UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 1999
(Argued:May 25, 2000Decided: August 24, 2000)
Docket No. 99-9025
PRIMA U.S. INC.,
M/V ADDIRIYAH, HER ENGINES, BOILERS, ETC.,
UNITED ARAB SHIPPING COMPANY,
WESTINGHOUSE ELECTRIC CORP.,
- v. -
Before:McLAUGHLIN AND CALABRESI, Circuit Judges, AND
MUKASEY, District Judge.*
Defendant Panalpina appeals from an order of the United States
District Court for the Southern District of New York (Hellerstein,
J.), ordering it to indemnify Westinghouse.
JAMES DeMORSCIA, Sonageri & Fallan, Garden City, NY
(James L. Sonageri, of counsel), for Third-Party-Defendant-Fourth-Party-Plaintiff-Appellee.
ANDREW R. SPECTOR, Hyman & Kaplan, P.A., Miami, FL
(Nicholas E. Pantelopoulos, Biedermann, Hoenig, Massamillo &
Ruff, P.C., New York, NY, of counsel), for
McLAUGHLIN, Circuit Judge:
The Westinghouse Electric Corporation ("Westinghouse")
contracted in writing with Panalpina, Inc. ("Panalpina"),
a "freight forwarder," for the transportation and shipment
of an electric transformer from the manufacturer (in Italy) to
the ultimate consignee, the 3M Corporation (in Iowa). Panalpina,
as freight forwarder, was to oversee all of the transportation
for the transformer, both on land and over sea. Aware of its
obligation, Panalpina stated to Westinghouse, "rest assured
your shipment will receive door to door our close care and supervision
. . . ."
Panalpina's obligations under the contract included ensuring
that the transformer was properly secured and lashed onto a flat-rack
for ocean shipment. Westinghouse paid Panalpina $21,785.00, for
its services. As is the industry custom, Panalpina did not issue
a bill of lading for the shipment.
Westinghouse and Panalpina had done business on countless
occasions. Pursuant to the standard terms and conditions listed
on the reverse side of its contract, Panalpina undertook to exercise
"reasonable care" in the selection of those who would
actually carry, store or otherwise handle the goods. The standard
terms also limited Panalpina's liability for losses to $50 per
shipment, and they disclaimed liability for all consequential
or special damages in excess of this amount. These were the same
terms utilized in the prior ten-year course of dealing involving
over 1,000 transactions between Westinghouse and Panalpina.
When the time came to ship the transformer, Panalpina arranged
for it to be picked up at a factory in Melegano, Italy, and brought
to the Port of Genoa for an ocean trip. In Genoa, Panalpina hired
Ligure Toscano, a customs broker, to coordinate the movement
of the transformer through the Genoa Port. Because the transformer
was oversized, it had to be secured to a forty foot "flat-rack"
container for ocean shipment. Through Toscano, Panalpina hired
CSM, a local stevedore, to load the transformer onto the appropriate
container, and to lash it securely for the trip. The transformer,
on its flat-rack, was loaded aboard the M/V Addiriyah for the
voyage to the United States.
Panalpina never inquired of CSM how the transformer was lashed
for the ocean voyage. Nor did it supervise the endeavor. On the
other hand, Westinghouse never requested that Panalpina be present
at any point during the shipment of the transformer, and specifically
retained Panalpina only to arrange for the various services in
connection with the export of the transformer from Italy to the
United States. CSM, moreover, was a well-known stevedore and
had often been utilized by other well-known freight forwarding
companies, including the United Arab Shipping Company (owner
of the M/V Addiriyah, the ship that carried the transformer).
During the ocean voyage, the M/V Addiriyah encountered heavy
seas and the transformer, which CSM had negligently lashed to
its flat-rack, broke loose, crushing a laser cutting machine
owned by Prima (U.S.A), Inc. ("Prima").
