Opposition Brief — Companhia de Navegacao Lloyd Brasileiro v. Allied Chemical International Corp.

Supreme Cours, U.S.

FILLED

“" WAR 12 1986

7.

cad JOSEPH F. SPANIOL, JR.

No. 85-1346 CLERK

IN THE

Supreme Court of the United States

Octoser Term, 1985

COMPANHIA DE NAVEGACAO

LLOYD BRASILEIRO,

Petitioner,

vs.

ALLIED CHEMICAL INTERNATIONAL CORP.,

Respondent.

BRIEF IN OPPOSITION TO

PETITION FOR CERTIORARI

IRVING RONALD STORCH

Counsel for Respondent

One Old Country Road

Carle Place, New York 11514

(516) 294-3160

Questions Presented

1. Whether an ocean carrier is liable for misdelivery of cargo

when it authorized the release of cargo by foreign port authorities

to a consignee without requiring production of the original order

bill of lading.

2. Whether bags of caprolactam or pallets should be deemed

packages for the purpose of the $500 per package limitation of

“Cogsa” [46 U.S.C. 1304(5)].

TABLE OF CONTENTS

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Reasons for Denying Certiorari ................

1. Petitioner has failed to show any conflict

between the Circuits as to the carrier’s

obligation to ensure that the proper party

receives goods under an order bill of lading .

2. The Court of Appeals correctly upheld the

District Court’s finding that the parties did

not intend the pallets to be packages ........

3. The Courts below correctly applied United

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TABLE OF AUTHORITIES

CASES:

Allied International American Eagle Trading

Corp. v. S.S. “Yang Ming”, 672 F.2d 1055 (2d

Cs Sess < «55554 vedas cere eee ceo cose sees

American & Far Eastern Trading Co. v. Sea-

Land Services, Inc., 493 F. Supp. 125, aff. 678

FO GOD Ce Gil TO ives eens

Anderson v. City of Bessemer City, 105 S. Ct.

1904, 04 L..0d. GAB (OGD ws os ce icenwavess

Binladen BSB Landscaping v. M.V. Nedlloyd

Rotterdam, 759 F.2d 1006 (2d Cir. 1985) .....

Constable v. National Steamship Co., 154 U.S. 51

4 Reet Wrran ere Se cererhre rh ien a

David Crystal, Inc. v. Cunard Steamship Co..,

339 F.2d 295 (2d Cir. 1964), cert. den. 380

ee ee I i cerca ek eee eerie

Farrell Lines v. Highlands Insurance Co., 696

fe Ff oe ere eae

Mitsui & Co. Ltd. et al v. American Export

Lines, Inc., 636 F.2d 807 (2d Cir. 1981) ......

Morse Electro Products Co. v. S.S. Great Peace,

437 F. Supp. 474 (D.C.N.J. 1977)............

The Cabo Villano, 14 F.2d 978, mod. 18 F.2d

et Ce es OED ih ore ee eee ei eekuess

Page

iv

STATUTES:

The Carriage of Goods By Sea Act (“Cogsa”), 46

USC S00... 5s

®. 6.8: os 4. 5 2 2

The Pomerene Act, 49 U.S.C. 81 et seq.........

CONVENTION:

1968 Brussels Protocol to Amend the International

Convention for the Unification of Certain Rules

of Law Relating to Bills of Lading

Page

i, 3

No. 85-1346

IN THE

Supreme Court of the United States

OcroBer TERM, 1985

COMPANHIA DE NAVEGACAO

LLOYD BRASILEIRO,

Petitioner,

vs.

ALLIED CHEMICAL INTERNATIONAL CORP.,

Respondent.

BRIEF IN OPPOSITION TO

PETITION FOR CERTIORARI

STATEMENT OF THE CASE

Respondent", respectfully submits this Statement of the Case

only to the extent necessary to correct inaccuracies and omissions

in petitioner’s statement.

Respondent, a shipper, instituted suit to recover money dam-

ages against petitioner, an ocean carrier, for breach of a contract

* Respondent Allied Chemical International Corp. was a wholly owned sub-

sidiary of Allied Corporation. After judgment was entered in the District Court

and while the appeal was pending in the Court of Appeals, Allied Corporation

merged with the Signal Corp. and is now known as Allied-Signal Corp.

of carriage of goods or alternatively for conversion, both found-

ed on a misdelivery of goods shipped from the United States by

respondent on petitioner's vessel to a Brazilian consignee. The

goods were sold on terms of sight draft against documents, in-

cluding the original order bill of lading, forwarded by respon-

dent to a local Brazilian bank for handling and collection. The

documents were only to be delivered against payment of the sight

draft.

