upon its bill of
lading any quantity which it "has had no reasonable means
of checking." Because the cartons were packaged together
in 42 bundles-- not to mention the fact that the pallets were
themselves sealed away within the containers-- there was no reasonable
way for P&O to check that the number of cartons Ocetra listed
on its pro-forma bill of lading was in fact the actual number
of cartons bound together upon the 42 pallets.
In this case, the district court
accepted P&O's bill of lading as the manifestation of the
parties' contract. SeeZurich Int'l France v. P&O Containers
Ltd., 99 F. Supp. 2d 1354, 1356 (S.D. Fla. 1999). As mentioned
above, we believe that the district court was correct in so doing.
We now proceed to review the court's analysis of the package
liability issue under the terms of the final bill of lading.
C. Number of COGSA Packages
Appellants argue that the number
of COGSA packages is four because "4" is listed in
the bill of lading under the heading "NO. OF PKGS."
In the alternative, they argue that the 42 pallets plus two cartons
are the COGSA packages because they are described as such in
the bill of lading. Groupe Chegaray, on the other hand, contends
that because the bill of lading is ambiguous regarding the number
of COGSA packages, we are required to resolve the ambiguity in
their favor and affirm the district court's finding that the
2,270 cartons constitute the COGSA packages. We believe that
the 42 pallets, described as "packages" in the bill
of lading, plus the two cartons, represent the accurate number
of COGSA packages.
In this Circuit, "we approach
any attempt to define a container as a COGSA package with great
reluctance. Moreover, our inquiry into the matter does not end
. . . at a quick glance at the `number of packages' column on
the bill of lading." Fishman & Tobin, Inc. v. Tropical
Shipping & Constr. Co., 240 F.3d 956, 964 (11th Cir.
2001) (footnote omitted); see also Monica Textile,
952 F.2d at 641 (noting that courts "have consistently cast
a jaundiced eye" upon agreements that containers be COGSA
Even if we were not reluctant to
take the container as the package, appellants' principal argument
does not withstand analysis under Hayes-Leger, supra,
the case which sets out the two basic rules in this Circuit for
determining the number of COGSA packages in container cases :
(1) when a bill of lading discloses
the number of COGSA packages in a container, the liability limitation
of section 4(5) applies to those packages; but (2) when a bill
of lading lists the number of containers as the number of packages,
and fails to disclose the number of COGSA packages within each
container, the liability limitation of section 4(5) applies to
the containers themselves.
at 1080. Because neither the statute nor its legislative history
is particularly helpful in defining a COGSA package, this Court
has adopted a family of principles for the task. We begin by
assuming "that Congress intended to vest the word with its
plain, ordinary meaning." Vegas, 720 F.2d at 631.
In Hayes- Leger, we elaborated upon this assumption by
endorsing the Second Circuit's definition of a COGSA package
in Aluminios Pozuelo, Ltd. v. S.S. Navigator as "a
class of cargo, irrespective of size, shape or weight, to which
some packaging preparation for transportation has been made which
facilitates handling, but which does not necessarily conceal
or completely enclose the goods." 407 F.2d 152, 155 (2d
Cir. 1968); Hayes- Leger, 765 F.2d at 1082 ("the
proper definition of a COGSA `package' is the one stated in the
Aluminios Pozuelo Ltd. case"). More recently, in
Fishman & Tobin, we listed four additional principles
to determine a COGSA package: (1) the court should look to the
parties' contractual agreement in the bill of lading; (2) a COGSA
package is the result of some amount of preparation for the purpose
of transportation, which also facilitates handling; (3) a container
can be considered a COGSA package only in light of a clear agreement
to that effect; and (4) when goods are placed in containers without
being described as separately packaged, they are classified as
"goods not shipped in packages" for COGSA purposes,
absent an agreement otherwise. See 240 F.3d at 960. Finally,
when a bill of lading is ambiguous regarding what constitutes
the COGSA package, then, in light of the widely accepted understanding
that the original purpose of § 1304(5) was to protect shippers
against carriers, the ambiguity is resolved against the carrier.
See Sony Magnetic Prods. Inc. v. Merivienti O/Y,
863 F.2d 1537, 1542 (11th Cir. 1989); Ins. Co. of North America
v. M/V Frio Brazil, 729 F. Supp. 826, 836 (M.D. Fla. 1990).
Applying these principles, we believe
that the district court was correct to find that the container
did not constitute the COGSA package and that the bill of lading
was not ambiguous. But we find that the court was incorrect not
to accord greater weight both to the description of the pallets
as packages in the bill of lading and to the fact that the shipper
chose to package and wrap the 2,270 carton boxes onto 42 separately
numbered pallets. We also find that the court was incorrect to
the extent that it based its decision on a rule requiring the
smallest unit enumerated in the bill of lading to constitute
the COGSA package.
