Extension of COGSA and its provisions empowering ocean carriers to limit their liability to 500 bucks a package to apply to intermediaries, surface carriers, stevedores and other service providers has been in the news heavily since the U.S. Supreme Court’s decision in Norfolk Southern Railway Co. v Kirby, 125 S. Ct. 385 (2004), and subsequent federal court rulings such as the Sompo Japan cases interpreting it. Kirby told us, among other things, that connecting surface carriers operating pursuant to a through ocean bill of lading enjoyed the same limited liability reserved by the ocean carrier. But the confusion and inconsistency that Kirby cleared up, those later decisions seemed to re-mess up, and the circumstances in which intermediaries, connecting carriers and others may rely on ocean carriers’ limited liability remain uncertain (some would say we’re worse off!). Where you live, i.e., what federal circuit governs you, can have more to do with your liability than how well you draft your shipping documentation.
The U.S. District Court for the Southern District of Texas recently took a look at the reach of COGSA-blessed limitation of liability from a different angle. Kirby, Sompo Japan and other precedents were premised on multimodal contracts which included connecting surface carriers engaged by steamship lines who claimed they were operating under a through bill of lading’s terms. At issue in Texas wasn’t bill of lading language extending COGSA to the ocean carrier’s agents; rather, it was a dispute over whose “agent” a player was.
This case didn’t address the effect or propriety of Himalaya Clauses or other contractual provisions bringing the maritime statute’s terms ashore. Rather, it dealt with whether or not the stevedore at issue was the agent of the ocean carrier, the shipper or someone else. If it wasn’t the carriers’ sub, then it couldn’t claim it was subject to its bill of lading terms. In other words, whether an entity is under a water carrier’s liability umbrella at all is just as important as how watertight that umbrella might be.
Ocean carrier Swire Shipping issued a bill of lading containing a standard Himalaya Clause to its shipper Dewanchand Ramsaran Industries (P) Ltd. (“DRI”) for a shipment of a drilling rig originating at the Port of Houston and bound for India. Stevedore Ports America Texas (“PAT”), the entity that allegedly caused the dockside loss by dropping it from a forklift, claimed it was covered as a carrier sub-contractor. Problematically, a number of entities associated with DRI also had hired PAT for purposes of facilitating dock movement and storage of numerous cargo components, and it wasn’t apparent whose work the stevedore was performing at the time of loss. It wasn’t even clear when the loss happened. Documentation stated that the accident occurred both during warehousing and loading operations. Of course, at what point the mishap occurred could be determinative as to whose agent PAT was at the time in question.
The fact that “stevedores” were specifically named as entities subject to the bill of lading’s terms didn’t resolve the issue. PAT would have to be under carrier sub-contract for it to enjoy the benefit, and be wearing that hat at the time it dropped the cargo. Moreover, the work would have to be done “in performance of the carriage,” which the bill of lading didn’t define. DRI sought a determination of full liability on PAT’s part; PAT sought to determine that its liability was limited to $500; and the two brought cross-motions for summary judgment. Because a court will not grant summary judgment in the face of factual dispute, both motions were denied pending further factual development and a possible trial on the issues.
The court also found that the drill rig cargo had been shipped as a single package. The shipping documents treated the cargo as a single unit, even though it listed “and accessories” as part of the package (the shipper argued there were 45 such “accessories”, each constituting a “package”). Thus, if PAT’s liability is limited to $500/package, DRI will recover peanuts.
The activities of complex transportation transactions involve multiple parties which often play multiple roles. It’s not uncommon for an intermediary to enter into forwarding, NVOCC and freight brokerage agreements all within the same through haul. This complexity complicates the issue of extension of COGSA’s limitation of liability rules regardless of what the federal judiciary ultimately does with the issue. Land-based service providers will always have to be mindful of whose agent they are.
Ref: Dewanchand Ramsaran Industries (P), Ltd. v. Ports America Texas, Inc., et al., 2010 WL 707380 (S.D. Tex. 2010)
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