Respondent contended that petitioner improperly caused the

goods to be delivered to the consignee without requiring produc-

tion of the original order bill of lading, as is required in overseas

trade, thus enabling the consignee, who later became insolvent,

to obtain possession of the goods without making payment

therefor.

Petitioner, on the other hand, contended that it made a pro-

per delivery of the goods under its contract of carriage with

respondent when it made physical delivery to the Brazilian port

authority charged with the responsbility for receiving goods from

ocean carriers, and that it was the responsibility of the port

authority to obtain the original bill of lading as prerequisite for

giving possession to the consignee. Thus, petitioner argued, it was

not liable for respondent's loss.

The Courts below both rejected petitioner’s argument on the

basis of undisputed evidence, not mentioned in the petition, that

were it not for the issuance of a document called a “carta

declaratoria” (in English “a letter of declaration”) by petitioner's

agent, the port authority would not have permitted the consignee

to take possession of the goods (A-7, par. 6) (A-14, A-24)*. Under

Brazilian import regulations, the carta declaratoria was an alter-

native to the bill of lading as an essential import document. Thus,

by issuing the carta declaratoria to the consignee, the petitioner

authorized the physical delivery of the goods by the port authority

to the consignee without requiring the consignee to produce the

original bili of lading.

* Reference is to petitioner's Appendix.

It is therefore inaccurate for petitioner to say in its Statement

of the Case (p. 3) that respondent contended that the letter was

improperly used by the consignee to obtain possession of the ship-

ment from the port authority without surrender of the bill of

lading, when, the very purpose of the letter, or carta declaratoria,

was to be a substitute for the bill of lading, as the record clearly

showed. However, by issuing the carta declaratoria, and not re-

quiring the bill, the petitioner acted at its peril. It was no longer

relying on documents, but rather on the reputation and honesty,

albeit misplaced, of the consignee’s agent.

The remaining question raised below and in the petition in-

volves the unpleaded partial defense of a $500 package limita-

tion provided in petitioner’s long-form bill of lading which in-

corporated the provisions of the Carriage of Goods by Sea Act

(“Cogsa”), 46 U.S.C. §1304(5)*. Petitioner claims that the pallet

was a package for the purpose of limiting respondent’s recovery

herein.

The District Court, however, found on the evidence presented

that the parties intended each bag of caprolactam to be a package,

rather than each pallet (A-8, par. 12). The Court further found

that respondent declared the nature and value of the cargo in

the bill of lading, and that there was no proof that petitioner

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

of the package limitation (A-8, par. 13). Among the District

Court’s specific findings on this issue was that “Neither Lloyd's

tariff nor its bill of lading provide for any additional freight in

the event of a declaration of value in excess of $500 per package.”

(A-6, par. 21).

And yet, in its brief to the Court of Appeals, petitioner at-

tempted to introduce new evidence to show that it offered a choice

of rates to the shipper, but the Court of Appeals, alluding to that

* The Court of Appeals bypassed the question of whether the failure to plead

the limitation as a partial defense constituted a waiver as they agreed with

respondent's contention that the pallet should not be considered to be the package

and that the limitation was irrelevant.

attempt by petitioner, stated that they were limited to the record

and sustained the District Court’s finding that respondent had

no option to pay a higher rate under the applicable tariff (A-28).

Petitioner here again seeks to introduce ulew evidence on the

same issue when it states on Page 9 of the petition, Point 3, that

an ad valorum freight bill of lading usually calls for additional

freight if the shipper desires to be covered for a value in excess

of $500 per package. This attempt by petitioner to inject new

evidence into this case should once again be rejected.

The Court of Appeals, in ruling that the question of what con-

stitutes a Cogsa package was in the first instance a matter of con-

tract interpretation and ultimately a question of the parties’ in-

tentions, unanimously concluded that the District Court’s fin-

dings as to the parties’ intentions were not clearly erroneous and

upheld its decision rejecting this partial defense.

Another point inaccurately stated by petitioner is that the

Court of Appeals was critical of the District Court’s opinion (sic),

giving the impression that such criticism was on the merits. In

fact, the criticism was only directed to the District Court’s adop-

tion, almost verbatim, of the respondent's findings of fact and

conclusions of law and the Court of Appeals actually affirmed

the District Court’s decision in every respect. Furthermore, on

a petition for rehearing and suggestion of a hearing in banc, not

one Court of Appeals Judge requested that a vote be taken thereon

(A-29).

