Ferrostaal, Inc. v. M/V Sea Phoenix ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
5-3-2006
Ferrostaal Inc v. M/V Sea Phoenix
Precedential or Non-Precedential: Precedential
Docket No. 05-1837
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 05-1837
FERROSTAAL, INC.,
Appellant
v.
M/V SEA PHOENIX formerly known as M/V EXPRESS
PHOENIX; INTERWAY SHIPPING CO. LTD.; PACIFIC &
ATLANTIC CORP.; TRANS SEA TRANSPORT NV;
DELARO SHIPPING COMPANY LIMITED
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 03-cv-00164)
District Judge: The Honorable Joseph H. Rodriguez
Argued January 17, 2006
Before: BARRY, AMBRO and ALDISERT, Circuit Judges
(Opinion Filed: May 3, 2006)
George R. Zacharkow, Esq. (ARGUED)
Mattioni Limited
399 Market Street
Philadelphia, PA 19106
Counsel for Appellant
A. Robert Degen, Esq. (ARGUED)
Fox Rothschild
2000 Market Street, 10th Floor
Philadelphia, PA 19103
Counsel for Appellees Pacific & Atlantic Corp.
and Delaro Shipping Company Limited
Patrick F. Lennon, Esq. (ARGUED)
Tisdale & Lennon
10 Spruce Street
Southport, CT 06890
-AND-
Frank P. DeGiulio, Esq.
Palmer, Biezup & Henderson
300 Market Street
Camden, NJ 08102
Counsel for Appellee Trans Sea Transport, etc.
OPINION OF THE COURT
BARRY, Circuit Judge
Appellant Ferrostaal claims that steel coils belonging to it
were damaged in transit from Tunisia to New Jersey. The
District Court granted partial summary judgment to the
defendants, now appellees, holding that the Carriage of Goods
by Sea Act (“COGSA”), ch. 229, 49 Stat. 1207 (1936), 46
U.S.C. app. §§ 1300-1315, limited their liability to Ferrostaal to
$500 per package. Ferrostaal appeals, arguing that COGSA does
not govern this transaction and that the “fair opportunity”
doctrine precludes enforcement of the $500 limitation. We hold
that the District Court correctly analyzed the choice of law
question and that the fair opportunity doctrine is inconsistent
with COGSA. We will, therefore, affirm.
2
I. Facts and Procedural History
The Delaro Shipping Company (“Delaro”), of Cyprus,
owned the Sea Phoenix, a Cypriot-flagged cargo ship. By an
agreement (the “Charter Party”) dated November 21, 2002,
Trans Sea Transport, N.V. (“TST”) of the Netherlands Antilles,
chartered the Sea Phoenix for $7,000 a day.1 The Sea Phoenix
was to be delivered into TST’s control on or about November 24
or 25, 2002, at Porto Marghera, Italy. TST directed the Sea
Phoenix to Bizerte, Tunisia, where, on or about December 15, it
took aboard a shipment of coils of galvanized steel. The shipper
was Tunisacier International S.A., of Tunisia; the shipment was
to be discharged at the Novolog terminal in Philadelphia and
consigned to the order of Ferrostaal Inc., a Delaware corporation
(“Ferrostaal”). The bills of lading (“Bills of Lading”) issued by
TST for the relevant portion of the shipment, written on a
standard form called a CONGENBILL,2 indicate in the section
labeled “number and kind of packages; description of goods”
that the shipment contained 402 coils, weighing a total of
3,628,480 kilograms. The total cost of the shipment was
$171,861.14. Man Ferrostaal AG, Ferrostaal’s German parent
1
The Charter Party is a standard New York Produce
Exchange time charter form modified with extensive strikeouts
and an additional seventeen pages of terms. It contains one
clause explicitly incorporating COGSA by reference and another
requiring arbitration of any disputes in London under English
law.
2
Especially by contrast with the Charter Party, the Bills
of Lading are clear and concise. Their boilerplate terms—a total
of five clauses—fit on the back of the sheet of paper that lists the
cargo manifest and the parties. Clause 1 purports to incorporate
by reference the terms of a charter party “dated as overleaf.” No
such date was provided; no charter party was named. Neither
party argues that the Charter Party should be deemed
incorporated into the Bills of Lading. Clause 5, the “Both-to-
Blame Collision Clause,” is unenforceable under United States
law. See United States v. Atl. Mut. Ins. Co., 343 U.S. 236, 241
(1952).
3
company, insured the coils, “full risk from warehouse to
warehouse,” through an Italian branch of the global Ace
Insurance Group. The insurance policies indicate a total value
for the coils of roughly $2 million.
The Sea Phoenix unloaded the coils in Gloucester City,
New Jersey, on or about January 13, 2003. Ferrostaal claims
that 280 of the coils had been exposed to seawater, causing them
to rust. It estimates the total damage at $507,892. On January
15, Ferrostaal sued the Sea Phoenix, Delaro, and TST in the
United States District Court for the District of New Jersey.3 The
complaint alleged that the damage was the result of the
unseaworthiness of the Sea Phoenix, the defendants’ negligence,
or breach of the contract of carriage.
Delaro and TST moved for partial summary judgment,
claiming that COGSA § 4(5) limited their liability to $500 per
package. That section provides:
“Neither the carrier nor the ship shall in any event
be or become liable for any loss or damage to or in
connection with the transportation of goods in an
amount exceeding $500 per package lawful money
of the United States . . . unless the nature and
value of such goods have been declared by the
shipper before shipment and inserted in the bill of
lading.”
46 U.S.C. app. § 1304(5). They claimed that the Bills of Lading
did not include a declaration of the “nature and value of such
goods” and that, therefore, the $500 limit applied, limiting their
total liability to $140,000. In response, Ferrostaal argued that
3
The complaint also named as defendants the Interway
Shipping Company and the Pacific and Atlantic Corporation.
Interway was dismissed by stipulation on December 10, 2003.
Pacific and Atlantic, the manager of the Sea Phoenix, is a
Liberian company whose principal office is in Greece. It did not
join in the motion for partial summary judgment and is not a
party to this appeal.
4
the Hamburg Rules, a competing set of terms for shipping
agreements with a higher limit, should apply instead. Ferrostaal
also argued that the fair opportunity doctrine rendered the $500
limit unenforceable. Under that doctrine, the $500 limit does not
apply unless the carrier provided the shipper with notice of the
limit and an opportunity to declare a higher value for its goods in
the bill of lading. Ferrostaal claimed that the Bills of Lading
neither mentioned the $500 limit of COGSA § 4(5), nor
contained a space in which the actual value could have been
inserted.
