Aboiler, manufactured by Babcock & Wilcox for the Indonesian sugar refiner Jawamanis Rafinasi, was shipped by railcar to Coastal Cargo Co. in New Orleans where the plan was to load it on a vessel owned by Rickmers-Linie for transport to Indonesia.
The court noted Coastal was hired to serve two specific roles:
- Retained by Rafinasi’s agent, ATS International, to unload the boiler from the manufacturer’s railcar, store it until the ship arrived, and then move the piece shipside for loading.
- Under an existing contract, serve as Rickmer’s exclusive stevedore in New Orleans.
The boiler weighed about 143,300 pounds and was successfully offloaded from the railcar and driven to its storage location until the Rickmers ship arrived Dec. 1.
When the ship arrived, a Coastal employee drove the trailer until it was alongside the ship, but the vessel’s port captain, who was in charge of planning how to stow the cargo, did not believe the boiler could be loaded on board from its initial position because its lifting points were too far away. During the repositioning, the boiler fell off the trailer and sustained significant damage.
Rafinasi and its insurer, XL Specialty Insurance, filed suit against Coastal on Dec. 1, 2009, alleging Coastal’s negligence caused the boiler’s damage and the company was liable for breach of warranty and contract. They sought $284,415 in damages, as well as fees, interest, and costs.
On Dec.16, 2010, Coastal filed a third-party complaint, claiming Babock & Wilcox’s conduct contributed to the boiler’s damage.
At a pretrial conference, the parties indicated they had resolved all outstanding issues except for two disputes: whether the Carriage of Goods at Sea Act (COGSA) limited Coastal’s liability, and whether the manufacturer was liable for negligently causing or contributing to the boiler’s damage.
The district court held Coastal’s liability was not limited by COGSA because it was not an agent of Rickmers when the boiler was damaged and Coastal was solely liable for damaging the boiler.
Coastal filed an appeal challenging the district court’s COGSA determination.
In its decision (Pt. Jawamanis Rafinasi et al. v. Coastal Cargo. 5th Cir. No. 12-30668. July 24), the Court of Appeals noted the parties disagreed whether finding an agency relationship constitutes a finding of fact, a conclusion of law, or a mixed question of fact and law.
But the court said it did not need to conduct traditional agency analysis to dispose of the issues presented.
It said the terms of the bill of lading unambiguously resolve the question of limiting Coastal’s liability, and all that remained was a question of contract interpretation, which it reviewed de novo.”
COGSA contains a “package limitation” that limits the liability of carriers for loss of or damage to goods being shipped overseas. But the package limitation only applies from the time goods are loaded onto the ship to the time they are discharged from the ship.
It said in this case, there was no disagreement the boiler had not been loaded onto the vessel when the damage occurred. Therefore, the 5th Circuit held Coastal could not directly limit its liability through the COGSA package limitation. Instead, Coastal sought to take advantage of the package limitation through its contract with Rickmers.
While COGSA’s package limitation does not, by its terms, apply to goods before loading or after unloading, parties can extend the package limitation’s coverage to include these periods, and Rickmers’ bill of lading did just that, extending the COGSA package limitation to “before the goods are loaded on or after they are discharged from the vessel” so long as the “goods at said time are in the actual custody of the carrier or any servant or agent.” Moreover, Rickmers’ bill of lading defined servants or agents as among other things “stevedores… and any independent contractors employed by the carrier in the performance of the carriage.”
The district court concluded Coastal was not acting as Rickmers’ agent, was fulfilling its obligation to ATS International, and was not under Rickmers’ control when the boiler was damaged. Therefore, it said Rickmers could not avail itself of the COGSA extension and the package limitation did not apply to Coastal.
The 5th Circuit observed, while the district court and parties “exclusively dedicate their argumentative resources to considerations of agency law,” Rickmers’s bill of lading defined the term servant or agent in a way that clearly encompassed Coastal. And it said the Supreme Court has clearly stated that bills of lading are subject to ordinary rules of contract interpretation.
The parties did not dispute that Coastal was Rickmers’s exclusive stevedore in New Orleans and the boiler was in Coastal’s custody prior to loading it on the vessel.
“Therefore, Coastal qualifies for COGSA’s limitation on liability per the unambiguous terms of Rickmers’s bill of lading,” the 5th Circuit found.
The plaintiffs also argued that the COGSA extension did not apply because Rafinasi was not aware of the bill of lading’s terms. They argued there was no evidence demonstrating the bill of lading offered as evidence was the bill of lading that Rickmers would have issued had the boiler been successfully loaded on the vessel.
But the court found by “submitting a copy of Rickmers’s bill of lading, it would appear that Coastal has made a prima facie showing and that, absent specific evidence to the contrary, plaintiffs’ claim lacks merit.” It also said the plaintiffs had the option to view the bill of lading prior to the failed loading and said the plaintiffs “cannot now claim ignorance as to the bill of lading applicable at that time.”
The court also rejected the assertion that Rafinasi lacked affirmative knowledge of the unissued bill of lading’s terms, saying under 5th Circuit case law, an unissued bill of lading nevertheless binds the parties.
The Fifth Circuit reversed the district court’s judgment and remanded the case to the district court for further proceedings.
