Petition for Writ of Certiorari — Universal Marine Corp. v. Encyclopedia Britannica, Inc.

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Text

Yas pie ; seg 5 aliice-supreme Cost U.S,

LIBRARY ieee FILED

SUPREME COURT, U. S. JAN 27 1970

, | | ~ JOHN F. DAVIS, CLERK

IN THE

ne Court uf the Wuited States

October T 1900 |

UNIVERSAL MARINE CORPORATION, and:S. S. “HONG

KONG ee her engines, etc.,

Petitioners,

| vs. ‘

ENCYCLOPAEDIA BRITANNICA INC.,

ea erice . Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

‘THE UNITED STATES COURT OF APPEALS

FOR THE SECOND .CIRCUIT

JOHN J. SULLIVAN

Counsel for Petitioners

27 William Street

n New York, N. Y. 10005 |

‘

Opinions Below

WON os ae ye ee eee

The Basis for Federal Jurisdiction in the Court in

Cie Wares Teetanee ss cd ie oa

Benshtia for Granting the Writ:

@) The decision below conflicts with the decision

of the Court of Appeals for the Seventh Cir-

cuit as to the proper interpretation of 46

RNAS, SONI s Fao hse vee eects cea

(2) The reasons stated by the Court below that

the bill of lading provision permitting on-deck

stowage violated the Carriage of Goods by Sea

Act, 46 U.S.A. §1303(8), are based on proposi-

tions in direct conflict with the decisions of

other Courts of Appeal ..... Fey eee Win Sse eke

Conclusion ......... DEES esata, Sea eee, are te Qe -

Appendix A—Opinion of the District Court on 1 Plain. :

\taff” s Motion for Summary Judgment ...........

Appendix B—Opinion of the District Ss ee

Appendix C—Opinion of the Court: ‘of Appeals for

Cee RMN Srey en cos ks SO vwod oe wale boc

Appendix ee ERATE acreage tre a

cg eeu K—Order Denying Reheari Sie fenperar ete

Table of Cases

American Mills v. Luckenbach Steamship Co., 24

P’.2d- 704 -Gth Cireuit: (1928)... eee ew ete 12

Atlantic Mutual Insurance Co. vy. Poseidon Schiff-

hart, 206 F.Supp. 19 (DC II1.), aff’d 313 F.2d 872

CPE CONG AMEE 6 Sec cass te Vas eshs pawareveo’s 8, 9, 10

Avco Corp. v. Aero Lodge 735, 390 U.S. 557, 1968) 11

. Bank of California v. International Mercantile M.

Co., 64 F.2d 97 (2nd Ciloekt 1908)... sek ss 13, 14

Commissioner v. Biker, 369 U.S. 499, (1962) ...... 11

” Davidson v. Flood Bros., et al., 30 F. 2d 279 (9th

Circuit 1929) ..... ey er Pe eer e Br re ee 13

Farr v. Hain Steamship Co., 121 F.2d 940 (2d Circuit

NE eas bs 10 5G RD CSE CaS esa es 7

~ Jonesev. The Flying Clipper, F.Supp. 386 (8.D.

N.Y. 1953) ..., ia va Wa W LOM he WKS ees 8, 9

Massachusetts Trustees v. Umited States, 377 U.S.

235, (1964) ..... NER MGEURS US Sena G bee ep eke a's Mh 11

New York v. Saper, 336 U.S. 328, (1949) ............ 11

Northeastern National Bank v. United States, 387 |

Me OU ios et i ee ea wees 11

Shapiro v. United States, 335 U.S. 1, (1948) ........ rere

Statutes

ee ee BOC ia vce bey vieenes Cieies Kaus re! 2

CE Se eed cachece db chusab viseene 2, 3, 6, 12

46 USC. $1908(6) .<:........... ieee ers 2, 6, 7, 8, 9

(na Ts eee

IN THE

Supreme Court of the United States

October Term, 1969

No.

te et ee

UnIversaL Marine Corporation, and S.S. ‘‘Hone Kone

Propbucer’’, her engines, etc.,

Petitioners,

vs. 5

_ Encycioparpia Britannica Inc,

Respondent.

n——

PETITION FOR A WRIT OF CERTIORARI TO |

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

, 7

Petitioners, Universal Marine Corp. (Universal) and

S.S. ‘Hone Kone Propucer’’, pray that a writ of certiorari

issue to review the judgment and opinion’ of the United

States Court of Appeals for the Second Circuit entered

in this proceeding on October 30, 1969.

Opinions Below

The opinion of the District Court of the United States

for the Southern District of New York is officially reported

in 297 F.Supp. 984. The majority and dissenting opinions

of the Court of Appeals are not yet officially reported, but

are unofficially reported in the New York Law Journal,

December 11, 1969, Page 1. Ail of the aforesaid opinions

appear in the Appendix hereto (Appendix pp. 4a-38a).

TPR TA ie SS at Soe i NOUR Tal UU AED a ie

Jurisdiction

The opinions of the judges of the Court of Appeals for

the Second Circuit were filed on October 30, 1969. A timely

petition for rehearing was denied by an Order entered by

that Court on November 18, 1969, and this petition for

certiorari was filed within 90 days of that date. The.

jurisdiction of this Court is invoked under 28 US.C.,,

§ 1254(1). |

Questions Presented

1. Whether a deviation by an ocean carrier deprives

the carrier of the statutory limitation of liability to cargo

provided under the United States Carriage of Goods by.

Sea Act, 46 U.S.C. § 1304(5). bern ot

2. Whether a bill of lading provision which permits an

ocean carrier to stow cargo on deck unless the shipper

informs the carrier under-deck stowage is required, and

which is incorporated by reference in the carrier’s short

form bill of lading issued to the shipper, relieves or lessens

the carrier’s liability in contravention of the United States

Carriage of Goods by Sea Act, 46 U.S.C. § 1303(8).

Statutory Provisions Involved

U:S. Code, Title 46:

Section 1304(5) :

‘‘Neither the carrier nor the ship shall in any .

event be or become liable for any loss or damage

to or in acer eran ‘with the transportation of goods

in an amount exceeding $500 per package lawful .

money of the United States, or in case of goods not

shipped in packages, per customary freight unit,

or the equivalent of that sum in other currency,

y unless the nature and value of such goods have been

ie dete, er

‘

s. | ee

wet. 3

‘ 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 he conclusive on the carrier.’’

U.S. Code, Title 46:

Section 1303(8) :

‘*Any clause, covenant, or agreement in a con-

tract or carriage relieving the carrier or the ship

| 4

from liability for loss or damage to or in connection

with the’ goods, arising from negligence, fault, or

failure in the duties and obligations provided in this

section, or lessening such liability otherwisé than as

_ provided in this Act, shall be null and void and of

no effect. A benefit of insurance in favor of the

carrier, or similar clause, shall be deemed to be

clause relieving the carrier from liability.’ :

Statement of the Case

that:

“1, On December 2, 1964, (Respondent) Encyclopaedia

Byitannica’s agent, United Cargo Corp. (*‘United Cargo’’),

delivered to the Hone Kone Propucer eight metal con-

tainers in which had been placed 4,080 cartons of bound

books for carriage to Britannica’s affiliate in Japan. The

‘ books had been transported from Britannica’s Chicago

“plant by motor truck to New York and there had been con-

. solidated into the metal containers by United Cargo... .

The shipment was received by (Petitioner) Universal in

“‘apparent good order and condition’’. ;

2. On receipt of these metal containers, Universal is-

sued a ‘‘short form’? bill of lading which contained no

notation on its face that any of the containers were to be

carried on deck. The short form bill of lading states that:

‘‘This Short Form Bill of Lading is issued for

the shipper’s convenience and at its request ...°,”?

ER TSI eee ee

6 ,* 2.

It was found by the District Court (Appendix pp. da-8a),

and that: |

‘‘All the terms of the carrier’s regular form of

’ Bill of Lading are incorporated herein with like

; ite and effect as if they were written at length

erein.”’

The, regular form bill of lading provides in part:

‘‘The shipper represents that the goods covered

by this bill of lading need not be stowed under deck

and.it is agreed that it is p r.to and they may be

‘ stowed on deck unless the shipper informs the car-

rier. in writing before delivery of the goods to the

earrier that under deck stowage is required.

_ With respect to goods varried on deck, all risk of

_loss or damage by peril inherent in or incidental to

such carriage shall be borne by the shipper. . .’’

(Clause 13). :

(Respondent) neither notified costa: ag led required

under-deck stowage nor did it insert in-tHe bill. of lading |

any increased value for the shipment.

3. During transit, the Hone Kone Propucer encoun-

tered ‘‘boisterous’’. weather, and a con iderable amount of

sea water passed over its weather decks on numerous occa-

sions. Six of the eight containers were shipped on deck,

and, as the parties stipulated, ‘‘The aforesaid shipment

sustained some damagé by breakage and sea water while

on board the S/S Hone Kone Propucer.’’

4. The Hone Kone Propucer arrived at Yokohama on

January 16, 1965. During .the next two days, surveyors,

at the request of (Universal) or its agent, inspected the

eargo aboard the vessel. At several places in the sur-

veyor’s report there was noted specifie damage to two

containers 5152 and 5330. On page 1 of the report, it is

said that on both containers ‘‘both sides were dented and

broken.”’ A similar remark was made on page 2, and the

two containers were included in a schédule of damaged

cargo with the ‘notation ‘side broken ( about 2’ x 8’)’’. All

> . -~ + & ¥ |

? Bae Lie <

5 7 .

