Petition for Writ of Certiorari — Companhia de Navegacao Lloyd Brasileiro v. Allied Chemical International Corp.

85 - I 8 4 eG ) ~ Supreme Court, U.S,

FILED

—FFE 10 1006

JOSEPH F. SPANIOL,

ais CLERK

IN THE '

Supreme Court of the United;

aioe

Octroser TERM, 1985

COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO,

Petitioner,

VS.

ALLIED CHEMICAL INTERNATIONAL CORP.,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR CERTIORARI

FRANCIS RALPH MATERA*

RICHARD A. HAGEN

CROWELL, ROUSE, VARIAN,

HAGEN « MATERA

111 Broadway

New York, New York 10006

(212) 732-3464

Counsel for Petitioner

Companhia de Navegacao Lloyd Brasileiro

*Counsel of Record

: Reed

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QUESTIONS PRESENTED

1. Whether an ocean carrier mains a bailee of cargo after

delivery of the cargo at the port of destination into the posses-

sion of the local port authority as there required.

2. Whether the pallets or the number of bags contained thereon

are “Cogsa” packages for the purpose of the $500. per package

limitation, 46 U.S.C. 1304 (5) where the Bill of lading states “150

pallets said to contain 6,000 bags.”

3. Whether a shipper can make the carrier an insurer by merely

stating the value of the shipment on the fact of the bill of lading

without paying the ad valorum freight rate as required by the

carrier’s tariff filed with the Federal Maritime Commission.

4. Whether foreign law applies to a tort committed abroad.

a oan, 7 ;

——' a. ’

ii

PARTIES TO THE PROCEEDINGS

The parties having an interest in the outcome of this case pur-

suant to Rule 21.1(b) of the Rules of the Supreme Court, are listed

in order that the Justices of this Court may evaluate possible dis-

qualification or recusal, and are as follows:

1. Companhia de Navegacao Lloyd Brasileiro, a foreign corpora-

tion owned by a Federative Republic of Brasil.

2. Allied Chemical International Corporation.

TABLE OF CONTENTS

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Reasons For Granting The Petition For Writ of

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1. There Is A Conflict Between Circuits As To

The Obligation Of The Ocean Carrier

Following Delivery Of Cargo To A Port

Ser ree See Pree re a eee

2. The Function Of The Federal Court System Is

To Insure Uniformity In The Application Of

og | reer ree Te tert Te ree

3. The Court Below Improperly Found The

Carrier Liable For An Ad Valorum Bill Of

PERE ye eer re Perr pee ee

4. Foreign Tort Law Should Apply .............

SEER OCLC EEE IE NLL OEE DED

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TABLE OF AUTHORITIES

Page

All Commodities Supplies Ltd. v. M/V Acritas,

1982 AMC 166 (ED. La. 1981) (not officially

SR 5 ices Cvceus da cyndaneeek Gaheskes« 4

Allied International v. Yang Ming, 672 F.2d 1055

Es vn bet enn ates kwee uC Keak hs 8,9

Allstate Insurance v. Imparca Lines, 646 F.2d 166

IN, GI 5's byrahnnp wacabeuaesc ca5ks 4,5,6

Bahrain Insurance Co. v. M/V Trein Maersk,

1984 AMC 354 (SDNY 1984) (not officially

I 6b nbs bo da oe RNS eo des ay ake eke 8, 9

Brown ¢ Root, Inc. v. M/V Peisander, 648 F.2d

— 2 8 er re rere )

Cameco, Inc. v. S.S. American Legion, 514 F.2d

SUL rer ere rarer e ye 8

Consol. Intl. Corp. v. Falcon, 1983 AMC 270

(SDNY 1982) (not officially reported) ......... 5

Constable v. National Steamship Company, 154

U.S. 51, 14 S.Ct. 1062, 38 L.Ed. 903 (1894)... 4,6

David Crystal, Inc. v. Cunard Steam-Ship Co..,

339 F.2d 295 (2nd Cir. 1964) ........... ae 5, 6

DuPont de Nemours International v. S.S.

Mormacvega, 493 F.2d 97 (2nd Cir. 1974) .... 8

Exim Industries v. Pan American, 754 F.2d 106,

Se Ge GN I hw aes boca cae eens bee 8

Farrell Lines v. Highlands Ins. Co., 532 F.Supp.

77, aff. 696 F.2d 28 2nd Cir. (1982).......... 4

Gordon v. Eastern Air Lines, Inc., 391 F.Supp.

rr erry pe

Komatsu, Ltd. v. States Steamship Company, 674

F.2d 806 (Oth Cir. 1069) ....................

La Interamericana v. Delta S.S., 1984 AMC

2972, (ED. La. 1983), aff. 736 F.2d 1524 (5th

UMS Gg WA 5 Sek cad sok nce ewhwenckis

La Seguridad v. Delta S.S., 1981 AMC 996, (SD

Rag MARGE re ted SAS sae eee a

Menley & James Laboratories Ltd. v. M/V

Hellenic Splendor, 433 F.Supp. 254 (SDNY

CRC UN NMR AGA Saws 040% Senet cboeackks

Mitsui & Co. Ltd. v. American Export Lines, 636

F.2d 807 (2nd Cir. 1981)....................

Omark Industries v. Associated Container, etc..

420 F.Supp. 139 (D. Or. 1976) ..:...........

Reed v. Wiser, 555 F.2d 1079, (2nd Cir. 1977)

eos wc mn vc wk cK cc cmcnccn

Tapco Nigeria, Ltd. v. M/V Westwind, 702 F.2d

See Ae ea: WE Soo ws cee a Cee dca ccuckeue

Trotter & Co. v. Delta S.S. Lines, 1985 AMC

ee

Wuerttembergische v. M/V Stuttgart Express, 711

F.2d 621, 622 Sth Cir. (1983)...............

12

10

10

IN THE

Supreme Court of the United States

Ocroser TERM, 1985

COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO,

Petitioner,

VS.

ALLIED CHEMICAL INTERNATIONAL CORP.,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR CERTIORARI

Petitioner, Companhia de Navegacao Lloyd Brasileiro, respect-

fully prays that a Writ of Certiorari issue to review the judgment

of the United States Court of Appeals for the Second Circuit

entered in this proceeding after a petition for rehearing and

rehearing en banc were filed with the aforesaid Court and said

petitions were denied by Order dated November 20, 1985.

OPINIONS BELOW

The opinion of the United States Court of Appeals for the Se-

cond Circuit reported at 775 F.2d 476 of which review is sought

was issued October 15, 1985 and is printed as Appendix C. The

proceedings below prior to that opinion were as follows:

On January 18, 1985, a decision was rendered by District Judge

Owen after submission of the case based upon stipulated facts

and is printed as Appendix A.

A judgment was entered thereon and is printed as Appendix B.

JURISDICTION

Within the time provided, Petitioner moved for a rehearing

and a rehearing en banc to review the above decision by the Court

of Appeals for the Second Circuit. The motion was denied by

an order of the Court uf Appeals dated November 20, 1985, which

is printed as Appendix D. This petition for a Writ of Certiorari

was filed within ninety (90) days of that date as required by 28

U.S.C. 2101(c). The jurisdiction of this Court is invoked under

28 U.S.C. 1254(1).

STATUTES INVOLVED

The United States Carriage of Goods by Sea Act, 46 U.S.C.

§1300 et seq.

The Harter Act, 46 U.S.C. §190 et seq.

The Pomererne Act, 49 U.S.C. §81 et seq.

STATEMENT OF THE CASE

On September 10, 1981, Ailied Chemical International Corp.

(Ailied) commenced an action in the United States District Court

for the Southern District of New York against Companhia de

Navegacao Lloyd Brasileiro (Lloyd), a common carrier by water,

for the total value of a shipment of 150 pallets said to contain

6,000 bags of a chemical, caprolactum, which was carried

without incident from the Port of Norfolk, Virginia to the Port

of Salvador, Brasil where the cargo was discharged and delivered

without loss or damage to the governmental Port Authority which

was charged by local law and the custom and usage of said port

to receive same.

The plaintiff contended that the defendant breached the terms

of the contract of carriage and the provisions of the U.S. Car-

riage of Goods By Sea Act, (COGSA), 46 U.S.C. §1300 et seq.

by the carrier’s agent signing a letter acknowledging that the

ocean freight and merchant marine tax had been paid which let-

ter was improperly used by the ultimate receiver to obtain posses-

sion of the shipment from the governmental Port Authority

without surrender of the bill of lading. The defendant argued

that in accordance with the terms of its bill of lading and pur-

suant to local custom and usage at the port of discharge it made

a valid delivery by delivering the cargo into the custody of the

local Governmental Port Authority and was not liable for any

subsequent loss. However, if it was liable, its liability was limited

to $500. per package (pallet) pursuant to COGSA, 46 U.S.C.

1304(5).

The District Court rendered an opinion on January 18, 1985,

virtually adopting plaintiff's proposed Findings of Fact and Con-

clusions of Law without comment or recitation of authority and

awarding plaintiff a full recovery. That decision is set forth in

Appendix A.