In 1998, Prima, via its subrogated insurer, filed a complaint
in the United States District Court for the Southern District
of New York (Hellerstein, J.), against: (1) the United
Arab Shipping Company ("United") (as owner of the M/V
Addiriyah); (2) Westinghouse; and (3) Panalpina. Prima sought
damages for the loss of its laser. United filed a third-party
action against Westinghouse for indemnification, and for clean
up costs related to some silicon that had spilled from the broken
transformer. A fourth-party action was then filed by Westinghouse
against Panalpina for indemnification.
Panalpina moved for summary judgment, dismissing: (1) Westinghouse's
fourth- party action; and (2) Prima's direct suit. The district
court denied both prongs of the motion.
At a bench trial, the district court then awarded: (1) Prima
$2500.00 from United; (2) United $103,508.19 from Westinghouse
for the costs of cleaning up the spilled silicon; and (3) Prima
$260,000.00 from Westinghouse for the broken laser. The court
held that Westinghouse was directly liable to United for the
spilled silicon; and directly liable to Prima for the broken
laser, because Westinghouse had stipulated that it was engaged
in a maritime venture, and thus subject to the Carriage of Goods
by Sea Act ("COGSA"). 46 U.S.C. App. § 1300 et.
The district court went on to find Panalpina liable to Westinghouse,
in indemnity, for both the spilled silicon and the broken laser
awards, because the contract that Panalpina had entered with
Westinghouse stated that Panalpina would give "door to door
. . . close care and supervision." Because of that clause
in the contract, the court found that any negligence of the stevedore,
CSM, in lashing the transformer was imputed to Panalpina.
Panalpina now appeals, challenging the district court's decision
that it must indemnify Westinghouse for CSM's negligent actions.
Panalpina asserts that it is only a freight forwarder, and hence,
should not be made to indemnify Westinghouse.
DISCUSSIONThis court reviews conclusions of law, as
well as mixed questions of law and fact, de novo.
See In re Ionosphere Clubs, Inc., 922 F.2d 984,
988 (2d Cir. 1990); Muller ex rel. Muller v. Committee on
Special Educ. of East Islip Union Free Sch. Dist., 145 F.3d
95, 102 (2d Cir. 1998). We apply a de novo standard
in this case because the question whether an entity is a freight
forwarder is a mixed question of law and fact.
I. Panalpina was a freight forwarder, not a carrier
The job of a non-vessel operating common carrier ("NVOCC")
is to consolidate cargo from numerous shippers into larger groups
for shipment by an ocean carrier. See Chicago, Milwaukee,
St. Paul & Pacific R.R. Co. v. Acme Fast Freight, Inc.,
336 U.S. 465, 467-68 (1949); Insurance Co. of North America
v. S/S American Argosy, 732 F.2d 299, 300-01 (2d Cir. 1984).
A NVOCC - as opposed to the actual ocean carrier transporting
the cargo - issues a bill of lading to each shipper. If anything
happens to the goods during the voyage the NVOCC is liable to
the shipper because of the bill of lading that it issued. See
Modern Office Systems, Inc. v. Aim Carribean Express, Inc.,
802 F. Supp. 617, 623 (D.P.R. 1992); Fireman's Fund American
Insurance Cos. v. Puerto Rican Forwarding Co., 492 F.2d 1294,
1296 (1st Cir. 1974).
A freight forwarder like Panalpina, on the other hand, simply
facilitates the movement of cargo to the ocean vessel. The freight
secure[s] cargo space with a steamship company, give[s]
advice on governmental licensing requirements, proper port of
exit and letter of credit intricacies, and arrange[s] to have
the cargo reach the seaboard in time to meet the designated vessel.
New York Foreign Freight Forwarders and Brokers Ass'n v.
