Henley v. Marine Transportion

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 93-1543
HENLEY DRILLING COMPANY,

Plaintiff, Appellee,

v.

WILLIAM H. McGEE
AND
CNA CASUALTY OF PUERTO RICO,

Defendants, Appellants.

No. 93-1548
HENLEY DRILLING COMPANY,

Plaintiff, Appellee,

v.

MARINE TRANSPORTATION SERVICES, ETC.
AND
LUIS A. AYALA COLON SUCRS., INC.,

Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Raymond L. Acosta, U.S. District Judge]

Before

Torruella, Circuit Judge,

Aldrich, Senior Circuit Judge,

and Cyr, Circuit Judge.

Keith A. Graffam, with whom Dario Rivera Carrasquillo, John

E. Mudd and Cordero, Miranda & Pinto were on brief for plaintiff.

Jose F. Sarraga for defendant Marine Transportation

Services.
Eugene F. Hestres, with whom Bird, Bird & Hestres was on

brief for defendant Luis A. Ayala Colon Sucrs., Inc.

September 27, 1994

CYR, Circuit Judge. The central question in this case
CYR, Circuit Judge.

whether the $500 per-package limit on ocean carriage liability

imposed by the Carriage of Goods by Sea Act (COGSA), 46 U.S.C.

1304(5), is applicable to an oil drilling rig requires the

court to consider for the first time the COGSA-related "fair

opportunity" doctrine.

I

BACKGROUND

Puerto Rico Electric Power Authority (PREPA) contracted

with Henley Drilling Company (Henley) to conduct petroleum

drilling operations in Puerto Rico. Marine Transportation

Services-Sea Barge Group, Inc. (Sea Barge), an ocean carrier,

agreed to transport Henley's drilling equipment from Houston to

Puerto Rico, and return. PREPA obtained marine cargo insurance

on the Henley drilling rig through William H. McGee & Co. (McGee)

and CNA Casualty of Puerto Rico (CNA). Following an uneventful

southbound voyage, Sea Barge retained a stevedoring contractor,

Luis A. Ayala Col n Sucrs., Inc. (Ayacol), to stow the drilling

rig aboard the barge for the return trip to Houston. When the

barge arrived in Houston, however, Henley's huge drilling rig,

valued at $629,000, was nowhere to be found.

Henley sued Sea Barge, Ayacol, McGee, CNA and PREPA in

the United States District Court for the District of Puerto Rico.

Under the terms of their settlement agreement, PREPA, McGee and

CNA were subrogated to the rights of Henley, leaving Sea Barge

3

and Ayacol as the only defendants. In March 1992, Sea Barge and

Ayacol moved for partial summary judgment, contending that their

liability, if any, could not exceed the $500 per-package/CFU

limit imposed by COGSA.1 Contemporaneously, Ayacol and Sea

Barge moved for summary judgment on the further ground that the

stowing of the drilling rig aboard the barge for the return trip

to Houston was improperly supervised by the marine surveyor

retained by PREPA, thereby entitling Ayacol and Sea Barge to

exoneration from liability.

A magistrate judge recommended partial summary judgment

in favor of Sea Barge and Ayacol, based on a finding that the

drilling rig constituted a "package" within the meaning of COGSA

4(5), for which the maximum liability of the carrier is $500.2

The magistrate judge did not rule on the summary judgment claim

for exoneration. McGee, CNA and PREPA objected to the magis-

trate-judge's report and recommendation, which the district judge

subsequently adopted over their objection. McGee, CNA and PREPA

unsuccessfully moved for reconsideration by the district judge.

CNA and McGee [collectively: "McGee"] appealed. Ayacol and Sea

Barge cross-appealed, challenging the district court order

adopting the magistrate-judge's report and recommendation insofar

as it failed to grant Ayacol and Sea Barge exoneration from all

liability and included no attorney fee award against McGee.

1The COGSA-imposed liability limit applies to each package
or "customary freight unit" ("CFU").

2See note 1 supra.

4

II

DISCUSSION

A. The McGee Appeal (No. 93-1543)

1. Summary Judgment Standard

We review a grant of summary judgment de novo.

Commercial Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1050

(1st Cir. 1993). Summary judgment is appropriate where the

record, viewed in the light most favorable to the nonmoving

party, reveals no genuine issue as to any material fact, and the

moving party is entitled to judgment as a matter of law. Velez-

Gomez v. SMA Life Assur. Co., 8 F.3d 873, 874-75 (1st Cir. 1993).