On appeal, the Second Circuit Court of Appeals, while critical

of the District Court’s opinion, affirmed the District Court’s

award in favor of the plaintiff.

The basis for affirmance of the District Court was an erroneous

conclusion as to the law of maritime carriage in conflict with

settled authorities concerning delivery to the local governmen-

tal port authority, the misapplication of the law of bailment and

the disturbance of the settled law on package limitation under

COGSA, 46 U.S.C. §1304 (5)

REASONS FOR GRANTING THE

PETITION FOR WRI1 OF CERTIORARI

1. THERE IS A CONFLICT BETWEEN CIRCUITS AS TO THE

OBLIGATION OF THE OCEAN CARRIER FOLLOWING

DELIVERY OF CARGO TO A PORT AUTHORITY.

The Second Circuit held below that the ocean carrier remained

liable as a. bailee of the cargo following delivery to the Port

Authority in Salvador, that as bailee it had a continuing respon-

sibility for delivery of the goods and that any bill of lading clauses

to the contrary were void and unenforceable.

This decision is contrary to the prior decision of the Second

Circuit in Farrell Lines v. Highlands Ins. Co., 532 F. Supp. 77,

aff. 696 F.2d 28, (1982), the decisions of the Fifth Circuit in

Allstate Insurance v. Imparca Lines, 646 F.2d. 166 (1981), and

in Tapco Nigeria, Ltd. v. M/V Westwind, 702 F.2d 1251 (1983)

and the decision of this Court in Constable v. National Steam-

ship Company 154 USS. 51, 14 S.Ct. 1062, 38 L.Ed. 903 (1894).

A similar result was reached in All Commodities Supplies Ltd.

v. M/V Acritas, 1982 AMC 166 (ED. La. 1981) (not officially

reported) and in La Interamericana v. Delta S.S. 1984 AMC 2972,

2978 (ED La.1983) aff. 736 F.2d 1524 (5th Cir. 1984).

In Constable v. National Steamship Co., this Court held at

page 154 US. 63.:

“No rule is better settled that the delivery must be

according to the custom and usage of the port, and

such delivery will discharge the carrier of his

responsibility”.

More recently, the Fifth Circuit Court of Appeals in Allstate

Insurance v. Imparca Lines, supra, concluded that delivery to

the Venezuelan Port Authority discharged the carrier’s obliga-

tions. The Court at 646 F.2d 169 stated:

“We conciude the evidence overwhelmingly supports

the district court’s finding of fact that the container

was unloaded from the vessel and placed on the dock

in the control of INP. This constitutes delivery as a mat-

ter of law, in accordance with the bill of lading and

the custom and usage of the port. The district court’s

legal conclusion that delivery never occurred is thus

in error, and is accordingly reversed. Delivery had taken

place, and the carrier’s responsibility for the goods was

discharged before the container disappeared, and ac-

cordingly the district court shall on remand enter judg-

ment for Imparca.”

The Court approved clause 12 of the Imparca bill of lading

which is identical to the clause contained in petitioner’s bill of

lading which read:

“The responsibility of the Carrier in any capacity

shall altogether cease and the goods shall be considered

to be delivered and at their own risk and expense in

every respect when taken into the custody of customs

or other authorities . . .” Imparca, supra, at 646 S 2nd

167 n.l.

In Tapco Nigeria Ltd. v. M/V Westwind, at 702 F.2d 1262 the

Fifth Circuit held that there was good delivery under the Harter

Act when the cargo was delivered... .

“to persons charged by law and usage of the port with

the duty to receive cargo and distribute it to the con-

signee.” See also Consol Intl. Corp. v. Falcon, 1983

AMC 270 (SDNY 1982) (not officially reported).

The Court below erroneously relied on the case of David

Crystal, Inc. v. Cunard Steam-Ship Co. 339 F.2d. 295 (2nd Cir.

1964) for the proposition that an ocean carrier has a continuing

obligation as a bailee following discharge of cargo onto a receiving

pier. In that case, the cargo was discharged into the hands of

the carrier's independent stevedore and subsequently was

misdelivered by the carrier’s agent through use of a fraudulent

delivery order. There was no contention, in Crystal, supra, that

the goods had been delivered, constructively or otherwise, to the

consignee or to a governmental agency.

In the instant case, the Second Circuit disregarded the

numerous decisions that applied the tenents of this Court’s pro-

mulgation in Constable, supra, as relates to the custom and usage

at the port of discharge. The Crystal decision is clearly not

authority for the law of delivery abroad and the effect of com-

pulsory delivery to a foreign governmental port authority and

thus was misapplied by the Court below.

The bill of lading clause held void herein by the Second Cir-

cuit had been specifically approved by the Fifth Circuit in Im-

parca, supra, at 646 F.2d 167, n.l.

2. THE FUNCTION OF THE FEDERAL COURT SYSTEM

IS TO INSURE UNIFORMITY IN THE APPLICATION OF

MARITIME LAW.

The bill of lading issued by petitioner read as follows: (quoting

from the Court at 775 F.2d 485).

“The bill of ladin herein contained six columns under

the usual general headings ‘Particulars Furnished by

Shipper’. Only two of those columns and only a few

of the items appearing in those columns are important

to our decision. The first column, headed “No. of

Packages’ contained the entry ‘150°. Immediately to the

right of that number, squarely in the column labeled

‘Description of Packages and Goods, was entered “Dou-

ble Faced Pallets Said to Contain: 6,000 Bags Caprolac-

eres

and

“We conclude that the district court’s finding that

the parties did not intend the pallets to be packages

was not clearly erroneous” at 775 F.2d 486.

The foregoing language of the Second Circuit indicates that

the bill of lading clearly sets forths the number of packages to

be carried by the vessel; i.e. 150 pallets. Nevertheless, without

any other evidence, the Court below improperly held that the

District Court’s finding regarding the intent of the parties “was

not clearly erroneous.”

It is clear that there was no evidence of the intent of the par-

ties, other than that set forth in the commercial invoice and the

ocean bill of lading wherein each enumerated the number of

packages as “150 pallets”.

If the panel’s opinion remains unmodified, uniformity in the

application of maritime law is destroyed and the jurisprudence

of stare decisis can no longer be relied upon in the preparation

of a bill of lading or other shipping documents in ocean

commerce.

In Trotter ¢& Co. v. Delta SS. Lines, 1985 AMC 2783 (E.D.

Pa. 1982) (not officially reported), Judge VanArtsdalen held at

page 2792.

“.. . One purpose of COGSA’s package limitation is

to describe ‘a unit that would be fairly uniform and

predictable in size, and one that would provide a com-

mon sense standard so that the parties would easily

ascertain at the time of contract when additional

coverage was needed, place the risk of additional loss

upon one or the other, and thus avoid the pains of

litigation. Nichimen, supra, ... 462 F.2d at 225,

quoting Standard Electrica, S.A. v. Hamburg

Sudamerikanische Dampfschiffahrts-Gesellschaft, . . .

375 F.2d 943, 946 (2nd Cir. 1976). cert. denied 389 U.S.

831 .. . (1967) (emphasis added).

The goals of uniformity and predictability are best serv-

ed by considering the manifestation of the parties’ in-

tent as evidenced by their cwn descriptions of ‘packages’

on documents. As business people routinely engaged

in commerce, a shipper and carrier must be presum-

ed to know that the word ‘package’ is a term of art

under COGSA and to have understood the conse-

quences of their actions when they utilized that term

in their contracts. See Aluminios, supra .. . 407 F.2

at 156. To ignore the parties’ use of the term ‘package’

would inject more uncertainty into this already

troublesome area.”

Thus, uniformity in the application of the laws of foreign com-

merce is a necessity and wholly desirable Reed v. Wiser, 555 F.2d

1079, 1083 (2nd Cir. 1977) cert. den. 434 U.S. 922; Exim Industries

v. Pan American, 754 F.2d 106, 108, (2nd Cir. 1985). To permit

Allied to contradict its own use of the term “package” i.e. “pallet”,

in view of the clear language oi the documents would under-

mine COGSA’s goals of uniformity and predictability. Trotter,

supra, at 1985 AMC 2793.

Also, this will be the first case where the shipper has chosen

to palletize its cargo and to list the pallets as the number of

packages in a bill of lading that a court has held that it was not

the shipper’s intent that a pallet would be deemed the shipping

package.

It will also be the first case where a Court has postulated that

the number of times the number of packages are mentioned in

a bill of lading may be determinative of the intention of the par-

ties (at 775 F.2d 485). Was this the intent of the Second Circuit’s

decision in Allied International v. Yang Ming, 672 F.2d 1055 (2nd

Cir. 1982) and upon which the Court heavily relied for its ra-

tionale in the case presently before this Court?

