Opinion ID: 507381
Heading Depth: 2
Heading Rank: 1

Heading: Limitation of Liability under COGSA

Text: 15 The question presented by Coutinho's appeal is simply this: Was the presence of Additional Clause B (Clause B) in the bills of lading legally sufficient to establish Jugolinija's prima facie case of fair opportunity? Coutinho argues that Clause B standing alone could not satisfy the carrier's burden for three reasons: first, Clause B did not incorporate COGSA into the contract of carriage by its own terms; second, Clause B did not notify the shipper of a potential limitation or how to avoid it; and third, even if Clause B had incorporated COGSA into the contract, a mere incorporation of COGSA generally would not provide adequate notice to the shipper of the terms of section 1304(5). The district court's answer to Coutinho's legal question is subject to our plenary review, and we must disagree with the district court's conclusion. 16 A reading of Clause B reveals that the basis of the district court's holding--that the clause incorporated COGSA into the bills of lading and provided constructive notice to the shipper of section 1304(5)'s statement of fair opportunity--is fatally flawed. COGSA applies by its own force to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade, although an express provision in a bill of lading will subject other contracts to COGSA's terms. See 46 U.S.C.App. Sec. 1312; see also id. Sec. 1300. COGSA governs the period from the time when the goods are loaded on to the time when they are discharged from the ship, id. Sec. 1301(e), although the carrier and shipper may expressly cover by contract the period before loading and after discharge, id. Sec. 1307. In this case, Clause B does not state that the bill of lading is subject to COGSA's provisions or that COGSA is deemed to be incorporated herein. See Peisander, 648 F.2d at 420 n. 9. Clause B merely provides that if COGSA applies, the period of applicability will include the entire time that the carrier has custody of the goods, including before loading and after discharge. Thus it is clear that if COGSA otherwise governed the bill of lading, Clause B operated to extend the duration of COGSA's effectiveness. Here, COGSA did control the bills of lading because of COGSA's compulsory terms and the nature of the voyage--not by the force of Clause B and the principle of incorporation. We fail to see how Clause B, which took effect (if at all) incident to COGSA's mandate, provided even constructive notice to the shipper of the content of COGSA's limitation of liability provision. 17 Without the faulty premise of the district court's reasoning--constructive notice through incorporation--Clause B provides no basis to sustain the district court's decision. In our cases cited by the district court, incorporation of COGSA was not determinative; we relied on evidence that the carrier gave the shipper a choice of rates and valuations. See Peisander, 648 F.2d at 424-25; Stuttgart Express, 711 F.2d at 622. In each case, the terms of the carrier's tariff clearly afforded the shipper an opportunity to declare an increased value and pay a higher freight charge. 6 In this case, by contrast, Clause B contains no indication that a choice of shipping rates existed or that the shipper knew a particular rate was tied to a limited value. Jugolinija points to no other evidence, such as a tariff, to show that it offered the shipper the option to declare a value. Therefore, the district court wrongly concluded that Jugolinija was entitled to limited liability because of unrebutted evidence of fair opportunity. 18 Jugolinija only briefly attempts to defend the district court's conclusion. Instead, Jugolinija contends that Coutinho mistakenly argues that the carrier must demonstrate fair opportunity. In Jugolinija's view, the real question is who bears the burden of proof? Its answer: the shipper must prove that a fair opportunity did not exist. Jugolinija's authority for this proposition is our statement to that effect in Peisander, 648 F.2d at 424, repeated in Stuttgart Express, 711 F.2d at 622. Implicitly, Jugolinija urges us to affirm the district court's result on a new legal ground because the district court based its decision on a statement of law gleaned from our decision in Peisander: To benefit from the $500 per package limitation of section 1304(5), the carrier must present prima facie evidence that it afforded the shipper an opportunity to avoid the limitation by declaring a higher value, consisting of a provision in either the bill of lading or the carrier's tariff. 7 19 As previously stated, other federal courts have similarly allocated the burden of demonstrating fair opportunity, and although we have not stated the rule as plainly as other circuits, we have voiced our agreement with their statements of law. In our most recent case involving a carrier's entitlement to COGSA's limitation of liability provision, we stated: As to the burden of proof issue, we are in agreement with the position of the United States Court of Appeals for the Second Circuit. Stuttgart Express, 711 F.2d at 622 (citing In re Isbrandtsen Co., 201 F.2d 281, 285 (2d Cir.1953)). In the cited case, the Second Circuit held that a limitation clause was valid if the shipper in fact could have secured a higher valuation on paying a higher freight, and concerning the necessary proof, the court explained: 20 The clause in the Isbrandtsen bill of lading expressly provides that the shipper may avoid the limitation by declaring in writing the nature of the goods and a higher valuation, paying extra freight. Such a provision is prima facie evidence of what it recites. The [shipper] was at liberty to show the falsity of the recital.... 21 Isbrandtsen, 201 F.2d at 285 (citations omitted). More recently, the Second Circuit summarized its view of the law following Isbrandtsen: If the carrier succeeds in demonstrating fair opportunity, the burden of proof shifts to the shipper to demonstrate that a fair opportunity did not in fact exist. General Elec., 817 F.2d at 1029. According to these cases then, the carrier must present some evidence of fair opportunity before the shipper is required to come forward with its evidence that no opportunity existed. Our statements concerning the shipper's burden of proof in Peisander and Stuttgart Express are not inconsistent with this rule; in both of those cases, we first looked for evidence that the carrier offered the shipper a choice of rates and valuations. In this case, because the carrier did not make its threshold showing, the shipper's burden of proof is irrelevant. Thus contrary to Jugolinija's assertions, a failure of proof by Coutinho would not entitle Jugolinija to limited liability.