Savanna Auto Sales v. Mediterranean Shipping Company (USA), Inc.

Filing 20

OPINION AND ORDER re: 15 MOTION for Judgment on the Pleadings (Partial), filed by Mediteranean Shipping Company, S.A. For the reasons set forth above, MSC's motion for partial judgment on the pleadings is granted in part and denied in part. The Clerk of the Court is directed to close this motion (Docket No. 15). A conference is scheduled for August 9, 2013 at 4:30 p.m. (Signed by Judge Shira A. Scheindlin on 7/16/2013) (ja)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

._--------------------------------------------------

)(

SAVANNA AUTO SALES,
Plaintiff,
OPINION AND ORDER
- against13 Civ. 1615 (SAS)
MEDITERRANEAN SHIPPING
COMPANY, S.A.,
Defendant.

SHIRA A. SCHEINDLIN, U.S.D.J.:
I.

INTRODUCTION
Plaintiff Savanna Auto Sales ("Savanna") filed a maritime action

against defendant Mediterranean Shipping Company, S.A. ("MSC") for
misdelivery of a shipment of used cars. After answering the Complaint, MSC filed
a motion for partial judgment on the pleadings, arguing that its liability is limited
under the Carriage of Goods by Sea Act ("COGSA") as a matter oflaw. Because
the provisions of COGSA apply to this shipment, and because neither the cars
Savanna shipped nor the container they were in qualifY as "packages" under that
Act, MSC's liability in this action is limited based on the number of customary
freight units that were shipped.
1

II.

FACTUAL BACKGROUND
In March 2012, Savanna contracted to sell four automobiles and

various parts to Ali Mohi Hammood, a resident of Iraq.1 Through a freight
forwarder, Savanna hired MSC to ship the cars from New York City to Umm Qasr
Port in Iraq.2 According to the bill of lading, MSC was to deliver the cargo
“against the surrender of one original Bill of Lading.”3
The bill of lading described the contents of the shipment to include “4
unpackaged multiple units of used autos,” then listed the makes and models, along
with “one lot of used auto parts.”4 However, on the same page, the bill of lading
also states, “Total Number of Packages: 4.”5 In stating the number of containers

1

See First Amended Complaint (“FAC”) ¶ 5.

2

See id. ¶ 6.

3

See Bill of Lading, Ex. 1 to FAC, at 1. The copy attached to the First
Amended Complaint is largely illegible. However, this Court relied upon the
reprint provided by MSC in its Notice of Motion in order to confirm the text of the
bill of lading. See Bill of Lading Terms and Conditions (“Terms and Conditions”),
Ex. C to Declaration of Garth S. Wolfson, Counsel for MSC, at 1.
4

See Bill of Lading at 1.

5

Id.
2

or packages received by the carrier, the bill merely states that one container was
received.6 The box stating the declared value of the goods contained only X’s.7
In addition to these statements, the bill of lading also purported to
define the term “package” for the purposes of COGSA.8 The relevant clause read
as follows:
6.2 For limitation purposes under the COGSA, it is agreed that
the meaning of the word “package” shall be any palletised and/or
unitised assemblage of cartons which has been palletised and/or
unitised for the convenience of the Merchant, regardless of
whether said pallet or unit is disclosed on the front hereof.9
On April 29, 2012, a telex was sent to MSC personnel stating that the
full set of original bills of lading was surrendered by Savanna, and that the cargo
should thus be turned over to Hammood.10 However, Savanna denies surrendering
a bill of lading, and claims instead that MSC or its agent “manufactured a
fraudulent telex release” and improperly turned over the cargo.11 Through its

6

See id.

7

See id.

8

See id. at 2; Terms and Conditions at 5.

9

Bill of Lading at 2; Terms and Conditions at 5.

10

See FAC ¶ 11; Telex Release, Ex. 3 to FAC.

11

FAC ¶¶ 11-12.
3

agent, Savanna then “demanded payment from [MSC] in the amount of
$75,978.62, the full value of the [c]argo.”12
After MSC failed to comply with the demand, Savanna filed suit in
this Court seeking recovery of $75,978.62.13 After MSC filed its Answer, it also
moved for partial judgment on the pleadings, asking this Court to determine its
maximum liability as either $500 or $2000 under COGSA’s $500 per package
limitation.14
III.