In these days of containerized cargo, courts have wrestled with

the issue as to whether a container is a package. However, con-

tainer cases involve factors not found in pallet cases, Yang Ming,

supra. at 672 F.2d 1061. It has been uniformly held that where

the bill of lading states that the cargo is palletized, the number

of pallets has determined the application of the $500. package

limitation. Cameco, Inc. v. S.S. American Legion, 514 F.2d 1291

(2nd Cir. 1974), DuPont de Nemours International v. S.S. Mor-

macvega, 493 F.2d 97 (2nd Cir. 1974), Bahrain Insurance Co.

v. M/V Trein Maersk, 1984 AMC 354 (SDNY 1984) (not official-

ly reported), Menley ¢> James Laboratories Ltd. v. M/V Hellenic

Splendor, 433 F.Supp 254 (SDNY 1977), Omark Industries v.

Associated Container, etc., 420 F.Supp. 139 (D.Or. 1976), and

even where the cargo was not actually palletized, Mitsui ¢ Co.

Ltd. v. American Export Lines, 636 F.2d 807 (2nd Cir. 1981).

In the Yang Ming case, supra, the Second Circuit held at 672

F.2d 1056-7:

“

. . we are convinced that the case is controlled by

the explicit statements in the bill of lading that the total

number of packages was thirty. In order to reach a total

of thirty, one must count the pallets as ‘packages’ ”.

In Bahrain Ins. v. Trein Maersk, supra, at 1984 AMC 357, the

District Court affirmed a magistrate’s holding:

“We are of the view, for reasons hereinafter discussed,

that the ‘package’ should be deemed the pallet and that

each carton thereon does not represent a separate and

distinct COGSA ‘package’ ”

Since all parties to a bill of lading must rely on the judicial

interpretation of the provisions inserted in said document, this

unusual decision has injected an unsettling ambiguity into the

maritime law relative to the carriage of goods which compels

analysis, clarification and review of the opinion below so that

commercial men may rely on a clear understanding as to the ef-

fect of enumerating packages on a bill of lading.

3. THE COURT BELOW IMPROPERLY FOUND THE CAR-

RIER LIABLE FOR AN AD VALORUM BILL OF LADING

The Court of Appeals held the petitioner to be an insurer of

the goods because the shipper stated the value of the goods on

the face of the bill of lading for the purpose of establishing a

freight rate. Thus, in the “Description of Packages and Goods”

section of the instant bill of lading there was also stated “Rate:

$110.00 LT, Value: $1,657.00 LT”. The abbreviation LT stands

for “long ton”, the equivalent of 2,240 pounds. This insertion was

solely for the purpose of obtaining the lower regular freight rate

for this commodity and had no function in assessing an ad

valorum rate. In essence, an ad valerum freight bill of lading

calls for the payment of an additional freight charge, usually 2%

of the declared value, plus the regular freight rate (in this case

$110.00 per LT) in the event the shipper desires to be covered

for a value in excess of $500.00 per package.

10

The terms of the carrier’s filed tariff as a matter of law are

binding upon the shipper Brown ¢& Root, Inc. v. M/V Peisander

648 F.2d 415, (5th Cir. 1981), and Komatsu, Ltd. v. States Steam-

ship Company 674 F.2d 806, (9th Cir. 1962). The ordinary bill

of lading becomes an ad valorum bill of lading only when the

shipper declares the value and pays the additional ad valorum

charge set forth in the carrier’s tariff filed with the Federal

Maritime Commission.

The Fifth Circuit Court of Appeals in Wuerttembergische v.

M/V Stuttgart Express, 70 F.2 621, 622 (1983) held:

“

. we have firmly established the position in

PEISANDER that the option need not be included on

the face of the bill of lading, 648 F.2d at 425. Further,

we concluded that the shipper carries the burden of

proving that an opportunity for choice of evaluations

and rates did not in fact exist. 648 F.2 at 424. 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. Petition of Isbrandsten Co., 201

F.2d 281, 285 (2d Cir. 1953).

Under COGSA the valuation per package was $500.

The option to increase valuation by declaration and

paying a higher freight was clear in the tariff which

was in terms incorporated into the bill of lading. The

option not having been expressed, the $500. per

package limitation applies.”

and

“While the $500 per package minimum may be

unrealistic in today’s economy, the remedy must come

from Congress. Until that occurs, an experienced ship-

per should not be permitted to gamble that no damage

will occur, pay the customarily lower freight rates for

goods of undeclared value, and then, when destruc-

tion in fact occurs, cry ‘I did not know’ and seek an

exception to its own obligation 46 U.S. Code, sec.

1304(5).” (not officially reported). La Seguridad v.

Delta S.S 1981 AMC 996, 1003. (SD Fla. 1980)

11

Thus, the Court below improperly concluded that the sub-

ject bill of lading was an ad valorum bill of lading despite any

evidence in support thereof.

If shippers are reluctant to pay a higher rate and choose in-

stead to gamble on safe delivery, they cannot argue later that

the $500 package limitation of liability is inequitable Trotter,

supra, at 1985 AMC 2789.

If the instant case is permitted to stand, this Court will in some

future time be confronted with this issue. Succintly, if a shipper

places a value on the face of a bill of lading without anything

further, makes no declaration to the carrier that it is disclosing

a value for the purpose of obtaining the carrier's unlimited liabili-

ty and pays no higher freight rate, does the shipper unilaterally

transform an ordinary bill of lading into an ad valorum bill of

lading? This is the situation which bespeaks of judicial instruc-

tion in favor of this petitioner.

4. FOREIGN TORT LAW SHOULD APPLY

All of the events which took place in Brasil after completion

of the carriage of goods should have been reviewed under the

laws prevailing in the Federative Republic of Brasil. The Court

below refused to consider the laws of Brasil despite the fact that

the alleged acts of the defendant occurred there following com-

pletion of the ocean carriage. The Court of Appeals rejected

evidence of Brasilian law that the carrier was not liable for

misdelivery by the Port Authority or guilty of conversion since

. it did not have physical possession of the goods.

The Court stated at 775 F.2d 484:

“It is surely obvious at this point that Lloyd’s

Brazilian law arguments are inapposite. The rights and

obligations of the parties herein are rooted in United

States Law. Both COGSA, 46 U.S.C. app. §1300, and

the Harter Act, 46 U.S.C. app. §190, cover transactions

involving carriage from ports in the United States to

foreign ports.”

12

It is primer law that the law of the place of the tort is con-

trolling. In Gordon v. Eastern Air Lines, Inc., 391 F.Supp. 31,

33 (SDNY 1975), the Court held:

“More specifically, the New York Court of Appeals,

in Babcock v. Jackson, supra, has carefully distinguish-

ed between those cases where the defendant’s exercise

of due care is in issue and those cases where the sole

issue is the extent of plaintiffs recovery. In the former

situation, the law of the state where the tort occurred

controls.’

‘In such a case, it is appropriate to look to the law of

the place of the tort so as to give effect to that jurisdic-

tion’s interest in regulating conduct within its borders,

and it would be almost unthinkable to seek the ap-

plicable rule in the law of some other place”

By its mistaken holding that the defendant remained liable

as a bailee, the Second Circuit found it unnecessary to discuss

foreign law. It is submitted that the Court erred in failing to do so.

13

CONCLUSION

The questions presented to this Court are of paramount im-

portance to the shipping industry and the uniform application

of the Carriage of Goods by Sea Act.

For these reasons, a Writ of Certiorari should be granted.

Respectfully submitted,

CROWELL, ROUSE, VARIAN, HAGEN & MATERA

FrRANcis RALPH MATERA*

Of Counsel:

Richard A. Hagen

Counsel for Petitioner

CoMPHANIA De NAvEGACAO LLoyp BRASILEIRO

* Counsel of Record

APPENDIX

RO seapectiully- stquanted the

A-l

APPENDIX A

PLAINFIFES PROPOSED *

FINDINGS OF FACT AND CONCLUSIONS OF LAW

81 Civ 5643(RO)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

ALLIED CHEMICAL INTERNATIONAL CORP.

Plaintiff,

VS.

COMPANHIA DE NAVEGACAO Lloyd Brasileiro,

Defendant.

Ple+ntitt+Alied—Chemieat _titernatorne Heth a tt = =

Courthte-makethefolloming findings

of facts and conclusions of law:*

FINDINGS OF FACT

1. Allied was and still is a corporation duly organized and ex-

isting under the laws of the State of Delaware and qualified to

do business in the State of New York with offices and a place

of business in the City, County and State of New York. It is engag-

ed in the business of exporting chemical products manufactured

by Allied Fibers and Plastics Co., a division of Allied Corpora-

tion, parent company of the plaintiff.

2. Defendant Companhia De Navegacao Lloyd Brasileiro

(“Lloyd”) was and still is a corporation organized under the laws

of the Federative Republic of Brasil, with its principal place of

business in Brasil, with an ofiice and place of business in the Ci-

ty, County and State of New York. It is engaged in the business

of an ocean common carrier of freight for hire, between ports

in the United States and ports of Brasil, and in conducting said

business, owned and operated the vessel “Itapura.”

3. In September 1980, Allied received an order for a certain

quantity of a product called caprolactam from a Brasilian com-

pany called Banylsa Tecelagem Do Brasil, S.A. (“Banylsa”).

* Editing marks made by District Court and reflect original document.