On December 14, 2004, the District Court granted the
motion for partial summary judgment. It found, first, that
COGSA, rather than the Hamburg Rules, applied to the
shipment. Ferrostaal had not shown that Tunisian law required
application of the Hamburg Rules, and the Bills of Lading
indicated an intent to contract into COGSA rather than the
Hamburg Rules. The District Court then applied the fair
opportunity doctrine. Because we have not articulated a fair
opportunity test, the District Court relied on the test adopted by
the Court of Appeals for the Second Circuit, and concluded that
the Bills of Lading provided Ferrostaal with the necessary
opportunity. The Bills of Lading, the District Court found,
provided notice of the $500 limit by unambiguously selecting
COGSA as the governing legal regime. The section of the Bills
of Lading in which the number and weight of the coils were
indicated provided the space in which a higher value could have
been inserted.
At Ferrostaal’s request, the District Court certified for
immediate appeal, pursuant to 28 U.S.C. § 1292(b), the
following issue: “an ocean carrier’s right to invoke [COGSA] in
order to limit recovery of damages without having incorporated
any reference to COGSA or COGSA’s $500 per package
limitation in the Bill of Lading . . . .” App. 2a. We granted
leave to appeal.
5
II. Jurisdiction and Standard of Review
The District Court had jurisdiction under 28 U.S.C. §
1333(1) as a “civil case of admiralty or maritime jurisdiction.”
We have jurisdiction over this interlocutory appeal under 28
U.S.C. § 1292(b). Our jurisdiction extends to all questions
included in the summary judgment order, not just the particular
issue certified for immediate appeal. Yamaha Motor Corp.,
U.S.A. v. Calhoun, 516 U.S. 199, 204-05 (1996). We review de
novo the District Court’s grant of summary judgment. See Foulk
v. Donjon Marine Co., 144 F.3d 252, 257-58 (3d Cir. 1998).
Summary judgment is appropriate when “there is no genuine
issue as to any material fact and . . . the moving party is entitled
to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). All
reasonable inferences from the evidence must be granted to the
non-moving party. See Serbin v. Bora Corp., 96 F.3d 66, 69 n.2
(3d Cir. 1996).
Determinations of the content of foreign law are questions
of law, see Fed. R. Civ. P. 44.1, and our review of them is
plenary. See Grupo Protexa, S.A. v. All Am. Marine Slip, 20
F.3d 1224, 1239 (3d Cir. 1994). “The court, in determining
foreign law, may consider any relevant material
. . . whether or not submitted by a party . . . .” Fed. R. Civ. P.
44.1. We may consider materials not considered by the District
Court. Grupo Protexa, 20 F.3d at 1239. “This rule provides
courts with broad authority to conduct their own independent
research to determine foreign law but imposes no duty upon
them to do so.” Bel-Ray v. Chemrite Ltd, 181 F.3d 435, 440 (3d
Cir. 1999). The parties, therefore, carry the burden of proving
foreign law; where they do not do so, we “will ordinarily apply
the forum’s law.” Id.
III. COGSA Governs This Transaction
Ferrostaal’s initial argument on appeal is that, for two
reasons, COGSA is not the controlling legal regime and that the
higher liability limit of the Hamburg Rules should apply instead.
It claims, first, that the Hamburg Rules are the law of Tunisia,
requiring a conflict-of-laws analysis that ultimately results in the
selection of those Rules. Second, it claims that the Bills of
6
Lading are ambiguous and should be construed against the
defendants—again, resulting in the selection of the Hamburg
Rules. We disagree.
A. COGSA, the Hamburg Rules, and the CONGENBILL
COGSA is the 1936 United States enactment of the
Hague Rules, the first of two major international conventions to
produce standardized shipping terms. The Hague Rules, drafted
in 1921 and adopted at an international conference in 1924,4
have been enacted by most nations. Section 4(4) of the original
Hague Rules specified a liability limit of £100 instead of $500
and differed from COGSA § 4(5) in several other
inconsequential ways. A later protocol, the Hague-Visby Rules,
adopted in 1968,5 amended the Hague Rules to set an inflation-
neutral liability limit. The United States is not a signatory to the
Hague-Visby Rules and has never enacted them.
The second major international set of shipping terms, the
Hamburg Rules, was intended as a complete replacement for the
Hague Rules.6 The Hamburg Rules have been enacted by
comparatively few countries. The United States has not enacted
them; Tunisia has. Article 6 of the Hamburg Rules includes the
general limitation-of-liability rules of the Hague Rules, but with
the inflation-neutral mechanism of the Hague-Visby Rules and a
moderately higher limit:
“The liability of the carrier for loss resulting
from loss of or damage to goods according to the
provisions of article 5 is limited to an amount
4
Brussels Convention for the Unification of Certain
Rules of Law Relating to Bills of Lading, Aug. 25, 1924, 51
Stat. 233, 120 L.N.T.S. 155.
5
Protocol to Amend the Hague Rules, Feb. 23, 1968,
1977 Gr. Brit. T.S. No. 83 (Cmnd. 6944) (entered into force June
23, 1977).
6
United Nations Convention on the Carriage of Goods by
Sea, Mar. 31, 1978, 17 I..L.M. 608.
7
equivalent to 835 units of account[7] per package or
other shipping unit or 2.5 units of account per
kilogramme of gross weight of the goods lost or
damaged, whichever is the higher. . . . By
agreement between the carrier and the shipper,
limits of liability exceeding those provided for in
paragraph 1 may be fixed.”
App. 156-57a. Based on exchange rates as of January 15, 2003,
the Hamburg Rules limited liability to $3.40 per kilogram or
$1,135.89 per package, whichever was higher. This limit is
substantially higher than the limit under the Hague Rules would
be and, indeed, is high enough to cover all of Ferrostaal’s
alleged losses.
Shippers, carriers, and shipowners often attempt to
specify the terms that will govern their contracts. Clause 24 of
the Charter Party provided, in part:
“It is also mutually agreed that this Charter
is subject to all the terms and provisions of and all
the exemptions from liability contained in
[COGSA]. It is further subject to the following
clauses, both of which are to be included in all
bills of lading issued hereunder:
U.S.A. Clause Paramount
This bill of lading shall have
effect subject to [COGSA], which
shall be deemed to be incorporated
herein, and nothing contained herein
shall be deemed a surrender of the
carrier of any of its rights or
immunities or an increase of any of
its responsibilities or liabilities under
said Act.”
7
The Hamburg Rules use as their unit of account the
Special Drawing Right, whose value is defined in terms of a
basket of currencies.
