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Ferrostaal, Inc. v. M/V Sea Phoenix

May 3, 2006


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.

The opinion of the court was delivered by: Barry, Circuit Judge


Argued January 17, 2006

Before: BARRY, AMBRO and ALDISERT, Circuit Judges.


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.

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.*fn1 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,*fn2 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 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.*fn3 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 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.

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 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,*fn4 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,*fn5 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.*fn6 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 equivalent to 835 units of account*fn7 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."

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 ...

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