~—eontainers was noted.

six vans which were stowed on deck were included in this

schedule of damaged cargo with’ the notation ‘‘on deck

cargo,.”’ Ps

do. On January 18, 1965, the cargo was discharged into

two barges, and was taken to’ the warehouse, used by

(Respondent’s) Japanese affiliate in Tokyo.” It ai trans-

ported there by United Cargo and arrived on January 19

or 20, 1965.

6. On January 22, 1965, a joint survey of the cargo

was conducted at the warehouse by surveyors representing

both parties. The cartons had been removed from the

containers prior to survey, apparently by employees or

agents of (Respondent). Containers 5152 and 5330 were

outside the warehouse and were inspected; the remaining

containers were unavailable. Over 1300 cartons were found

by the surveyors to have come in contact with water.

Four hundred twenty cartons containing Volumes 1-12 of

the encyclopedia and two hundred thirty-six cartons con-

taining Volumes 13-24 were found to have sustained ex-

tensive damage, and the books therein were unmerchant-

able. The balance of the cartons which had contacted

water sustained only slight damage to the cartons, and no

claim has ‘been made as to the books contained therein.

Damage to the front and rear doors, the rubber packing,

the top plate, the plywood panel and the sides of the two

7. Although there are several weak points in the plain-

tiff’s proof on the question of “‘causation’’, I am convinced

by the totality of the evidence that the damage sustained

to the encyclopedias was caused by the rough seas en-

countered by the Hone Kone Propvcer on its voyage,”’

ee ee tid Cine Ye o> Lec GAN A> > my le NE Re aE Hoon gf

It. was concluded by the District Court (Appendix,

p. 8a), that: :

*¢1. There was no breach of contract or, as articu-

lated by plaintiff’s counsel, unreasonable deviations,

by the defendant in transporting these books on deck

to Japan because the contract of carriage (the bill

of: lading) provided that the carrier could ship on

deck unless notified to the contrary by the shipper .

or its agent.

2. The defendant was not negligent in the man-

ner in which it stowed and handled the subject cargo,

nor. is there any indication that the Hone Kone

PropuceR was unseaworthy at any relevant time.

See 46 U.S.C. §¢ 1308, 1304 (1936).

y 3. Accordingly, I conclude that the defendant is

not answerable to the plaintiff for the damage sus-

tained to the cargo during the voyage in question.”’

The judgment rendered by the District Court in peti-

tioner’s favor was reversed by the Court of Appeals

(Appendix pp. 13a-34a), with one judge dissenting (Ap-

pendix pp. 34a-38a), and the stowing of the six containers

on the weather deck was held an unreasonable deviation

or which petitioner is liable for the full amount of dam-

ages sustained without the benefit of the $500 limitation

per package of COGSA, § 4(5), 46 U.S.C. 1304(5).

The stowage on deck was held an unreasonable deviation

on the grounds that Clause 13 of pétitioner’s bill of lading

violated COGSA, §3(8), 46 U.S.C. 1303(8), since ‘by

incorporating the carrier’s regular form bill of lading by

reference in the bill of lading issued, the burden of inquiry

was placed on the shipper as to the provisions of the car-

rier’s regular bill of lading (Appendix p. 23a) ; that the ship-

per could, by default, lose the right to have its goods stowed

under deck (Appendix p. 23a; that the Clause placed

the burden of proof showing lack of due diligence or fault

on the shipper (Appendix p. 24a); that the provisions of

ih cc Dec Aah 9a RIES LIRR IBA

the ‘‘regular’’ bill of lading were never specifically brought

to the shipper’s attention (Appendix p. 24a) ; and that it is

’ impractical to compel the shipper to make a detailed study

of the carrier’s bill of lading before it ships out a package

(Appendix p. 25a); that the bill of lading does not state

cargo is being carried on deck but that it may be so carried

(Appendix p. 27a); and that petitioner is estopped

from invoking Clause~13 since it received the cargo before

issuing the bill of lading (A ppendix p. 29a).

The Court of Appeals remanded the case to the District

“Court for a determination of the issue of damages.

The Basis for Federal Jurisdiction in the

Court of First Instance

The jurisdiction of the District Court was invoked

because of the admiralty and maritime nature of the claim

arising out of the carriage of cargo in ocean transit from

the United States to Japan.

Reasons for Granting the Writ

1. The decision below conflicts with the decision -

of the Court of Appeals for the Seventh Circuit

as to the proper interpretation of 46 U.S.C.

§ 1304(5). :

The decisions of the Courts of Appeals for the Second

nd Seventh Cireuits are in sharp conflict as to whether

a carrier’s statutory limitation of liability to cargo applies

‘“‘in any event,’’ or whether such liability is limited “in

any event,’’ except in the case of a ‘‘deviation’’.

A ‘‘deviation’’ consists of ‘‘a breach of the contract

of carriage,’’ Farr v. Hain Steamship Co., 121 F.2d 940,

’ 944 (2nd Circuit, 1941): The conflict between the Circuits

arises out of the application of the Carriage of Goods by

sttetsonanas Baerga se in!

Sea Act, 46 U.S.C. § 1304(5), where there is a ‘‘deviation”’

by a carrier. The statute provides, in part:

‘‘Neither the carrier nor the ship shall im any

event be or become liable for any loss or damage to _

or in connection with the transportation of goods in

an amount exceeding $500 per package . . .’’ (em-

phasis added).

The conflict is sharply defined by the acceptance by one

Cireuit, the Seeond Circuit in the instant case, and the

rejection by the Seventh Circuit, of the reasoning in Jones

v. The Flying Clipper, 116 F.Supp. 386 (S.D.N.Y. 1953),

which held an unreasonable deviation deprives the carrier

of its statutory limitation of liability. That case was relied

on by the Court below, with one judge dissenting, as

authority for that proposition:

je stowing of the six édntainers on the weather

deck was, therefore, an unreasonable deviation . . .

The carrier is liable fu. the full amount of the dam-

ages sustained without the benefit of the $500 limita-

tion per package of COGSA. Jones v. The Flying

Clipper, 116 F.Supp. 386 (S. D.N.Y. 1953).”’ (Appen-

dix P. 33a).

In a prior decision, howev er, the Oourt of Appeals for the

Seventh Cireuit, in Atlantic Mutual Insurance Company v.

Poseidon Schiffahrt, G.m.b.H., 313 F.2d 872 (CAT7C, 1963),

‘affirming that an unreasonable deviation does not deprive

the carrier of its statutory limitation of liability, specifi-

cally rejected the holding in Jones v. The Flying Clipper:

‘‘In Jones, the court reasoned that the doctrine

f deviation was so firmly entrenched in maritime

v that such a drastic change would have Ween ex-

pressed in clear and unmistakable language. The

court found no such language in the Act.

We respectfully disagree with this reasoning and |

adopt that of the district court in the instant case

** Atlantic Mutual Insurance Company v. Pose-

idon sin fact G.m.b.H., 313 F.2d 872, 874 (CAT7C,

1963).

Jones v. The Flying Clipper involved the on-deck car-

riage of twenty ‘“‘packages’’. containing automobiles and

automobile parts for which a clean bill of lading was issued,

thereby giving rise to a ‘‘deviation’’. The question con-

sidered was whether the deviation deprived the carrier of.

the benefit of the $500 per package limitation of the Car-

riage of Goods by Sea Act, 46 U.S.C. 1304(5). The Court

rejected the carrier’s contention that, according to the lan-

guage of § 1304(5), the limitation is applicable ‘‘in any

event’’, stating, at page 388:

‘‘The purpose of the $500 limitation in § 1304(5)

‘was to prevent a stipulated value for cargo in a

lesser amount and to do away with the then current

limits imposed by carriers, usually $100 or even a

smaller sum. Except for this change in amount, the -

provision of the Act did not represent any basic

departure from existing law. Neither the Conven-

tion nor the Act contains any provision concerning

the legal result of an unjustifiable deviation, There

is nothing in the history of the Act to indicate that

Congress by fixing the limitation at $500 intended to

displace the doctrine of unjustifiable deviation which

was so firmly entrenched in maritime law. Such a

drastic change in the existing law, with its far-

reaching consequences in the commercial and financial

world would have been expressed in clear and un-

mistakable terms.’

In rejecting the reasoning of the Flying Clipper Case,

the Court of Appeals for the Seventh Circuit adopted the

reasoning of the District Court: :

‘‘There is no question about the fact that prior to

the enactment of the Carriage of Goods "by Sea Act,

the doctrine of unjustifiable deviation was firmly

entrenched in maritime law. This doctrine had de- —

veloped to circumvent the efforts of carriers to avoid

justifiable liability through insertion in shipping con-

tracts and bills of lading of provisions for minimum

limitation of liability. It is equally certain that

Congress may not be found to have changed existing

law without expressing this change in clear and

ee ee

i : “

unmistakable terms. But it appears to this Court

that the language of the statute, if it constitutes a

change of existing law, according to the rule applied

to other statutes, is sufficiently clear and unmis-

takable. No amount of interpolation is required to

evaluate the weight of the phrases ‘in any event’ and

‘any loss or: damage’ upon’ the admonition that

‘neither the carrier nor the ship shall in any event

be or become liable for any loss or damage * * *

unless * * *.’’’ Atlantic Mutual Insurance Company

v. Poseidon Schiffahrt, 313 F.2d 872, 874, 875.