8
Ohio App. 86a. The Bills of Lading, however, did not contain such a
clause. Instead, they were issued on the popular standard
CONGENBILL form. The CONGENBILL included a “General
Paramount Clause” that read:
“(2) General Paramount Clause. (a) The
Hague Rules . . . as enacted in the country of
shipment, shall apply to this Bill of Lading. When
no such enactment is in force in the country of
shipment, the corresponding legislation of the
country of destination shall apply, but in respect of
shipments to which no such enactments are
compulsorily applicable, the terms of the said
Convention shall apply.
(b) Trades where Hague-Visby Rules apply.
In trades where [the Hague-Visby Rules] apply
compulsorily, the provisions of the respective
legislation shall apply to this Bill of Lading.”
App. 114a.
Article 10 of the original Hague Rules specified that they
applied “to all bills of lading issued in any of the contracting
States.” App. 209a. COGSA went further, making itself
applicable to “[e]very bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea
to or from ports of the United States, in foreign trade . . . .” 46
U.S.C. app. § 1300. Therefore, by its own terms, COGSA
applies to this shipment. The Bills of Lading state that the coils
were to be discharged in the United States, and they were. The
Hamburg Rules are even broader. They state that they apply
whenever the port of loading or the port of discharge is in a
contracting state (as in COGSA), whenever the bill of lading is
issued in one (as in the Hague Rules), or when the bill of lading
provides that they are applicable.
9
B. Ferrostaal Has Not Established Tunisian Law
Ferrostaal argues that proper consideration of Tunisian
law requires application of the Hamburg Rules instead of
COGSA. Ferrostaal, however, has not demonstrated that the
Hamburg Rules are the law of Tunisia. The only record
evidence on the scope of Tunisian shipping law provided by
Ferrostaal is the text of the Hamburg Rules and a list of nations,
including Tunisia, that have enacted them into law. Ferrostaal
did not provide expert testimony, the text of the actual
enactment, Tunisian court decisions, excerpts from treatises, or
any other authoritative sources. We cannot tell whether Tunisia
enacted the Hamburg Rules with significant modifications,
whether it has amended its laws since 1980, whether Tunisian
law would provide the defendants with other relevant defenses,
or even whether Tunisia would consider its own law applicable
to this shipment. We do not have and cannot readily obtain the
information we would need to make supportable findings about
Tunisian law. See Fed.R.Civ. P. 44.1 advisory committee’s note
(“[T]he court is free to insist on a complete presentation [of
foreign law] by counsel.”).
Ferrostaal had the burden of establishing Tunisian law
and showing that it differs from United States law. See Bel-
Ray,181 F.3d at 440. It did not carry that burden. Under these
circumstances, we assume that Tunisian law is the same as
United States law, i.e., COGSA. In light of this assumption, we
reject Ferrostaal’s suggestion that because COGSA and the
Hamburg Rules present a “false conflict” of laws, comity
requires that we apply Tunisian law. The necessary predicate to
this argument—knowing what Tunisian law says—has not been
satisfied.
C. The Bills of Lading Do Not Select the Hamburg Rules
Ferrostaal’s argument that the Bills of Lading should be
read to select the Hamburg Rules is also unconvincing. COGSA
permits a carrier “to surrender in whole or in part all or any of
his rights and immunities or to increase any of his
responsibilities and liabilities under this chapter, provided such
surrender or increase shall be embodied in the bill of lading
10
issued to the shipper.” 46 U.S.C. app. § 1305. Thus, to the
extent that the Bills of Lading “embody” a choice to adopt the
Hamburg Rules, COGSA will not stand in the way of provisions
more favorable to the shipper, such as the higher limit of
liability. See also id. § 1304(5); Ilva U.S.A. Inc. v. M/V Botic,
No. 92-717, 1992 U.S. Dist LEXIS 16663, at *8 (E.D. Pa. Oct.
7, 1992) (selecting Hague-Visby Rules).
The CONGENBILL Bills of Lading used for this
shipment, however, do not embody such a choice. The General
Paramount Clause begins by selecting the “Hague Rules . . . as
enacted in the country of shipment.” App. 114a. Since Tunisia
has not enacted the Hague Rules, this selection does not apply.
Where it does not, next in order of consideration is “the
corresponding legislation of the country of destination.” Id.
That, of course, is COGSA—the United States legislation
enacting the Hague Rules. See St. Paul Fire and Marine Ins. Co.
v. Thypin Steel Co., No.95 Civ. 4439, 1999 U.S. Dist LEXIS
3418, at *8 –11 (S.D.N.Y. Mar. 23, 1999), vacated in part on
other grounds, 1999 U.S. Dist. LEXIS 12888, 1999 A.M.C.
2752 (S.D.N.Y. Aug. 23, 1999) (reaching similar result in
interpreting CONGENBILL General Paramount Clause).
Ferrostaal argues that the mere fact that the Bills of
Lading do not exclude the Hamburg Rules creates an ambiguity.
Ordinary principles of contract drafting impose no requirement
that a choice of law clause explicitly exclude the law of
jurisdictions other than the one selected. See, e.g.,
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 cmt. a
(1971) (“[E]ven when the contract does not refer to any state, the
forum may nevertheless be able to conclude from its provisions
that the parties did wish to have the law of a particular state
applied.”). The use of a provision selecting the Hague Rules is
better understood as a decision not to select the Hamburg Rules
than as a decision to make an ambiguous selection. If, as
Ferrostaal now suggests, the parties had forgotten about the
Hamburg Rules, it could hardly have been their intent to select
them. Similarly, no ambiguity is created by referring to the
Hague Rules rather than to a particular local enactment of them,
such as COGSA. See Indem. Ins. Co. of N. Am. v. Hanjin
Shipping Co., 348 F.3d 628, 634 (7th Cir. 2003); Nippon Fire &
11
Marine Ins. Co. v. M.V. Tourcoing, 167 F.3d 99, 102 (2d Cir.
1999).
It makes no difference that the Hamburg Rules purport to
apply to every shipment from a contracting state and that they
purport to void any deviation from them. Even if it had been
demonstrated that the Hamburg Rules were the law of Tunisia,
their self-stated compulsory application would not be relevant to
our interpretation of the terms of the Bills of Lading even if it
might have been relevant in a Tunisian court. It is similarly
irrelevant that the Hamburg Rules were first adopted after the
CONGENBILL form was drafted. The contract between
Tunisacier and TST (of which Ferrostaal is a beneficiary) was
executed well after the adoption of the Hamburg Rules.
