United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT August 10, 2005
Charles R. Fulbruge III
Clerk
No. 04-30418
THYSSEN, INC.,
Plaintiff-Appellant,
versus
NOBILITY MV, ETC.; ET AL,
Defendants,
NATIONAL UNION FIRE INSURANCE COMPANY OF LOUISIANA;
FENICE MARITIME LTD.,
Defendants-Appellees
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No. 04-30453
THYSSEN INC.,
Plaintiff-Appellant,
versus
NOBILITY MV, ETC.; ET AL,
Defendants,
FENICE MARITIME LTD.,
Claimant-Appellee.
Appeal from the United States District Court
For the Eastern District of Louisiana
Before BARKSDALE, DeMOSS, and PRADO, Circuit Judges.
DeMOSS, Circuit Judge:
Plaintiff-Appellant Thyssen, Inc. (“Thyssen”) appeals both
from the district court’s order granting Defendant-Appellee
National Union Fire Insurance Co. of Louisiana’s (“National Union”)
motion for involuntary dismissal and from the court’s judgment in
favor of Defendant-Appellee Fenice Maritime Ltd. (“Fenice”). For
the following reasons, we AFFIRM.
BACKGROUND
This case involves the carriage of 243 cold-rolled steel coils
(the “coils” or the “cargo”) aboard Fenice’s vessel, the MV
NOBILITY (the “NOBILITY”). Thyssen purchaded the coils for resale
to its customer CP Louisiana. The NOBILITY left Rio de Janeiro,
Brazil, in February 2001 and arrived in New Orleans, Louisiana, in
April 2001. The cargo was carried under bills of lading
CPERNO105RINO007 and CPERNO105RINO008.
Fenice time chartered1 the vessel to Clipper Bulk Shipping,
Ltd. and/or Bossclip, Ltd., which in turn voyage chartered2 the
1
A time charter is a contract whereby a vessel is let to a
charterer for a stipulated period, in exchange for a remuneration
known as hire – a monthly rate per ton deadweight or a daily rate.
The charterer is free to employ the vessel as it thinks fit within
the terms as agreed, but the shipowner continues to manage his own
vessel through the master and crew who remain his servants.
2
A voyage charter is a contract under which the shipowner agrees
to carry an agreed quantity of cargo from a specified port or ports
to another port or ports for a remuneration called freight, which
is calculated according to the quantity of cargo loaded, or
sometimes at a lumpsum freight.
2
ship to CSC Cayman Ltd., the manufacturer of the coils. The voyage
charter was dated February 19, 2001, and was specifically
incorporated into the bills of lading. The terms of carriage for
Thyssen’s cargo were “Free In Out Stowed.”3 The NOBILITY carried
other cargo, including tin plates for discharge in New Orleans on
behalf of another cargo shipper; the terms of carriage for the tin
plates were “Free In Stowed Liner Out.”4
Pennant Shipping (“Pennant”), Fenice’s New Orleans agent,
selected the Chalmette Slip as the NOBILITY’s discharge wharf and
contacted Stafford & Stillwell Stevedoring, Inc. (“S & S”) to
discharge the cargo. Thyssen was notified of the discharge
location and that S & S would perform the discharge; Thyssen
received a rate and terms quotation from S & S, which it accepted.
Shortly after the vessel arrived in New Orleans on or about April
6, 2001, the cargo was examined while it was still stowed aboard
the NOBILITY. Condensation and rust scale were noted, and Thyssen
originally lodged a possible water damage claim with the NOBILITY.
During subsequent, follow-up surveys to examine the coils for
possible rust damage, all attending surveyors noted handling
damages due to the negligence of the discharging stevedore, S & S.
3
“Free Out” cargo is discharged at the risk and expense of the
cargo interests.
4
“Liner Out” cargo is discharged at the risk and expense of the
vessel interests and thus is generally charged to shippers at a
higher rate.
3
CP Louisiana rejected the coils.
Thyssen filed suit in rem against the NOBILITY on April 9,
2001, in district court and simultaneously moved to arrest the
vessel. The vessel was arrested and then released pursuant to bond
filed by Fenice, which also filed a claim to the vessel and
undertook its defense. Fenice filed an answer on December 5, 2001.
On January 8, 2002, Thyssen filed its first supplemental and
amended complaint, adding S & S as an additional defendant. Fenice
filed a cross-claim against S & S on February 22, 2002. S & S
failed to respond to service, so the summons and complaint were
reissued on July 3, 2002. S & S continued to fail to appear;
Thyssen moved for a default against S & S on August 29, 2002; and
the clerk entered the default on September 5, 2002.
