Opinion ID: 195619
Heading Depth: 3
Heading Rank: 2

Heading: The COGSA Liability Limitation

Text: 7 Section 1304(5) of COGSA, entitled Rights and immunities of carrier and ship, provides in relevant part: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 ... or in case of goods not shipped in packages, per customary freight unit ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.... 8 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 ... [but] in no event shall the carrier be liable for more than the amount of damage actually sustained. 9 46 U.S.C.App. Sec. 1304(5) (emphasis added). 10 The courts generally have required the carrier to afford the shipper a fair opportunity to avoid the COGSA package/CFU liability limitation through adequate advance notice. See, e.g., Carman Tool & Abrasives, Inc. v. Evergreen Lines, 871 F.2d 897, 899 n. 3 (9th Cir.1989). As this court has not adopted the COGSA fair opportunity doctrine, see Granite State Ins. Co. v. M/V Caraibe, 825 F.Supp. 1113, 1118-24 (D.P.R.1993) (noting absence of First Circuit precedent on fair opportunity doctrine), we first examine the case law in other jurisdictions. 11 All courts which have addressed the matter require the carrier to provide the shipper some notice of the COGSA package/CFU liability limitation, differing only as to the type of notice. See id. (examining circuit split as to level of notice required); see generally 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 I), 19 J.Mar.L. & Com. 1, 13-17 (1988) (hereinafter, Sturley, Part I); Michael F. Sturley, The Fair Opportunity Requirement (Part II), 19 J.Mar.L. & Com. 157 (1988) (hereinafter, Sturley, Part II). The Ninth Circuit is thought to have the more demanding notice requirement, see 2A Ellen Flynn & Gina A. Raduazzo, Benedict on Admiralty Sec. 166, at pp. 16-28 to 16-29 (Michael F. Sturley, contrib. ed. 1993) (hereinafter, 2A Benedict ) (describing strict Ninth Circuit standard, citing cases), mandating that the carrier provide the shipper legible written notice of the COGSA package/CFU liability limitation in the bill of lading, employing language substantially similar to COGSA Sec. 4(5). See, e.g., Nemeth v. General S.S. Corp., 694 F.2d 609, 611 (9th Cir.1982). Other courts, including the Second, Fourth, Fifth and Eleventh Circuits, simply require that the bill of lading include a clause paramount incorporating COGSA by reference. See, e.g., Insurance Co. of N. Am. v. M/V Ocean Lynx, 901 F.2d 934, 939 (11th Cir.1990), cert. denied, 498 U.S. 1025, 111 S.Ct. 675, 112 L.Ed.2d 667 (1991); General Elec. Co. v. MV Nedlloyd, 817 F.2d 1022, 1029 (2d Cir.1987), cert. denied, 484 U.S. 1011, 108 S.Ct. 710, 98 L.Ed.2d 661 (1988); Cincinnati Milacron, Ltd. v. M/V American Legend, 804 F.2d 837, 837 (4th Cir.1986) (en banc) (per curiam), rev'g 784 F.2d 1161 (4th Cir.1986); Brown & Root, Inc. v. M/V Peisander, 648 F.2d 415, 424 (5th Cir.1981). The courts are in agreement that the carrier bears the burden of proving that it has afforded the shipper the requisite fair opportunity notice. See, e.g., General Elec., 817 F.2d at 1029; Tessler Bros. (B.C.) Ltd. v. Italpacific Line, 494 F.2d 438, 443 (9th Cir.1974). 12 Our review leads us to conclude that the bill of lading in this case afforded fair opportunity notice sufficient to satisfy whatever essential requirements are imposed by these other courts. Constructive notice was afforded by the clause paramount 3 legibly printed on the reverse side of the bill of lading: This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act.... See Cincinnati Milacron, 804 F.2d at 837 (clause paramount provides constructive notice). 4 A more particular notice was contained in the bill of lading valuation clause: 13 20. VALUATION. Carrier shall not be liable in any event for any loss, damage, misdelivery or delay with respect to the goods in an amount exceeding $500.00 lawful money of the United States per package, or in the case of goods not shipped in packages, per customary freight unit, unless the nature of the goods and a valuation thereof higher than $500.00 is declared in writing by Shipper on delivery of the goods to Carrier and inserted in the Bill of Lading and extra freight is paid thereon as required by the applicable tariff to obtain the benefit of such higher valuation. 14 See Carman Tool, 871 F.2d at 899 n. 4 (finding that bill of lading provision substantially similar to that sub judice recited terms of COGSA Sec. 4(5) and thus afforded actual notice); cf. supra pp. 144-45 (quoting 46 U.S.C.App. Sec. 1304(5)). 