2. The COGSA Liability Limitation

Section 1304(5) of COGSA, entitled "Rights and immuni-

ties of carrier and ship," provides in relevant part:

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 trans-
portation 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 . . . .

By agreement between the carrier, mas-
ter, or agent of the carrier, and the shipper
another maximum amount than that mentioned in
this paragraph may be fixed . . . [but] in no
event shall the carrier be liable for more
than the amount of damage actually sustained.

46 U.S.C. App. 1304(5) (emphasis added).

5

The courts generally have required the carrier to

afford the shipper a "fair opportunity" to avoid the COGSA

"package/CFU" liability limitation through adequate advance

notice. See, e.g., Carman Tool & Abrasives, Inc. v. Evergreen

Lines, 871 F.2d 897, 899 n.3 (9th Cir. 1989). As this court has

not adopted the COGSA "fair opportunity" doctrine, see Granite

State Ins. Co. v. M/V Caraibe, 825 F. Supp. 1113, 1118-24 (D.P.R.

1993) (noting absence of First Circuit precedent on "fair

opportunity" doctrine), we first examine the case law in other

jurisdictions.

All courts which have addressed the matter require the

carrier to provide the shipper some notice of the COGSA

"package/CFU" liability limitation, differing only as to the type

of notice. See id. (examining circuit split as to level of

notice required); see generally Michael F. Sturley, The Fair

Opportunity Requirement Under COGSA Section 4(5): A Case Study

in the Misinterpretation of the Carriage of Goods by Sea Act

(Part I), 19 J. Mar. L. & Com. 1, 13-17 (1988) (hereinafter,

"Sturley, Part I"); Michael F. Sturley, The Fair Opportunity

Requirement (Part II), 19 J. Mar. L. & Com. 157 (1988) (here-

inafter, "Sturley, Part II"). The Ninth Circuit is thought to

have the more demanding notice requirement, see 2A Ellen Flynn &

Gina A. Raduazzo, Benedict on Admiralty 166, at pp. 16-28 to

16-29 (Michael F. Sturley, contrib. ed. 1993) (hereinafter, 2A

Benedict) (describing "strict" Ninth Circuit standard, citing

cases), mandating that the carrier provide the shipper legible

6

written notice of the COGSA "package/CFU" liability limitation in

the bill of lading, employing language substantially similar to

COGSA 4(5). See, e.g., Nemeth v. General S.S. Corp., 694 F.2d

609, 611 (9th Cir. 1982). Other courts, including the Second,

Fourth, Fifth and Eleventh Circuits, simply require that the bill

of lading include a "clause paramount" incorporating COGSA by

reference. See, e.g., Insurance Co. of N. Am. v. M/V Ocean Lynx,

901 F.2d 934, 939 (11th Cir. 1990), cert. denied, 498 U.S. 1025

(1991); General Elec. Co. v. M/V Nedlloyd, 817 F.2d 1022, 1029

(2d Cir. 1987), cert. denied, 484 U.S. 1011 (1988); Cincinnati

Milacron, Ltd. v. M/V American Legend, 804 F.2d 837, 837 (4th

Cir. 1986) (en banc) (per curiam), rev'g 784 F.2d 1161 (4th Cir.

1986); Brown & Root, Inc. v. M/V Peisander, 648 F.2d 415, 424

(5th Cir. 1981). The courts are in agreement that the carrier

bears the burden of proving that it has afforded the shipper the

requisite "fair opportunity" notice. See, e.g., General Elec.,

817 F.2d at 1029; Tessler Bros. (B.C.) Ltd. v. Italpacific Line,

494 F.2d 438, 443 (9th Cir. 1974).

Our review leads us to conclude that the bill of lading

in this case afforded "fair opportunity" notice sufficient to

satisfy whatever essential requirements are imposed by these

other courts. Constructive notice was afforded by the "clause

paramount"3 legibly printed on the reverse side of the bill of

3The bill of lading included a typical "clause paramount":

1. CLAUSE PARAMOUNT: This bill of lading shall have
effect subject to the provisions of the Carriage of
Goods by Sea Act, approved April 16, 1936.