The.Court of Appeals for the Seventh Cireuit went on

to note, at page 875:

‘‘In addition to the reasons stated by the district

court, our conclusion finds support in the fact that

the package limitation immediately follows § 4(4) of

the Act, 46 U.S.C.A. § 1304(4) in which Congress, as

¥ we have already stated, recognized the. carrier’s lia-

bility for unreasonable deviations. It is difficult for

us to believe that Congress did not intend this limita-

tion to apply to the Section next preceding it.’’

In like manner, the dissenting opinion below in the

present case accepted the Seventh Circuit case as con-

trolling authority, stating at page 280:

‘‘In any event, the shipper’s recovery should be

limited to $500 per package pursuant to Section

4(5) of COGSA (46 U.S.C. §1304[5] [1964]).

Atlantic Mutual Insurance Co. v. Poseiden Schif-

fahrt G.m.b.H., 313 F. 2d 872 (7th Cir.), cert.

denied, 375 U.S. 819 (1963). By its express terms,

that section applies ‘in any event.’

Perhaps if the stowage of the cargo on deck had

constituted a breach of the contract of carriage, its

provisions would be inapplicable. But it seems

highly unlikely that without including some more

specific statutcry direction the draftsman of COGSA

intended that a breach .of contract should relieve

the carrier and the shipper of their rights and duties

under the Act. The provisions of COGSA apply

independently of any contract. See Benefict, 1 The

11 si

Law of American Admiralty 291 n. 35 (Knauth ed.

1940). Indeed, it is generally accepted that COGSA

Modified the doctrine of deviation in maritime law

at least to the extent that insurer’s liability attaches

only when the damage is causally related to the

unreasonable deviation. See Searoad Shipping Co.

v. E. I. du Pont de Nemours and Co. Inc., 361 F.

2d 833, 835-35 (5th Cir.), cert. denied, 385 U.S. 973

(1966) ; Gilmore and Black, The Law of Admiralty

§§3-40 and 3-41 (1957). It is difficult to understand

how the majority opinion can take the position that

it is so important to protect an experienced shipper

from losing the benefits of COGSA by agreeing to

on deck stowage and yet can adopt the view that a

breach of the contract of carriage nullifies the care-

fully balanced provisions of the Act.’? .

The propriety of granting a writ of certiorari is ap-

perent. There is a square and irreconcilable conflict be-

tween Courts of Appeals, Avco Corp. v. Aero Lodge 735,

_ 890 U.S. 557, 559, (1968), Northeastern National Bank v.

United States, 387 U.S. 213, 217, (1967), and the conflict _

“¢Gnvolves an important question of statutory construc-

tion,’’ Shapiro v. United States, 335 US. 1, 4, (1948).

The importance of the issue in conflict is of considerable

importance in the maritime industry, and has a direct bear-

ing in the day to day operations of ocean carriers. New

York v. Saper, 336 U.S. 328, 329, (1949). There is an

obvious ‘‘need for a uniform rule on the point,’’ Commis-

sioner v. Bilder, 369 U.S. 499, 501 (1962), as evidenced by

the fact ‘‘a considerable number of suits are pending in

the lower courts which will turn on resolution of these

issues,’’ Massachusetts Trustees v. United States, 377 U.S.

235, 237, (1964).

2. The ikon stated ‘by the Court below that the

bill of lading provision permitting on deck

stowage violates the Carriage of Goods by Sea

Act, 46 U.S.C. § 1303(8), are based on propo-

sitions in direct conflict with the decisions of

other Courts of Appeal.

The Court below concluded that Clause 13 of the car-

rier’s regular bill of lading, which permitted the carrier a

conditional option to stow cargo en deck, and: which was

incorporated by reference in the‘‘short-form”’ bill of lading

issued to the shipper, relieved or lessened the ecarrier’s

liability in contravention of the Carriage of Goods by Sea

— Act, § 1303(8). :

The stated reasons upon which the conclusion is reached

“ are in conflict with the decisions of other Courts of Appeal.

‘The Court stated, as a reason, that petitioner is estopped

from invoking Clause 13 since it received the cargo before

issuing the bill of lading, (Appendix p. 29a). In American

Mills v. Luckenbach S.S. Co., 24 F.2d 704 (Fifth Circuit,

1928), the Court stated at page 705: ee

‘Appellee is presumed to know the law, and

therefore must have known that the terms and condi-

tions on which its goods were received and would be

transported would be contained in a bill of lading

to be issued later. In the circumstances, it cannot be

inferred that it was the intention of the parties to

enter into a contract that would bind the earrier as

insurer; but an implied understanding arose from

common business experience that the carrier would

issue such bill of lading as it was its custom to issue

to shippers in the usual course of its business. The

Caledonia (C.C.) 43 F. 681, 685; s.c., 157 U.S. 124,

139, 15 S. Ct. 537, 39 L. Ed. 644. |

Appellant’s bill of lading~was issued after the

fire, but it was in accordance with its standard form,

issued to all shippers alike, and was not made to fit

‘a special case, in order to escape a liability that had

already accrued. It, therefore, but evidenced the

Dig Bahai de Od ARN SISO BIE SALE NARI R ERIN ACE in Og a

et o

contract the parties entered into at the time the

goods were delivered and accepted. In the ordinary

case of a shipment of goods, it is not to be assumed,

upon proof of delivery without condition, that the

carrier intends to become insurer; but a shipper, in

. the absence of a special contract, must be presumed

to deliver his goods on the terms and conditions

usually and customarily wmposed by the carrier in

the regular course of business.’’ (emphasis added).

The Court below stated, as a reason, that the incor-

poration in the carrier’s short form bill of lading of its

regular form bill of lading by reference placed the burden

. of inquiry on the shipper as to the provisions of the car-

rier’s regular bill of lading (Appendix p. 23a). In Bank of

California v. International Mercantile M. Co. (2nd Circuit,

1933), 64 F.2d 97, 290 U.S. 649 the Court, in considering a

similar type bill of lading provision, stated at page 98:

‘‘These clauses had the effect of incorporating in

the contract of carriage the appellant’s ocean bill of

lading by reference.’? ;

The Court below stated, as a reason, that the shipper :

could, by default, lose the right to have its goods stowed

under deck (Appendix p. 23a), and that the bill of lading

does not state cargo is being carried on deck, but that it

may be so carried ( Appendix p. 27a). In Davidson v.. Flood

Bros., et al. (9th Cir. 1929), 30 F.2d 279, 279 U.S. 883, the

Court, in holding it was not negligence per se to carry

cargo.on deck, instead of under deck, stated at page 280:

*‘On deck stowage was pursuant to a clause in

the bills of lading granting appellees ‘liberty to carry

the goods and any other goods on deck or’ under

deck,’ ”?

The Court below stated, as a reason, that the provisions

of the ‘‘regular’’ bill of lading were never specifically

brought to the shipper’s attention (Appendix p. 24a), and

'. that’ it is impractical to compel the shipper to make a

]

, ‘

€

TPR RRR EOE See 1 A DNS

y 3

Tee PI MMR IM Inner ty

detailed study of the carrier’s bill of lading before it ships

out a package (Appendix p. 25a). In Bank of California v.

International Mercantile M. Co. (supra), thefCourt stated’

at page 98: |

‘‘The shipper could have requested and obtained

knowledge as to its terms if it so required;*having

failed to do so, it is bound by the reasonable clauses

therein contained.’’

As is apparent from the foregoing, the Court below, in

concluding that Clause 13 of petitioner’s bill of lading vie-

lated the provisions of the U. S. Carriage of Goods by Sea

Act, stated propositions in conflict with long accepted prin-

ciples of maritime law relating to the carriage of cargo, as ~

enunciated in the opinions of other Courts of Appeals.

The majority of the Court below cites virtually no

authorities in support of the propositions set forth by it,

and.as opposed to this, the dissenting opinion, sets forth,

point by point, authorities in conflict with the holding of

the majority.

CONCLUSION |

For these reasons, a writ of certiorari should

issue to review the judgment and opinion of the

Second Circuit.

Respectfully submitted,

9 JoHNn J. SULLIVAN

Counsel for Petitioners

27 William Street

New York, N. Y. 10005

LEE RARE ie RE

EA ENB TRAIN Be

Appendix A

~ (Opinion of the District Court on Plaintiff’s Motion

; for Summary Judgment)’

UNITED STATES DISTRICT COURT

SoutHern Disrricr OF N. EW York

-O

Eceyctoparpia Brirannica, IN C.,

| Plaintiff,

Vv.

S.S. “Hone Kone Propucer,”’ her engines, etc.,

Universat Marine Corporation,

Defendant.

re)

Croake, D. JJ,

MEMoRANDUM

Plaintiff, Eneyclodaedia Britannica, Ine. (Brirrantca),

moves for partial summary judgment under Rule 06, Fed.

R. Civ. P. Britannica, claiming that no factual issues are

present, asks this court to make determinations on several

questions of law. Examination of the. moving papers

shows that there are factual matters in dispute.

The present action arose out of a shipment of eight

containers said to contain volumes of the Encyclopaedia

Britannica on the S.S. ‘Hone Kona Propucer,””’ Six of the

eight containers in question were shipped on the deck of the

ship rather than in the hold.. A “clean’’ bill of lading

eee ee ee a

So ere —

= Fag

Appendix A

was: issyed for all eight of the containers. In transit,

rough seas were encountered and two of the six on deck

containers were damaged.