5 15 McGee contends that Sea Barge did not demonstrate its entitlement to summary judgment on compliance with the fair opportunity requirement because there was competent evidence that Sea Barge failed to offer PREPA ad valorem rates based on the true value of the cargo. Specifically, McGee reiterates its claim below that Sea Barge failed to show that published tariffs were available for a drilling rig on this voyage. 6 McGee relies primarily on the Fifth Circuit's language in Brown & Root: 16 [T]he circumstances of the case before us do not overcome the prima facie evidence of the opportunity for a choice of rates and valuations ... First, COGSA was expressly incorporated in the bill of lading to thereby bring into play Sec. 4(5). Next, and more significantly, the published tariff which has the effect of law very carefully gave Shipper a choice of valuations by a choice of precisely definable freight rates. 17 648 F.2d at 424 (emphasis added, citations omitted); see also Wuerttembergische v. M/V Stuttgart Express, 711 F.2d 621, 622 (5th Cir.1983) (per curiam) (similar, applying Brown & Root ). The controlling question before us therefore becomes: whether actual and constructive notice, without more, affords the shipper fair opportunity, as a matter of law. 18 Careful examination of the authorities has disclosed no appellate case which requires a valid tariff--in addition to actual or constructive notice--as an element of the fair opportunity doctrine. The Fifth Circuit, whose cases constitute the principal authority relied on by McGee, has reserved judgment on this matter: 19 The facts of [Brown & Root, 648 F.2d at 424, and Wuerttembergische, 711 F.2d at 622] reveal that we have not held ... that the mere incorporation of COGSA into a bill of lading constitutes prima facie evidence of fair opportunity. Because that circumstance is not before us in this case, we express no opinion on the issue. 20 Couthino, Caro & Co. v. M/V Sava, 849 F.2d 166, 170 n. 6 (5th Cir.1988) (emphasis added). Other courts of appeals either directly hold that a tariff is not required if notice of the COGSA liability limitation has been given, see, e.g., Ocean Lynx, 901 F.2d at 939 (Brown & Root thus adopted a system of constructive notice of an opportunity to declare excess valuation. Either a clause paramount in the bill of lading or a valid tariff filed with the Federal Maritime Commission ... is sufficient to afford the shipper an opportunity to declare excess value.) (citations omitted, emphasis added), 7 or clearly imply such a rule, see, e.g., Aetna Ins. Co. v. M/V Lash Italia, 858 F.2d 190, 193 (4th Cir.1988) (In this case [language reciting the COGSA liability limitation in the] bill of lading establishes prima facie evidence of fair opportunity by clearly outlining the limitation of liability and explaining the shipper's opportunity to avoid the limitation by declaring a higher value.); Carman Tool, 871 F.2d at 901 (so long as the bill of lading, on its face, provides adequate notice of the liability limit and an opportunity to declare a higher value, the carrier has discharged its responsibility) (9th Cir.); cf. Komatsu, 674 F.2d at 811 (published tariff, without actual notice of the relevant provisions of COGSA, does not satisfy fair opportunity requirement). 21 We thus eschew McGee's implicit invitation to augment the fair opportunity doctrine. As the Ninth Circuit observed in a similar context: 22 We decline to expand the fair opportunity requirement as suggested by [shipper]. The requirement is not found in the language of COGSA; it is a judicial encrustation, designed to avoid what courts felt were harsh or unfair results. The requirement has been criticized for introducing uncertainty into commercial transactions that should be governed by certain and uniform rules. 23 Carman Tool, 871 F.2d at 900 (citations omitted); see also Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 29 F.3d 727, 728 (1st Cir.1994) (COGSA was ... intended to reduce uncertainty concerning the responsibilities and liabilities of carriers, responsibilities and rights of shippers, and liabilities of insurers.) (citations omitted); see generally Sturley, Parts I, II (criticizing fair opportunity doctrine as economically inefficient and inconsistent with COGSA's roots in international and domestic law). 8 The bill of lading indisputably provided both actual and constructive notice of the COGSA Sec. 4(5) liability limitation. 9 As there was no material fact in genuine dispute, the district court properly granted summary judgment for Sea Barge/Ayacol on the ground that the COGSA package/CFU liability limitation applies.