7

lading: "This bill of lading shall have effect subject to the

provisions of the Carriage of Goods by Sea Act . . . ." See

Cincinnati Milacron, 804 F.2d at 837 ("clause paramount" provides

constructive notice).4 A more particular notice was contained

in the bill of lading "valuation clause":

20. VALUATION. Carrier shall not be liable
in any event for any loss, damage, misdeliv-
ery or delay with respect to the goods in an
amount exceeding $500.00 lawful money of the
United States per package, or in the case of
goods not shipped in packages, per customary
freight unit, unless the nature of the goods
and a valuation thereof higher than $500.00
is declared in writing by Shipper on delivery
of the goods to Carrier and inserted in the
Bill of Lading and extra freight is paid
thereon as required by the applicable tariff
to obtain the benefit of such higher valua-
tion.

See Carman Tool, 871 F.2d at 899 n.4 (finding that bill of lading

provision substantially similar to that sub judice recited terms

See also 46 U.S.C. App. 1312 ("any bill of lading . . .

containing an express statement that it shall be subject to the
provisions of [COGSA] shall be subjected hereto as fully as if
subject hereto by the express provisions of [COGSA] . . . Provid-

ed further, that every bill of lading . . . shall contain a

statement that it shall have effect subject to the provisions of
[COGSA]") (emphasis original); cf. Komatsu Ltd. v. States S.S.

Co., 674 F.2d 806, 810 n.6 (9th Cir. 1982) (rejecting statutory

challenge to "fair opportunity" doctrine based on 1312, because
this section "leaves a carrier free to quote the language of
section 4(5) in full").

4McGee does not challenge the legibility of the COGSA
notice. Cf. Nemeth, 694 F.2d at 611-12 (illegible recitation of

COGSA 4(5) does not provide "fair opportunity" notice).

8

of COGSA 4(5) and thus afforded actual notice); cf. supra pp.

5-6 (quoting 46 U.S.C. App. 1304(5)).5

McGee contends that Sea Barge did not demonstrate its

entitlement to summary judgment on compliance with the "fair

opportunity" requirement because there was competent evidence

that Sea Barge failed to offer PREPA ad valorem rates based on

the true value of the cargo. Specifically, McGee reiterates its

claim below that Sea Barge failed to show that published tariffs

were available for a drilling rig on this voyage.6 McGee relies

primarily on the Fifth Circuit's language in Brown & Root:

[T]he circumstances of the case before us do
not overcome the prima facie evidence of the
opportunity for a choice of rates and valua-
tions . . . First, COGSA was expressly incor-
porated in the bill of lading to thereby
bring into play 4(5). Next, and more sig-

nificantly, the published tariff which has

5In light of our conclusion that the bill of lading met
whatever "fair opportunity" notice requirements are imposed by
other circuits, we refrain from embracing the "fair opportunity"
doctrine itself, in any form. We take this course because the
parties have assumed, from the outset, that a COGSA-related "fair
opportunity" doctrine would apply. Thus, we leave for another
day, and a proper adversarial setting, what we perceive to be a
problematic question. See Michael F. Sturley, The Fair Opportu-

nity Requirement Under COGSA Section 4(5): A Case Study in the

Misinterpretation of the Carriage of Goods by Sea Act (Part I),

19 J. Mar. L. & Com. 1 (1988); and Michael F. Sturley, The Fair

Opportunity Requirement (Part II), 19 J. Mar. L. & Com. 157, 176

(1988) ("All of the available evidence suggests that the [COGSA]
package limitation should not be subject to a fair opportunity
requirement.").

6McGee relies on a deposition by William Lauderdale, the Sea
Barge agent responsible for negotiating freight charges with
PREPA, which states that the rate for transporting the drill rig
was "outside" the tariff Sea Barge filed with the Federal Mari-
time Commission, because this was "a single shipper on a single
voyage, on a contract voyage." The record does not contain a
copy of the Sea Barge tariff. Cf. infra note 7.

9

the effect of law very carefully gave Shipper

a choice of valuations by a choice of pre-

cisely definable freight rates.

648 F.2d at 424 (emphasis added, citations omitted); see also

Wuerttembergische v. M/V Stuttgart Express, 711 F.2d 621, 622

(5th Cir. 1983) (per curiam) (similar, applying Brown & Root).