A-2

4. On October 20, 1980, at Norfolk, Virginia, pursuant to said

order, Allied delivered to Lloyd 6,000 bags of caprolactam (“the

Cargo”) to be loaded and shipped aboard the Itapura to the Port

of Salvador, Brasil.

5. Lloyd issued a clean Bill of Lading, describing the aforesaid

cargo, showing Allied as the shipper, that the cargo was consigned

to the order of Banylsa and describing Banylsa as the “notify

party”.

6. The invoice price for the sale of the said caprolactam from

Allied to Banylsa was $266,756.92, C & F Salvador. Tie terms

of sale were sight draft against documents through Banco

Bamerindus Do Brasil S.A. of Sao Paulo, Brasil (“the Brasilian

bank”). Allied, through its own bank, United Californi Bank In-

ternational, forwarded the required shipping documents, in-

cluding a sight draft, the original bill of lading and the original

commercial invoice No. 866477 to the Brasilian bank for hand1-

ing and collection.

7. The cargo was carried by Lloyd aboard the Itapura to

Salvador, Brasil and on November 12, 1980, Lloyd discharged

said cargo in the same good order and condition as shipped at

a warehouse under the control of the Administration of the Port

of Salvador, a Brasilian government agency (“the Port

Authorities”).

8. On November 17, 1980, Banylsa delivered to Lloyd a letter

said to be in accordance with a Brasilian customs regulation,

#040, requesting Lloyd to furnish a document to Banylsa describ-

ed as a “carta declaratoria” (in English, a “letter of declaration’),

attesting that the freight and a merchant marine tax have been

paid. On the same date, and in response to said letter, Lloyd

delivered such a document to Banylsa, stating also that Lloyd

does not object to the customs clearance of said cargo.

_ 9. After obtaining said “carta declaratoria’, and presumably

after complying with other customs and port formalities, Banylsa

obtained possession of said cargo from the Port authorities.

RO

A-3

10. Banylsa did not pay the Brasilian bank or Allied the sum

of $266,756.92 as provided for in the sight draft, did not obtain

the original bill of lading from the Brasilian bank and did not

surrender the original bill of lading to Lloyd or to anyone else.

li. After Banylsa obtained possession of the caprolactum,

Banylsa used it in the manufacture of its yarn product, and then

on or about January 26, 1981, made a complaint to Allied that

the caprolactam was of inferior quality and demanded a credit.

This was the first time that Allied became aware that Banylsa had

obtained possession of the said cargo without paying the sight draft.

Allied thereupon investigated and rejected Banylsa’s claim and

meanwhile was also investigating the circumstances surrounding

Banylsa’s obtaining possession of the cargo without making pay-

ment therefor. Indeed, Lloyd investigated and- during that in-

vestigation, acknowledged that — it had acted improperly in releas-

ing the goods without its surrender of the original Bill of Lading.**

12. In due course, the original bill of lading and unpaid sight

draft were returned by the Brasilian bank to Allied, who is in pre-

sent possession thereof.

13. On April 3, 1981, Banylsa filed a voluntary proceeding in

a Brasilian Court to obtain relief from its debts. On May 8, 1981,

Allied made claim against Lloyd for the improper release of the

cargo, but Lloyd refused to pay and Allied then instituted this

suit on September 10, 1981. On May 20, 1981, Allied filed claim

against Banylsa in the Brasilian Court proceeding in regard to this

shipment and two other shipments on another vessel with another

ocean carrier. Having taken steps to regain possession of the other

two shipments from the Port authorities, whch was eventually

accomplished, Allied filed an amended claim on May 29, 1981

in the Banylsa proceeding in the sum of $266,756.92, the same

amount as sued for herein.

14. On September 2, 1983, Bany!sa deposited with the Brasilian

Court 20,414,907 Cruzeiros for Allied’s first and final distributive

share in the receivership proceeding, based or Allied’s claim of

U.S. $266,756.92 at the exchange rate of 76.53 Cruzeiros to U.S.

$1.00 in effect when Banylsa filed its petition on April 3, 1981.

Allied’s position was that it was entitled to 178,993,872.22

** Handwritten insert by District Court.

A-4

Cruzeiros based on the rate of 671 Cruzeiros to U.S. $1.00 in ef-

fect on the date of Banylsa’s deposit, together with interest, but

the Court rejected Allied’s claim, approved Banvylsa’s deposit and

terminated the proceeding. Allied filed an appeal to this ruling,

claiming interest and additional Cruzeiros based on the current

rate of exchange, but then withdrew the appeal upon receipt from

Banylsa directly of a sum of money for interest and upon advice

of counsel that its demand for additional Cruzeiros would be of

no avail on the appeal and would tie up the principal for about

three to four years. Accordingly, Allied received the following

sums:

20,414,907 Cruzeiros equal to U.S. $30,424.60 (Prin-

cipal) as of September 2, 1983

5,920,350 Cruzeiros eaual to U.S. $8,823.17 (Interest

as of September 2, 1983

15. After this suit was instituted, Allied kept Lloyd advised at

various times during the Banylsa proceedings of settlement pro-

posals which never materialized and of its intention to take its

first and final distributive share, always reserving its rights against

Lloyd, and while Lloyd never specifically consented or objected

to Allied’s efforts, it did acquiesce thereto.

16. On April 2, 1981, Allied’s Brasilian attorney, with Allied’s

consent, released the original commercial invoice to Banylsa cover-

ing the said cargo, and on April 8, 1981, Banylsa surrendered

the said invoice to Brasilian Customs authorities. In releasing the

invoice to Banylsa, Allied’s Brasilian attorney stated that it was

being released for the sole purpose of Banylsa’s avoiding a penalty

due to Banylsa’s not presenting said invoice as per an instrument

assuming responsibility filed with Brasilian Customs in order to

obtain possession of the cargo.

17. Allied performed its part of the contract of sale with Banylsa

and there is no evidence that the caprolactam was of inferior

quality.

A-5

18. Lloyd’s long-form bill of lading, incorporated by reference

into the short form bill of lading, provides inter alia, that:

(a) the bill of lading shall be construed and the rights of the parties

thereunder determined according to the laws of the United

States;

(b) the bill of lading shall be subject to the provisions of the U.S.

Carriage of Goods by Sea Act (“COGSA”), which shall govern

before goods are loaded on and after they are discharged from

the ship and throughout the entire time the goods | are in the

custody of the carrier.

(c) The carrier shall not be liable for mis-delivery while the goods

are not in the actual custody of the carrier.

(d) The responsibility of the carrier shall cease and the goods

shall be deemed delivered when taken into the custody of

customs or other authorities.

(e) The carrier shall not be liable for any loss in an amount ex-

ceeding $500 per package unless the nature and value of the

goods have been declared by the shipper before shipment and

inserted in the bill of lading and extra freight paid.

19. While the limitation of $500 per package is set forth in

Lloyd’s long form bill of lading, that specific defense was not

pleaded by Lloyd in its answer. Lloyd pleads two general defenses,

its “Second” alleging that delivery was made in accordance with

Lloyd’s long form bill of lading, and its “Third”, alleging delivery

in accordance with COGSA.

20. The bill of lading itself describes the cargo as “150 double

faced pallets said to contain 6000 bags caprolactum. In the only

correspondence between the parties before the commencement

of this action, there is no reference to the number of packages

nor did Lloyd ever claim the package limitation or even refer

to it on its motion to dismiss on the grounds of forum non con-

venience previously before this Court, until it surfaced at a pre-

trial conference on September 22, 1983, when Lloyd raised it for

RO

A-6

the first time. Allied characterized the shipment in its commer-

cial invoice to Banylsa as “6000 packages. In the “carta

declaratoria”, Lloyd characterized the shipment as 150 pallets con-

taining 6000 bags of caprolactam.

21. The bill of lading specifically declares the nature of the

goods (caprolactam) and the value thereof to be $1,657 per long

ton. A long ton is equivalent to 2240 pounds. According to Lloyd’s

tariff, if the value does not exceed $2,000 per 2240 pounds, the

rate is $110 per ton, which is the rate actually charged by Lloyd.

Neither Lloyd’s tariff nor its bill of lading provide for any addi-

tional freight in the event of a declaration of value in excess of

$500 per package.

CONCLUSIONS OF LAW

1. This Court has jurisdiction of the parties and of the subject

matter of the action in admiralty, or alternatively, by virtue of

diversity of citizenship and that the matter in controversy exceeds

$10,000.00.

2. Allied, as the shipper in the bill of lading and thereby be-

ing a party to the contract of carriage, and being in possession

of the original bill of lading in the same form as issued, is the

real party in interest and has standing to bring this action.

3. This case is governed by United States law, not only of vir-

tue of express provisions of various United States Statutes, 49

U.S.C. §81, 46 U.S.C. §190, 46 U.S.C. §1300 that so provide, but

also by virtue of the express terms of the bill of lading and United

States maritime law.