Federal Maritime Comm'n, 337 F.2d 289, 292 (2d Cir. 1964);
see also, 46 C.F.R. § 510, et. seq. Freight
forwarders generally make arrangements for the movement of cargo
at the request of clients and are vitally different from carriers,
such as vessels, truckers, stevedores or warehouses, which are
directly involved in transporting the cargo. Unlike a carrier,
a freight forwarder does not issue a bill of lading, and
is therefore not liable to a shipper for anything that occurs
to the goods being shipped. See United States v. American
Union Transport, 327 U.S. 437, 442-43 (1946) (stating that
independent forwarders "assume no responsibility for the
transportation of goods"). As long as the freight forwarder
limits its role to arranging for transportation, it will not
be held liable to the shipper. See J.C. Penney v. The
American Express Co., 102 F. Supp. 742, 747 (S.D.N.Y. 1951);
Zima Corp. v M/V Roman Pazinski, 493 F. Supp. 268, 273
(S.D.N.Y. 1980); Consolidated Int'l Corp. v. S.S. Falcon,
563 F. Supp. 969 (S.D.N.Y. 1983).
Panalpina did not issue a bill of lading and it did not consolidate
cargo. It was hired by Westinghouse simply as a freight forwarder
to arrange for the transportation of a transformer from Italy
to Iowa. By analogy, Panalpina was hired to act as a "travel
agent" for the transformer: it set things up and made reservations,
but did not engage in any hands-on heavy lifting. Admittedly,
Panalpina did state that Westinghouse's "shipment [would]
receive door to door our close care and supervision . . . ."
However, because of the well settled legal distinction between
forwarders and carriers, that statement - mere puffing - cannot
transform Panalpina into a carrier, and bestow liability upon
In Government of the United Kingdom of Great Britain and
Northern Ireland v. Northstar Services, Ltd., the District
Court of Maryland held that Panalpina (in another dispute) was
not liable to a plaintiff that had hired it as a freight forwarder.
1 F. Supp. 2d 521 (D.Md. 1998). In Northstar, the trucking
company that Panalpina had hired to move cargo damaged that cargo,
and Panalpina was sued in its role as the freight forwarder for
having breached its duty to inquire into Northstar's reputation
and practices. The district court there held that Panalpina took
reasonable measures in hiring Northstar, and, as a mere facilitator,
was not responsible for the negligence of the trucker. Id.
This case is much like Northstar. Panalpina was a freight
forwarder, hired by Westinghouse to arrange for transportation
and incidental services, and to select the companies that would
perform those tasks. It was not a carrier, and is therefore not
responsible for the damages caused by the poorly lashed transformer.1
Moreover, when a freight forwarder selects someone to perform
transportation services, that selection fulfills the forwarder's
obligations in the absence of proof that the selection itself
was negligent. See John Brown Engineering, Ltd. v.
Hermann Ludwig, Inc., 1991 A.M.C. 2540 (D.S.C. 1991).
Panalpina hired CSM as a stevedore to load and lash the transformer.
CSM was the same stevedore that was used by United Arab Shipping,
and was the designated official Port of Genoa stevedore. Panalpina
clearly acted reasonably in hiring CSM on behalf of Westinghouse,
fulfilling its duties as a freight forwarder. Panalpina is not
liable to Westinghouse for CSM's negligent actions.
For the foregoing reasons, we REVERSE the district court's
order that Panalpina indemnify Westinghouse, and remand to the
district court to enter judgment accordingly.
The Honorable Michael B. Mukasey of the United States
District Court for the Southern District of New York, sitting
Of course a party that calls itself a freight forwarder
might in fact be performing the functions of a carrier, in which
case function would govern over form. But the burden of demonstrating
any deviation from what freight forwarders normally do in the
maritime context must rest, and heavily so, on the party who
would show such deviation. Cf.Chicago, Milwaukee, St. Paul
& Pacific R.R. Co. v. Acme Fast Freight, Inc., 336 U.S.
at 467 (applying the term "freight forwarder" in the
railroad context to entities that consolidate cargo and issue
bills of lading).