The controlling question before us therefore becomes: whether

actual and constructive notice, without more, affords the shipper

"fair opportunity," as a matter of law.

Careful examination of the authorities has disclosed no

appellate case which requires a valid tariff in addition to

actual or constructive notice as an element of the "fair

opportunity" doctrine. The Fifth Circuit, whose cases constitute

the principal authority relied on by McGee, has reserved judgment

on this matter:

The facts of [Brown & Root, 648 F.2d at 424,

and Wuerttembergische, 711 F.2d at 622] re-

veal that we have not held . . . that the

mere incorporation of COGSA into a bill of
lading constitutes prima facie evidence of
fair opportunity. Because that circumstance

is not before us in this case, we express no

opinion on the issue.

Couthino, Caro & Co. v. M/V Sava, 849 F.2d 166, 170 n.6 (5th Cir.

1988) (emphasis added). Other courts of appeals either directly

hold that a tariff is not required if notice of the COGSA liabil-

ity limitation has been given, see, e.g., Ocean Lynx, 901 F.2d at

939 ("Brown & Root thus adopted a system of constructive notice

of an opportunity to declare excess valuation. Either a clause

paramount in the bill of lading or a valid tariff filed with the

Federal Maritime Commission . . . is sufficient to afford the

10

shipper an opportunity to declare excess value.") (citations

omitted, emphasis added),7 or clearly imply such a rule, see,

e.g., Aetna Ins. Co. v. M/V Lash Italia, 858 F.2d 190, 193 (4th

Cir. 1988) ("In this case [language reciting the COGSA liability

limitation in the] bill of lading establishes prima facie evi-

dence of fair opportunity by clearly outlining the limitation of

liability and explaining the shipper's opportunity to avoid the

limitation by declaring a higher value."); Carman Tool, 871 F.2d

at 901 ("so long as the bill of lading, on its face, provides

adequate notice of the liability limit and an opportunity to

declare a higher value, the carrier has discharged its responsi-

bility") (9th Cir.); cf. Komatsu, 674 F.2d at 811 (published

tariff, without actual notice of the relevant provisions of

COGSA, does not satisfy "fair opportunity" requirement).

We thus eschew McGee's implicit invitation to augment

the "fair opportunity" doctrine. As the Ninth Circuit observed

in a similar context:

We decline to expand the fair opportunity
requirement as suggested by [shipper]. The
requirement is not found in the language of
COGSA; it is a judicial encrustation, de-
signed to avoid what courts felt were harsh
or unfair results. The requirement has been
criticized for introducing uncertainty into

7Though the published tariff in Ocean Lynx "provide[d] that

an ad valorem rate shall be applied to shipments of certain com-

modities [but did] not provide for the method through which a
shipper of goods other than the listed commodities can avoid
COGSA section 4(5)'s limitation on liability," 901 F.2d at 940,
the court found that incorporation of COGSA into the bill of
lading satisfied the "fair opportunity" requirement, id. The

argument rejected by the Eleventh Circuit is very similar to that
advanced by McGee. See supra note 6.

11

commercial transactions that should be gov-
erned by certain and uniform rules.

Carman Tool, 871 F.2d at 900 (citations omitted); see also Vimar

Seguros y Reaseguros, S.A. v. M/V Sky Reefer, F.3d ,

(1st Cir. 1994) [No. 93-2179, slip op. at 4 (1st Cir. July 7,

1994)] ("COGSA was . . . intended to reduce uncertainty concern-

ing the responsibilities and liabilities of carriers, responsi-

bilities and rights of shippers, and liabilities of insurers.")

(citations omitted); see generally Sturley, Parts I, II

(criticizing "fair opportunity" doctrine as economically ineffi-

cient and inconsistent with COGSA's roots in international and

domestic law).8 The bill of lading indisputably provided both

8Further, nothing in the facts of this case counsels exten-
sion of the "fair opportunity" doctrine. McGee has not shown
that the absence of relevant published tariffs prevented PREPA
from avoiding the COGSA liability limitation. We will not
presume that PREPA, McGee's insured, would have declared addi-

tional value under a published tariff, especially since PREPA's
contract with Henley obligated it to provide marine cargo insur-