Finally, Ferrostaal’s argument that the phrases “such
enactment” and “shall apply” in the General Paramount Clause
fail to exclude the Hamburg Rules is wholly without merit.
“Such enactment,” in the second sentence of the Clause, refers
back to the “[Hague Rules] as enacted” in the first sentence. The
Hamburg Rules explicitly require any contracting state to
denounce the Hague Rules, so the “[Hague Rules] as enacted”
cannot refer to the Hamburg Rules. Saying that one body of law
“shall apply” logically excludes all others.
IV. The Fair Opportunity Doctrine is Inconsistent with
COGSA
Ferrostaal’s other claim on appeal is that the fair
opportunity doctrine precludes enforcement of the $500 limit. In
general, in those Courts of Appeals that apply the doctrine, the
carrier may not enforce the limit unless it presents a prima facie
case that it offered the shipper a fair opportunity to avoid the
limit by declaring a higher value.8 The contents of that showing
8
It is usually asserted that the shipper may then rebut this
showing with evidence of its own to show that it was not offered
such an opportunity. See, e.g., Kukje Hwajae Ins. Co. v. M/V
Hyundai Liberty, 408 F.3d 1250, 1255 (9th Cir. 2005). We are not
aware of any case in which the shipper successfully carried its
12
vary from Court to Court. The majority of Courts of Appeals
require that the carrier provide the shipper with notice of the
$500 limit and the declared value procedure. In the Ninth
Circuit, for example, the carrier must include the text of COGSA
§ 4(5) or similar language in the bill of lading itself. See Kukje
Hwajae Ins. Co. v. M/V Hyundai Liberty, 408 F.3d 1250, 1255
(9th Cir. 2005). Other Courts of Appeals focus on the carrier’s
willingness to offer a choice of different rates for different
declared values. See, e.g., Brown & Root, Inc. v. M/V
Peisander, 638 F.2d 415, 424 (5th Cir.1981) (finding fair
opportunity where the carrier’s published tariff offered a 5% ad
valorem rate for excess declared value). Occasionally, the
presence or absence of a space on the bill of lading in which a
declared value could have been (but in fact was not) inserted is
considered evidence of the presence or absence of a fair
opportunity. See Nippon Fire & Marine Ins. v. M.V.
Tourcoing,167 F.3d 99, 101 (treating space for declaring excess
value as evidence of notice and opportunity). In all, seven of our
sister Courts of Appeals have adopted some version of the
doctrine and it remains good law today in all seven.9 It has also
been the subject of mounting skepticism.10 We have not, until
burden at the second step.
9
See Nippon Fire & Marine Ins., 167 F.3d at 10 (2d Cir.
1999); Caterpillar Overseas, S.A. v. Marine Transp. Inc., 900
F.2d 714, 719 (4th Cir. 1990); Sabah Shipyard SDN BHD. v.
M/V Harbel Tapper, 178 F.3d 400, 404 (5th Cir. 1999); Acwoo
Int’l Steel Corp., v. Toko Kaiun Kaish, Ltd., 840 F.2d 1284,
1288-89 (6th Cir. 1988); Gamma-10 Plastics v. Am. President
Lines, 32 F.3d 1244, 1251-54 (8th Cir. 1994); Kukje Hwajae Ins.
Co., 408 F.3d at 1255 (9th Cir. 2005); Fireman’s Fund Ins. Co.
v. Tropical Shipping & Constr. Co., 254 F.3d 987, 996 (11th Cir.
2001).
10
See Senator Linie GMBH & Co. KG v. Sunway Line,
Inc., 291 F.3d 14, 155 n.9 (2d Cir. 2002); Henley Drilling Co. v.
William H. McGee, 36 F.3d 143, 146 n.5 (1st Cir. 1994);
Carman Tool & Abrasives, Inc. v. Evergreen Lines, 871 F.2d
897, 899-900 (9th Cir. 1989); Alex Kozinski, The Fourth Annual
Frankel Lecture: The Relevance of Legal Scholarship to the
13
now, had an opportunity to decide which version of the doctrine,
if any, to apply.11
Under similar circumstances, the Court of Appeals for the
First Circuit was able to resolve the case before it without ruling
on the scope of the fair opportunity doctrine:
“In light of our conclusion that the bill of lading
met whatever ‘fair opportunity’ notice
requirements are imposed by other circuits, we
refrain from embracing the ‘fair opportunity’
doctrine itself, in any form. We take this course
because the parties themselves have assumed, from
the outset, that a COGSA-related ‘fair opportunity’
doctrine would apply. Thus, we leave for another
day, and a proper adversarial setting, what we
perceive to be a problematic question.”
Henley, 36 F.3d at 146 n.5. The bill of lading at issue in Henley
contained both a clause paramount explicitly selecting COGSA
and a valuation clause limiting liability to $500 per package
unless the shipper declared a higher value and paid a higher rate
“as required by the applicable tariff.” Id. at 146. Such provisions
Judiciary and Legal Community: Who Gives a Hoot About Legal
Scholarship?, 37 HOUS. L. REV. 295, 296-97 (2000); Michael F.
Sturley, The Fair Opportunity Requirement Under COGSA
Section 4(5): A Case Study in the Misinterpretation of the
Carriage of Goods by Sea Act (pts. 1&2), 19 J. MAR. L. &
COMM. 1, 157 (1988).
11
In our sole COGSA § 4(5) case, SPM Corp. v. M/V
Ming Moon, 965 F.2d 1297 (3d Cir. 1992), we proceeded
immediately to an analysis of the bill of lading to determine
whether the parties intended to contract for a higher limit of
liability. See id. at 1301-02. Finding an ambiguity created by the
interaction of a clause incorporating COGSA and one stating,
“Compensation shall not exceed US $2,-per kilogram,” we held
that they had. Id. In that context, it was unnecessary for us to
reach the issue of the fair opportunity doctrine itself.
14
would have satisfied any extant version of the doctrine.
We do not have similar freedom here. The Bills of
Lading would fail the fair opportunity test of at least one other
Court of Appeals. See Pan Am. World Airways, Inc. v. Calif.
Stevedore & Ballast Co., 559 F2d 1173 (9th Cir. 1977). The bill
of lading in Pan Am. contained a clause paramount that
incorporated COGSA by reference, but did not specifically note
the opportunity to declare a higher value. The Ninth Circuit
rejected the argument that “an experienced shipper should be
deemed to have knowledge of an opportunity to secure an
alternative freight rate, and higher carrier liability, by reason of
his knowledge of COGSA, 46 U.S.C. § 1304(5), made
applicable by a ‘Paramount Clause’ in the bill of lading, where
such opportunity does not present itself on the face of the bill of
lading.” Id. at 1177. Here, where the Bills of Lading referred to
COGSA only under the name of the “Hague Rules,” and were
silent on the option to declare a higher value, the Ninth Circuit’s
standard for fair opportunity would not be satisfied. We will,
therefore, consider whether and to what extent the fair
opportunity doctrine should be the law of this Circuit.