_ -». The carrier, among other defenses, has pleaded that the

bill of lading is subject to the United States Carriage of

Goods Act, 46 U.S.C. § 1300, et seq. (1964) (COGSA),

and particularly § 4(5) COGSA, 46 U.S.C. § 13804(5) (1964),

which places a $500 per package limitation on the carrier’s

liability. Britannica claims that the issuance of a ‘‘ctleam’’ ~~

bill of lading implies under deck stowage. See St. Johns

N.F: Shipping Co. v. S.A. Companhia Geral Commercial Do

Rio de Janerio, 263 U.S. 119 (1923) ; Seaboard Shipping Co.

v. Du Pont de Nemours Co., 361 F. 2d 833 (5th Cir. 1966).

Therefore, failure to ship’ below deck as required by the

‘*clean’’ bill of lading was an unreasonable deviation from -

the agreement to ship and the $500 limitafion provided by

statute is inapplicable. Compare Jones v. The Flying

Clipper, 116 F. Supp. 386 (S.D.N.Y. 1953), with Atlantic

Mutual Ins. Co. v. Poseidon Schiffakrt, 313 F. 2d 872 (7th

Cir. 1963). Brirannica also argues that the containers

_were not packages within the meaning of § 4(5) COGSA;

.46 US.C. § 1304(5) (1964).

The defendant argues that while a ‘‘clean’’ bill of .

lading usually implies under deck stowage, it has been the

custom of container carriers to ship goods in containers on

the deck under a ‘‘clean’’ bill of lading and that the plain-

tiff was aware of this fact.

This court recognizes that there has been-an increase

in the use of containers in the shipping industry. . The

United States Supreme Court in construing the meaning

of the term ‘‘clean’’ bill of lading-has indicated that a

general port custom permitting above deck stowage could

modify the meaning of a ‘‘clean’’ bill. See St. Johns N. F.

Shipping Co. v. S. A. Compania Geral Commercial Do

de Janerio, supra, at 124. Because of the growth in this

Appendix A

type of shipping arrangement and the importance of the

questions presented to the shipping industry, we do not

believe that justice would be served if we attempted to ~

decide questions concerning custom in the industry on the

present affidavits or without a full evidentiary proceeding.

Neither do we feel that justice will be served by piecemeal

legal determinations in this matter. See Boston & Maine

RR. v. Lehigh & New England R.R. Co., 188 F. Supp. 487,

491 (S.D.N.Y. 1960). The particular factual and legal

questions should be determined at trial. ~~

_ In accordante with the foregoing, the notion for sum-

mary judgment is denied, |

So Ordered. «

Dated: New York, N. Y.

November 29, \1967

Tuomas F.. Croaxe

ee U.8.D. J.

~ pg te aR Sete

Appendix B

(Opinion of the District Court)

UNITED STATES DISTRICT COURT

SouTtHERN District oF New York

65 Ad. 910

Ewcyc.opaepiA Britannica, INc.,

Plaintiff,

against

SS Hone Kone Propucer, her engines, etc.,

and against

UniversaL Marine CorpPoraTION,

Defendant.

BicHam, ‘Enciar, Jones & Houston, New York, New

York, by F. Hersert Prem, Esq., Attorneys for _

Plaintiff.

Menves & Mount, New York, New York, by Joun J.

Suuuivan, Esq., Attorneys for Defendant.

* Tyner, D. J.

This suit arises out of a shipment of books by plaintiff

Encyclopaedia Britannica, Inc. (‘‘Britannica’’) on the SS

Hone Kone Propucer, which is owned by defendant Uni-

versal Marine Corporation (‘‘Universal’’). A trial was

held before the court sitting without a jury on January 15

and 16, 1969. The following findings of fact and conclu-

sions of law represent my decision on the merits of this

controversy. 2

Appendiz B

(Findings of Fact)

1. On December 2, 1964, Britannica’s agent, United

Cargo Corp. (‘*United rgo’’), delivered to the Hone

Kone Propucer eight metal containers in which had been

placed 4,080 cartons of bound books for carriage to Britan-

nica’s affiliate in Japan. The books had been transported

from Britannica’s Chicago plant by motor truck to New

- York and there had been consolidated into the metal con-

tainers by United Cargo. The containers bore the follow-

ing identification numbers: UCC 9120, UCC 5152, UCC.

5223, UCC 5298, UCC 5330, UCC 5458, UCC 5496, and

€-10344.1 The shipment was received by defendant Uni-

versal in. ‘‘apparent good order and condition’’ (Ex-

hibit 5).

2. On receipt of these metal containers, Universal issued

a “‘short form’? bill of lading which contained no notation

on its face that any of the containers were to be carried

on deck. The short form bill of lading (see Exhibit 5)

states that:

‘‘This Short Form Bill of Lading is issued for

the shipper’s convenience and at its request ...’’

and that:

’

‘All the terms of the carrier’s regular form of

Bill of Lading are incorporated herein with like force

and effect as if they were written at length herein.’’

The regular form bill of lading (see Exhibit 5) provides in

part:

“The shipper represents that the goods covered

by this bill of lading need not be stowed under deck

’ The first seven of these containers were 17” x 8’ x 8’. The

eighth, described as a “pallet container”, was evidently smaller than

the others.

6a %

Appendix B

and it is agreed that it is proper to and they may be

stowed on deck unless the shipper-informs the carrier

in writing before delivery of the goods to the carrier

that under deck stowage is required.

With respect to goods carried on deck, all risk

of loss or damage by peril inherent in or incidental

to such carriage shall be borne by the shipper. . .’’.

’ Britannica neither notified Universal that it required under-

deck stowage nor did it insert-in the bill of lading any

increased value for the shipment.

3. During transit, the Honc Kone Propucer encoun-

tered ‘‘boisterous’’ weather, and a considerable amount of

seawater passed over its weather decks on numerous occa-

_ sions. Six of the eight containers were shipped on deck,

and, as the parties stipulated, ‘‘The aforesaid shipment

sustained some damage by breakage and sea water while

on board the SS Hone Kone Propvucer.’’

4, The Hone Kone Propwcer arrived at Yokohama on

January 16, 1965. During the next two days, surveyors, at

the request of defendant or its agent, inspected the cargo

aboard the vessel. At several places in the surveyor’s

report (Exhibit 7), there was noted specifie damage to

containers 5152 and 5330. On page 1 of the report, it is

said that on both containers ‘‘both sides were dented and

broken.’’ A similar remark was made on page 2, and the

two containers were included in a schedule of damaged

cargo with the notation ‘‘side broken, (about 2’ x 8’)’’. All

six vans which were stowed on deck were includes in this

schedule of damaged cargo with the notation ‘‘on deck

cargo.’’ .

5. On January 18, 1965, the subject cargo was dis-

charged into two barges (see Exhibits 3A and 3B), and was

Appendix B

taken to the warehouse used by Britannica’s Japanese

affiliate in Tokyo. It was transported there by United

Cargo and arrived on J anuary 19 or 20, 1965.

6. On January 22, 1965, a joint survey of the cargo was

conducted at the warehouse by surveyors representing both

parties,’ (Exhibits 4 and C.) The cartons had been removed

from the containers prior to survey, apparently by em-

ployees or agents of Britannica. Containers 5152 and 5330

were outside the warehouse and were inspected; the re-

‘maining containers were unavailable. Over 1300 cartons

were found by the surveyors to have come in contact with

water. Four hundred twenty cartons containing Volumes

1-12 of the encyclopaedia and two hundred thirty-six car-

tons. containing Volumes 13-24 were found to have sus-

tained extensive damage, and the books therein were un-

merchantable. The balance of the cartons which had con-

tacted water sustained only slight damage to the cartons,

and no claim has been made as to the books contained

therein. Damage to the front and rear doors, the rubber

packing, the top plate, the plywood panel and the sides of

the two containers was noted.

7. Although there are several weak points in the plain-

tiff’s proof on the question of ‘‘causation 2? I am convinced

by the totality of the evidence that the damage sustained

* The proof is very thin on the condition of the books themselves oy

when received by defendant. Cf. Koyo International Inc. ¥.. 3.5.

Ootmarsum, 234 F. Supp. 424, 425 (S.D.N.Y. 1964) ; Copco Steel

& Engineering Co. v. §.S. Alwaki, 131 F. Supp. 332, 333 (S.D.N.Y.

1955). Also, there is no indication’ in the record as to precisely

agents so that the precise containers from which the extensively

damaged books were taken cannot be ascertained. .

bower tt

OO ee oP CEN, Py. OBS RDI DS gc ets:

Appendix B

to the encyclopaedias was caused by the rough seas encoun-

tered by the Hone Kone Propucer on its voyage.

ConcLusions or Law

1. There was no breach of contract or, as articulated by

plaintiff’s counsel, ‘‘unreasonable deviation’’, by the de-

fendant in transporting these books on deck to Japan be-

cause the contract of carriage (the bill of lading) provided

that the carrier could ship on deck unless notified to the

contrary by the shipper or its agent.

2. The defendant was not negligent in the manner in

which it stowed and handled the subject cargo, nor is there

any indication that the Hona Kona Propucrer was unsea-

worthy at any relevant time. See 46 U.S.C. §§ 1303, 1304

(1936). )

3. Accordingly, I conclude that the defendant is not

answerable to the plaintiff for the damage sustained to the

cargo during the voyage in question.