LEGAL STANDARD
“The same standards apply to a Rule 12(c) motion for judgment on the

pleadings and to a Rule 12(b)(6) motion to dismiss for failure to state a claim upon
which relief may be granted.”15 As such, “this Court must ‘view the pleadings in
the light most favorable to, and draw all reasonable inferences in favor of, the
nonmoving party.’”16 “[A] party is [then] entitled to a judgment on the pleadings

12

Id. ¶ 13.

13

See id. at 4.

14

See Notice of Motion; MSC’s Memorandum of Law in Support of
Motion at 5-9.
15

United States Fidelity & Guar. Co. v. Petroleo Brasileiro S.A.Petrobras, No. 98 Civ. 3099, 2001 WL 300735, at *2 (S.D.N.Y. Mar. 27, 2001).
16

Davidson v. Flynn, 32 F.3d 27, 29 (2d Cir. 1994) (quoting Madonna
v. United States, 878 F.2d 62, 65 (2d Cir. 1989)).
4

‘only if it has established that no material issue of fact remains to be resolved and
that [it] is entitled to judgment as a matter of law.’”17
IV.

APPLICABLE LAW
A.

Applicability of COGSA Limitation
COGSA applies to “[e]very bill of lading . . . which is evidence of a

contract for the carriage of goods by sea to or from ports of the United States, in
foreign trade . . . .”18 Section 4(5) of COGSA provides carriers and ships with a
$500 per package cap on liability from “loss or damage” of goods, “unless the
nature and value of such goods have been declared by the shipper before shipment
and inserted in the bill of lading.”
The only exception to COGSA’s limitation of liability that is at issue
here is the doctrine of unreasonable deviation. COGSA provides that a
“reasonable deviation [in the voyage] shall not be deemed to be an infringement or
breach of [COGSA] or the contract of carriage.”19 As a corollary of this,

17

Bailey v. Pataki, No. 08 Civ. 8563, 2010 WL 234995, at *1 (S.D.N.Y.
Jan. 19, 2010) (quoting Juster Assocs. v. Rutland, 901 F.2d 266, 269 (2d Cir. 1990)
(alteration in original) (internal quotation marks omitted)).
18

Pub. L. No. 74-521, 49 Stat. 1207 (1936) (codified as amended at 46
U.S.C. § 30701 note (2006)).
19

COGSA § 4(4).
5

“‘unreasonable deviations’ may deprive a carrier of COGSA’s benefits.”20 In the
Second Circuit, the doctrine of unreasonable deviation is “limited . . . to two
situations: geographic deviation and unauthorized on-deck stowage.”21 Despite
attempts to expand the doctrine, the Second Circuit has refused to do so, enforcing
COGSA’s limitation of liability even in “instances of corrupt or criminal
misdelivery.”22
B.

Definition of a Package
“For decades American admiralty courts have struggled to define the

deceptively simple noun ‘package’ within the context of § 4(5) of [COGSA].”23 In
the Second Circuit, “[t]he question of what constitutes a COGSA package . . . is
largely and in the first instance a matter of contract interpretation.”24 “The first

20

OOO Garant-S v. Empire United Lines Co., No. 11 Civ. 1324, 2013
WL 1338822, at *5 (E.D.N.Y. Mar. 29, 2013) (emphasis added) (quoting B.M.A.
Indus., Ltd. v. Nigerian Star Line, Ltd., 786 F.2d 90, 91 (2d Cir. 1986) (per
curiam)).
21

Sedco, Inc. v. S.S. Strathewe, 800 F.2d 27, 31 (2d Cir. 1986) (citing
B.M.A. Indus., 786 F.2d at 91-92). Accord Vigilant Ins. Co. v. M/T Clipper
Legacy, 656 F. Supp. 2d 352, 359-60 (S.D.N.Y. 2009).
22

B.M.A. Indus., 786 F.2d at 92.