ance for the full replacement value of the drilling rig. Compare

Travelers Indemn. Co. v. Vessel Sam Houston, 26 F.3d 895, 900

(9th Cir. 1994) (because shipper obtained insurance through an
independent underwriter, "there is every reason to believe that
[the shipper] made a deliberate choice to forego the additional
cost that would have been incurred in raising [the COGSA] liabil-
ity limit"). Indeed, Sea Barge proffered uncontroverted evidence
that though it offered insurance, PREPA declined, opting instead
to purchase insurance through McGee.
Professor Sturley has suggested that in the typical case,
the ad valorem rates for excess value offered by a carrier are

higher than premiums for equivalent cargo-insurance coverage from
a third-party underwriter. See Sturley, Part II, at 194. A

rational shipper confronted with such a choice is not likely to
pay ad valorem rates when third-party insurance coverage is less

expensive. Moreover, a judicially-imposed tariff requirement
would increase transaction costs to the carrier, with no corre-
sponding benefit to either party.

12

actual and constructive notice of the COGSA 4(5) liability

limitation.9 As there was no material fact in genuine dispute,

the district court properly granted summary judgment for Sea

Barge/Ayacol on the ground that the COGSA "package/CFU" liability

limitation applies.

3. COGSA Package/Customary Freight Unit

COGSA 4(5) limits liability to "$500 per package . .

. or in case of goods not shipped in packages, per customary

freight unit." 46 U.S.C. App. 1304(5). The district court

concluded that the drill rig was shipped as a single "package."

Strictly speaking, of course, it was not a "package." The

parties agree that "the actual cargo that was lost overboard was

a truck mounted Cabot 900 Drilling rig, which was self propelled

and had eighteen (18) wheels . . . [and which] was not boxed or

crated in any way." McGee's Mot. Opposing Def.'s Mot. for Summ.

J. at 5-6 (emphasis added); compare Sea Barge's Resp. to Pl.'s

Statement of Uncont. Mat. Facts at 4 (expressly admitting these

facts). Moreover, we have held that a printing press shipped "in

9McGee also argues that because David Kiester, the PREPA
agent who negotiated the bill of lading with Sea Barge, allegedly
was inexperienced in maritime matters, knowledge of the effect of
COGSA 4(5) may not be imputed to PREPA. The only case McGee
cites for this proposition, see Pan American World Airways, 559

F.2d at 1177 (holding that "clause paramount" alone cannot be

used to impute knowledge of effect of COGSA to shipper), is
inapposite. Moreover, we conclude that Kiester's inexperience is
immaterial to our analysis. Cf. Carman Tool, 871 F.2d at 901 n.9

("So long as the bill of lading has all the necessary information
[i.e., gives actual notice of COGSA 4(5)], the shipper, or any

other interested party, has the means of learning everything it

may wish to know about the terms of the transaction.") (emphasis
added).

13

open view, unboxed, [which] was not wrapped or crated . . . was

not a package as defined by COGSA." Hanover Ins. Co. v. Shulman

Transp. Enters., Inc., 581 F.2d 268, 275 (1st Cir. 1978); accord

Tamini v. Salen Dry Cargo AB, 866 F.2d 741, 743 (5th Cir. 1989)

(free-standing portable drilling rig, "for the most part" fully

exposed and not enclosed in a container, was not a COGSA "pack-

age"); Petition of Isbrandtsen Co., 201 F.2d 281, 286 (2d Cir.

1953) (uncrated locomotive not COGSA "package"); 2A Benedict,

supra, 167, at 16-35 ("cargo that is shipped without any

packaging whatsoever is generally treated as 'not shipped in

packages'") (citations omitted, citing numerous cases). How,

then, since the shipper chose to describe the shipment as a

single package can it now claim it constituted multiple units?

Thus, the drilling rig constituted but one unit,

whether labeled a "package" or, more correctly, one "customary

freight unit" (CFU). Within the meaning of COGSA, the CFU "is

generally the unit on which the freight charge is based for the

shipment at issue." Binladen BSB Landscaping v. M.V. Nedlloyd

Rotterdam, 759 F.2d 1006, 1016 (2d Cir.), cert. denied, 474 U.S.