Tue Breacu or Contract Issur

Plaintiff’s contention on the issue of liability is rela-

tively clear. It claims that the defendant shipped its goods

on deck notwithstanding its contract and contrary to the

custom, and that the goods were damaged as a result of

on-deck stowage. The pivotal issue of law in this case is

whether there has been a breach of contract during the

voyage by reason of defendant’s on-deck stowage of the six

metal containers. In fairness to the plaintiff, which has

relied exclusively on this argument to establish liability,

I will discuss this issue at some length.

Ves

1 TALL RIN Se TP SS IDRC ILIA ARE

OIE PNR IAA ETE Ft RET RAL SD

Appendix B

Despite the understandable incursions of public law into

admiralty cases involving contracts for the carriage of

goods by sea, the basic legal relationship between shipper

and carrier is one of private contract. Thus, it is not sur-

prising that admiralty courts have come to recognize that

certain fundamental breaches of performance by a carrier,

frequently styled ‘‘unreasonable deviations’’, give rise to

liability of the carrier for damage to the goods.? See

Gilmore & Black, Admiralty, 156 (1957). A good example

of such a breach or deviation occurs when the ship makes

a substantial geographical departure from its scheduled

route. See Gilmore & Black, supra, at 156-58.

A related doctrine has emerged that if the parties con-

tracted for under-deck stowage but the carrier shipped the

cargo on a weather deck, liability for damage to the cargo

will be imposed upon the carrier, at least for any damage

causally related .to shipment on deck. See Gilmore &

Black, supra, at 161-62. This doctrine is based upon the

proposition that on-deck shipments ineur substantially

greater risks than do below deck shipments. Ret

Apparently it has been a long-standing custom in most

ports in this country that a ‘“‘clean’’ bill of lading, i.e. one

that makes no mention of on-deck stowage, connotes under-

—————

* For various reasons not important here, admiralty courts have

even imposed an insurer’s liability in these cases, i.e. the damage

need not have been caused by the “unreasonable deviation.”

* In virtually all the cases concerning this type of breach of

the shipping contract, the damage has been causally related to on-

deck shipment. To my knowledge, none of the cases spécifically ©

hold that such a causal relationship is necessary, and some of the

cases describe the breach as “unreasonable deviation.” See Jones v.

The Flying Clipper, 116 F. Supp. 386, 387 (S.D.N.Y. 1953). In

any event, as heretofore indicated, I have expressly found that

* weather deck stowage of two of the containers contributed to their

damage.

ait take Seas Ce LS ie AIG IB RR ROE SARE. Se RAO REAR RRR RRA. CE Vie NO I Nw

10a

Appendix B

deck stowage of general cargo.® See Searoad Shipping Co.

v. E. I. duPont du Nemours & Co., 361 F.2d 833, 835 (5th

Cir.), cert. denied, 385. U.S. 973 (1966) ; Jones v. The Flying

Clipper, 116 F. Supp. 386, 387-88 (S.D.N.Y. 1953). Thus,

where the parties have made no mention of this element of

their contract, failure by the carrier to stow general cargo

below deck has been regarded as a breach or deviation,

this term of the contract being supplied by custom.

The reason that this latter rule has no application to

this case is simple: the bill of lading specifically addresses

itself to the question of on-deck stowage, stating that ‘‘... it

is agreed that it is proper to and they [the goods] may be

stowed on deck ...’’. Givaudan Delawanna v. The

Blijdendijk, 91 F. Supp. 663 (S.D.N.Y. 1950), and cases

iss therein.

' Here, as in Givaudan Delawanna, the plaintiff seems to

be confused about the meaning of the term ‘‘clean bill of

lading.’’ In my opinion, Judge Kaufman there correctly

stated the law in this area, and I agree with his conclusion,

which follows: aie

‘Considerable difficulty has been occasioned by

the use of the term ‘clean’ bill of lading, due in all

probability to the fact that the term has two mean-

5 My reasoning does not require me to consider the effect here,

if any, of the fact that the cargo was loaded and_ sealed in metal

containers by United Cargo before it was delivered-to defendant’s

ship. However, I note in passing that containerization has already

posed difficult questions for admiralty courts, see, e.g. Standard

Electrica S.A. v. Hamburg Sudamerikanische Dampfachiffahrts-

Gesellschaft, 375 F. 2d 943 (2d Cir. 1967),sand one can be fairly

"certain that changes in the custom and usage of the industry will —

have some effect on the law in this area.

Indeed, if a finding on this issue were required in this case, I

would tend to the view that defendant, through its witnesses Rand

and Sember, established that in recent years there has been a grow-

ing. practice of stowage of containerized cargo on weather decks

of container ships and general cargo vessels.

| oa lla | =.)

Appendix B

ings, one broad and one narrow. Broadly speaking,

a ‘clean’ bill of lading is one which contains nothing

‘written, stamped or printed in the margin qualify-

ing the words of the bill of lading itself. * * * In the

narrower sense, where a bill of lading with no

qualifying words in the margin and with no provi-

sion in the bill of lading itself as to the manner of

stowage is used, the import of such ‘clean’ bill of - -

lading is that goods are to be secured under

a Malate nae

It is conceded that the bill of lading issued in

this case was ‘clean’ in the broader sense, that is,

nothing was printed or noted in the margin. How-

ever, libelant seeks to make the broader usage of a

‘clean’ bill of lading synonymous with its narrower

usage and thereby establish that under deck stowage

was implied by this bill of lading; and therefore it

_ concludes that the clause permitting on deck stowage

was invalid. :

A ‘clean’ bill of lading cannot import under deck °

stowage except in the absence of a specific provision

as to stowage.’’ [Citations omitted.] 91 F. Supp.

at 665,

One final argument made by plaintiff must be considered.

Britannica points to the fact that the regular forn) bill of

lading containing the applicable contract term was incorpo-

rated by reference into the so-called ‘short form’’, and to

the fact that the print on the long form bill of lading was

fine. It then argues that it should not be held to have agreed

to this clause, apparently because neither its employees

nor its agents read the regular form bill of lading.® If this _

* It has been, held that an innocent purchaser for value of a bill

of lading takes with notice of the provisions of the bill. Givaudan

Delawanna v. The Blijdendijk, 91 F, Supp. 663, 666 (S.D.N.Y.

1950). It» would seem that @ fortiori the shipper must be held to

such notice. ;

DR Aare Uae TBR ee et Son Zpee Phe 0 nS iA ot 2p RE

12a -

Appendix B

were an occasional and inexperienced shipper dealing di-

rectly with the carrier, such an argument might engender

at least sympathetic consideration. But Britannica was

and is no ‘‘babe’’ in the shipping ‘‘woods’’. It engaged

an experienced shipping agent, United Cargo, to make final

arrangements for passage to Japan. United Cargo deals

with evarriers, including the defendant, on a daily basis,

It: should be well acquainted with the provisions of the

bills of lading used by the carriers. I think it is entirely

proper to hold Britannica to the terms of the bill of lading,

especially since it could have assured below deck stowage

by merely notifying the defendant that such was requiréd.

Decree or judgment for defendant.

Dated: New York, N. Y. wae

March 21, 1969 é

H. R. Tyuer, Jr,

U.S.DJ.

RS eae en Pama tet SARA Bihienh x Mentisa)

13a

Appendix C | z

(Opinion of the Court of Appeals for the Second Circuit)

_ UNITED STATES COURT OF APPEALS

For tur Seconp Circuir a

No. 10--September Term, 1969 ;

(Argued September 15, 1969 Decided October 39, 1969)

| Docket No. 33495

Encycioparpia Brivannica, Inc.,

Plaintiff-A ppellant,

SS ‘Hone Kone Propvcer,’’ her engines, ete., and

UntversaL Marine CorPorATION,

Defendant-Appellee.

Before:

Moors, Hays and ANDERSON,

Circuit Judges.

Appeal by shipper from judgment by United States Dis-

trict Court, Southern District of New York, Harold R.

Tyler, Jr., Judge, holding carrier not liable for damage to

cargo by sea water. Reversed and remanded.

F’, Hersert Prem, Esq., New York, N. Y. (Big-

ham, Englar, Jones & Houston, New York,

_N. Y., on the brief), for Appellant.

l4a

Appendix C

Joun J. Suuiivay, Esq,, New York, N. Y. (Men-

des & Mount, “ew York, N. Y., on the brief),

for Appellee.

Awperson, Circuit Judge: » |

This case concerns a claim for damage by breakage and

sea water to approximately 1300 cartons of encyclopedias

shipped by the appellant, Britannica, from New York to

its affiliate in Yokohama, Japan. The damaged cartons were

a part of a shipment of 4080 cartons of books, sent by ap-

pellant from its Chicago plant to its agent in New York,

United Cargo Corp., which packed the cartons into seven

separately numbered, metal containers, 17’ x-8’ x 8’, and

one smaller metal pallet container, also numbered. On De-

~ eember 2, 1964 United delivered the containers to 8.S. Hong

Kong Producer, owned and operated by appellee, Universal

. Marine Corporation, which received the shipment onboard

in ‘‘apparent good order and condition’’ and issued a

‘*short form’? bill of lading. Unknown to Britannica and

United only two of the containers were stowed below deck

while six were stowed on the weather deck. - The short form

bill in itself contained no notice or statement that the con-

tainers were to be carried as deck cargo or that they

_< might be so earried, but it incorporated by reference’ all

' The provisions of the short form bill are as follows:

“Received the goods, or packages, said to contain goods here-

in mentioned, in apparent good ofder and condition unless

otherwise indicated, to be transported and delivered or tran-

shipped as herein provided.