On May 29, 2003, Thyssen moved for a default judgment against
S & S. The district court scheduled Thyssen’s motion for default
judgment against S & S for hearing on June 17, 2003. At the
hearing, Thyssen submitted testimony from its surveyor, Stan Janak
(“Janak”), plus exhibits. S & S was not represented by counsel at
the hearing. The court granted Thyssen’s motion and rendered a
default judgment against S & S for damages in the amount of
$160,696.28.
Immediately prior to the hearing, the parties deposed the
president of S & S, Tony Stafford (“Stafford”), and learned the
identity of S & S’s insurance broker, USI Gulf Coast, Inc. (“USI
4
Gulf”). Thyssen ultimately learned that S & S was insured by
National Union under a comprehensive marine liability policy. The
insurance policy obligated S & S to provide National Union timely
notice of any occurrences and claims against S & S that could
potentially be covered by the policy.
On June 26, 2003, Thyssen presented its damages claim to USI
Gulf, which in turn faxed the claim to National Union on July 17,
2003. National Union advised that it intended to deny coverage
based on late notice. On August 19, 2003, Thyssen filed for leave
to file its second supplemental and amended complaint to name
National Union as a defendant pursuant to the Louisiana Direct
Action Statute (“LDAS”), LA. REV. STAT. ANN. § 22:655.5 The district
court continued the trial on August 29, 2003.
National Union answered Thyssen’s original and amended
complaints on October 28, 2003. Fenice filed a summary judgment
motion on January 13, 2004, which Thyssen opposed; the motion was
reserved for trial on the merits. National Union filed a summary
5
The LDAS provides, in relevant part:
The injured person or his or her survivors or heirs . . ., at
their option, shall have a right of direct action against the
insurer within the terms and limits of the policy; and, such
action may be brought against the insurer alone, or against
both the insured and insurer jointly and in solido, in the
parish in which the accident or injury occurred or in the
parish in which an action could be brought against either the
insured or the insurer under the general rules of venue
prescribed by Code of Civil Procedure Art. 42 only.
LA. REV. STAT. ANN. § 22:655(B)(1).
5
judgment motion on February 9, 2004, which both Thyssen and Fenice
opposed; this motion was denied. On March 2, 2004, Fenice filed a
motion to dismiss its cross-claim against S & S with prejudice.
The case proceeded to bench trial on March 22-23, 2004. The
district court granted National Union’s motion for involuntary
dismissal at the close of Thyssen’s case, finding that National
Union was prejudiced by the late notice. Thyssen and Fenice filed
post-trial memoranda on April 2, 2004. On April 23, 2004, the
district court ruled from the bench and dismissed Thyssen’s claim
against Fenice. The court concluded Fenice was exonerated from
responsibility for the damage under the Carriage of Goods by Sea
Act (“COGSA”), 46 U.S.C. § 1300 et seq. Alternatively, the court
concluded even if the Harter Act, 46 U.S.C. § 190 et seq., applied,
Fenice was exonerated. Thyssen timely appealed, and the appeals
were consolidated.
DISCUSSION
The district court’s factual findings are subject to review
for clear error. Folger Coffee Co. v. Olivebank, 201 F.3d 632, 635
(5th Cir. 2000); Sabah Shipyard Sdn. Bhd. v. M/V HARBEL TAPPER, 178
F.3d 400, 404 (5th Cir. 1999). “In admiralty cases tried by the
district court without a jury, we review the district court’s legal
conclusions de novo.” Sabah Shipyard, 178 F.3d at 404.
Whether the district court erred in granting National Union’s
motion for involuntary dismissal.
6
In West v. Monroe Bakery, Inc., 46 So. 2d 122 (La. 1950), the
Louisiana Supreme Court held that where an injured third person is
not at fault, he does not lose his right or cause of action under
the LDAS where the insured breached a notice provision in the
policy with its insurer. Id. at 129-130. The West court stated,
after explaining the difficulties often faced by injured third
parties, which rarely have knowledge of the insurer of the
negligent party, in providing notice to the insurer: “It is not
desirable that [the third party] should be divested of such action,
and that result should not obtain except in a very clear case.
This is not such a case.” Id. at 130 (emphasis added). “The West
court did not address this issue, but it did by implication
recognize that if the insurer showed prejudice to an adequate
level, it could escape liability.” Auster Oil & Gas, Inc. v.
Stream, 891 F.2d 570, 579 (5th Cir. 1990).