A. Common Law Carrier Liability Doctrine Has Been
Superseded by COGSA
Some courts have treated the fair opportunity doctrine as
a matter of common law. See, e.g., Gen. Elec. Co. v. MV
Nedlloyd, 817 F.2d 1022, 1028 (2d Cir. 1987). We, therefore,
examine the history of carrier liability to determine whether
common law precepts are applicable. We conclude that the
enactment of COGSA rendered the question wholly statutory.
At common law in the late 19th century, a carrier could
not limit its liability for damage caused by its own negligence.
See, e.g., Bank of Ky. v. Adams Express Co., 93 U.S. 174, 181
(1876) (rail); Liverpool & Great W. Steam Co. v. Phoenix Ins.
Co., 129 U.S. 397, 439 (1889) (sea). The Supreme Court
recognized an exception to this principle in Hart v. Pennsylvania
Railroad Co., 112 U.S. 331 (1884), in which it held that a
shipper would be estopped from claiming that the goods were
worth more than a valuation agreed upon in the bill of lading.
15
The Court reasoned that the carrier would have charged a higher
rate if it had assumed liability against a greater valuation.
“Agreed valuation” clauses, therefore, became a legal fiction by
which a carrier could overcome the default rule that it would be
liable for damage caused by its negligence. The logic was
contractual. The carrier had the burden of overcoming the
default of full liability by proving the contract; the shipper then
had the burden of demonstrating why the contract should not
control. See Frederick Leyland & Co. v. Hornblower, 256 F.
289, 291-92 (1st Cir. 1919) (citing cases).
In addition to pleading standard contractual defenses, the
shipper could show that it had not actually had the option to
declare a higher value. In The Kensington, 183 U.S. 263, 272-
73 (1902), for example, the Supreme Court considered a 250-
franc limit printed on a steamer ticket not signed by the plaintiff.
It found that “no such right was allowed,” id. at 273, in part
because the terms under which the carrier allowed a higher value
to be declared constituted “illegal conditions,” id. at 276.
Congress institutionalized this arrangement for railway carriage
in several amendments to the Interstate Commerce Act: the
Carmack Amendment, 34 Stat. 584 (1906), and the Cummins
Amendment, 38 Stat. 1196, 1196-97 (1915), amended by 39 Stat.
441, 441-42 (1916). The amended Interstate Commerce Act
enforced agreed valuations “declared in writing by the shipper or
agreed upon in writing as the release value of the property” if
and only if the Interstate Commerce Commission had authorized
the carrier to set rates dependent on the value declared. See Am.
Ry. Express Co. v. Lindenburg, 260 U.S. 584, 591-92 (1921).
Although the Harter Act, 27 Stat. 445 (1893), prohibited
provisions in bills of lading for oceanic carriage that purported to
relieve a carrier from liability for its negligence, courts
continued to enforce agreed valuation clauses in bills of lading.
See, e.g., The Caledonier, 31 F.2d 257, 259 (2d Cir. 1929).
Section 4(5) of COGSA, enacted in 1936, changed this
baseline in two ways. First, it made the first $500 of damage
completely nondisclaimable. Second, it limited the carrier’s
liability to $500 “unless the nature and value of such goods have
been declared by the shipper before shipment and inserted in the
bill of lading.” 46 U.S.C. App. § 1304(5). Thus, COGSA
16
reversed the default rule for cases in which no value was
declared; a “declared” value by which a shipper could demand
full liability protection replaced an “agreed” value by which a
carrier could exonerate itself. The $500 minimum is pro-shipper
compensation for this change, part of the basic compromise
between shippers and carriers at the heart of the Hague Rules
and of COGSA. See 2A MICHAEL F. STURLEY, BENEDICT ON
ADMIRALTY § 15 (2005).12
Section 4(5) now specifies the law of valuation clauses.
It sets a default value of $500 for cases in which the bill of
lading is silent. It negates any contractual attempts to reduce
that liability limit, and provides two mechanisms—a valuation or
an explicit contractual term—by which the parties can increase
the liability limit. These provisions together provide for all
possible cases. In so legislating, Congress has used its authority
to displace the common law regime, leaving no room for the
operation of common law doctrines on the liability of oceanic
carriers for their negligence. Accordingly, pre-COGSA cases do
not provide authority for the fair opportunity doctrine.
B. Supreme Court Precedent Does Not Mandate the Fair
Opportunity Doctrine
We are bound to apply decisions of the Supreme Court of
the United States. We, therefore, turn to those decisions
construing COGSA and those upon which the fair opportunity
doctrine is claimed to rest. The phrase “fair opportunity” comes
from a passage in a railroad case postdating COGSA, New York,
New Haven, & Hartford Railroad Co. v. Nothnagle, 346 U.S.
128 (1953). Mrs. Nothnagle gave her suitcase to a redcap and
never saw it again. The Supreme Court refused to enforce
against her a liability limit declared only in the rate the railroad
12
COGSA also followed a general policy of exempting
the shipper from liability for damages resulting from certain
causes—such as negligent navigation—while prohibiting the
shipper from avoiding liability for damage stemming from
others—such as a negligent failure to make the ship seaworthy.
See 46 U.S.C. App. §§ 1303–1304.
17
had filed with the ICC. The basis for the holding was that the
railroad had failed to comply with the provision of the Interstate
Commerce Act requiring a “value declared in writing by the
shipper or agreed upon in writing,” because the railroad had not
given Mrs. Nothnagle so much as a baggage check. Id. at 135.
The Court continued:
“But only by granting its customers a fair
opportunity to choose between higher or lower
liability by paying a correspondingly greater or
lesser charge can a carrier lawfully limit recovery
to an amount less than the actual loss sustained.
Boston & Maine R. Co. v. Piper, 246 U.S. 439,
444-445 (1918); Union Pacific R. Co. v. Burke,
255 U.S. 317, 321-323 (1921); cf. The Ansaldo
San Giorgio I v. Rheinstrom Bros. Co., 294 U.S.
494, 497-498 (1935). Binding respondent by a
limitation which she had no reasonable
opportunity to discover would effectively deprive
her of the requisite choice. Ibid.; cf. Watson Bros.
Transp. Co. v. Feinberg Co., 193 F.2d 283, 286
(1951).”