Here, the bill of lading could not
have been more clear. It described the pallets in plain language
as "packages." Groupe Chegaray can point to no case
where the bill of lading was not found to be ambiguous, that
finds a unit explicitly referred to as a "package"
to not be the COGSA package.
Parbel chose to incur the expense
of packaging the 2,270 shoebox-sized cartons onto a total of
42 pallets. While Groupe Chegaray is correct to point out that
the record is not explicit regarding whether the 42 plastic-wrapped
units containing the cartons were themselves each plastic-wrapped
onto the pallets or just plastic-wrapped together and moved around
with pallets, we find this consideration to be immaterial.11
The 42 units of plastic-wrapped cartons clearly facilitated the
efficient transport of the individual cardboard boxes, and reduced
any safety or damage risks that may have been involved in handling
them. Under the principles laid out in Hayes-Leger and
Fishman & Tobin, the fact that Parbel chose to package
the cartons in these manageable units instead of shipping them
loose supports our conclusion that they represent the COGSA package.
Even though the district court found
that the 42 pallets were "clearly indicated" on the
bill of lading as the number of packages, it reasoned, "[n]evertheless,
the `UNIT TOTALS' line indicates a greater number of items[.]"
P&O Containers, 99 F. Supp. 2d at 1356. Although the
majority of package limitation cases may, in fact, end up with
such a result, these cases do not stand for the proposition that
the smallest enumerated unit of transport always constitutes
the number of COGSA packages. Significantly, many of these cases,
unlike this case, involve bills of lading that are ambiguous
and, hence, resolved against the carrier. See, e.g., Vegas,
720 F.2d at 630-31 (finding, in bill of lading describing goods
as "Palletized master cartons, STC: 109 cartons: auto brake
parts," that both individual and master cartons fit into
"plain, ordinary meaning" of "package," and,
thus, designating 109 cartons as COGSA packages in light of "congressional
purpose"); M/V Frio Brazil, 729 F. Supp. at 836 (finding
bill of lading describing goods as "160 PALLETS CONTAINING:
12,000 CARTONS WITH 12 PACKAGES of 1,000 ML EACH ONE CONTAINING
FROZEN CONCENTRATED ORANGE JUICE" to be ambiguous and, thus,
designating 12,000 cartons as COGSA packages); but cf.Sony,
863 F.2d at 1542 (finding bill of lading describing goods as
"1X40 foot container STC: 1320 Ctns. Magnetic Tapes"
not to be ambiguous under Vegas and designating 1320 cartons
as COGSA packages).
For the foregoing reasons, we find
that the correct number of COGSA packages is 44, representing
the 42 pallets plus the two outstanding cartons.12
II.Claims Against Wells Fargo
P&O and Sea-Land also appeal
the district court's final judgment dismissing their cross-claims
for indemnity and contribution against Wells Fargo.13
At the time of the incident, Sea-Land
had hired Wells Fargo as an independent contractor to provide
security services at its container yard in Port Everglades. Under
the relatively limited terms of the contract, Sea-Land exercised
considerable control over Wells Fargo's employees. Wells Fargo
was responsible for hiring, training, uniforming, equipping,
supervising, directing, and discharging security officers. Wells
Fargo was not responsible for creating a security scheme for
the yard; this was Sea-Land's chosen responsibility.
Sea-Land's yard is operated by the
use of wheeled chassis on which containers are placed and can
be wheeled around by tractor, as opposed to a grounded yard in
which containers are stacked upon one another and moved by crane.
The yard includes a high security area where containers are locked
with keyed pins that are kept under the custody of Wells Fargo
guards. After visiting the container yard during the trial, the
trial judge found that the spirited container was not stored
in the high security area.
The court also found that a history
of security problems has plagued Sea-Land's yard. Repeatedly,
Sea-Land was put on notice of these problems by irate customers
-- including P&O -- as well as by the Coast Guard, who cited
Sea-Land for numerous security violations that went uncorrected.
One such violation was a missing front gate that was replaced
by a makeshift gate made from an empty container wheeled in front
of the yard entrance.
The court found that the container
was lost sometime between Saturday, December 26, 1992, when it
was discharged from the ocean vessel, and Monday, December 28,
1992, when Sea-Land discovered the loss. Due to the holiday weekend,
the terminal was closed and, under Sea-Land's direction, manned
by only one guard who was required to leave his or her post at
the main gate for a significant period of time in the course
of making security rounds.