In Pomares v. Kansas City Southern Railway Co., 474 So. 2d 976
(La. Ct. App. 1985), the Fifth Circuit Court of Appeal of Louisiana
relied on West to reject the insurer’s argument that it could
escape liability to a third party under the LDAS because it did not
receive notice of the suit until the third party attempted to
execute the judgment by garnishment against the policy. 474 So. 2d
at 978. The Pomares court held that “the jurisprudence dealing
with such notice provisions establishes that an insurer may not
raise the nonprejudicial failure of the insured to give proper
7
notice of suit as a defense to valid claims by a third party.” Id.
(citing, amongst others, West) (emphasis added). Because the
insurer “neither alleged nor show[ed] any prejudice resulting to it
by the lack of notice,” the Pomares court found the insurer could
not deny coverage based on late notice. Id. The court noted in
particular that the insured “was represented by counsel during the
tort suit” brought by the injured third party. Id.
This Court has interpreted Louisiana law on late notice in the
context of the LDAS, “as presented in both Pomares and West,” to
mean that “the insurer can defend successfully against the third
party only if it can demonstrate prejudice from the insured’s
failure to comply with the policies’ notice provisions.” Auster
Oil, 891 F.2d at 579 (emphasis added). We restated this standard
in Jackson v. Transportation Leasing Co., 893 F.2d 794 (5th Cir.
1990)(per curiam):
[W]here through the Louisiana Direct Action statute, La.
Rev.Stat.Ann. 22:655, an injured third party directly
sues the insurer, the third party does not lose his cause
of action due to the insured’s breach of the notice
provisions of the policy. The insurer can defend
successfully against the third party only if it can
demonstrate prejudice from the insured’s failure to
comply with the policy’s notice provisions.
Id. at 795-96 (citing Auster Oil, 891 F.2d at 576, West and
Pomares) (emphasis added).6 In Auster Oil, we noted that “denial
6
In Jackson, we held the insurer only needed to show late notice
and not prejudice to defeat the insureds’ claim because it was the
insureds themselves, not a third party, which provided untimely
8
of the opportunity to litigate is obviously prejudicial to some
extent and in certain cases may constitute prejudice as a matter of
law.” 891 F.2d at 579. However, this Court determined in Auster
Oil that the district court erred in granting the insurer summary
judgment based on lack of notice without requiring the insurer to
prove sufficient prejudice to defeat the third party’s LDAS claim.
Id. (remanding where genuine fact issues regarding prejudice were
raised). There, evidence was presented that the insurer would not
have defended the insured even if it had been timely notified and
would have denied coverage. Id. Also, the insured was otherwise
“represented fully and effectively at trial.” Id. Moreover, the
damages portion of the underlying suit had been remanded and had
“yet to be tried.” Id.
The relevant provisions in S & S’s policy with National Union
regarding S & S’s obligations to provide National Union with timely
notice of occurrences and claims under the policy state:
9. NOTICE OF OCCURRENCE
Whenever the Assured has information from which the
Assured may reasonably conclude that an occurrence
covered hereunder involved injuries or damages which in
the event that the Assured should be held liable, is
likely to involve this Policy, notice shall be sent to:
notice and then sued their insurer for coverage of the damages
against them in the underlying suit. 893 F.2d at 795-96
(discussing Auster Oil’s reconciliation of Louisiana late notice
law – comparing the line of cases where the insured sued its
insurer, not requiring prejudice to defeat the insured’s claim,
with the line of cases where an injured third party sued the
insurer, requiring prejudice to defeat the direct action claim).
9
USI Gulf Coast, Inc.
[mailing address]
as soon as practicable, provided, however, that failure
to notify the above firm of any occurrence which at the
time of its happening did not appear to involve this
Policy, but which, at a later date, would appear to give
rise to claims hereunder, shall not prejudice such
claims.
. . .
15. REPORTING OF CLAIMS: In the event of an occurrence
with respect to which insurances are afforded under this
Policy, written notice containing particulars sufficient
to identify the Assured and also reasonably obtainable
information with respect to the time, place and
circumstances thereof, and the names and addresses of
available witnesses, shall be given by or for the Assured
to this Company as soon as practicable.
Thyssen first argues the district court erred by agreeing with
National Union that the rendering of the default judgment against
S & S constituted ipso facto prejudice to National Union. Thyssen
maintains that entry of a default judgment alone does not create
prejudice. See Jackson, 893 F.2d at 795 (adopting Pomares).
Thyssen also contends that National Union could not have been
prejudiced in its defense of a claim where S & S’s own agent agreed
that there was no available defense. Thyssen emphasizes that S &
S was represented by its own surveyor, the firm Martin Ottoway,
during the damage surveys; Martin Ottaway surmised the damage
occurred precisely as had Thyssen’s surveyor, as a result of S & S
using improper equipment to handle the coils.