4. Under United States law, Lloyd’s obligation under the con-

tzact of carriage with Allied was to deliver the cargo to the order

of Banylsa, but only on the presentation by Banylsa of the original

bill of lading duly endorsed by Banylsa, which Banylsa failed to

do. Brasilian law imposes the same obligation on the carrier. Lloyd

acknowledged this, and it is the only way these transactions--and

there were three of thein--could realistically go to completion.**

5. By releasing the cargo to Banylsa without obtaining the

original bill of lading, Lloyd, as a common carrier, was absolute-

ly liable to Allied for any loss Allied sustained by reason of the

improper delivery, either for breach of contract or in conversion.

** Handwritten insert by District Court.

A-7

6. Lloyd cannot exonerate itself from such misdelivery by shif-

ting responsibility to the Brasilian Port authorities with whom

Lloyd deposited the cargo, for the reason that it was Lloyd own

act of giving Banylsa a “carta declaratoria’, amounting to a release

of Lloyd’s control over the cargo, that enabled Banylsa to obtain

possession from the Brasilian Port authorities without produc-

tion of the original bill of lading. If Lloyd had not issued the

“carta declaratoria”, Banylsa could not have obtained possession

of the cargo unless it obtained a court order.

7. Nor is there anything in Lloyd’s bill of lading, which is a

contract of adhesion, or in Brasilian law or the custom at the

Port, that excuses Lloyd for the misdelivery, when Lloyd itself

brought the misdelivery about by its own act.

8. Lloyd not only did not follow the laws, regulations or

customs of Brasil as to the release of cargo, but it also failed to

adhere to its own Service Manual. It not only failed to obtain

the original bill of lading, but it also failed to take any of the

diligent steps for its own protection when the original is not sub-

mitted, as in a case where the bill is lost has disappeared, such

as getting in touch with the shipper, publishing notices in a

newspaper, seeking a Court judgment, obtaining an instrument

from the consignee or its agent assuming responsibility, or ob-

taining a guaranty from a bank. Not having taken any of these

steps, it is unnecessary for the Court to pass judgment on the

legal consequences if it had.

9. Those Brasilian laws, provisions of the bill of lading, or

United States Court decisions that may relieve the carrier of

liability for cargo damage, shortages, physical loss or disap-

pearance, occurring while the goods are in the custody of the

Port authorities at the port of destination, are inapplicable to

the case at bar.

10. Any efforts by Allied to recover from Banylsa, the person

to whom the cargo was wrongfully delivered, or the delivery of

the original commercial invoice to Banylsa for the sole purpose

of enabling Banylsa to avoid a Brasilian customs penalty, at a

time when Allied was trying to recover two other shipments from

the Port authorities, did not constitute a waiver of Allied’s rights

RO

RO

A-8

to recover against Lloyd, but the sums actually received by Allied

from the Banylsa Court proceeding shall be applied in mitiga-

tion of damages.

1l. The $500 package limitation in the bill of lading was not

pleaded by Lloyd and was only raised two years after this suit

was instituted and is not a defense now available to Lloyd.

12. In any event, based on the terms of the bill of lading, clearly

setting forth the number of bags in each pallet, and the negotia-

tions between the parties, Allied’s commercial invoice and Lloyd's

carta declaratoria, and because of the long delay by Lloyd in

raising this defense, the parties intended that the package be each

bag of caprolactam, rather than each pallet.

13. Moreover, Allied declared the nature and value of the cargo

in the bill of lading, and there is no proof of any kind that Lloyd

offered a choice of rates in its tariff or otherwise for purposes

of the package limitation.

14. Ailied paid Lloyd the agreed freight charge for delivery

of the cargo, but Lloyd misdelivered the cargo in violation of

its contractual obligation to Allied, and accordingly, Allied is en-

titled to recover the sum of $266,756.92, less the sum of $30,424.60

recovered from the Banylsa proceeding or the net sum of

$236,332.32, plus interest from November 17, 1980, with Allied

to give Lloyd a credit in its judgment for interest received from

the Banylsa proceeding in the sum of $8,823.17, together with

costs and disbursements to be taxed by the clerk.**

15. Lloyd has failed to sustain its burden of proof on any of

its other affirmative defenses, and accordingly, all of Lioyd’s af-

firmative defenses are dismissed.

16. Submit judgment accordingly on notice."

/s/ R. Owen **

January 18, 1985

Dated: ferne28—10s4

** Handwritten insert by district court

A-9

APPENDIX B

81 Civ 5643(RO)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

ALLIED CHEMICAL INTERNATIONAL CORP.

Plaintiff,

VS.

COMPANHIA DE NAVEGACAO Lloyd Brasileiro,

Defendant.

JUDGMENT

NO. 82,0206

This cause came on to be heard on the consent of the parties

by the submission of the case to the Honorable Richard Owen

on stipulations as to facts, the deposition of a witness, memoranda

of law and an appendix, and the Court having decided that plain-

tiff is entitled to judgment herein in accordance with its findings

of fact and conclusions of law dated January 18, 1985, it is hereby

ORDERED, ADJUDGED, AND DECREED that plaintiff

ALLIED CHEMICAL INTERNATIONAL CORP., of 1411

Broadway, New York, New York recover from defendant COM-

PANHIA DE NAVEGACAO LLOYD BRASILEIRO, of 17 Bat-

tery Place, New York, New York the sum of $236,332.32 (after

giving defendant a credit of $30,424.60), plus $88,308.92 as pre-

judgment interest from November 17, 1980 (after giving defen-

dant a credit of $8,823.17), for a total of $324,641.24, plus in-

terest on such sum after judgment at the rate of 9.09 percent (% )

per annum from the date hereof, plus all costs and disbursements

as taxed by the Clerk of the Court.

/s/ R. Owen

US.D.].

Dated: New York, New York

January 20, 1985

THIS DOCUMENT WAS ENTERED

ON THE DOCKET ON FEBRUARY 5, 1985

| eee = |

A-10

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

+

No. 1125—August Term, 1984

(Argued May 8, 1985 Decided October 15, 1985)

Docket No. 85-7103

no

ALLIED CHEMICAL INTERNATIONAL CORP,

Plaintiff-Appellee,

—_Y , <=

COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO,

Defendant-Appellant.

Before:

MESKILL, KEARSE and WINTER,

Circuit Judges.

—a—

Appeal from a judgment of the United States District

Court for the Southern District of New York, Owen, J.,

finding Companhia de Navegacao Lloyd Brasileiro, an

Ocean carrier, liable to Allied Chemical International

Corporation, a shipper, for misdelivery. Concluding that

A-11

the Carriage of Goods by Sea Act package limitation, 46

U.S.C. app. § 1304(5) (Supp. I 1983), incorporated into

the bill of lading, did not reduce the carrier’s liability, the

court held that the shipper was entitled to recover the full

value of the cargo.

Affirmed.

7

RICHARD A. HAGEN, New York City (Francis

R. Matera, Crowell, Rouse, Varian,

Hagen & Matera, New York City, of

counsel), for Defendant-Appellant.

IRVING RONALD STORCH, Carle Place, New

York, for Plaintiff-Appellee.

+

MESKILL, Circuit Judge:

Companhia de Navegacao Lloyd Brasileiro (Lloyd), an

ocean carrier, appeals from a judgment of the United

States District Court for the Southern District of New

York, Owen, J., finding Lloyd liable to Allied Chemical

International Corporation (Allied), a shipper, for the

misdelivery of goods to the consignee, Banylsa Tecelagem

do Brasil S.A. (Banylsa). The carrier caused the goods to

be delivered without requiring Banylsa to produce the

original order bill of lading. Lloyd also challenges the

district court’s refusal to interpret the Carriage of Goods

by Sea Act (COGSA) package limitation, 46 U.S.C. app.

A-12

§ 1304(5) (Supp. I 1983), which was incorporated into the

bill of lading, to reduce Allied’s recovery. The court

awarded damages equal to the value of the cargo in

United States dollars minus an amount that Allied had

already recovered from Banylsa plus interest.

We affirm the judgment of the district court.

BACKGROUND

This case was decided without a trial. The parties

submitted to the district court two stipulations of fact; the

deposition of Pedro Calmon Filho, an expert on Brazilian

law; memoranda, one of which included an appendix;

and separate proposed findings of fact and conclusions of

law. Allied alleged federal jurisdiction on the basis of

admiralty or, alternatively, diversity of citizenship. The

pertinent, undisputed facts follow.

In September 1980, Allied, an exporter of chemical

products, received from Banyisa an order for a quantity

of caprolactam, a crystalline cyclic amide used in the

manufacture of nylon. The sale was to be in two lots of

6,000 bags on terms of sight drafts against documents

through Banco Bamerindus do Brasil S.A. of Sao Paulo,

Brazil (Brazilian bank). The sight drafts were in the

amount of the per lot invoice price, $266,756.92 C & F

Salvador, Brazil.

In October 1980, Allied delivered to Lloyd at the Port

of Norfolk, Virginia two lots of 150 double faced pallets,

each lot said to contain 6,000 bags of caprolactam to be

shipped to the Port of Salvador, Brazil. The cargo was

loaded onto Lloyd’s vessel ITAPURA. Lloyd issued clean

A-13

order bills of lading that described the cargo, listed Allied

as the shipper and showed that the goods were consigned

to the order of Banvlsa. Banylsa was also listed as the

notify party. Allied, through its bank, forwarded the

shipping documents—including the sight drafts, the origi-

nal bills of lading and the original commercial invoices—

to the Brazilian bank for handling and collection. Allied

specifically instructed the Brazilian bank to deliver the

documents only against payment of the sight drafts.