In light of these facts, the trial
court found that Wells Fargo neither failed to perform its contractual
duties nor acted negligently. The court stated from the bench:
What somewhat jumps at me in all
this evidence is that Sealand was trying to do security on the
cheap. They were controlling nearly everything about security
through their contract. . . . Whether you want to proceed on
negligence or under the contract, I don't find that Sealand has
carried its burden of proof under either theory. [R9-294]
Appellants ask us to speculate about
possible scenarios in which Wells Fargo security guards may have
been negligent, but they fail to support their speculations with
compelling record evidence. Upon independent review of the record,
we find that the district court committed no clear error in its
Appellants also argue that they
are entitled, as a matter of law, to indemnification from Wells
Fargo under the implied warranty of workmanlike performance.
Under the warranty, a carrier may be indemnified by a stevedore,
in certain circumstances, without proving negligence. See
Italia Soc. v. Oregon Stevedoring Co., 376 U.S. 315, 318,
84 S.Ct. 748, 750, 11 L.Ed.2d 732 (1964); see alsoSmith &
Kelly Co. v. S/S Concordia Tadj, 718 F.2d 1022, 1025-26 (11th
Even if the implied warranty of
workmanlike performance were applicable to the facts before us,
appellants are unable to establish the key element required to
prevail under the theory, namely, that Wells Fargo exercised
exclusive control over the lost container. SeeStein Hall &
Co. v. S.S. Concordia Viking, 494 F.2d 287, 290 (2d Cir.
1974) (finding presumption of breach of implied warranty of workmanlike
service where cargo was in stevedore's custody and control);
David Crystal, Inc. v. Cunard Steam-Ship Co., 339 F.2d
295, 299 (2d Cir. 1964) (holding that a carrier is entitled to
indemnification from a stevedore where the latter had possession,
custody and control of the cargo and negligently misdelivered
it to a thief).
Courts have uniformly held in implied
warranty of workmanlike performance cases that "'liability
should fall upon a party best situated to adopt preventive measures
and reduce the likelihood of injury.'" Stein Hall,
494 F.2d at 293 (quoting Doak, Liabilities of Stevedores,
Terminal Operators and Other Handlers in Relation to Cargo,
45 Tul. L. Rev. 752, 757 (1971)); see also, Scindia
Steam Navigation Co. v. De Los Santos, 451 U.S. 156, 171,
101 S.Ct. 1614, 1624, 68 L.Ed.2d 1 (1981) ("The approach
of the indemnity cases in this Court . . . was that the stevedore
was in the best position to avoid accidents during cargo operations
and that the shipowner could rely on the stevedore's warranty
to perform competently."); Italia Soc., 376 U.S.
at 323-24, 84 S.Ct. at 754 (holding that absence of negligence
does not preclude liability under implied warranty where stevedore
had exclusive control and was in best position to prevent injury);
David Crystal, 339 F.2d at 299 ("[L]iability should
properly fall upon the party who is best situated to adopt protective
Because Wells Fargo did not have
exclusive custody, possession or control, we find that it was
not liable for the lost container under the warranty of workmanlike
performance. In fact, the roving duties of the guards would have
required them periodically to relinquish any control that
they may have had. Liability cannot fairly fall upon the party
not best situated to prevent injury. Thus, we affirm the district
court's dismissal of appellants' claims against Wells Fargo.
For the foregoing reasons, we find
that the district court erred in limiting appellants' liability
to $500 for each of the 2,270 cartons. Accordingly, we VACATE
the district court's judgment and REMAND for further proceedings.
On remand, the district court must apply the $500 liability limitation
to each of the 42 pallets and each of the two cartons. We also
find that the district court did not err in dismissing appellants'
indemnification claims against Wells Fargo. Accordingly, we AFFIRM
the court's final judgment.
Honorable James L. Oakes, U.S. Circuit
Judge for the Second Circuit, sitting by designation.
Subsection 1304(5) provides in pertinent
Amount of liability; valuation of
(5) 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 . . . or in 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. . . . In no event
shall the carrier be liable for more than the amount of damage
The originally named plaintiff in
this case, Zurich Compagnie D'Assurances, S.A., changed its name
to Groupe Chegaray during the course of the lower proceedings.
Subsection 1304(5) erects a limitation
to liability; it does not determine actual liability. In its
order of final judgment, the district court found the shipper's
actual damages, and thus appellants' liability, to be $505,190.40,
plus pre- and post-judgment interest.