Next, Thyssen argues that occurrence policies in particular
function to attach coverage and vest the injured third party with
10
rights against the insurer at the time of the tort, as evidenced by
the LDAS and Louisiana’s strong public policy in favor of
protecting injured third parties. Thyssen contends the insured’s
dilatory failure to comply with notice provisions in the policy
cannot defeat the third party’s rights under the LDAS “except in a
very clear case” because the injured party often does not have
knowledge of the insurer’s identity and thus cannot give notice on
its own. See West, 46 So. 2d at 129-30; see also Auster Oil, 891
F.2d at 579.
Thyssen stresses National Union was not prejudiced because the
time for appealing the default judgment had not run before notice
was given, even though USI Gulf waited three weeks to forward the
claim. Moreover, Thyssen contends National Union could have raised
a Rule 60(b) motion to set aside the default judgment for good
cause shown; Thyssen argues if any prejudice was suffered, it was
a result of National Union’s own inaction. Thyssen thus maintains
National Union did not meet its burden to show a “very clear case”
of adequate prejudice on the instant facts.
National Union asserts the district court was correct to find
prejudice due to late notice. First, National Union reiterates
that there is no dispute that S & S breached its policy obligations
to provide timely notice of Thyssen’s claim and that neither
National Union nor USI Gulf received any notice of the occurrence,
much less the suit, prior to the entry of default judgment against
11
S & S.
National Union submits that the rendering of a default
judgment alone will support a finding of prejudice. See Elrod v.
P.J. St. Pierre Marine, Inc., 663 So. 2d 859, 864 (La. Ct. App.
1995)7; Hallman v. Marquette Cas. Co., 149 So. 2d 131, 135 (La. Ct.
App. 1963).8 Regardless if such rendering shows ipso facto
prejudice, National Union argues it proved prejudice in fact and
relies on its original trial arguments: “The default judgment, no
counsel, the mitigation factor, the reduction [in damages], all add
up to prejudice.”
National Union maintains late notice of the claim deprived it
7
In Elrod, the third party plaintiff did not bring suit against
the insurer pursuant to the LDAS, but instead attempted to enforce
the default judgment against the insured by filing a petition to
make the judgment executory and for garnishment. 663 So. 2d at
861. However, the Elrod court, relying on Pomares and West, stated
that “[t]he injured party’s right to recover in both instance[s]
may be defeated if the insurer can demonstrate prejudice from the
insured’s failure to comply with the policies’ notice provisions.”
663 So. 2d at 863.
8
In Auster Oil, this Court rejected the conclusion in Hallman,
that the insurer was not required to demonstrate prejudice to
escape liability in an LDAS action, as contrary to the result in
Pomares, which relied on West. 891 F.2d at 577. The Fifth Circuit
Court of Appeal of Louisiana in Elrod also discounted the rule in
Hallman as contrary to that in Pomares and West. 663 So. 2d at
863-64. But the Elrod court explained that “the result in Hallman
is consistent” with the requirement to show prejudice from late
notice because the Hallman court “noted the extreme prejudice to
the insurer caused by the insured’s failure to comply with the
policy notice provisions, allowing a default judgment to be
obtained by the plaintiff against the insured without knowledge of
the insurer and an opportunity to furnish a defense to the claim.”
Id. at 864 n.1.
12
of the opportunities to promptly investigate the claim, to appoint
counsel to represent S & S’s interests, and to present any defense
to Thyssen’s claim. National Union also disputes any contention
that because S & S was represented by Martin Ottaway, which
conceded liability, National Union lacks any defense. National
Union notes Pennant, Fenice’s New Orleans agent, retained Martin
Ottaway; and once a damage claim is made, the charterer and the
discharging stevedore have conflicting interests.
National Union next argues there is substantial evidence
supporting the district court’s finding that its judgment amount
“would have been somewhat, if not greatly, different than it is as
a default judgment.” National Union challenges the method used to
determine the amount of damaged coils at the default hearing as not
equitable, in that Thyssen’s damage claim was premised on 100% of
damaged coils (all 243) instead of the estimated 80% of cargo found
to be damaged (194 coils) based on representative sample surveys:
a difference in damages of almost $22,000. National Union also
maintains certain of the transportation fees, surveyor’s fees, and
storage charges were improperly deemed to be a result of the
sustained damage and would instead have been incurred even in the
absence of any damage by S & S.