Reasons For Denying Certiorari

1. Petitioner has failed to show any conflict between the Cir-

cuits as to the carrier’s obligation to ensure that the proper par-

ty receives goods under an order bill of lading.

Petitioner contends that the decision of the Second Circuit runs

counter to a line of decisions, including one of this Court, Con-

stable v. National Steamship Co., 154 U.S. 51, 63, holding in

general terms that a carrier’s responsibility ceases after delivery

of cargo is made according to the custom and usage of the port,

in this case, to a government port authority charged with the

duty to receive cargo and to physically distribute it to the

consignee.

These cases were distinguished in the Courts below from the

case at bar because they all involved either cargo damage, short-

ages or physical loss or disappearance occurring while the goods

were in the custody of the port authorities. Not one case involv-

ed the failure to produce an original bill of lading as required

by the Pomerene Act, 49 U.S.C. 81, et seq., or the carrier’s in-

volvement in such failure. Although the District Court referred

to the cited cases as being inapplicable (A-7, par. 9), the Court

of Appeals apparently did not think it worthy of comment, not-

withstanding that petitioner cited the Second Circuit’s recent deci-

sion in Farrell Lines v. Highlands Insurance Co., 696 F. 2d 28

(2d Cir. 1982) in its brief before that Court, as well as in its peti-

tion for rehearing.

More precisely, on the question of whether this Court should

grant certiorari to resolve a conflict between Circuits, the peti-

tioner has not cited a single case in another Circuit holding that

an ocean cari:er is not liable to a shipper when it does not re-

quire production of the original bill of lading as a condition for

the release of cargo, or holding that a carrier is not liable when

it issues a document to a foreign port authority which has the

effect of releasing cargo without requiring surrender of the

original bill of lading.

The single case which was the most in point and relied on by

the Second Circuit is not mentioned or distinguished by the peti-

tioner, The Cabo Villano, 14 F. 2d 978, mod. 18 F. 2d 220 (2d

Cir. 1927). The Second Circuit there said that the defense of

delivery in the usual manner to the Spanish Government did not

relieve the carrier of liability because the Spanish Government

made the ultimate delivery on the order of the carrier’s agent,

who relied on the fact that the person to whom the goods were

released was a reliable and well-known person. There was no

proof in that case that the carrier’s agent was compelled under

the laws, requirements or custom of the port to make the order

for delivery as it did, nor was there proof in the instant case that

petitioner’s agent was compelled under the laws, requirements

or customs of the port of Salvador to issue the carta declaratoria

to the consignee’s agent.

The critical factor in The Cabo Villano case and in the in-

stant case is that the cargo was within the control of the carrier

or its agents and that the misdelivery came about as a result of

the carrier’s voluntary act. See Morse Electro Products Co. v. S.S.

Great Peace, 437 F. Supp. 474, 482 (D.C.N.J. 1977).

Petitioner further argues that the Court of Appeals relied er-

roneously on the case of David Crystal, Inc. v. Cunard Steam-

ship Co., 339 F.2d 295 (2d Cir. 1964), cert. den. 380 U.S. 976

(1965) because in that case the cargo was discharged into the

hands of the carrier’s independent stevedore whereas in the ins-

tant case, the goods had been delivered to a government agency.

Once it is determined that an ocean carrier has a continuing

responsibility, as carrier or bailee, to see that the proper person

receives the goods and the carrier has some control over the

disposition of the goods, it should make no difference who has

physical possession of the goods. However, even on this point,

petitioner has failed to cite a single case in conflict with the Se-

cond Circuit that makes a distinction between delivery to an in-

dependent stevedore as against delivery to a government agency.

Petitioner attempts to show a conflict between the Second and

Fifth Circuits with respect to clause 12 of petitioner’s bill of lading

which the Fifth Circuit upheld, but which the Second Circuit

held to be null and void. Each Court, however, was applying

the clause to a different set of facts. In the Fifth Circuit, it was

applied to a case of a disappearing container which had been

delivered by the carrier to the port authority and was lost through

no fault of the carrier. In the instant case, it was applied to the

active involvement of the carrier in authorizing the port authority

to release cargo without calling for the surrender of the bill of

lading. Conceivably, the clause could be valid for one purpose

and invalid for another. Therefore, respondent submits that, on

the different facts, the two Circuits are not in conflict on an im-

portant or novel question of federal law.

2. The Court of Appeals correctly upheld the District Court's

finding that the parties did not intend the pallets to be packages.