23

Orient Overseas Container Line, (UK) Ltd. v. Sea-Land Serv., Inc.,
122 F. Supp. 2d 481, 482 (S.D.N.Y. 2000).
24

Allied Chem. Int’l Corp. v. Companhia de Navegacao Lloyd
Brasileiro, 775 F.2d 476, 485 (2d Cir. 1985).
6

step for the Court is to begin with the use of the term ‘package’ in the bill of
lading.”25 While this reliance on the understanding of the parties prevents a
concrete definition, there still must have been “some packaging preparation for
transportation . . . which facilitates handling” for something to qualify as a COGSA
package.26
An even more complicated question arises when goods are shipped
within a container. Courts have generally avoided classifying the container as a
package, with the Second Circuit holding that “at least when what would ordinarily
be considered packages are shipped in a container supplied by the carrier and the
number of such units is disclosed in the shipping documents, each of those units
and not the container constitutes the ‘package’ referred to in [COGSA].”27 In
addition, the container itself may not qualify as the package. “[I]n the absence of
clear and unambiguous language indicating agreement on the definition of
‘package,’ then [the court] will conclusively presume that the container is not the
25

Agfa Gevaert AG v. TMM Lines Ltd., No. 04 Civ. 4202, 2005 WL
2063836, at *6 (S.D.N.Y. Aug. 25, 2005) (citing Seguros Illimani S.A. v. M/V Popi
P, 929 F.2d 89, 94 (2d Cir. 1991)).
26

Aluminios Pozuelo Ltd. v. S.S. Navigator, 407 F.2d 152, 155 (2d Cir.
1968). Accord Binladen BSB Landscaping v. M.V. Nedlloyd Rotterdam, 759 F.2d
1006, 1012 (2d Cir. 1985).
27

Mitsui & Co. v. American Export Lines, Inc., 636 F.2d 807, 817 (2d

Cir. 1981).
7

package where the bill of lading discloses the container’s contents.”28 If the parties
did not unambiguously define the container as the package, and the other units
involved cannot qualify as COGSA packages, “the $500 limit would apply ‘per
customary freight unit’” instead.29 In the Second Circuit, this “customary freight
unit” is “the actual freight unit used by the parties to calculate freight for the
shipment at issue.”30
V.

DISCUSSION
A.

The COGSA Limitation Applies to this Shipment
Because the bill of lading for the shipment is “evidence of a contract

for the carriage of goods by sea to or from ports of the United States, in foreign
trade,” it is subject to the limitations of liability contained in COGSA.31 Savanna
did not declare a value for the goods in question on the bill of lading,32 and

28

Smythgreyhound v. M/V Eurygenes, 666 F.2d 746, 753 n.20 (2d Cir.

1981).
29

Mitsui, 636 F.2d at 822 (quoting COGSA § 4(5)).

30

FMC Corp. v. S.S. Marjorie Lykes, 851 F.2d 78, 80 (2d Cir. 1988)
(citing Binladen, 759 F.2d at 783).
31

See, e.g., Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S.
Ct. 2433, 2440 (2010) (“COGSA . . . applies to shipments from United States ports
to ports of foreign countries and vice versa.”).
32

See Bill of Lading at 1.
8

accordingly its recovery is limited to “$500 per package . . . or in case of goods not
shipped in packages, per customary freight unit . . . .”33
Savanna argues that MSC is not entitled to limitation under COGSA
because by allegedly issuing the fraudulent telex release, MSC unreasonably
deviated from the proposed shipment.34 Notwithstanding the merits of Savanna’s
policy argument,35 the Second Circuit has clearly limited the applicability of that
doctrine “to two situations: geographic deviation and unauthorized on-deck
stowage.”36 The circuit court has directly addressed the question of whether
“corrupt or criminal misdelivery” constitutes unreasonable deviation, ruling that it
does not.37 Even In re Complaint of Tecomar S.A.,38 cited by Savanna as noting the
“unjust paradox” created by strictly limiting the unreasonable deviation doctrine,39
held that the doctrine could not be expanded because of the Second Circuit’s

33

COGSA § 4(5).

34

See Plaintiff’s Memorandum of Law in Opposition to Defendant’s
Motion for Judgment on the Pleadings (“Opp. Mem.”) at 3-8.
35

See id. at 5-7.

36

Sedco, 800 F.2d at 31.

37

B.M.A. Indus., 786 F.2d at 92.

38

765 F. Supp. 1150 (S.D.N.Y. 1991).

39

See Opp. Mem. at 6-7.
9

holdings.40 This Court must follow the dictates of the Second Circuit.
Accordingly, I find that the doctrine of unreasonable deviation is inapplicable.
B.

MSC’s Maximum Liability Depends Upon the Number of
Customary Freight Units
While COGSA’s application to the shipment likely eliminates the vast

majority of Savanna’s potential recovery in this action, there is still the question of
how many COGSA packages there are, if any. As a matter of law, neither the cars
nor the container were COGSA packages. Accordingly, the limitation of MSC’s
liability under that Act depends upon the number of customary freight units that
were shipped.
1.