This Short Form Bill of Lading is issued for*the shipper’s

convenience and at its request, instead of the carrier’s regular

form of Bill of Lading. It shall have effect subject to the pro-

visions of the U. S. Carriage of Goods by Sea Act, 1936, or of

the Carriage of Goods by Sea or similar Act in force in the

locality where this Bill of Lading is issued, so far as they may

be applicable.

;

% y

jp tewenis i 6

lia

Appendix C

of the terms of the carrier’s regular form bill of lading.

Of this regular form the portion which is at the center of

the controversy in this case, is Clause 13, of which Britan-

nica claims to have been wholly unaware but which reads,

in full, as follows:

‘13. Srowace On Deck, etc.—Goods stowed in

poop, forecastle, deckhouse, shelter deck, passenger

space, storeroom, bunker'space, or any other covered-

in space shall be deemed to be stowed under deck for

all purposes, including General Average.

The shipper represents that the goods covered by

this bill of lading need not be stowed under deck

and it is agreed that it is proper to and they may

be stowed on deck unless the shipper informs the

carrier in writing before delivery of the goods to

the carrier that under deck stowage is required.

With respect to goods carried on deck, all risk of

loss or damage by perils inherent in or to incidental

[sic] such carriage shall be borne by the shipper and

the carrier shall have the benefit of ‘all the terms of

. this bill of lading not inconsistent with the provisions

All the terms of the carrier's regular form of Bill of Lading

are incorporated herein with like force and effect as if they

were written at length herein. A copy of such Bill of Lading

may be obtained from the carrier, its agents or the master.

All agreements or freight engagements for shipment of goods

are superseded by this Bill of Lading and all its terms, whether

written, typed, stamped or printed, or incorporated by reference

are agreed by the shipper to.be binding and to govern the re-

lations, whatever they may be, between those included in the

words ‘shipper’ and ‘carrier’ as defined in the carrier’s regular

form of Bill of Lading. One signed Bill of Lading, duly

endorsed, will be surrendered, if requested, to the agent of the

vessel at port of discharge in exchange for delivery order.”

16a

Appendix C

of this clause and shall have the benefit of all and

the same rights, immunities, exemptions, and limita-

tions as provided for in Act 4 of the Hague rules or

the corresponding provision of any Act that may

be applicable, excepting subdivisions (1), (2)(j),

(2)(q), (3) and (4) thereof. In no event shall the

carrier be liable for any loss or damage to goods

so carried’ on deck arising or resulting from any

cause whatsoever, including unseaworthiness, unless

affirmatively proved to be due to lack of due dili-

.gence or to the fault or the neglect of the carrier

or those for whom it may otherwise be responsible,

but the carrier shall not in any event be liable for

any act, neglect or default in the navigation or the

management of the ship.’’

Universal delivered the original short form bill of lading,

duly signed by its agent, but no copy of the long form bill

was attached to or issued with it, though the short form

stated where the regular form could be obtained. Neither

the shipper nor its agent asked for one. The short form

’ bill was issued after the delivery of the containers to Uni-

versal, and there was no opportunity for Britannica or

United to inform Universal ‘‘in writing before the delivery

of the goods to the carrier’’ that the containers should be

stowed under deck. There was no evidence of any oral

understanding or agreement by the parties regarding on

deck stowage nor was there any evidence of notice by

Universal to the appellant prior to the receiving of the

containers on board that Universal had the option under

Clause 13 to stow the containers above deck, nor was there

any evidence that the appellant had any actual notice or

knowledge that above deck stowage might be made. More-

over, there was no proof that the appellant had ever had

any past dealings with Universal although United had-dealt

with Orient Lines. There was no evidence that\either

* Britannica or United had previously been issued a bill of

17a

Appendix C

lading containing Clause 13 nor does it appear when Uni-

versal adopted and began using that clause in its regular

long form bill of-lading. The goods were loaded and stowed

on December 2, 1964 at 1300, and the ship departed the

Port of New York at 2230 of the same day.

“In the course of its winter crossing of the Pacific the

Hong Kong Producer ran into what was described as “‘bois-

terous’’ weather. The abstract from the ship’s log showed

two days, January 11 and 12, 1965, when the wind velocity

reached force 7-8 (28-40 knots) on the Beaufort scale and

one day, January 13, when it reached 8-9 {54-47 knots),

but it made no references to. the condition of the sea nor

any record of damage to the ship. The trial court found

that ‘‘a considerable amount of sea-water passed over its

weather decks on numerous occasions.’ The parties stip-

ulated, and the court also found, that the shipment sus-

tained some damage by breakage and sea water. The

appellee’s surveyors, ‘on arrival at Yokohama, reported

specific damage to two of the containers. The findings

below state that over 1300 cartons had come in contact with

sea water. Of these, 420 cartons containing volumes 1-12

of the encyclopedia and 236 cartons containing volumes

13-24, had sustained damage so extensive that the books

were unmerchantable. The remaining volumes were only

slightly damaged, and no claim has been made with regard

-to them. The two containers were also found to have been

damaged.

The central issue of this case, as the trial court noted,

is Britannica’s claim that Universal issued to it what ap-

peared to be a clean bill of lading which imported below

deck stowage, and that Universal deviated therefrom by

stowing six of the containers on deck. The district court

held, in support of Universal’s contention, that it did not

issue a clean bill because Clause 13 of the bill of lading

itself ‘specifically addresses itsclf to the question of on-

a Sah

18a

Appendix C

deck stowage, stating that ‘. .. it is agreed it is proper

to and they [the goods] may be stowed on deck... .’”’

Under the terms of Clause 13 the carrier had the option

to stow the containers above or below decks, unless the

shipper notified it in writing, before delivery of the goods

to the carrier, that under deck stowage was required. The

district court concluded that the issue was a simple matter

of contract; the shipper did not give written notice to the

edrrier that under deck stowage was required and, there-

fore, the carrier had the right to stow the goods on deck

if it elected to do so.

We do not view this case as one of simple contract

between completely free contracting parties. Universal is

a common carrier and its legal relations may be affected by

public interest. Congress has recognized this, with regard

to shipment of cargoes out of the ports of this country in

ocean going vessels, through enactment of The Harter Act,

46 U.S.C. § 190 et seq., and the Carriage.of Goods By Sea

Act (COGSA), 46 U.S.C. § 1301 et seq.

During the century or so preceding COGSA the laws

governing liability for loss of or damage to ship-borne

cargoes, which occurred in the course of their shipment

overseas to foreign ports ran through wide swinging ex-

tremes from almost absolute responsibility of the carrier

under the general maritime law to almost absolute immu-

nity from such liability when the carriers, exercising their

vastly superior bargaining powers, compelled shippers to.

submit to the insertion of innumerable, all embracing eéx-

ceptions to liability in bills of lading which the carriers

drafted. The courts of this country took steps to redress

the balance by declaring some of these exceptions invalid.

In some other countries, notably England, the courts upheld

the exceptions. In 1893 by enacting The Harter Act, Con-

gress sought to provide a statutory solution which would

be fair to the competing interests. The Hague Rules, which

NS Cute Tg Bees ois AA ESTEE et ee \ RAS Ana eae

19a

: Appendix C

leaned heavily on The Harter Act, were promulgated in

1921 and amended by the Brussels Convention in 1924,

under the sponsorship of maritime nations and representa-

tives of ocean shipping, to provide a set of uniform pro-

visions for ocean bills of lading. This country joined the

Brussels convention in 1936, and, to make its adherence

effective, passed COGSA which duplicates the nee Rules

practically word for word.

The purposes behind Harter, the Hague Rules and

COGSA were to achieve a fair balancing of the interests of

the carrier, on the one hand, and the shipper, on the other,

and also to effectuate a standard and uniform set of.pro-

visions for ocean bills of lading. In Robert C:Herd é& Vo. v.

Krawill Machinery Corp., 359 US. 297, 301..(1959 the _

Supreme Court, speaking of the history of: COGSA éaid: c

‘*The legislative history of the Act’ shows that it

was lifted almost bodily from the Hague Rules of

1921, as amended by the Brussels Convention of 1924,

51 Stat. 233.5 The effort of those Rules was to estab- .

lish uniform ocean bills of lading to govern the rights

and liabilities of carriers and shippers inter se in

international trade.’’

See Pan-Am Trade & Credit Corp. v. The Campfire, 156

F.2d 603 (2 Cir.) cert. denied 329 U.S. 774 (1946) ; Scar-

burgh v. Compania Sud-Americana de Vapores, 174 F.2d

423, 424 (2 Cir. 1946); Standard Electrica, S. A. v. Ham-

burg Sudamerikanische, etc., 375 F.2d 943 (2 Cir.), cert.

denied 389 U.S. 831 (1967).

In anticipation of persistent efforts by carriers, who are

the drafters of ocean bills of lading, to limit or eliminate

5 “The Hague Rules as amended by the Brussels Convention were,

in turn, based in part upon the pioneering Harter Act of 1893, 27

Stat. 445, 46 U.S.C. §§190-196. See H. R. Rep. No. 2218, 74th

Cong., 2d Sess. 7.”

