When two or more disputing parties square off in court, which side bears the burden of proof on pivotal issues frequently dictates who emerges victorious. In most U.S. civil matters, the plaintiff shoulders threshold responsibility of proving the elements of its case by a preponderance of the evidence; if it fails to get the ball over the net with respect to any element of its claim, the match can be called in its opponent’s favor.
But lawsuits over lost/damaged cargo are different. The law has long since realized that carriers of all modes usually have access to the most crucial information and evidence, frequently exclusively. It’s just too much to ask shippers located in remotes places to come forward with evidence of wrongdoing by truckers, water carriers, railroads and airlines in order to pursue a cargo claim. Plus, there’s a general notion that if a shipper tendered freight to a carrier in good order and condition, didn’t get the freight back, or got it back damaged, then the carrier probably did something wrong.
But then how does a carrier get a fair shake at avoiding liability when it wasn’t at fault, or is entitled to avail itself of certain defenses (such as those established by the U.S. Carriage of Goods by Sea Act (COGSA) for international shipments)? And who bears the burden of proof along the way?
Maritime law has adopted a nearly unique burden shifting scheme in its approach to COGSA cargo claims. This scheme sets up a figurative table tennis match in which the last player serving frequently aces its way to victory. A great case in point is the recent match between steamship line OOCL and seafood importer Crystal Cove in the U.S. District Court for the Southern District of New York.
To get started in a COGSA-governed cargo claim, a shipper need only demonstrate a prima facie case, which is proof of tender to the carrier of freight in good order and condition, and either non-delivery or delivery by the carrier in short or damaged condition. Crystal Cove’s cargo of tilapia bound from China to Tennessee arrived spoiled, no question. Advantage Shipper.
To respond to a shipper’s prima facie case, the defendant ocean carrier on the other side of the net bears a burden of proof to show it “exercised due diligence to avoid and prevent the harm.” It seems that OOCL inspected its reefer unit in which Crystal Cove’s fish was packed, and found it to be in good working order before its ship set sail. That’s duly diligent enough. Ad Carrier.
Now Crystal Cove was faced with a burden of showing that OOCL’s negligence or other wrongdoing caused the loss. Apparently, OOCL knew about the reefer failure several days before reporting it to Crystal Cove, and didn’t take available measures to transship the cargo to a working substitute reefer. That constitutes negligence, and liability. Ad Shipper.
Having lost the liability battle, the carrier gets one more serve to try showing that its wrongdoing didn’t solely cause the cargo loss. The standard measure of damages under COGSA is the difference between a cargo’s fair market value (had it not been damaged) and actual value at destination in the shape it arrived in. There was an issue here because the freight ultimately was sold at salvage for about 50% of its expected destination value, and Crystal Cove refused delivery on the ground it was a total loss. Shippers and their consignees are entitled to refuse delivery when cargo arrives completely destroyed (or “practically valueless”). Had Crystal Cove accepted delivery, then certain costs would have been avoided. But a consignee need only act “reasonably” when electing to refuse delivery, and confirmed inspections demonstrated that the cargo was indeed practically valueless (the successful salvage sale was a surprise, and it wasn’t to a buyer who intended to resell the fish for human consumption). Shipper’s game and match.
OOCL tried to recover demurrage costs incurred while the parties were fighting about liability and damages. But you can’t get demurrage if the consignee was within its rights in refusing delivery.
In addition to the win, Crystal Cove was awarded its attorneys’ fees, the court finding that OOCL hadn’t put up any colorable argument as to liability. It therefore had acted in bad faith, which empowers the court under maritime law’s discretionary standard to award the prevailing party its litigation costs. A good day at the table for this shipper.
Ref: Orient Overseas Container Line, Ltd. v. Crystal Cove Seafood Corp., 2012 WL 463927 (SDNY 2012)
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