The Parties Did Not Unambiguously Agree that the
Container Is the Package

MSC’s argument that the container should be treated as the sole
COGSA package ignores the Second Circuit’s “significant container
jurisprudence.”41 Under that case law, the circuit court has demonstrated a
“‘repeatedly-expressed reluctance . . . to treat a container as a package.’”42 To

40

See Tecomar, 765 F. Supp. at 1184-85.

41

Monica Textile, 952 F.2d at 640.

42

Id. at 641 (quoting Binladen, 759 F.2d at 1015)).

10

rebut the presumption that the container is not a COGSA package, there must be
“clear and unambiguous language indicating agreement” that the container is to be
treated as the package.43
In this case, there is no such clear and unambiguous agreement. The
bill of lading, though acknowledging receipt of “1 cntr,” also notes the total
number of packages as four.44 Moreover, the container does not fit within the
agreed-upon definition of container, which states that a container is “any palletised
and/or unitised assemblage of cartons which has been palletised and/or unitised for
the convenience of the Merchant.”45 As such, the bill of lading fails to demonstrate
the “clear and unambiguous” expression of the parties’ intent required to rebut the
presumption that the container is not a COGSA package.

43

Smythgreyhound, 666 F.2d at 753 n.20.

44

See Bill of Lading at 1.

45

Id. at 2; Terms and Conditions at 5.

11

2.

Because the Cars Cannot Be COGSA Packages Under the
Bill of Lading, MSC’s Maximum Liability Is Determined by
the Total Number of Customary Freight Units

While the container itself is not a package under COGSA, this does
not mean that the contents of the container are. In making that determination, this
Court “begin[s] with the use of the term ‘package’ in the bill of lading.”46
The bill of lading expresses a clear intent that the cars were not to be
treated as COGSA packages. Though there were four cars and the face of the bill
of lading lists the number of packages as four, every other relevant part of the bill
of lading negates the inference that this number was intended to define the number
of packages for COGSA purposes.47 First, the description of the goods states them
to be “4 unpackaged multiple units of used autos.” Second, the cars were not the
only items shipped in the container — the bill of lading notes that “one lot of used
auto parts” was included as well. Third, the definition of COGSA packages
included in the bill — “any palletised and/or unitised assemblage of cartons which

46

Agfa Gevaert, 2005 WL 2063836, at *6

47

See Bill of Lading at 1.

12

has been palletised and/or unitised for the convenience of the Merchant” — cannot
be read to include “unpackaged multiple units of used autos.”48
When the shipment is not divided into items that can be classified as
packages for COGSA purposes, the limitation of liability is instead determined by
the number of “customary freight units.”49 In the Second Circuit, this means “the
actual freight unit used by the parties to calculate freight for the shipment at
issue.”50 Because the freight in this case was prepaid and the bill of lading does
not disclose the units used to calculate it,51 this Court lacks the evidence needed to
determine the number of customary freight units that were shipped, and thus
cannot determine MSC’s maximum potential liability at this time.

48

While courts will ordinarily defer to the number of packages stated on
the bill of lading, this deference is only granted “‘if the item to which the numbers
referred could fairly be considered a package.’” Orient Overseas, 122 F. Supp. 2d
at 488 (quoting Seguros, 929 F.2d at 95).
49

COGSA § 4(5).

50

FMC, 851 F.2d at 80 (citing Binladen, 759 F.2d at 783).

51

See Bill of Lading at 1.

13

VI.

CONCLUSION
For the reasons set forth above, MSC's motion for partial judgment on

the pleadings is granted in part and denied in part. The Clerk of the Court is
directed to close this motion (Docket No. 15). A conference is scheduled for
August 9, 2013 at 4:30 p.m.

SO ORDERED:

Dated:

New York, New York
July 16, 2013

14

- Appearances For Plaintiff:
Anne Casey Levasseur, Esq.
Charles Edmund Murphy, Esq.
Kevin John Lennon, Esq.
Lennon, Murphy, Caulfield & Phillips, LLC
420 Lexington Avenue, Suite 300
New York, NY 10170
[phone]

For Defendant:
Edward A. Keane, Esq.
Garth S. Wolfson, Esq.
Mahoney & Keane, LLP
40 Worth Street, 10th Floor
New York, NY 10013
[phone]

15