In addition, National Union attempts to shift some of the
blame for the damage from S & S, noting that two preloading surveys
indicated several of the outer covers of the coils were already
bent and crimped. National Union also emphasizes Thyssen’s
13
persistent claims of rust damage prior to entry of the default
judgment. Moreover, National Union contends Thyssen failed to
mitigate any handling damages by S & S by not stopping the
discharge operations when Thyssen was informed the coils were being
damaged, and then by subsequently allowing S & S to load the coils
onto trucks for transfer to the inspection site.
Finally, National Union asserts Thyssen has no basis for the
proposition that an insurer is required to appeal or exhaust any
procedural remedy as to a default judgment against its insured
before asserting late notice.
In response, Thyssen maintains that the amount of damages in
the default judgment is correct; but even if it is not, this Court
can cure any prejudice by reversing the district court’s dismissal
and either reduce the award level or remand for further proceedings
to establish the proper amount of damages.
Under Louisiana law, the insurer must make a showing of
adequate prejudice to defeat an action by a third party under the
LDAS. See Auster Oil, 891 F.2d at 579 (“[I]f the insurer showed
prejudice to an adequate level, it could escape liability.”).
Thus, the question here is whether the district court erred in
granting National Union’s motion for involuntary dismissal based on
its finding that National Union showed adequate prejudice to defeat
Thyssen’s claim under the LDAS. Prejudice due to late notice is a
factual finding subject to clear error review. See Elevating
14
Boats, Inc. v. Gulf Coast Marine, Inc., 766 F.2d 195, 199 (5th Cir.
1985)9; see also Auster Oil, 891 F.2d at 579 (finding genuine
factual issue existed as to prejudice from late notice).
No case has required procedural exhaustion by an insurer, such
as appealing the default judgment or seeking to have it set aside,
before a showing of prejudice can be made. Of course, this might
weigh in favor of lack of prejudice. In contrast, entry of a
default judgment is a strong starting basis for a claim of
prejudice. See Elrod, 663 So. 2d at 864 (noting “it would be
difficult to conceive of greater prejudice . . . than a demand for
payment of a default judgment of which a defendant is totally
ignorant”) (quoting Hallman, 149 So. 2d at 135). The insurer’s
loss of opportunity to litigate the action weighs in favor of
finding prejudice. See Auster Oil, 891 F.2d at 579 (noting “denial
of the opportunity to litigate is obviously prejudicial to some
extent”); Elrod, 663 So. 2d at 864 (finding sufficient prejudice
where insurer did not have the opportunity to appear in the case
and present a defense, which it would have done, had it known about
the suit). The lack of representation by counsel of the insured
defendant during the underlying suit weighs in favor of prejudice.
See Auster Oil, 891 F.2d at 579 (finding fact issues on prejudice
where insured was “fully and effectively” represented by counsel
9
In Elevating Boats, the insureds themselves – not a third party
under the LDAS – brought suit. 766 F.2d at 196-97.
15
during 42 U.S.C. § 1983 trial); Elrod, 663 So. 2d at 863 (noting
the Pomares court “focused on the fact that the insured had been
represented at trial by able counsel as evidence negating the
existence of prejudice to the insurer”); Pomares, 474 So. 2d at 978
(finding lack of prejudice where insured was represented by counsel
during tort suit). If damages have been tried and found, this also
weighs in favor of prejudice. See Auster Oil, 891 F.2d at 579
(finding fact issues on prejudice where question of damages
remained open).
The district court relied on the following orally given
reasons to find that National Union met its burden of showing
adequate prejudice due to late notice:
With regard to the National Union motion, I think the
facts which are subject to stipulation with regard to
notice . . . along with the record itself and I think our
discussion here with regard to at what point the
plaintiff could have discerned the name of the broker,
which was known to Mr. Stafford, at what point could the
plaintiff have finally secured Mr. Stafford’s presence at
a deposition concerns me. Such that the information
could have been available to the plaintiff earlier in the
litigation. The default judgment, too, is problematic,
based upon what I heard in the past day and a half. I
think there is no doubt the stevedore, S&S Stevedores,
surely bore some responsibility, if not the majority of
the responsibility, for the damages that plaintiff
claims, but nonetheless, looking at the facts of this
case in light of the Jackson . . . case . . . and the
other Fifth Circuit [Court of Appeal of Louisiana] cases
such as Elrod, . . . . I don’t think I can come to any
other conclusions but that National Union was prejudiced
to the extent that it could have provided a defense to
S&S Stevedores. And as I indicated earlier, that the
judgment, as it exists today, against S&S Stevedores,
would have been somewhat, if not greatly, different than
it is as a default judgment.