902 (1985); Granite State, 825 F. Supp. at 1126.10 To deter-

10Some early cases looked to shipping-industry custom in
determining the CFU. See, e.g., Waterman S.S. Corp. v. United

States Smelting, Ref. & Mining Co., 155 F.2d 687, 693-94 (5th

Cir.), cert. denied, 329 U.S. 761 (1946). But the clear modern

trend is to "recognize the customary freight unit as the unit
specifically employed by the parties in arriving at the rate
charged for shipment," Granite State, 825 F. Supp. at 1126; see,

e.g., FMC Corp. v. S.S. Marjorie Lykes, 851 F.2d 78, 80 (2d Cir.

1988); see also Jerome C. Scowcroft, Recent Developments Concern-

ing the Package Limitation, 20 J. Mar. L. & Com. 403, 412 (1989)

(discussing modern cases); 2A Benedict, supra, 168, at pp. 16-

14

mine the unit upon which freight was charged we look "to the

parties' intent, as expressed in the Bill of Lading, applicable

tariff, and perhaps elsewhere."11 Croft & Scully Co. v. M/V

Skulptor Vuchetich, 664 F.2d 1277, 1282 (5th Cir. 1982); see FMC

Corp. v. S.S. Marjorie Lykes, 851 F.2d 78, 80 (2d Cir. 1988) (in

determining the CFU, "district court should examine the bill of

lading, which expresses the contractual relationship in which the

intent of the parties is the overarching standard") (citations

omitted).

In support of its motion for summary judgment, Sea

Barge argued that it charged a lump sum for transporting the

drilling rig on the northbound voyage.12 Sea Barge relied on

the bill of lading, PREPA's acceptance of the bid/purchase order

(purchase order), and a facsimile from Sea Barge to PREPA quoting

the charge for the northbound voyage ("quoted charge"). The

purchase order and the quoted charge clearly establish that the

freight charge was based on a lump sum:

46 to 16-47 (same).

11Since the bill of lading is the contract of carriage
between shipper and carrier, Grant Gilmore & Charles L. Black,
Jr., The Law of Admiralty 93 (2d ed. 1975), familiar principles

of contract interpretation govern its construction, see Croft &

Scully Co. v. M/V Skulptor Vuchetich, 664 F.2d 1277, 1282 (5th

Cir. 1982).

12It is undisputed that the freight charges for the south-

bound voyage, totalling $164,583, were calculated on a short-ton

basis, as evidenced by the bill of lading. It is not clear from
the record exactly why the parties opted for a lump-sum contract
rate on the northbound voyage, but the Lauderdale deposition
suggests that Sea Barge's expenses would be lower for the trip to
Houston because the barge to be used on the return leg was
already positioned in Puerto Rico.

15

[PURCHASE ORDER]

Charges will be as follows:
a) Ocean Transportation
--Drill rig & acc.: $86,400 lumpsum
b) Port charges & handling fees
--San Juan arrimo: $5.00/2,000 lbs
--Houston Wharfage: 1.50/2,000 lbs
--Houston truck loading: $7.50/2,000 lbs

[QUOTED CHARGE]

David, I have finalize [sic] shipping charges for this
move and wish to give you our charges to move this rig
to Houston, Texas.
. . .
Charges ocean transportation:
Drill rig and accessories loose. $86,400.00
lumpsum
. . .
Port charges and handling fees:
San Juan Arrimo $5.00 per 2000 lbs
Houston Wharfage $1.50 per 2000 lbs
Houston truck loading $7.50 per 2000 lbs

The relevant portion of the bill of lading is substantially the

same, though it does not use the term "lump sum."13 This evi-

dence was sufficient to establish that Sea Barge was entitled to

summary judgment on its claim that the northbound freight charge

13

TARIFF ITEM NUMBER CHARGES TOTAL
TARIFF ITEM NUMBER CHARGES TOTAL

CONTRACT 86,400.00

TOTAL THRU FREIGHT

WHARFAGE 1.50 st 1,322.25

TERMINAL USAGE(1)PR 5.00 st 4,407.50

TERMINAL USAGE(2)US 7.50 st 6,611.25

. . .
TOTAL CHARGES -------- 98,741.00
--------

(Italicized characters are typed in the original; all other
characters are pre-printed in the bill of lading.)

16

was based on a lump sum. See FMC Corp., 851 F.2d at 81 (bill of

lading established that CFU was calculated on lump-sum basis).

McGee argues that listing wharfage and terminal usage

charges by short ton (st) on the bill of lading established the

short ton as the CFU. We think this argument cuts the other way.