For example, the Second Circuit,
which has had the most experience applying
§ 1304(5), has struggled to
find one definitive approach. See, e.g., Mitsui,
636 F.2d at 818-21 (abandoning functional economics test and
holding that when bill of lading discloses on its face contents
of container, then contents, not container, are COGSA packages);
Royal Typewriter Co. v. M/V Kulmerland, 483 F.2d 645,
648-49 (2d Cir. 1973)(introducing "functional economics
test," creating presumption that when shipper's own packaging
units are functional, those units are COGSA packages but when
units could not themselves be shipped feasibly overseas, then
container is COGSA package); Nichimen Co. v. M.V. Farland,
462 F.2d 319, 335 (2d. Cir. 1972) (stating that COGSA "package"
provision has "become unsatisfactory . . . but, pending
a new resolution, courts do best to apply it in light of the
parties' probable intention"); Leather's Best,
451 F.2d at 815 (reasoning from congressional intent); Standard
Electrica, S. A. v. Hamburg Sudamerikanische Dampfschifffahrts-
Gesellschaft, 375 F.2d 943, 945 (2d Cir. 1967) (holding that
a package is "a unit that would be fairly uniform and predictable
in size, and one that would provide a common sense standard")
(footnote omitted); see generally Andrea R. Luciano, Much
Ado About Packages: Containers and the COGSA Limitation of Liability
Provision, 48 Brook. L. Rev. 721 (1982).
Clause 26(1) of P&O's bill of
lading states, in pertinent part:
[T]his Bill of Lading shall be subject
to [COGSA], the terms of which are incorporated herein and shall
be paramount throughout Carriaged [sic] by sea and the entire
time that the Goods are in the actual custody of the Carrier
or his sub-contractor at the sea terminal in the United States
of America before loading onto the vessel or after discharge
therefrom, as the case may be. As thus applied other than at
sea, US COGSA is applied to determine the liability of the Carrier
who shall be entitled to the benefits of the defences [sic] and
limitations therein, notwithstanding that loss did not occur
In the parties' pre-trial stipulation
on March 20, 1998, P&O stipulated that "[t]he terms
and conditions of P&O Combined Transport Bill of Lading TFEI
HOL 255 500828 incorporate the United States Carriage of Goods
by Sea Act, 46 U.S.C. § 1300 et seq., to apply before
loading and after discharge of the cargo." [R5-124-11,
sec. VII, p.2]
In each of their individual motions
for partial summary judgment, P&O and Sea-Land argued against
applying § 1301(e)-- although they now argue for it-- and
[A]n ocean carrier can contractually
extend the application of COGSA from the time after discharge
from the ocean vessel to the time of actual or constructive delivery
. . . . Clause 26 of the P&O bill of lading incorporates
COGSA to be paramount throughout the entire time that the goods
are in the actual custody of the carrier or its subcontractor
at the sea terminal after discharge from the vessel. . . . .[T]he
loss occurred prior to delivery to the consignee and at a time
when the bill of lading continued to govern the rights and obligations
of the parties. . .one of which was the right of P&O to limit
its liability. . .pursuant to Section 1304(5) of COGSA[.]"
[R1- 39, 40]
Subsection 1303(3) provides in part:
After receiving the goods into his
charge the carrier . . . shall, on demand of the shipper, issue
to the shipper a bill of lading showing among other things-
. . . .
(b) Either the number of packages
or pieces, or the quantity or weight, as the case may be, as
furnished in writing by the shipper.
(c) . . . Provided, That
no carrier . . . shall be bound to state or show in the bill
of lading any marks, number, quantity, or weight . . . which
he has had no reasonable means of checking.
46 U.S.C. 1303 (2000).
The containers were surrendered
to P&O on December 10, loaded onto a feeder vessel on December
12, and loaded onto the Nedlloyd Holland headed for Florida on
December 14. P&O's bill of lading is dated December 14.
There is some record evidence that
the words "pallet" and "package" were used
interchangeably, including that "palettes" were referred
to in the shipper's packing slip, as "colis," which
is the French word for "package." See Standard
Electrica, 375 F.2d at 946 (noting that considerations outside
of the four corners of the bill of lading "are entitled
to considerable weight" in determining the parties' understanding
of what constitutes a "package" for shipping purposes).
Nevertheless, we note that the majority
of the pallets are referred to in the bill of lading as individually
numbered and labeled units, suggesting that the record is silent
because the fact seemed obvious at the time.
Groupe Chegaray argues that there
cannot be consistently 44 COGSA packages comprising 42 pallets
plus two cartons; if two cartons can be packages, then all cartons
must be packages. This argument is unconvincing. The shipper
went to the trouble of packaging the cartons onto pallets. The
fact that it may have been inconvenient to package two outstanding
cartons onto a pallet does not prove that the pallets were themselves
not packages. If anything, it supports the argument that the
shipper intended for the pallets to constitute a COGSA package
by bundling together loose cartons for ease of transport and
Groupe Chegaray elected not to appeal
the district court's dismissal of its claims against Wells Fargo.
To the extent that appellants challenge this dismissal in their
brief, they lack standing. Therefore, we review only the rulings
that pertain to appellants' claims.