16
To the extent the district court placed part of the fault for the
late notice on Thyssen, we give little credit to that as a reason
in light of the strong Louisiana public policy in favor of direct
actions by an injured third party. See West, 46 So. 2d at 129-30.
However, several other factors weigh in favor of prejudice.
National Union makes persuasive arguments that it would have, with
proper notice of the claim, challenged when some of the coil damage
occurred (preloading and/or onboard versus discharge); whether the
damage was entirely caused by S & S; and the method by which
damages were calculated. Moreover, National Union makes cogent
arguments that S & S was neither adequately represented by Martin
Ottaway nor represented at all by counsel at the default judgment
hearing, and that Thyssen had the ability to but did not mitigate
some of the damage. There was no evidence that National Union
would have refused to defend or denied coverage to S & S under the
policy. Also, the default judgment addressed the issue of damages.
Thus, we conclude that the district court did not commit clear
error in finding National Union’s situation reached the level of
adequate prejudice.
Whether the district court erred in dismissing Thyssen’s in rem
claim against the NOBILITY and against Fenice as vessel owner.
The district court entered the following factual findings and
conclusions of law before it dismissed Thyssen’s case against the
NOBILITY. The court found the bills of lading specifically
incorporated all terms and provisions of the charter party, such
17
that the coils constituted private, not common carriage. Thus, the
court determined the Harter Act did not apply.10 The court
concluded that even if the Harter Act were to apply, § 192 absolved
the vessel, her owners, agents, and charterers “for loss resulting
from any act or omission of the shipper or owner of the goods, his
agent or representative,” 46 U.S.C. § 192, because the damage to
the coils resulted from the negligence of Thyssen’s agent, S & S.
The court found that Thyssen negotiated with S & S and entered into
a contract with it to discharge the cargo.
Moreover, the district court found that while COGSA did not
apply of its own force, the Clause Paramount contained in rider
clause 28 of the incorporated voyage charter made COGSA applicable
to this cargo. Subsection 1304(2)(i) of COGSA provides immunity
for the carrier and ship for an “[a]ct or omission of the shipper
or owner of the goods, his agent or representative”; and subsection
1304(2)(q) provides immunity where the carrier can show “[a]ny
other cause arising without the actual fault and privity of the
carrier and without the fault or neglect of the agents or servants
of the carrier.” 46 U.S.C. § 1304(2)(i) and (q). Thus, the court
determined that the vessel was entitled to exoneration for the
damage to the coils.
10
The Harter Act makes it unlawful for a bill of lading to
contain language relieving the vessel from liability “for loss or
damage arising from negligence, fault, or failure in proper
loading, stowage, custody, care, or proper delivery” of the cargo.
46 U.S.C. § 190.
18
The district court noted that whether the Harter Act or COGSA
applied, both acts were intended to prevent the carrier from being
exonerated from the carrier’s own fault, or the fault of the
carrier’s agents or employees. However, the acts never intended to
shift the responsibility to a carrier for the negligence of an
agent, employee, or contractor of the cargo owner. Also, the court
noted that while the Harter Act imposes obligations on the carrier
until delivery of the cargo, delivery can be “actual” or
“constructive.” Here, the court found actual delivery occurred
when Thyssen’s agent S & S obtained possession of the cargo. The
court concluded any negligence occurred some distance from the
vessel during handling by the stevedore hired and paid by Thyssen,
without any involvement of the vessel, her agents, or employees.
First, Thyssen argues that the district court erred by
applying COGSA after the discharge of the coils, such that the
NOBILITY was exonerated from liability by virtue of COGSA
subsections (i) and (q). Thyssen insists that although COGSA
supplanted certain parts of the Harter Act, it did not repeal it.
Because COGSA applies to “contracts of carriage,” which include
“any bill of lading or any similar document as aforesaid issued
under or pursuant to a charter party,” 46 U.S.C. § 1301(b), Thyssen
argues COGSA applied before discharge, but the Harter Act applied
after. Thus, because the damage occurred post-discharge and before
delivery, Thyssen maintains the Harter Act controls.
Under the Harter Act, Thyssen contends the properly liable
19
party is the common carrier, subject to any proven defenses such as
acts of God, war, or public enemy. See Liverpool & G. W. Steam Co.
v. Phenix Ins. Co., 129 U.S. 397, 437 (1889).11 Thyssen stresses
the district court’s failure to apply the Harter Act stems from its
error in determining this was a case of private, not common,
carriage. Because the NOBILITY carried cargo for various shippers,
Thyssen contends this means it held itself “out to the general
public as engaged in the business of marine transport for
compensation,” 1 THOMAS J. SCHOEMBAUM, ADMIRALTY AND MARITIME LAW § 10-3,
at 587 (4th ed. 2004) (citations omitted). Thyssen insists
multiple shipping defeats any indication of private carriage that
a bill of lading incorporating the terms of the voyage charter may
connote.