The portion of the bill of lading reproduced above, see supra

note 13, sets out the charge per short ton only for wharfage and

terminal usage, whereas the freight charge is stated in a lump

sum. And this reading is buttressed by the quoted charge and the

purchase order, which clearly evince the intent of the parties to

calculate the freight charge on a lump-sum basis.

Sea Barge having carried the initial burden on its

motion for summary judgment, the burden shifted to McGee to point

to competent evidence indicating a trialworthy issue. See Local

48 v. United Bhd. of Carps. & Joiners, 920 F.2d 1047, 1050 (1st

Cir. 1990). In support of its claim that freight charges were

based on the short ton, McGee proffered the Sea Barge invoice to

PREPA relating to the northbound voyage, and a portion of the

deposition testimony of William Lauderdale. The invoice is

similar in all relevant respects to the portion of the bill of

lading set out in the margin. See supra note 13. A flat $86,400

charge is made for "Ocean freight," while wharfage and terminal

charges are listed on a short-ton basis. Although, as McGee

points out, other portions of the invoice and bill of lading

reflect that the drilling rig weighed 1,726,000 pounds, there is

17

nothing to link weight with the freight charge, and McGee made no

proffer supporting such a link.14

More importantly, the Lauderdale deposition tendered by

McGee states that Lauderdale calculated the charges for the

northbound voyage based on Sea Barge's expenses, including the

costs of operating the vessel; agency, port, stevedoring and

container costs; as well as a profit margin. Nowhere does

Lauderdale intimate that the drilling-rig weight was a factor in

calculating the freight charge or in the parties' discussions of

the freight charge for the northbound voyage. Thus, we find no

competent evidence that the freight charge was based on anything

other than a lump sum, see S.S. Marjorie Lykes, 851 F.2d at 80-81

(finding that bill of lading and tariff established that parties

intended to calculate freight on lump-sum basis), which means

that the drilling rig itself was the CFU in this case. Binladen,

759 F.2d at 1016; see Union Carbide Corp. v. M/V Michele, 764 F.

Supp. 783, 786 (S.D.N.Y. 1990) (CFU was transportable tank, since

freight charge was computed on lump-sum basis).

B. The Cross Appeal (No. 93-1548)

B. The Cross Appeal (No. 93-1548)

14Even evidence that Sea Barge used the weight of the drill
rig to calculate its own costs may not have been dispositive.

See M/V Lash Italia, 858 F.2d at 193 ("[w]hile [carrier] may have

considered the vehicles' dimensions in setting its freight rates,
the mere consideration of a particular measure does not render it
a customary freight unit"); S.S. Marjorie Lykes, 851 F.2d at 80-

81 (even though preliminary negotiations indicated that carrier
was calculating freight based on price per ton, the fact that the
bill of lading and tariff unambiguously reflected a lump-sum rate
was controlling).

18

The Ayacol and Sea Barge cross-appeal challenges (1)

the district court finding that the loading of the drilling rig

was not controlled by PREPA to such an extent that Ayacol was

exonerated from liability, and (2) the order denying Ayacol/Sea

Barge an attorney fee award against McGee.15 We deem these

claims waived due to cross-appellants' failure to object to the

magistrate-judge's report and recommendation within the ten-day

period prescribed by 28 U.S.C. 636(b)(1)(C). See Park Motor

Mart, Inc. v. Ford Motor Co., 616 F.2d 603, 605 (1st Cir.

1980)16 ("[A] party 'may' file objections within ten days or he

may not, as he chooses, but he 'shall' do so if he wishes further

[appellate] consideration.").17 See also Fed. R. Civ. P. 72(b)

(same); D.P.R. Loc. R. 510.2(A) (failure to object to magistrate-

15Prior to briefing and oral argument, McGee moved to
dismiss the Ayacol/Sea Barge cross-appeal for failure to comply
with D.P.R. Loc. R. 510.2(A) (failure to object to magistrate-
judge's report within ten days waives right to appellate review).
On written submissions by the parties, we denied the motion
without prejudice, specifically preserving McGee's right to
address this issue in its appellate brief. Ayacol/Sea Barge
failed to respond to the waiver argument presented in McGee's
brief, either at oral argument or in their principal brief on
appeal, and filed no reply brief. Thus, we rely on the Ayacol/-
SeaBarge submissions in opposition to McGee's motion to dismiss.