On or about November 12, 1980, Lloyd’s vessel arrived

at the Port of Salvador. In accordance with local custom

and usage, the carrier unloaded the caprolactam at a

warehouse under the control of the Administration of the

Port of Salvador (the port authority), an agency of the

Brazilian government. The caprolactam was undamaged.

Banylsa made payment on only one of the two sight

drafts and therefore received from the Brazilian bank

only one bill of lading. It is the bill of lading not received

and the lot to which it related that are the subject of this

dispute. Hereinafter, when we refer to the cargo or to the

bill of lading, we refer solely to the misdelivered goods

and the bill of lading that covered them.

On November 17, 1980, Banylsa through its agent

delivered to Lloyd’s agent in Salvador a letter explaining

simply that the original bill of lading had not been

received and requesting Lloyd to issue in accordance with

Brazilian import regulations a “carta declaratoria,” a

letter declaring that the freight had been paid at the port

of origin and that the Merchant Marine Renewal Tax had

been paid in Salvador.' That same day, Lloyd’s agent

I The body of the letter sent by Banylsa’s agent to Lloyd’s agent

provided as follows:

etieeeenincesinenmeeieaniaietiitiatia ei

A-14

issued the requested document.* The parties do not dis-

pute that to obtain the release of goods from the port

authority, a party would have to produce either the

original bill of lading or a carta declaratoria from the

carrier. Thus, by virtue of the carta declaratoria, Banylsa

was able to obtain possession of the caprolactam al-

though it had not paid for the goods and it was not in

possession of the bill of lading.

Allied first became aware that the sight draft had not

been paid in January 1981. It was not until several weeks

later, however, when Banylsa complained about the qual-

ity of the caprolactam, that Allied discovered that Ban-

ylsa had, notwithstanding nonpayment, obtained

possession of the caprolactam. After an investigation that

With reference to Bill of Lading No. 2—Norfolk/Salvador of

steamship “Itapura” V. 80148.2 arrived at this port on November

1i, 1980, due to the fact that the Original Bill of Lading up to to

[sic] the present date has not been received and in compliance with

our client (Banylsa Tecelagem do Brasil S.A.)’s request, the said Bill

of Lading being consigned to the order of the latter, for the purpose

of [customs clearance regulations], we beg hereby your being kind

enough to supply a “carta declaratoria” that the freight has been

paid at the port of origin and that the T.R.M.M. payment was made

here.

J. App. at 27.

: The body of the carta declaratoria issued by Lloyd’s agent stated as

follows:

Vessel “ITAPURA” arrived on 11/11/1980—150 pailets, marked

“BANYLSA-ARATU-VIA SALVADOR BA 473 FIB_ 8766

WEIGHT 158,876 kgs. containing 6,000 bags of caprolactam con-

signed to Banylsa Tecelagem do Brasil S.A.”

For the purpose of [customs clearance regulations], we state that we

do not object to the customs clearance of the cargo referred to

above, since the freight and the Merchant Marine Renewal Tax have

already been paid.

J. App. at 28.

A-15

included an on-site inspection of the goods at Banylsa’s

facility, Allied rejected Banylsa’s quality complaint.

In early April 1981, Banylsa filed a voluntary receiver-

ship proceeding in the Civil Court of the District of

Salvador, Brazil. On May 8, 1981, Allied made a demand

on Lloyd for losses incurred as a result of the carrier’s

failure to request proper documentation before authoriz-

ing the release of the caprolactam. J. App. at 160. The

demand letter stated that Allied had been advised by

Lloyd that the goods were released on Banylsa’s promise

to deliver the original bill of lading within 90 days. Jd.

Negotiations between the shipper and the carrier proved

unavailing and Allied filed this suit in September 1981.

In May 1981, Allied filed a claim against Banylsa in the

receivership proceeding. In September 1983, Banylsa de-

posited with the Salvador court 20,414,907 cruzeiros to

pay Allied’s share of the receivership distribution. The

amount was equal to Allied’s claim in United States

dollars at the exchange rate of 76.53 cruzeiros to the

dollar, the rate in effect when Banylsa filed its petition.

Allied argued that it was entitled to payment at the rate in

effect on the date of Banylsa’s deposit, 671 cruzeiros to

the dollar. On advice of counsel, Allied abandoned its

appeal and accepted a sum in cruzeiros equal to less than

$40,000 as of September 1983.

In its complaint against Lloyd, Allied charged that the

ocean carrier had breached its contract of carriage with

Allied. It also claimed that Lloyd was liable for conver-

sion of the cargo because Lloyd authorized the delivery of

the cargo to a party not entitled to possession. The

district judge decided in Allied’s favor and adopted

Allied’s proposed findings of fact and conclusions of law

A-16

virtually verbatim. The findings and conclusions cited no

cases and contained not a single reference to the brief but

adequate record.

On appeal, Lloyd preliminarily argues that because the

district court decided this case on submission and because

the court simply adopted the prevailing party’s proposed

findings verbatim, our review should not be limited by the

clearly erroneous standard but should be de novo. On the

issue of liability, Lloyd raises four challenges. First, it

claims that it fully discharged its responsibility under the

contract of carriage when it delivered the cargo as dic-

tated by local custom and usage to the government

controlled port authority. Second, Lloyd claims that it

cannot be liable for conversion either because that would

be conizary to Brazilian law or because the rights and

liabilities under COGSA, 46 U.S.C. app. § 1300 et seq.

(Supp. I 1983), are exclusive. Third and fourth, Lloyd

raises related arguments, payment and waiver, based on

Allied’s claim and partial recovery against Banylsa in the

receivership proceeding. Finally, Lloyd contends that even

if it is liable, the COGSA package limitation, incorpo-

rated into the bill of lading, should reduce Allied’s

recovery to $500 per pallet or $75,000. For the reasons

that follow, we reject Lloyd’s arguments.

DISCUSSION

A. The Scope of Review

The Supreme Court recently and unequivocally rejected

the standard of review that Lloyd urges us to employ. In

Anderson v. City of Bessemer City, 53 U.S.L.W. 4314,

4315 (U.S. Mar. 19, 1985), the Court reversed a Fourth

Circuit decision on the ground that the appeals court

A-17

“misapprehended and misapplied the clearly-erroneous

standard.” The circuit court had reasoned that an essen-

tially de novo review of the record was justified because

the district court had adopted, albeit with some variation,

the prevailing party’s proposed findings of facts. The

Supreme Court adamantly disagreed. Emphasizing that

“review of factual findings under the clearly-erroneous

standard—with its deference to the trier of fact—is the

rule, not the exception,” id. at 4317, the Court explained

that neither findings based on documentary evidence and

thus largely devoid of credibility considerations, id., nor

findings adopted verbatim from a party’s proposals may

be subjected to a more stringent standard of review. Jd. at

4316.

We certainly do not wish to in any way condone the

verbatim adoption of proposed findings of fact. While

recognizing the time pressures on district court judges, we

have expressed our displeasure with this procedure in the

past. E.g., International Controls Corp. v. Vesco, 490

F.2a 1334, 1341 n.6 (2d Cir.), cert. denied, 417 U.S. 932

(1974). 'n this we are not alone. £.g., Bessemer City, 53

U.S.L.‘v. at 4316; United States v. Marine Bancorpora-

tion, 418 U.S. 602, 615 n.13 (1974); United States v. El

Paso Natural Gas Co., 376 U.S. 651, 656-57 (1964).

Nonetheless, we are bound to uphold the findings of the

court below unless, on the basis of the entire record, we

are convinced that they are clearly erroneous. We are not

persuaded that the findings below fall short of this

familiar benchmark. We therefore leave them undis-

turbed.

A-18

B. Jurisdiction and Governing Law

This suit involves claims by a shipper against an ocean

Carrier arising from an alleged breach of a contract of

carriage. Thus it lies within our admiralty jurisdiction.

Leather’s Best, Inc. v. §.S. Mormaclynx, 451 F.2d 800,

807 (2d Cir. 1971); David Crystal, Inc. v. Cunard Steam-

Ship Co., 339 F.2d 295, 298 (2d Cir. 1964), cert. denied,

380 U.S. 976 (1965); see 28 U.S.C. § 1333(1) (1982).

Consequently, this action is governed by federal maritime

law.

C. Liability

The liability question in this case inextricably involves

the critical importance of the documentary transaction in

overseas trade. See generally G. Gilmore & C. Black, The

Law of Admiralty 110-12 (2d ed. 1975). The documentary

sale enables the distant seller to protect himself from an

insolvent or fraudulent foreign buyer by ensuring that the

buyer ordinarily cannot take possession of the goods until

he has paid for them. It accomplishes this rather simply.