Het Sey ohG

20a

Appendix C

their own duties and responsibilities under the Act by

inserting exceptions into the foot long, double columns of

well nigh indecipherable fine print, various exceptions to

their possible liabilities, COGSA included a self-protective

provision, § 1303(8), which prohibited tne inclusion of

clauses which relieve the carrier or ship from liability for

loss or damage to goods arising from negligence, fault. or

failure in fulfilling obligations specified in other portions of

the section or lessening such liabilities.*

This is not to say that the parties to a bill of lading are

forbidden by COGSA to agree upon exceptions outside of

the provisions of the Act. As stated in Gilmore & Black,

Admiralty, § 3-25 at 125 (1957

‘*Cogsa allows a freedom of contracting out of its

terms, but only in the direction of ‘increasing the

shipowner’s liabilifies, and never in the direction of

diminishing them.’’ (Footnote omitted.)

See also COGSA § 1306, which i is, however, not se ig ei

to the present case.

In spite of the clear intent and purpose of COGSA, some

carriers sought by various means to insert into their bills

of lading provisions which would give them an added ad-

vantage or lessen their liabilities. These were not, how-

ever, necessarily arbitrary or lacking in equities. One

246 US.C. §$1303(8) provides:

~“(8) Any clause, covenant, or agreement in a contract of

carriage relieving the carrier or the ship from liability for

loss or damage to or in connection with the goods, arising from

negligence, fault or failure in the duties and obligations pro-

vided in this section, or lessening such liability otherwise than

as provided in this chapter, shall be null and void and of no

effect.. A benefit of insurance in favor of the carrier, or simi-

lar clause, shall be deemed to be a clause relieving the carrier

from liability.”

IRE ATRIOS CES SK. GNA RTM CP lak wad PD EGRET LEEK A MAG TEI 2 4

mm | 2la

Appendix C

provision known as the ‘‘Both-to Blame Clause’? was put in

practically all ocean bills of lading after COGSA. It applied

where there was a collision between two ships both of which

were at fault and cargo was lost or damaged. If a recovery

was made by the cargo against the non-carrying ship, the

effect of the provision was to require that the amount

recovered be paid over to the carrying vessel. This was

considered an indemnification of the carrying ship for what

it had to pay to the non-carrying ship by reason of the

cargo damage, though COGSA had relieved the carrying

ship of any liability for damage to its cargo because of

negligent operation of the ship. The Supreme Court, how-

ever, struck down the clause as a violation ef ¢ 1303(8).

United States v. Atlantic Mutual Ins. Co., 343 U.S. 236

(1952).*

* The decision affirmed the holding of this court in the case,

before us sub nom. United States v. Farr Sugar Corp., 191 F.2d

370 (2d Cir. 1951). A portion of the opinion is set forth at length

in Gilmore & Black, Admiralty, § 3-39, note 106 at 155 (1957). It

is repeated here because in its broader aspect it bears on the simple

contract approach to the issue of the validity of Clause 13 in the

case now before us. While there is no evidence that use of this

clause is common or wide-spread in bills of lading, it would speedily

be adopted, if it were held to be valid, because of the enormous

advantage it gives the carriers. The quoted portion is 191 F.2d at

374 and reads as follows:

“The shipowners stress the consensual nature of the clause,

arguing that a bill of lading is but a contract. But that is so

at most in name only; the clause, as we are told, is now in

practically all bills of lading issued by steamship companies

doing business to and from the United States. Obviously the

individual shipper has no opportunity to repudiate the docu-

ment agreed upon by the trade, even if he has actually examined

it and all of its twenty-eight lengthy paragraphs, of which this

clause is No. 9. This lack of equality of bargaining power ‘has

long been recognized in our law; and stipulations for unreason-

able exemption of the carrier have not been allowed to stand.”

ees —_— a es eens ee ee

22a ,

Appendix C

Some carriers also sought to get around COGSA by

providing in their bills of lading that only the law of a |

specified foreign country would apply and that any suit

would have to be brought in the courts of that country. This

court approved the provision. in a bill of Iading that

Swedish law would apply and suits could be brought only

in Swedish courts: Sweden applied the Hague Rules, and

this undoubtedly was a persuasive factor in the decision,

which also required that a clause of that kind be ‘‘not un-

reasonable in the setting of the particular case.’? William

H. Muller & Co: v. Swedish American Line Ltd., 224 F.2d

806 (2 Cir.) cert. denied 350 U.S. 903 (1955). The holding

did, however, give a certain amount of encouragement to the

inclusion of such a elause in a bill of lading wherever the

foreign country’s law was less favorable than COGSA to

shippers, but such a provision actually violated COGSA

because it lessened the carrier’s liabilities. See Gilmore &

Black, Admiralty, § 3-25 at 125, note 23 (1957). Therefore,

Muller was expressly overruled by Indussa Corporation v.

S.S. Ranborg, 377 F.2d 200 (2 Cir. 1967), by the full court

sitting in bane, on the ground that the holding in Muller

violated the provisions of COGSA, particularly § 1303(8),

as well as its intent and purpose.

Turning to Clause 13 of the bill of lading: issued by Uni-

versal in the case now before us, we see a new and in-.

genious device which carries with it the strong likelihood

of not only lessening the liabilities of the carrier but also

stripping the shipper of all the protection afforded it by

COGSA. This is doubtless the reason why the words

‘*. .. so far as they may be applicable’’ were inserted fol-

fowitne the Clause Paramount, required-by 46 U.S.C. § 1312,*

* The pertinent question of § 1312 reads as follows:

“. . every bill of lading or similar document of title which is

evidence of a contract for the carriage of goods by sea from

ports of the United States, in foreign trade, shall contain a

statement that it shall have effect subject to the provisions of

this chapter.”

23a

Appendix C

in the carrier’s short form bill. In the first place Clause 13

places:the burden of inquiry on the shipper, in circum-

stances in which it is highly unlikely that such an inquiry

would be made, to-search out a copy of the carrier’s regular

bill of lading to discover a clause which in effect authorizes

a serious deviation from the standard provisions and which

can only be prevented by the shipper’s assuming the burden ~

of giving notice to the carrier before delivery that below

deck stowage is required. Even if the shipper, as in this

case, never made any actual representation that the goods

‘ need not be stowed under deck, as Clause 13 says, never

agreed that they might be stowed on deck and never had

any notice or knowledge of the provisions of Clause 13, it .

would, nevertheless, by default lose the right to have its

goods stowed below deck. Once the shipper has by default

lost the right to under deck stowage, the concept behind

Clause 13 assumes that the carrier is thereafter in a posi-

tion to claim that the shipper has lost-all its rights under

COGSA because 4 1301 by definition eliminates deck cargo

from the provisions of the Act. Pannell v. United States

Tanes Co., 263 F.2d 497, 498 (2 Gir. 1959), cert. denied, 359 -

U.S. 1013 (1959) ; Globe Solvents Co. v. The California, 167

F.2d 859, 862 (3 Cir.), cert. denied, 335 U.S. 844 (1948);

Blanchard Lumber Co. v. SS. Anthony IT, 259 F. Supp.

857, 864 (S.D.N.Y..1966).- This leaves the carrier free to

write into the bill of lading his own rules as to liability

and burden of proof, just as Universal did in the third

paragraph of the clause. The shipper, at this point a shorn

lamb wholly untempered to the wind, has placed upon it

‘fall risk of loss or damage by perils inherent in or to in-

cidental [sic] such carriage’’ and the carrier retains for it-

self, not only all benefits inuring to it under the bill of lad-

ing, but to make it absolutely certain, incorporates all the

rights, immunities, exemptions ‘and limitations provided

for in § 1304 of COGSA except for five provisions which

would require the carrier to assume the burden of proof, /

enh Dn,

4 ta

24a

Appendix C

as in (1), (2q) and (3) or where the carrier might be ex-

posed to certain claims- mentioned in the subsection, as in

(2)(j) (see Gilmore & Black, Admiralty, § 3-34 at 143-144

(1957)), and (4). Clause 13 in its final sentence places

the entire burden of proof of showing that loss or damage

to cargo resulted from lack of due diligence or fault or

neglect of the carrier on the shipper and goes on to re-

iterate the provision of § 1304 (2) (a) that in no event will

’ the carrier be liable for any neglect or default in the navi-

gation or the management of the ship. Thus, as the result

of an unusual provision inserted by the carrier in its ‘‘reg-

ular’’ bill of lading, which it never specifically. brought to

the shipper’s attention, and of which the shipper had’ no

actual knowledge, the shipper was compelled to.assume the

risk of loss or damage resulting from above deck stowage

of its goods, it lost its protection under COGSA, and was

subjected to the burden of proof that loss or.damage was

due to the fault of the carrier, although evidence of such

fault rests almost entirely in the hands of the carrier.

What adds to its unfairness is the context in which the

ocean bill of lading functions. In accepting the short form,

the shipper relies upon the fact that the long form, which

is incorporated by reference, contains only the usual pro-

visions which closely follow COGSA, unless there is some

warning on the face of the short form of special terms or

exceptions which differ from the COGSA provisions. If

there is no definite agreement one way or the other,. the

| shipper is entitled to expect below deck satin ii It is

5 R. Colinvaux, Carver’s Carriage of Goods by Sea 697 (11th

ed. 1963). It is there stated that:

“Goods ought not to be carried on deck if they are exposed

to a greater risk than when stowed in the usual carrying part

of the ship, unless the shipper has assented to their being so

25a

Appendix C

impractical for a shipper to be compelled to make a de-

tailed study of all of the fine print clauses of the carrier’s

regular bill on each occasion before it ships out a package. °

One of the principal purposes of COGSA was to obviate

the necessity for doing so. At the time of its enactment

the House Report, H. R. Rep. #2218, 74th Cong., 2d Sess.