16The Supreme Court has made clear that the failure to make
timely objection does not deprive the court of appeals of juris-
diction. Thomas v. Arn, 474 U.S. 140, 146 n.4 (1985).

17We reject the contention that the Ayacol/Sea Barge claim
sought to be raised on cross-appeal was preserved by an oblique
footnote reference in their joint memorandum opposing McGee's

objection to the magistrate-judge's report. Their joint memoran-

dum was not filed within the ten-day period prescribed by 28
U.S.C. 636(b)(1)(C). See Park Motor Mart., 616 F.2d at 605.

19

judge's report within ten days waives absolute right to appeal

district court order).18

Ayacol/Sea Barge urge that timely objection is required

only when a party challenges a finding actually set out in the

magistrate-judge's report and recommendation. Thus, they assert

no exception to the report per se but challenge the "fail[ure] to

make the additional findings requested [in the motion for summary

judgment]." We reject their contention, which would allow an

aggrieved party to assert on appeal an argument never surfaced in

the district court; namely, in this case, that the magistrate-

judge's report failed to respond to the portions of the motion

dealing with exoneration of liability and attorney fees. See

United States v. Nu ez, 19 F.3d 719, 722 n.8 (1st Cir. 1994)

(arguments not seasonably addressed to trial court may not be

surfaced for first time on appeal) (citing cases).19 Finally,

18The report and recommendation warned that "failure to
comply with [D.P.R. Loc. R. 510.2(A)] precludes further appellate
review." See United States v. Valencia-Copete, 792 F.2d 4, 6

(1st Cir. 1986) (directing inclusion of notice of waiver in
magistrate-judge's reports).

19Ayacol/Sea Barge point to Orthopedic & Sports Injury

Clinic v. Wang Labs., Inc., 922 F.2d 220 (5th Cir. 1991), as

support for their theory. In Wang, plaintiffs did not object to

the magistrate-judge's report with respect to its failure to
treat plaintiffs' res ipsa loquitur defense against partial

summary judgment. The Fifth Circuit rejected the defendant's
argument that Thomas v. Arn barred the claim, stating: "[plain-

tiff] is still able to request that the issue be considered on

appeal, even if it did not question the magistrate's findings."
Wang, 922 F.2d at 225 (emphasis added), citing Thomas, 477 U.S.

at 148-49. Although the court did not detail the reasons for its
decision, the referenced portion of Thomas states: "we need not

decide whether the Act mandates a waiver of appellate review
absent [timely objection to the magistrate-judge's report]. We
hold only that it does not forbid such a rule." Id. No other

20

the proposed bypass of the Article III judge would undermine the

established role of the magistrate judge in the federal system:

The purpose of the Federal Magistrates Act is
to relieve courts of unnecessary work. Since
magistrates are not Article III judges, it is
necessary to provide for a redetermination by
the court, if requested, of matters falling

within subsection (b)(1)(B). To require it

if not requested would defeat the main pur-

pose of the act.

Park Motor Mart, 616 F.2d at 605 (footnote omitted) (emphasis

added); see also id. at 605 n.1 ("Nor can it be thought that a

party could skip the district court and, in effect, appeal

directly to us. We have no jurisdiction to review the determina-

tions of magistrates").20

We affirm the district court judgment for Sea

Barge/Ayacol, dismiss the Sea Barge/Ayacol cross-appeal, and

remand for further proceedings consistent with this opinion. All

parties are to bear their own costs.

court has cited Wang on this point. We think Wang is better seen

as support for the view that a court of appeals has discretion to

adopt a rule allowing a party to raise a claim not preserved
before magistrate-judge. Since this case presents no suitable
occasion for such a rule, see Park Motor Mart, 616 F.2d at 605,

we find Wang to be inapposite.

20Additionally, we note that these claims likely would not
succeed on the merits. Ayacol cites no case holding that a
stevedore's duty of care may be delegated, in toto, to its marine

surveyor. The district court case cited for this proposition,
see Royal Embassy of Saudi Arabia v. S.S. Ioannis Martinos, 1986

A.M.C. 769 (E.D.N.C. 1984), merely found a right to contribution

from the marine surveyor. As concerns the request for attorney
fees, Sea Barge/Ayacol established no conduct on the part of
McGee which would warrant a fee award.

21