In upholding the findings of the District Court that the par-

ties did not intend the pallets to be packages, The Court of Ap-

peals followed the clear direction of this Court in the recent case

of Anderson v. City of Bessemer City, 105 S. Ct. 1504, 1511,

84L.Ed.2d 518, 527 (1985), that findings by the District Court

cannot be disturbed unless, on the basis of the entire record, they

are clearly erroneous. Since the Court of Appeals had the benefit

of the complete record and showed that it fulfilled its reviewing

responsibility, little need be said on this issue beyond what is set

forth in the Court of Appeals opinion (A-25-28).

Petitioner’s reason for certiorari on the package limitation issue

is founded on a plea for uniformity in maritime law and foreign

commerce’, but petitioner’s view would have the opposite result.

As noted in Mitsui & Co. Ltd., et al. v. American Export Lines,

Inc., 636 F.2d 807, 821 (2d Cir. 1981) and in Binladen BSB Land-

scaping v. M.V. Nedlloyd Rotterdam, 759 F.2d 1006, 1013 (2d

* Petitioner incorrectly stated that this is the first case where a court has held

a pallet not to be a package. It was so held in American & Far Eastern Trading

Co. v. Sea-i.and Services, Inc., 493 F. Supp. 125, aff. 678 F.2d 830 (9th Cir.

1982).

Cir. 1985), the 1968 Brussels Protocol to Amend The Interna-

tional Convention for The Unification of Certain Rules of Law

Relating to Bills of Lading* would provide in a case like the in-

stant one, that the “article of transport,” i.e. the pallet, shall not

be deemed to be the package. This Protocol was signed by the

United States, but not ratified, but the necessary number of coun-

tries signed it so as to come in effect in 1977. Thus, petitioner

would have this Court adopt a hard and fast rule contrary to

one already in use in many countries by law, an adoption which

would be the antithesis of uniformity. The trend, if anything,

appears to be the other way, towards the Protocol definition.

True, the Second Circuit in Allied International American

Eagle Trading Corp. v. S.S. “Yang Ming”, 672 F.2d 1055 (2d Cir.

1982), was unwilling to abide only by the written notice in the

bill of lading of the number of units on the pallets, if the bill

elsewhere listed the number of pallets as the number of packages.

But in the instant case, without the additional reference, the Se-

cond Circuit was constrained to give equal consideration to the

fact that the number of pallets was listed once, as was the number

of bags. If there was nothing more, the principle that ambiguities

in contracts of adhesion must be resolved against the issuing car-

rier should have tipped the scales in favor of the shipper at that

stage of the case. However, the Courts below further found that

the shipper had declared the nature and value of the goods, that

the freight rate was based on the value of the goods and that

under the applicable tariff, respondent “had no option to pay

a higher rate.” Under those circumstances, the Court of Appeals

properly said that “Allied could reasonably have expected to

recover their value if they were lost. Similarly, having levied a

*The Brussels Protocol provides in pertinent part as follows:

“...(c) Where a container, pallet or similar article of transport is used to con-

solidate goods, the number of packages or units enumerated in the bill of lading

as packed in such article of transport shall be deemed the number of packages

or units for the purpose of this paragraph as far as these packages or units are

concerned. Except as aforesaid such article of transport shall be considered the

package or unit.”

rate keyed to value, Lloyd could reasonably have expected to be

liable for that value. It would be illogical to ascribe a contrary

intent to the parties.” (A-28).

Respondent heretofore discussed the effort by petitioner to in-

troduce new evidence in the appeal of the case and in its peti-

tion with respect to an alleged additional freight charge if the

shipper desired coverage in excess of $500 per package, an at-

tempt rejected by the Court of Appeals, and which should be

rejected once again. Suffice it to say that not having a choice

of rates, the cases cited by petitioner where a tariff provides for

a choice of rates are inapposite.

3. The Courts below correctly applied United States Law.

Petitioner’s contention with respect to applicability of Brazilian

tort law was met head-on by the Court of Appeals (A-24) and

need not be repeated. However, it should be noted that if peti-

tioner’s argument is accepted, respondent would be without a

remedy, for petitioner contends that under Brazilian law, the car-

rier would not be liable either under contract or in tort. It is

also evident that the Brazilian port authorities would also not

be liable because they acted in accordance with their own im-

port regulations which allowed them to accept a carta

declaratoria from the ocean carrier, in place of the bill of lading.

Such result would be disastrous to international trade and

commerce.

10

CONCLUSION

For the foregoing reasons, respondent respectfully prays that

the application for a writ of certiorari be denied.

Respectfully submitted,

IRVING RONALD STORCH

. Attorney for Respondent