Thus, according to Thyssen, under the Harter Act, the vessel
could not delegate its duty to make proper delivery. Thyssen
argues this duty required the carrier to place the cargo upon a fit
and proper wharf at the port of destination; segregate it by bill
of lading; put it in a place of rest (here, the Chalmette
warehouse) accessible to the consignee; and afford the consignee a
reasonable opportunity to retrieve it. See F.J. Walker, Ltd. v.
Motor Vessel LEMONCORE, 561 F.2d 1138, 1142 (5th Cir. 1977).
Thyssen contends the lack of enclosed storage and improper
11
We note this case was decided before the Harter Act was passed
in 1893.
20
forklifts at the Chalmette Slip rendered the wharf unfit and made
the damage virtually inevitable.
Moreover, Thyssen maintains the district court erred in
finding that even if the Harter Act applied, the carriers would
still not have liability because S & S was Thyssen’s agent and thus
the loss resulted from an act of the owner of the goods. That is,
the act of shipper defense under § 192 of the Harter Act negated
the vessel’s liability. Thyssen points to what it characterizes as
overwhelming and uncontradicted evidence that the carrier chose S
& S and the Chalmette Slip and (because the “Liner Out” cargo
outweighed the “Free Out” cargo) controlled and directed the
discharge. Thyssen asserts it is not enough that it paid S & S;
this did not relieve the carrier of its duty to make proper
delivery. See Caterpillar Overseas, S.A. v. S.S. Expeditor, 318
F.2d 720, 723 (2d Cir. 1963) (noting that cost allocation does not
affect the duty of proper delivery). Thus, Thyssen argues S & S
was the carrier’s, not its, agent. Thyssen insists only where a
carrier suffers a breakdown of law and order that prevents it from
fulfilling its duty to make proper delivery can it be exonerated.
See, e.g., Tapco Nigeria, Ltd. v. M/V WESTWIND, 702 F.2d 1252,
1259-60 (5th Cir. 1983).
In response, Fenice argues the district court correctly
concluded that this carriage, pursuant to bills of lading clearly
incorporating charter parties and thereby COGSA, was private,
21
making the Harter Act inapplicable. See, e.g., Kerr-McGee Corp. v.
Law, 479 F.2d 61, 64 (4th Cir. 1973); In re MARINE SULPHUR QUEEN,
460 F.2d 89, 102-03 (2d Cir. 1972). Fenice contends this can be no
surprise to the huge conglomerate Thyssen, which was aware that the
coils would ship on a vessel subject to charter parties and would
be carried on a “Free Out” basis. Fenice maintains the Harter Act
only applies to the context in which it was passed in 1893 – where
large vessels provided common shipping for small, individual
shippers which had no bargaining power and little ability to
negotiate private carriage of their goods pursuant to charter
parties.
Next, Fenice contends the district court correctly found that
the discharge of the coils was effected by S & S, which stevedore
was selected, paid, and controlled by Thyssen, thus exonerating the
vessel from responsibility under § 192 of the Harter Act and/or
under COGSA subsections (i) and (q). Fenice challenges Thyssen’s
argument that it was forced to agree to use S & S. Fenice points
to the cross-examination of Thyssen’s logistics director, Simon
Golding (“Golding”), who admitted Thyssen had the obligation to
discharge the coils because they were “Free Out.” Golding also
stated nothing in writing took away Thyssen’s ability to choose its
own stevedore, and Thyssen never asked to use its own chosen
stevedore. Thyssen accepted the quote from S & S; and Golding
stated that if Thyssen had used a different stevedore, the price
22
likely would have been “more costly.” Moreover, other testimony
indicated that S & S did not have an exclusive lease at Chalmette
Slip, meaning a different stevedore could have been selected, and
that frequently multiple stevedores can discharge cargo from one
vessel without any problem. Also, Janak confirmed only Thyssen had
the right to suspend the discharge operations.