The selier tenders shipping documents, including a nego-

tiable bill of lading, rather than goods to the buyer. By

paying for the documents, the buyer gets possession of

the original bill of lading. Possession of the bili entitles

him to possession of the goods; it represents the goods

and conveys title to them. Most likely, the bill will be an

order bill of lading, made to the order of or endorsed to

the buyer. See id. at 96-97. Absent a valid agreement to

the contrary, the carrier, the issuer of the bill of lading, is

responsible for releasing the cargo only to the party who

presents the original bill of lading. “Delivery to the

consignee named in the bill of lading does not suffice to

discharge the [carrier] where the consignee does not hold

A-19

the bill of lading.” 2 T.G. Carver, Carriage by Sea 4 1593

(R. Colinvaux 13th ed. 1982). If the carrier delivers the

goods to one other than the authorized holder of the bill

of lading, the carrier is liable for misdelivery. David

Crystal, 339 F.2d at 300; Morse Electro Products Corp. v.

S.S. Great Peace, 437 F.Supp. 474, 482 (D.D.J. 1977);

The Cabo Villano, 14 F.2d 978 (E.D.N.Y. 1926), modified

as to damages, 18 F.2d 220 (2d Cir. 1927). The ocean

carrier’s liability arises from rights of property, 1 T.G.

Carver, supra, at ¢ 120, and “[dJelivery to a person not

entitled to the goods without production of the bill of

lading is prima facie a conversion of the goods and a

breach of contract.” 2 id. at ¢ 1593 (footnotes omitted).

The dispute herein involved precisely the consequence

that the documentary transaction is intended to avert:

Banylsa, which turned out to be an insolvent buyer, was

given possession of goods for which it had not paid. This

result would have been avoided had Lloyd, in keeping

with its obligation, demanded the production of the bill

of lading before permitting Banylsa to claim the capro-

lactam.

Before we can hold Lloyd liable for causing Allied’s

loss, however, we must examine the respective rights and

obligations of the parties at the time of the apparent

misdelivery to determine whether Lloyd was somehow

relieved of its duty to take up the bill of lading. Although

the cargo had been discharged from the ship and, thus,

the actual carriage completed when the apparent misde-

livery occurred, the relationship between Allied and

Lloyd was still governed by the contract of carriage. See

Leather’s Best, 451 F.2d at 807. Our analysis begins with

the bill of lading, the document evidencing the contract of

carriage. David Crystal, 339 F.2d at 297. We bear in mind

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that bills of lading are contracts of adhesion and, as such,

are strictly construed against the carrier. The Caledonia,

157 U.S. 124, 137 (1895); West India Industries v. Tradex,

664 F.2d 946, 951 n.9 (Sth Cir. 1981); Mitsui & Co. v.

American Export Lines, 636 F.2u 807, 822-23 (2d Cir.

1981); E. Gerli & Co. v. Cunard S.S. Co., 48 F.2d 115,

116 (2d Cir. 1931) (L. Hand, J.).

Lloyd contends that clauses | and i2 of the bill of

lading absolve it from liability. Clause | provides that

“(t]he Carrier shall not be liable in any capacity what-

soever for any delay, non-delivery or mis-delivery, or loss

of or damage to the goods occurring while the goods are

not in the actual custody of the Carrier.” J. App. at 32.

Clause 12 provides that “{t]he responsibility of the Car-

rier, in any capacity, shall altogether cease and the goods

shall be considered tc be delivered and at their own risk

and expense in every respect when taken into the custody

of customs or other authorities.” J. App. at 34.

Lloyd’s reliance on these clauses is unavailing because

they are null and void. In David Crystal, 339 F.2d at 297,

we held clauses similar to 1 and 12 to be invalid under the

Harter Act’s proscriptions against certain limitations on

carriers’ liability. See 46 U.S.C. app. § 190 (Supp. I

1983). Although the enactment of COGSA sharply cur-

tailed the applicability of the Harter Act, 46 U.S.C. app.

§ 190 et seq. (Supp. I 1983), to ocean bills of lading and

matters of ocean carriers’ liability, absent a valid agree-

ment to the contrary, the Harter Act still governs prior to

loading and after discharge of cargo until proper delivery

is made.’ Caterpillar Overseas, S.A. v. S.S. Expeditor,

3 Where goods are shipped under an order bill of lading, it would

seem logical to include in any definition of proper delivery the

fulfillment of the carrier’s duty to ensure, absent specific agreement to

the contrary, that the cargo is released to the holder of the properly

endorsed bill.

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318 F.2d 720, 722-23 (2d Cir.), cert. denied, 375 U.S. 942

(1963); G. Gilmore & C. Black, supra, at 147-48. While a

carrier and a shipper may specify by agreement what the

responsibility of the carrier should be after the goods are

discharged, the carrier may not simply disclaim all post-

discharge responsibility. Leather’s Best, 451 F.2d at 807

n.5.

Insofar as Lloyd relies on these clauses as agreements

not to eliminate but merely to reduce its liability, which

would be permissible under the Harter Act, its arguments

are unavailing because the district court found that the

parties did not intend the clauses to have that effect. It is

undisputed that the parties agreed that COGSA, which by

its terms does not apply either before loading or after

discharge of cargo, 46 U.S.C. app. § 1311, was to govern

before the goods were loaded and after they were dis-

charged from the ship. This was a permissible agreement,

see Colgate Palmolive Co. v. S/S Dart Canada, 724 F.2d

313, 315 (2d Cir. 1983), cert. denied, 52 U.S.L.W. 3791

(U.S. Apr. 30, 1984), and made COGSA “apply [not] of

its own force as a statute, but merely as a contractual

term in the bill of lading.”* Jd. Because COGSA § 1303(8)

provides that the parties may not, except as otherwise

provided by COGSA (see our discussion below), agree

even to lessen the carrier’s liability for loss arising from

its own negligence or fault, and COGSA was incorporated

into the bill of lading, the court’s finding that clauses 1

and 12 of the bill of lading did not lessen Lloyd’s liability

for its negiigent misdelivery is not clearly erroneous.

4 We reject Lloyd’s argument that COGSA’s remedies are exclusive

under these circumstances. The wholesale incorporation into the bill of

lading of COGSA’s terms does not suffice to extinguish the shipper’s

right of action for misdelivery. We are particularly loath to liberally

construe general language in a contract of adhesion to the obvious

advantage of the drafting party.

A-22

While it is clear, then, that Lloyd retained some respon-

sibilities after discharge, the bill of lading did not specify

what they might be. Therefore, “the law steps in to fill

the lacuna” and provides that when Lloyd discharged the

cargo, it assumed the status of a bailee. David Crystal,

339 F.2d at 298; Leather’s Best, 451 F.2d at 811-12. The

transfer of the cargo to the port authority, without more,

did not alter this status; thus Lloyd remained presump-

tively responsible for the proper delivery of the goods.

Leather’s Best, 451 F.2d at 812; David Crystal, 339 F.2d

at 298. We have previously articulated the applicable

standard of responsibility under admiralty law: “a bailee

is absolutely liable for misdelivering cargo, unless his

mistake as to the person entitled to receive the goods was

induced by the bailor” or the contract of carriage

otherwise reduced or eliminated his liability. David Crys-

tal, 339 F.2d at 298. There is no suggestion in the record

that Allied induced the misdelivery. Allied was not even

aware until well after the event that Banylsa had acquired

possession of the goods. We have already noted that the

parties could not lawfully agree to eliminate Lloyd’s

liability entirely and have upheld the district court’s

finding that they did not intend that clauses | and 12

would lessen Lloyd’s liability for negligent misdelivery.

The remaining question is whether the parties intended,

by their incorporation of COGSA, that any provision of

COGSA itself would lessen Lloyd’s liability for negligent

misdelivery. One important consequence of the enactment

of COGSA was the elimination of absolute liability of

carriers. Under COGSA, carriers can be liable for loss of

or damage to cargo only on the basis of fault. G. Gilmore

& C. Black, supra, at 150. After describing a number of

specific duties, the statute provides somewhat generally,

A-23

in language that seems relevant to this case, that the

carrier shall not be liable for losses resulting from

[aJny. . . Cause arising without the actual fault and

privity of the carrier and without the fault or neglect

of the agents or servants of the carrier, but the

burden of proof shall be on the person claiming the

benefit of this exception to show that neither the

actual fault or privity of the carrier nor the fault or

neglect of the agents or servants of the carrier con-

tributed to the loss or damage.

46 U.S.C. app. § 1304(2)(q).

Unfortunately for Lloyd, however, this provision seems

to support rather than undermine the imposition of liabil-

ity for the misdelivery. COGSA specifically left unaf-

fected the applicability of the Pomerene Bills of Lading

Act, 49 U.S.C. app. §°81 et seq. (1982), to ocean bills of

lading. Pursuant to the Pomerene Act, a carrier operating

under an order bill of lading is justified in delivering the

goods to one lawfully entitled to them or to one in

possession of an order bill “by the terms of which the

goods are deliverable to his order; or which has been

indorsed to him, or in blank by the consignee.” 49 U.S.C.

app. § 89. When Lloyd caused the goods to be released to

Banylsa, by means of the carta declaratoria, the bill of

lading was still in the custody of the Brazilian bank

because payment had not been made on the sight draft.