Id. at 135-36 (emphasis added).
There is little resembling the modern fair opportunity
doctrine in Nothnagle. First, Nothnagle was a railway case; the
Court gave no indication that the doctrine extended beyond
railway carriage.13 Second, even in the context of railway
carriage, the new phrases “fair opportunity to choose” and
“reasonable opportunity to discover” were dicta. The railroad
had failed to comply with an express statutory condition; the
discussion of “fair opportunity” is best read as explaining the
rationale behind the Interstate Commerce Act’s requirement of a
writing. Third, the decision upheld the rights of an individual
13
Neither do the cases cited by the Court suggest that it
does. The Ansaldo San Giorgio I is the only admiralty case of
the four; it predates COGSA. Watson Brothers is the only post-
COGSA case of the four; it is an Interstate Commerce Act case.
18
passenger who never saw a bill of lading, not a commercial
shipper presented with one. The first sentence of the decision
emphasizes that the “case concerns . . . a passenger’s baggage
loss.” Id. at 129.
The Supreme Court has heard three COGSA cases
colorably relevant to this case. All three of those cases
concerned third-party issues. The first, United States v. Atlantic
Mutual Insurance Co., 343 U.S. 236 (1952), involved a “both-to-
blame” clause in the bill of lading. Both-to-blame clauses
provide that when a ship collides with another and both vessels
are negligent, the shipper is required to indemnify the carrier for
liability to the other ship out of its own recovery from the other
ship. The Court held such clauses invalid. Id. at 241. The Court
did not regard the issue as one having to do with COGSA § 4(5);
instead, it saw it as one of the interaction of common law strict
liability for carriers and COGSA § 4(2), which exonerates
carriers from liability to shippers arising out of their own
negligent navigation (rather than negligent handling). In the
absence of a specific command from COGSA allowing such
clauses, the Court continued to apply the common law rule
prohibiting carriers from contracting out of their own
negligence. Id. at 239-40. Atlantic Mutual is inapposite here
because COGSA § 4(5) specifies a rule governing liability
limits, thereby displacing the common law rule.
Two later cases, Robert C. Herd & Co. v. Krawill
Machinery Corp., 359 U.S. 297 (1959), and Norfolk Southern
Ry. v. James N. Kirby, Pty Ltd., 543 U.S. 14 (2004), dealt with
the liability of stevedores for damage to goods. Herd held that §
4(5) did not of its own force limit stevedores’ liability, because
COGSA § 4(5) protected only “the carrier [and] the ship.” Herd,
359 U.S. at 301-02 (quoting 46 U.S.C. app. § 1304(5)). The
Court appeared to assume that COGSA § 4(5) and “parallel
provisions of the bill of lading” were independent routes to reach
the $500 limit. It repeatedly referred to both, and to the
intentions both of Congress and the parties to the bill of lading.
After Herd, carriers have often inserted “Himalaya clauses” in
their bills of lading to extend COGSA’s $500 limit to apply to
stevedores and other agents.
19
Kirby involved a pure, “simple question of contract
interpretation,” Kirby, 543 U.S. at 30, in construing two
Himalaya clauses. It had this to say about § 4(5) (in its recitation
of facts):
“In negotiating the ICC bill, Kirby had the
opportunity to declare the full value of the
machinery and to have ICC assume liability for
that value. Cf. New York, N. H. & H. R. Co. v.
Nothnagle, 346 U.S. 128, 135, 97 L. Ed. 1500, 73
S. Ct. 986 (1953) (a carrier must provide a shipper
with a fair opportunity to declare value). Instead,
and as is common in the industry, see Sturley,
Carriage of Goods by Sea, 31 J. Mar. L. & Com.
241, 244 (2000), Kirby accepted a contractual
liability limitation for ICC below the machinery’s
true value, resulting, presumably, in lower
shipping rates.”
Id. at 19. While this passage refers to the fair opportunity
doctrine, we do not read it to hold that the fair opportunity
doctrine is binding law. The reference to “a fair opportunity”
appears only in a parenthetical summarizing the holding of
Nothnagle, which was not a COGSA case. The proposition for
which it is cited is an uncontroversial statement of facts that
assumes, without further inquiry, that a fair opportunity existed.
The cited law review article is fiercely critical of the fair
opportunity doctrine. We do not read a tangential reference in a
Supreme Court decision as enacting, sub silentio, a doctrine as
significant as the fair opportunity doctrine.
Although other Courts of Appeals have read Nothnagle
somewhat differently than we do, they have not identified any
further independent authority for the fair opportunity doctrine.
The first decision applying the “fair opportunity” language to
COGSA was Tessler Bros. (B.C.) v. Italpacific Line, 494 F.2d
438 (9th Cir. 1974).14 There, a shipper sued a stevedore and,
14
Tessler Brothers is, after Nothnagle and Hart, the
principal claimed source of authority for the fair opportunity
20
citing Herd and Atlantic Mutual, argued that Himalaya clauses
were forbidden by COGSA. The Ninth Circuit rejected that
argument by distinguishing both-to-blame clauses from
Himalaya clauses.
In a subsidiary argument, the shipper claimed that it was
not offered a choice of rates and that, therefore, the $500 limit
was not even available to the carrier, let alone to a stevedore.
The Ninth Circuit could have rejected this argument without
reference to “fair opportunity,” because COGSA does not
purport to require a choice of rates. Instead, it accepted the
premise that the carrier must offer a choice of rates:
“A significant restriction on a carrier’s right
to limit liability to an amount less than the actual
loss sustained is that the carrier must give the
shipper ‘a fair opportunity to choose between
higher or lower liability by paying a
correspondingly greater or lesser charge. . . .’ . .
. Nothnagle . . . ; Sommer Corp. v. Panama
Canal Co., 475 F.2d 292, 298 (5th Cir. 1973), and
cases cited therein.”
doctrine. Tessler Brothers and its interpretation of Nothnagle are
regularly also cited whenever Nothnagle itself is discussed. The
fair opportunity doctrine in the Courts of Appeals has flowed
from Tessler Brothers. See Gen. Elec. Co. v. MV Nedlloyd, 817
F.2d 1022, 1028-29 (2d Cir. 1987) (citing Nothnagle, Hart, and a
Ninth Circuit case); Cincinnati Milacron, Ltd.v. M/V/ American
Legend, 784 F.2d 1161 (4th Cir. 1986) at 1163-64 (citing
Nothnagle and Tessler Brothers), at 1166 (Phillips, J.,
dissenting) (citing a Ninth Circuit case), rev’d on other grounds
en banc, 804 F.2d 837 (4th Cir. 1986); Brown & Root, Inc. v.
