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In maritime action by car maker against marine transport company for cargo damage, Sixth Circuit rules that, when court has to choose between applying U.S. Carriage of Goods by Sea Act (COGSA) or international Hague-Visby Rules because both foreign and U.S. ports are involved, it should do so intermodally rather than apply COGSA and Hague-Visby standards separately.

Ford Motor Company (Plaintiff) and Orient Overseas Container Line Ltd. (Defendant) had entered into a "Transportation Services Main Agreement" (TSM) in 2003, providing for carriage of transmission racks from Blanquefort, France, through Montreal, Canada, to various cities in the U.S. A storm at sea washed several containers with the transmission units overboard and damaged many others. Plaintiff and its cargo insurer, Royal Insurance Company of America (Royal) (jointly Plaintiffs) sued Defendant in a Michigan federal court for the damage that Ford's transmission racks suffered during the stormy voyage from France to Canada then to the U.S.

The district court granted Defendant partial summary judgment, holding that the liability limitation of $500 per package applied pursuant to the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. Section 30701. The district court found that COGSA did apply and that each transmission rack was a "package" for purposes of calculating damages. On Plaintiffs' appeal, the U.S. Court of Appeals for the Sixth Circuit reverses and remands.

COGSA implements within the U.S. the 1924 International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading for the Carriage of Goods by Sea , 53 Stat 233; T. S. 931; 120 L.N.T.S 155(the Hague Rules). Many countries later adopted the Hague-Visby Amendments of 1968 (the Hague-Visby Rules) amending the Hague Rules. Several of those countries also adopted the 1979 Protocol which changed the Hague-Visby Rules from the gold standard to a limitation system. The U.S. has never become a party either to the 1968 or the 1979 amendments.

The Court determines, first, whether COGSA or the Hague-Visby Rules apply to the ocean transport between France and Montreal. Here, the Hague-Visby Rules apply ex propio vigore if (1) the bill of lading is issued in a Contracting State, or (2) the carriage is from a port in a Contracting State, or (3) the Contract expressly makes the Hague-Visby Rules applicable. Art. 5, Protocol to Amend the above Convention, Feb. 23, 1968, 1977 Gr.Brit. T.S. No 83 (Cmnd. 6944) (entered into force on June 23, 1977) [Hague-Visby Rules]. Here, France is a Contracting State, making the Rules applicable.

COGSA applies to international sea transports to or from ports of the U.S. 46 U.S.C. Section 30701. Plaintiffs argued that COGSA did not apply as a matter of law because neither the French port nor the Canadian port are ports of the U.S. The Court disagrees.

"The Supreme Court's decision in Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004), affirmed the broad principle that courts should evaluate multimodal contracts in their entirety rather than treat each of the multiple stages in multimodal transportation as subject to separate legal regimes, which would present an obstacle to efficient liability rules. We therefore hold today that, as a matter of federal common law, COGSA liability rules apply to a multimodal maritime contract with an ultimate destination in the United States, regardless of whether the contract provides for an intermediary stop en route during the sea stage of transport or between the sea and land legs."

"The parties in this case, however, were free to contract for application of the liability limits set forth in either the Hague-Visby Rules or COGSA. The convoluted and contradictory nature of the contract at issue has led us to apply the doctrine of contra proferentem and to construe the bill of lading against its drafter, [Defendant] We hold that [Defendant] and [Plaintiff] contracted for application of the liability limits set forth in the Hague-Visby Rules." [Slip op. 4-5]

"We hold today that an intermediary stop en route pursuant to a multimodal maritime contract with an ultimate destination in the United States, regardless of whether the stop is during the sea stage of transport or between the sea and land legs, should not prevent the application of COGSA liability rules as a matter of federal common law. Our decision effectuates Congress's intent when it passed COGSA in 1936 to promote uniformity in shipping. We think that applying COGSA's liability rules to all carriage of goods by sea, in contracts for transportation with ultimate destinations in the United States, effectuates Congress's intent in a context that Congress could never have predicted: one in which containerized transport and 'through' bills of lading prevail." [Slip op. 11].

As to choice of law, the Court analyzes the choice-of-law provisions in the Transportation Agreement and the bill of lading, and finally applies U.S. law. As a matter of federal common law, COGSA applies. COGSA allows parties to contract for higher liability limitations than $500 per package. [Defendant's] bill of lading makes the Hague-Visby Rules applicable. The remaining issue then is what constitutes a "package."

"[Plaintiffs] argue that, in the 'Quantity' column of the bill of lading, [Defendant] identified and described each of the thousands of auto transmissions that [Plaintiff] shipped as a 'unit.' ... [Defendant] does not dispute this contention and instead argues only that, under COGSA liability limits, each rack within the container rather than each auto transmission constitutes one COGSA package. ... But we have reached the conclusion that the bill of lading binds [Defendant] by the Hague-Visby and not the COGSA liability limits. Accordingly, we turn to the bill of lading to assess the number of units listed by [Defendant]."

"The bill of lading, however, is sufficiently confusing to make it inadvisable for us to reach a conclusion as to the total number of units listed. A total of forty-three consecutive pages in the bill of lading include 'Quantity' columns with various numbers of units listed. .... An understanding of what exactly these numbers reference, where the pages duplicate and should not be counted twice, and ultimately how to calculate the total number of units listed requires a factual understanding of the practices of the shipping industry and specifically [Defendant's] bill of lading."

"Surveying and weighing such factual evidence is the job of the fact-finder. Therefore, we remand to the district court for further proceedings consistent with this opinion. We reiterate that, as a matter of law, the total number of units so listed will constitute the number of packages or units to be used to assess the limits set by the Hague-Visby Rules to [Defendant's] liability. Of course, the Hague-Visby Rules only set limits to liability; actual liability will depend on other relevant factors, which have not yet been addressed by the parties or the district court." [Slip op. 23-24]

Citation: Royal Ins. Co. of America v. Orient Overseas Container Line Ltd., 514 F.3d 621 (6th Cir. 2008).
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Publication:International Law Update
Date:Feb 1, 2008
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