Not having paid on the draft, Banylsa was neither law-

fully entitled to the goods nor in possession of the bill.

Delivery to Banylsa, therefore, was not justified. In light

of its unjustified authorization of the delivery, Lloyd

could not possibly show, as required by section 1304(2)(q)

of COGSA, that it did not by its actual fault contribute to

Allied’s loss.

A-24

Having found nothing in the contract of carriage that

eliminates or reduces the carrier’s duty to deliver the

cargo only to a party in possession of the bill of lading

paid to his order or properly endorsed, we conclude that

the district court correctly determined that Lloyd should

be liable for the loss that resulted from its misdelivery. See

49 U.S.C. app. § 90; see also Pere Marquette Ry. v. J.F-

French & Co., 254 U.S. 538, 546 (1921); Alderman

Brothers Co. v. New York, N.H. & H.R.R., 102 Conn.

461, 465 (1925).

The fact that the government controlled port authority,

rather than Lloyd itself, physically delivered the goods to

Banylsa does not in any way relieve Lloyd from liability.

As previously noted, it is undisputed that unless Banylsa

presented to the port authority either the original bill of

lading or a carta declaratoria issued by the carrier, the

port authority would not have permitted Banylsa to take

the cargo. Because Banylsa did not pay the sight draft

and take possession of the bill of lading, Lloyd retained

control over the goods. Thus, Lioyd acted at its peril

when it authorized the release of the goods to Banylsa

without demanding production of the bill. The Cabo

Villano, 14 F.2d at 979-81.

It is surely obvious at this point that Lloyd’s Brazilian

law arguments are inapposite. The rights and obligations

of the parties herein are rooted in United States law. Both

COGSA, 46 U.S.C. app. § 1300, and the Harter Act, 46

U.S.C. app. § 190, cover transactions involving carriage

from ports in the United States to foreign ports. More-

over, Lloyd’s own bill of lading provided that it should

“be construed and the rights of the parties thereunder

determined according to the law of the United States.”

J. App. at 34.

A-25

Finally, Allied’s claim and partial recovery against

Banylsa in the receivership proceeding did not extinguish

Allied’s right of action against Lloyd. By misdelivering

the caprolactam to Banylsa, Lloyd was responsible for

Allied’s loss. Allied is entitled to be compensated for the

full amount of its loss in United States dollars. Of course,

the amount that Allied has already recovered from Ban-

ylsa must be considered in mitigation of the damages that

Lloyd must pay.°

D. Damages

Citing both COGSA and clause 17 of the bill of lading,

Lioyd claims that its liability is limited to $500 per pallet

or $75,000 ($500 x i150 pallets). Section 1304(5) of

COGSA, which Lloyd argues is applicable through the

express extension of COGSA contained in the bill of

lading, provides in pertinent part that the carrier shall not

be liable for loss of or damage to cargo in an amount

greater than $500 per package “unless the nature and

value of [the] 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.” Clause 17 of the bill of lading provides in

relevant part that the carrier’s liability for damages shall

be identically limited “unless the nature and value of [the]

goods have been declared by the shipper before shipment

and inserted in the Bill of Lading and extra freight paid.”

J. App. at 34. The parties apparently agree that the term

“package” has the same meaning in COGSA and clause

5 We express no opinion at this time as to whether the entire prior

recovery would be similarly considered to mitigate the award against a

carrier who can successfully claim a statutory or contractual limitation

on damages.

A-26

17. We therefore need not on that ground distinguish

between the COGSA and the clause 17 limitations.

Allied maintains that the district court properly refused

to limit damages because Lloyd failed to plead the limita-

tion as a special defense and never moved to amend its

answer to include the defense. Our Circuit has never

addressed whether a partial limitation is waived if not

pleaded as a special defense. We need not decide it here

because Allied also argues that the district court was

correct because the pallets should not be considered to be

the packages. Therefore, Allied claims, the limitation is

irrelevant. We agree.

The question of what constitutes a COGSA package, a

question we frequently confront, is largely and in the first

instance a matter of contract interpretation. Allied

International American Eagle Trading Corp. v. S.S.

“Yang Ming,” 672 F.2d 1055, 1057, 1061 (2d Cir. 1982);

Standard Electrica, S.A. v. Hamburg Sudamerikanische

Dampfschifffahrts-Geselischaft, 375 F.2d 943, 946 (2d

Cir.), cert. denied, 389 U.S. 831 (1967). The most obvious

place for us to begin our search for the intent of the

contracting parties is, of course, the bill of lading. Bin-

laden BSB Landscaping v. M.V. “Nedlloyd Rotterdam,”

759 F.2d 1006, 1012 (2d Cir. 1985). The bill of lading

herein contained six columns under the usual general

heading, “Particulars Furnished by Shipper.” Only two of

those columns and only a few of the items appearing in

those columns are important to our decision. The first

column, headed “No. of Pkgs.,” contained the entry

“150.” Immediately to the right of that number, squarely

in the column labeled “Description of Packages and

Goods,” was entered “Double Faced Pallets Said to

Contain: 6000 Bags Caprolactum [sic].” Just above this

|

A-27

entry, im the sauic column, it stated “Rate: $110.00 LT

Value: $1657.00 LT.” The abbreviation LT stands for long

ton, the equivalent of 2,240 pounds.

We have long accepted that a pallet may, under appro-

priate circumstances, be deemed to be a package. Yang

Ming, 672 F.2d at 1062; Standard Electrica, 375 F.2d at

946. This may be so even where the containers on the

pallet themselves constitute ordinary commercial units.

Moreover, in Yang Ming we ruied that where, as here, the

shipper gives written notice in the bill of the number of

containers on the pallets, the carrier is not necessarily

bound to that number if the bill elsewhere lists the

number of pallets as the number of packages. Yang Ming,

672 F.2d at 1061. Thus the bill of lading could support

either the shipper’s or the carrier’s position; it is not

determinative. We do note, however, that in Yang Ming,

the number of pallets was declared several times in the bill

of lading to be the number of packages. Jd. at 1063. We

therefore were reasonably certain that the parties in-

tended the pallets to constitute packages for limitations

purposes. Here, however, the number of pallets was listed

but once—as was the number of bags. Looking only at

the numbers, we would conclude that the parties’ intent is

ambiguous.

But the bill contains another and potentially more

significant entry—ihe freight charge—which we believe

indicates that the parties did not intend the pallets to be

packages. Lloyd contends that it would have charged a

higher rate if it was potentially liable for the full value of

the goods. Indeed, clause 17 explicitly and COGSA

implicitly “cast upon the shipper the burden of declaring

the nature and value of the goods, and paying a higher

A-28

tariff, if necessary, [in order to] impose a higher liability

upon the carrier.” Standard Electrica, 375 F.2d at 945.

The excerpts cited from the bill of lading show that

Allied adequately met its burden to declare the nature and

value of the goods. And, despite Lloyd’s attempts to

introduce new evidence at this stage, we are limited to the

record, and the record clearly shows that the freight rate

was based on the value of the goods. Caprolactam valued

at less than $2,000 per long ton was charged a rate of

$110 per long ton. J. App. at 165. More valuable capro-

lactam was charged a rate of $131.50 per long ton. /d.

Thus, under the applicable tariff, Allied had no option to

pay a higher rate. Having paid a freight charge based on

the value of the goods, Allied could reasonably have

expected to recover their value if they were lost. Similarly,

having levied a rate keyed to value, Lloyd could reasona-

bly have expected to be liable for that value. It would be

illogical to ascribe a contrary intent to the parties.

As a final point, we reiterate that ocean bills of lading

are contracts of adhesion. Ambiguities, therefore, must

be resolved against the issuing carrier. Mitsui & Co. v.

American Export Lines, 636 F.2d at 822-23. We conclude

that the district court’s finding that the parties did not

intend the pallets to be packages was not clearly erro-

neous. Therefore, we affirm the district court’s award of

damages.

CONCLUSION

The judgment of the district court is affirmed. Appel-

lant is liable for costs.

A-29 |

APPENDIX C

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

At a stated term of the United States Court of Appeals, in and

for the Second Circuit, held at the United States Courthouse,

in the City of New York, on the 20th day of November one thou-

sand nine hundred and eighty-five.

Docket No. 85-7103

ALLIED CHEMICAL INTERNATIONAL CORP.,

Plaintiff-Appellee,

v.

COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO,

Defendant-Appellant.

A petition for rehearing containing a suggestion that the ac-

tion be reheard in banc having been filed herein by counsel for

the Defendant-Appellant, Companhia De Navegacao Lloyd

Brasileiro

Upon consideration by the panel that heard the appeal, it is

Ordered that said petition for rehearing is DENIED.

It is further noted that the suggestion for rehearing in banc

has been transmitted to the judges of the court in regular active

service and to any other judge that heard the appeal and that

no such judge has requested that a vote be taken thereon.

/s/ Elaine B. Goldsmith

Elaine B. Goldsmith

Clerk