M/V Peisander, 648 F.2d 415, 420 n.11, 423-24 (5th Cir. 1981)
(citing Tessler Brothers); Acwoo Int’l Steel Corp. v. Toko Kaiun
Kaish, Ltd., 840 F.2d 1284, 1288 (6th Cir. 1988) (citing
Cincinnati Milacron); Gamma-10 Plastics v. Am. President
Lines, 32 F.3d 1244, 1251-54 (8th Cir. 1994) (citing Ninth
Circuit and Fourth Circuit cases).
21
Id. at 443-44. The quoted passage from Nothnagle refers to the
Interstate Commerce Act’s validly-filed-tariff provision. Tessler
Brothers offers no further explanation why this feature of
statutory railroad law should apply to COGSA.15 The decision
then examines the bill of lading, which contained both a clause
with “substantially the same provisions limiting liability as
[COGSA] § 4(5)” and a clause paramount selecting COGSA:
“[The shipper] contends that there is no evidence
that the shipper was offered a choice of rates, one
with the limitation and another without it. The
15
Neither does Sommer, cited in Tessler Brothers.
Sommer concerned damage incurred after unloading, to which
COGSA was not directly applicable. Sommer, 475 F.2d at 295.
Under the complex circumstances of the case, the shipper’s
failure to pay a $6.88 handling charge attributable to excess
value, but not calculated by the carrier until months later, did not
allow the carrier to claim the benefit of the $500 contractual
liability limit.
The fair opportunity doctrine arises only in a brief
discussion of issues the decision does not affect. It cites
Nothnagle, id. at 298, but a statement two sentences later is flatly
inconsistent with the notice-oriented versions of the doctrine:
“Nor does [the Court’s conclusion] remotely suggest that Canal
Company either waived the various provisions or was estopped
to assert them merely because shipper-consignee was unaware of
them.” Id.
The other “cases cited therein” (all from the Courts of
Appeals) on the fair opportunity issue consist of two cases under
the Interstate Commerce Act, Sorensen-Christian Industries, Inc.
v. Railway Express Agency, Inc., 434 F.2d 867, 868-69 (4th Cir.
1970), and Chandler v. Aero Mayflower Transit Co., 374 F.2d
129, 132 n.2 (4th Cir. 1967), and two cases in which the carrier
was held to have breached an express promise to provide
insurance, Hamilton v. Stillwell Van & Storage Co., 343 F.2d
453, 454 (3d Cir. 1965) (landborne carriage), and Rhoades, Inc.
v. United Air Lines, Inc., 340 F.2d 481, 486 (3d Cir. 1965)
(airborne carriage). None of these cases found a fair opportunity
doctrine in COGSA.
22
provisions in the bill of lading and COGSA are
prima facie evidence of the opportunity to avoid
the limitation, however, and it is [the shipper’s]
burden to prove that such an opportunity did not in
fact exist. Petition of Istbrandtsen Co., 201 F.2d
281, 285 (2d Cir. 1953). [The shipper] did not
carry this burden.”
Id. The prima facie burden of proof on the carrier is borrowed
from Petition of Istbrandtsen, which does not analyze COGSA §
4(5) itself and cites as authority only Hart and other cases
predating COGSA.
A later Ninth Circuit case, Pan American World Airways,
Inc. v. California Stevedore & Ballast Co., 559 F.2d 1173, 1177
(9th Cir. 1977), appears to be the source of the understanding
that COGSA requires not merely that the carrier be willing to
accept a higher declared valuation (possibly by charging a higher
rate) but must also give the shipper specific notice of the $500
limit and the declared value option:
“Rather, we reject appellant's argument that an
experienced shipper should be deemed to have
knowledge of an opportunity to secure an
alternative freight rate, and higher carrier liability,
by reason of his knowledge of COGSA, 46 U.S.C.
§ 1304(5), made applicable by a ‘Paramount
Clause’ in the bill of lading, where such
opportunity does not present itself on the face of
the bill of lading. The bill of lading is usually a
boilerplate form drafted by the carrier, and
presented for acceptance as a matter of routine
business practice to a relatively low-level shipper
employee. We feel that imputing such knowledge
of COGSA applicability and provisions to such an
employee is an assumption that may well go
beyond the bounds of commercial realism.”
Id. Notably absent from this ringing vindication of the right of
shippers to avoid standard terms in contracts entered into by
their employees acting within the routine scope of their
23
employment is any citation to authority, relevant or otherwise.
In summary, our survey of precedent reveals no basis to
conclude that the carrier must offer a choice of rates or provide
the shipper with notice of the $500 limit. Nor can we find a
basis for placing the initial burden of proof on the carrier.
C. The Fair Opportunity Doctrine is Not Consistent with the
Text of COGSA § 4(5)
Because we have determined that the fair opportunity
doctrine is not compelled by precedent, we must make our own
determination of whether the text of COGSA § 4(5) is
susceptible of a reading in which the fair opportunity doctrine
appears:
“Neither the carrier nor the ship shall in any
event be or become liable for any loss or damage
to or in connection with the transportation of goods
in an amount exceeding $500 per package lawful
money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or
the equivalent of that sum in other currency, unless
the nature and value of such goods have been
declared by the shipper before shipment and
inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie
evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master,
or agent of the carrier, and the shipper another
maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above
named. In no event shall the carrier be liable for
more than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be
responsible in any event for loss or damage to or in
connection with the transportation of the goods if
the nature or value thereof has been knowingly and
fraudulently misstated by the shipper in the bill of
24
lading.”
46 U.S.C. app. § 1304(5).
This passage cannot be read to permit, much less to
require, the fair opportunity doctrine. Its first sentence
unambiguously places on the shipper the responsibility to
declare a higher value for its goods if it wishes to avoid the $500
limit: “Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to . . . goods in an
amount exceeding $500 per package . . . unless the nature and
value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading.” (emphasis added).
This language does not mention notice or the format of a bill of
lading, and does not refer to higher rates for additional declared
value.
The enforceability of the $500 limit is made conditional
only upon the shipper’s failure to declare a higher value. “By
agreement between the carrier, master, or agent of the carrier,
and the shipper another maximum amount than that mentioned in
this paragraph may be fixed . . . .” This provision emphasizes
that the “agreement” of the shipper and carrier is required to
vary the limitation from $500. Similarly, because a bill of lading
is issued by the carrier, no declaration of value could be
“inserted” in it without the carrier’s consent, yet the fair
opportunity doctrine requires the carrier to show, in effect, that it
would consent to any declaration made by the shipper. It would
pervert the meaning of these phrases to read them as requiring
the carrier to take affirmative steps to enforce the $500
limitation. We find it more natural to read them at face value.
