Much case law has followed recent high court developments regarding applicability of the U.S. Carriage of Goods by Sea Act (COGSA) to connecting or preceding land-based hauls. But just how far back or forward can those standard Paramount and Himalaya Clauses extend COGSA to losses? The U.S. District Court for the Southern District of Florida recently took a look at that issue in the context of freight that was stolen by an imposter who identified himself as an ocean carrier’s subcontracted truck driver assigned to dray a load to port. Neither the ocean carrier, nor anyone it actually had engaged, ever touched the freight before it was stolen.
Shipper Circuit Zone engaged forwarder FEI Logistics to arrange transit of cargo from Florida to Trinidad. FEI, in turn, booked the freight with ocean carrier SeaTruck, which provided a container for the freight at a warehouse FEI also had arranged. Somehow, the imposter learned the freight’s booking number, identified himself as a SeaTruck driver, and convinced the warehouse to release it to him. Circuit Zone’s subrogated insurer sued in Florida state court to recover the some 243 grand it paid its insured under its policy. It alleged that SeaTruck negligently allowed a thief access to information enabling him to convince the warehouseman to give him Circuit Zone’s goods. SeaTruck removed to federal court, citing admiralty jurisdiction under COGSA.
The insurer moved to remand, claiming COGSA never kicked in, and there was no other basis of federal jurisdiction. Why should COGSA apply, when neither the ocean carrier, nor any of its agents, ever even touched, much less had custody of the freight? SeaTruck hadn’t issued a bill of lading (the freight was stolen before it could do so), although the parties agreed that SeaTruck’s standard bill of lading, had it been issued, contained a Clause Paramount extending COGSA to the ocean carrier’s land-based service providers. This renders the bill of lading’s terms applicable based on the parties’ actual understanding of contractual terms intended to govern the transport.
Resisting remand, SeaTruck urged that COGSA can be, and typically is, contractually extended to drayage operators. It saw no reason why that extension shouldn’t apply to claims for pilferage that take place before freight actually reaches a vessel when they involve the dishonest acts of a trucker.
But as the insurer argued, and the court agreed, no previous decision has ever extended COGSA to a point prior to when a ocean carrier or any of its agents ever touched the freight. Here, the imposter was not a SeaTruck agent, even though he claimed he was. COGSA is first and foremost intended to cover losses occurring “tackle to tackle,” or between the times when cargo crosses a vessel’s rail during on- and offloading. In other words, “custody and care and handling” of cargo are trigger points of the statute’s applicability. Its capacity to be contractually extended beyond its location aboard a vessel is still defined by possession in the hands of a vessel operator’s agent engaged for purposes of effecting a service essential to the ocean haul. While cases hold COGSA can be extended to “pre-loading,” at least in the court’s view, all such cases were post-custody.
We have to draw the line somewhere about applicability of a liability statute designed for ocean cargo. By SeaTruck’s interpretation of prevailing law, ocean carriers could extend COGSA to any point they wish, such that any kind of wrongdoing resulting in lost or damaged freight would be subject to federal admiralty jurisdiction. That’s just not the statute’s intent, even recognizing the modern realities of multimodal shipping. The threshold of actual custody by a carrier or its agents provides a “practical limit,” one that can easily be understood and applied, as to how far COGSA may be extended. The court also noted that even were it possible for a carrier to extend COGSA to an imposter’s alleged theft of freight, SeaTruck’s standard bill of lading didn’t go that far, at least not clearly, and any ambiguity in a contract will be interpreted against its drafter.
This case properly goes back to state court, which is fully qualified to analyze a tortious negligence claim without impacting the national uniformity in maritime law which federal admiralty jurisdiction seeks to ensure. The ultimate significance to these parties may be that COGSA’s package limitation of liability won’t apply either.
Ref: Underwriters at Interest under Bailee Insurance Police No. 09RTAMIA1158 as assignee of Circuit Zone, Ltd. v. SeaTruck, Inc., et al., 858 F.Supp.2d 1334 (S. D. Fla. 2012)
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