Fenice argues even if the Harter Act were to apply, the damage
here was indisputably caused by Thyssen’s own agent, S & S; and §
192 specifically exempts the carrier from such liability. Fenice
insists that to rule otherwise would allow a cargo interest to
recover for damages caused by its own agent or employee. Fenice
agrees with Thyssen’s characterization of the proposition in
Caterpillar Overseas that the duty of proper delivery is not
affected by the allocation of costs between the carrier and the
shipper. See 318 F.2d at 724 (placing liability on carrier for
damage effected by its chosen lighter under its control where
shipper paid for lighterage). However, Fenice argues that here the
cargo damage occurred as a result of mishandling by a shipper-
controlled stevedore after discharge from the vessel, when the
cargo was far removed from and beyond Fenice’s control.
Next, Fenice maintains that COGSA, incorporated in rider
clause 28 of the voyage charter here, also exonerates the vessel
under § 1304(2)(i) and (q). Fenice relies on caselaw also cited by
the district court – Tubacex, Inc. v. M/V RISAN, 45 F.3d 951, 956
23
(5th Cir. 1995), and Sigri Carbon Corp. v. Lykes Brothers Steamship
Co., Inc., 655 F. Supp. 1435, 1437-38 (W.D. Ky. 1987) – for the
proposition that for “Free In” and “Free Out” cargo, the vessel
carries no liability for cargo damage that is caused by a stevedore
controlled by the shipper.
Finally, Fenice responds to Thyssen’s contention that the
district court erred in finding actual delivery of the coils under
the Harter Act occurred when S & S took possession. Fenice agrees
that the Harter Act extends not just to discharge, but also to
delivery; however, Fenice contends that delivery and discharge can
occur simultaneously when the goods are discharged into the custody
of the shipper or its agent. S & S received the coils on behalf of
its principal Thyssen – thus, according to Fenice, actual delivery
occurred at that time. See Farrell Lines Inc. v. Highlands Ins.
Co., 696 F.2d 28, 30 (2d Cir. 1982). Fenice also argues that
constructive delivery under the Harter Act, the only theory
requiring a fit wharf, was also accomplished here before damage
occurred. Thyssen was aware of the arrival of the coils and had
its surveyor meet the vessel before discharge occurred. Thyssen’s
own stevedore discharged and segregated its coils, and the coils
were placed on a wharf that did not crumble or drop the cargo into
the water. Fenice notes only negligent stevedoring caused the
damage, not any unfit condition of the wharf or because the coils
were not immediately placed into a warehouse. Fenice points to
24
testimony supporting the theory that competent stevedores should be
able to move coils multiple times without damaging them.
First, we find the district court did not err in its
determination that the NOBILITY was engaged in private carriage of
the coils. As one admiralty treatise explains:
The law of private carriage, now primarily charter
parties, . . . is still governed by the principle of
freedom of contract. Nevertheless, even in private
carriage the parties may agree that the statute will
govern their rights and duties. This is typically done
by incorporating COGSA into a charter party by a Clause
Paramount.
1 SCHOEMBAUM, ADMIRALTY AND MARITIME LAW § 10-3, at 589 (citations
omitted). Thyssen’s cargo was being carried subject to a voyage
charter, which incorporated COGSA by a Clause Paramount. Thus,
COGSA, not the Harter Act, applied. See Marine Sulphur Queen, 460
F.2d at 102-03 (explaining the Harter Act does not apply to private
carriage and charter party must specifically incorporate COGSA for
it to apply).
Next, we consider whether the district court erred in finding
S & S was Thyssen’s agent, not Fenice’s, such that the virtually
identical exoneration provisions under either the Harter Act or
COGSA applied to shift liability to Thyssen. Under Caterpillar
Overseas, Tubacex, and Sigri, the main inquiry to determine
liability is which party controlled the negligent stevedore that
caused the damage.
As the coils were subject to “Free Out,” the presumption is
25
that Thyssen would determine the method and purveyor of discharge.
Although Thyssen persistently alleges that it was powerless to
choose the stevedore and the carrier had ultimate control, the
testimony cited by Fenice belies this: there was no contract
provision stating Thyssen could not choose its stevedore, and
Thyssen’s own surveyor stated Thyssen was the only entity which
could have ordered S & S to stop the discharge. Finally, we agree
with the district court that actual delivery of the coils here
occurred when S & S commenced the discharge process, such that
Fenice was no longer in control of the cargo. See Farrell Lines,
696 F.2d at 30 (determining when control is relinquished and risk
passes to constitute time of delivery). Thus, the district court
did not err in its determination that S & S was acting as Thyssen’s
agent, not Fenice’s, when the damage to the coils occurred.
CONCLUSION
Having carefully reviewed the record of this case and the
parties’ respective briefing and arguments, for the reasons set
forth above, we AFFIRM the district court’s order granting National
Union’s motion for involuntary dismissal and the court’s judgment
in favor of Fenice.
AFFIRMED.
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