The carrier will not be liable in excess of $500 per package
unless it has acknowledged a higher value or agreed to a higher
limit.
We are also unable to locate in § 4(5) any basis for
placing an initial burden of proof of a fair opportunity on the
carrier. Before COGSA, when the carrier could rely only on the
bill of lading, it was appropriate to require the carrier to bear the
initial burden of showing a fair opportunity. The carrier was by
default liable for all damage caused by its negligence and could
25
reduce its liability only by showing a valid agreed valuation
clause. But COGSA, as governing law, relieves the carrier from
liability beyond $500; the carrier, by producing a bill of lading,
has easily satisfied its burden of showing that the case falls
within COGSA. From then on, any burden (of production or
persuasion) should fall on the shipper, whose task is to show that
“the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading.” 46
U.S.C. App. 1304(5). The ultimate issue is not the opportunity
to declare but the declaration itself. Section 4(5) is not
“evidence of the opportunity to avoid the limitation,” as Tessler
Brothers., 494 F.2d at 443, would have it. Section 4(5) is the
limitation. It is therefore incorrect to speak of the carrier
presenting “prima facie evidence” of the opportunity, because
COGSA places no burden of production on the carrier in the first
place.
Finally, we observe that Congress included an explicit
notice provision in an analogous context in the Interstate
Commerce Act. COGSA should not be read as though it
contained an implied notice provision.
D. The Fair Opportunity Doctrine is Not Consistent with the
Policies of COGSA § 4(5)
We find support for our conclusion that a fair opportunity
doctrine does not come within COGSA § 4(5) from the policies
embodied in that section. First, COGSA § 4(5) does not require
that the shipper have paid a higher rate to enjoy the benefits of
having declared a higher value, thus implying that the fair
opportunity doctrine’s occasional concern with a choice of rates
is misplaced. Second, the fair opportunity doctrine’s solicitude
for the unsophisticated shipper is misplaced in commercial
legislation such as COGSA. The typical disclosure requirement
is intended to warn of a departure from a legal default, protects
unsophisticated parties, and applies where the parties have
unequal bargaining power. COGSA’s $500 limit is itself the
default, most shippers COGSA reaches are commercially
26
sophisticated and used to dealing with COGSA,16 and the market
for oceanic carriage of goods is competitive, giving shippers
substantial freedom to choose among hundreds of international
shipping concerns. Under the scheme of COGSA § 4(5), the
shipper already has an effective remedy for not being allowed to
declare a higher value: it can take its business elsewhere.
Third, COGSA anticipates that shippers will often acquire
marine insurance through third parties. The typical policy of
marine insurance covers many risks for which the carrier would
not be liable under COGSA, such as damage arising out of
negligent navigation, deviations to save life or property, or non-
negligent handling of the cargo. See GRANT GILMORE &.
CHARLES L. BLACK, THE LAW OF ADMIRALTY §§ 2-9, 2-10 (2D
ED. 1975); 46 U.S.C. app. § 1304(2)-(4). Insurance through
third-party maritime insurers is usually cheaper and more
convenient than insurance by the carrier and prudent shippers
will insure their cargo regardless of the allocation of liability for
negligent damage.17 The fair opportunity doctrine, in seeking to
vindicate the rights of shippers, confers a windfall on subrogated
insurers.
Fourth, COGSA is the enactment by the United States of
an international convention adopted to create international
uniformity and simplicity. Its text almost exactly tracks the text
of the Hague Rules. One significant goal of the Hague Rules
was to free bills of lading from highly particularized statements
of rights under particular national laws. See Michael F. Sturley,
The Fair Opportunity Requirement Under COGSA Section 4(5):
A Case Study in the Misinterpretation of the Carriage of Goods
by Sea Act, Part II, 19 J. MAR. L. & COMMERCE 157, 175 (1988).
16
Ferrostaal is no exception. See, e.g., Ferrostaal, Inc. v.
M/V Sea Baisen, 2005 A.M.C. 482 (S.D.N.Y. 2004); Ferrostaal,
Inc. v. M/V Tupungato, 2004 A.M.C. 2498, (S.D.N.Y. 2004);
Ferrostaal Inc. v. M/V Yvonne, 10 F. Supp. 2d 610 (E.D. La.
1998).
17
We note that Ferrostaal chose to insure the cargo at
issue in this case.
27
The liability limit was a compromise between carrying and
shipping interests, id. at 184-85, intended to be applied
uniformly around the world. The drafters of the Hague Rules
would not have anticipated the fair opportunity doctrine. Id. at
174-77. Even other common law countries do not have a fair
opportunity doctrine; Canada has explicitly rejected one. Id. at
166-69. Shipping was and is a highly international business, as
the diverse nationality of the parties in this case suggests. The
fair opportunity doctrine imposes extra costs on shippers and
carriers who deal with the United States market, particularly
when it strikes down terms in bills of lading drafted to avoid
citing a multitude of national laws.
We conclude that the fair opportunity doctrine does not
comport with the principles of COGSA § 4(5) any more than it
comports with the text of that section.
V. Conclusion
The fair opportunity doctrine is not to be found in the text
of COGSA. Whatever the merits of the common law regime
imposing liability on the carrier by default, COGSA reversed
that default. Looking for a “fair opportunity” means ignoring
COGSA in favor of the very regime COGSA overrode. The
statute is not neutral as between carriers and shippers on this
point; the burden is on the shipper to declare a greater value.
Nor is the fair opportunity doctrine to be found in caselaw that
binds us.
We hold that the fair opportunity doctrine has no place in
the application of COGSA; we apply COGSA § 4(5) as written.
Ordinarily, the $500 limit is available to the carrier. The shipper
bears the burden of establishing that it has “declared” “the nature
and value of such goods . . . and inserted [the declaration] in
the bill of lading.” 46 U.S.C. app. § 1304(5). The carrier
remains free to present evidence that the declared value
overstated the true value, but the shipper is estopped from
claiming that it has suffered a loss in excess of the value it
declared. See id.
We agree with the District Court that COGSA governs
28
the transaction at issue here. A straightforward application of
COGSA’s text, therefore, resolves this case. Ferrostaal did not
declare a higher value and have that value inserted in the Bills of
Lading. As a result, its recovery is limited to $500 per package.
It is unnecessary to reach the question, answered by the District
Court in the affirmative, of whether Ferrostaal had a “fair
opportunity” on the facts of this case.
We will affirm the judgment of the District Court.
29