7, (1936), said,

‘‘The uniformity and simplification of bills of lad-

ing will be of immense value to shippers who will be

relieved of the necessity of closely examinizig all bills

of lading to determine the exceptions contained

therein to ascertain their rights and responsibilities ;

to underwriters who insure the cargo and are met

with the same difficulties; and to bankers who extend

credit upon the bills of lading’

* * ¥

‘‘There are in existence hundreds of different

forms of bills of lading with varying exceptions

which will be eliminated by this legislation. This

lack of uniformity creates an undesirable condition

in business which will largely be corrected by this

bill. On former occasions. copies of bills of lading

were presented to the committee. These bills con-

tained exception clauses in print so fine they could

only be read with great difficulty.’’

It is also interesting to note the remarks of Senator White

made on the Senate floor during the debate on COGSA:

carried, or unless a custom to carry in that way exists in the

particular trade.” Jd. at 697. |

See also J. Ridley, Carriage of Goods by Land, Sea and Air 104

(2 ed. 1965), where it is stated that “the carrier is, however, only

entitled to stow goods in those parts of the ship which are normally

used for stowage.”

“en

26a

Appendix C

ee: &

‘*The bill is designed to bring about uniformity

in ocean bills ofading precisely as through the years

uniformity in bills of lading has been worked out

covering land transportation.’’ 79 Cong. Rec. 8954

(1935).

There was nothing whatever on the face of the carrier’s

short bill of lading to indicate that the containers were deck

cargo. The shipper properly assumed it was receiving a

clean bill of lading, and the éarrier also considered that

the short form meant a clean bill. This was not, as the

trial court suggested, a case of confusion between broad

and arrow meanings of ‘‘clean bill’’ as described in Givau<

dan Delawanna Inc. v. The Blijdendijk, 91 F. Supp. 663

(S.D.N.Y. 1950). Rather a ‘‘clean bill’? was understood by

the parties as importing under deck stowage. It seems

fairly clear that what happened was that the, two contain-

ers were stowed, as understood, below deck but that there

was no hold space to take the remaining six and they were

arbitrarily stowed on deck.

While the obvious theory back of Clause 13 assumes that

the shipper’s failure to give written notice requiring below

deck stowage makes the goods deck cargo and thereby frees |

the carrier from all of the strictures placed in COGSA for

the benefit of the shipper, so that the carrier can write the

rules about liability and burden of proof, we conclude that

as the bare wording of Clause 13-stands, the shipper, even

though it gave no such written notice as Clause 13 calls

* The defendant carrier, in its memorandum in opposition to the

plaintiff's motion for partial summary judgment in the district court’

said on page 2: “. . . six of the containers were stowed on deck,

whereas a clean bill of lading N.Y. JY-15 was issued covering the

shipment.” Also counsel for the carrier in his accompanying affidavit

said, page 5, “admittedly the carriage of six’ metal containers were

carried on deck and this was not noted in the bill of lading.”

OAR Sie a OO, Be

27a

Appendiz C

for, nevertheless, did not lose its protections under COGSA °

because it literally does not come within COGSA’s defini-°

tion of the exception to ‘goods,”’

The terms of the agreement for the carriage of the con-

tainers of books were drafted and issued by the earrier and

constituted a contract of adhesion. Consequently any spe-

cial provisions, not uniformly standard in bills of lading

and not required by COGSA, must be narrowly and strictly

construed against the carrier, The rule of contra profer-

entem is discussed in 3 Corbin, Contracis §559 (1960);

among other things Professor Corbin said, at 269-270:

‘*The rule is hardly to be regarded as truly a rule

of interpretation. ... It is chiefly a rule of public pol-

icy, generally favoring the underdog. .. . It may ‘well

be that the rule is applied mainly in cases where the

agreement contains an ‘unconscionable’ or at least

an ‘unreasonable’ provision, and the court feels that

the attention of the party whom it affects adversely

was not clearly called to it.’’

The relevant part of § 1301(¢) which defines goods says,

‘*The term goods includes goods, wares [ete.] ... except...

cargo which by the contract of carriage is stated as being.

carried on deck and is so carried.’’ The bill of lading (short

form and long form combined) nowhere states that the

cargo ts being carried on deck. Clause 13 says it may be so

carried but not that it is being so carried. No consignee or

assignee could tell from the bill whether it was below deck

or on deck cargo. ;

In St. Johns Corp. v. Companhia Geral, 263 U.S. 119

(1923), the carrier and shipper eftered into a formal

written and signed freight reservation agreement which

expressly gave the carrier the option to stow on deck or

below deck, The carrier issued a clean bill containing no

28a

Appendix C

reference to the freight agreement between the carrier and

shipper and no statement that the goods were on deck

eargo. The goods were jettisoned and lost in an emergency.

The Supreme Court held that the issuance of the clean bill

was, in effect, an exercise of the option in favor of below

deck stowage, and because the cargo was stowed on deck,

there was a deviation which made the carrier liable for the

lost goods. |

The St. Johns case is distinguishable from the present

ease in that there was in the former a separate written

agreement for the option and no mention of it in the bill of

lading, whereas in this case the option was in the regular

form of the carrier. The carrier in St. Johns argued, in

effect, that the option was exercised by the actual stowage

on deck and the silence in the bill of lading didn’t act as a

promise to earry under deck. But the Supreme Court held

it was the bill of lading that governed and determined how

the eargo was to be stowed and that this was not-affected

by what the carrier did or by the terms of the separate

freight agreement. In the présent case the bill of lading

stated the option, but it contained no information or

declaration whatever as to how it was exercised. As in the

St. Johns case the option could not be left to be exercised

by the actual placing of the cargo on deck or below deck.

The bill of lading did not, therefore, qualify the goods

within the exception to § 1301(¢) as“... cargo which by the

contract of carriage is stated as being carried on deck . . .”’

As_the terms of the bill of lading do not bring the cargo

within the exception, the containers were ‘‘ goods’ to which

COGSA applied. Clause 13 states that the carrier will not

be liable for any damage unless the shipper proves

negligence or lack of due diligence on the carrier’s part.

This effects a shift in the burden of proof from the carrier,

as provided by COGSA, to the shipper. COGSA had

CH. inte, ME Pa ee OE

Appendix C

effected a change from the pre-Harter situation when the

burden of proof was on the shipper, by shifting it to the

carrier.’ The burden of proof which COGSA has placed on

the carrier is a major weapon in the shipper’s arsenal.* It

is almost impossible for the shipper to prove that the

carrier was negligent or lacked due diligence because as a

practical matter all evidence on those issues is in the

earrier’s hands. Clause 13’s attempted transfer of burden

of proof to the shipper creates such a lessening of the

earrier’s liability as to be impermissible under § 1303(8).

Another reason why Clause 13 of the carrier’s regular

bill of lading cannot be invoked by Universal is because

Universal is estopped from doing so, Certainly Universal,

as the carrier, was chargeable with knowledge of Clause 13

in its own regular bill. In spite of this, it received delivery

of the containers from United and put them on board before

issuing the bill of lading, At’ that point in time it was

impossible for the shipper ‘to inform the carrier in writing

before delivery of the goods to the earrier”’ that under deck

stowage was required. By, accepting the goods without

notifying the shipper that it would be subject to an option

in the carrier to stow thé containers on deck, the carrier

waived any right it may otherwise have had to exercise

_ Such an option. The trial court’s idea that the shipper was

chargeable prior to delivery of the goods to the carrier and

* The burden is normally on the carrier either to prove that it

exercised due diligence or that jt was free from negligence in the

preparation of the ship and care and stowage of. the cargo. See

§$4(1) and 4(2)(q) of COGSA, 46 U.S.C. §§ 1304(1) and

1304(2) (q).

* The legislative history is quite emphatic on this point. . See

H. R. Rep. No. 2218, 74th Cong., 2d Sess. 8-9 (1936). The report

stated, for example, that “this shift in the burden of proof [from

the shipper to the carrier] will constitute a tremendous advantage to

- Cargo owners.” Jd. at 9,

30a

Appendix C )

the issuance of the bill of lading with the terms the bill of

lading was going to contain is untenable. There was no

evidence in the case of preliminary negotiations or oral

representations by either party relative to anything con-

tained in the carrier’s bill of lading except for the names

of the persons concerned, a description of the cargo and its

destination which were furnished the carrier through a

short form bill prepared by United and apparently handed

over to the carrier with delivery of the containers. The

trial court’s finding that Britannica was, from experience,

familiar with Universal’s bill of lading, headed ‘‘Orient

Overseas Line,’’ and that its agent, United, was, or should

have been, because it dealt with Orient Overseas Line,

infers too much. There is nothing whatever to show that

Universal ever issued to Britannica or United a bill of

lading containing Clause 13 or anything like it nor, for

that matter, was there any evidence that they had ever been

issued a bill by any other carrier containing such a clause

or anything like it. e

From what little there is in the record it appears as if

the parties proceeded on the assumption that the carrier

had given the shipper a clean bill importing below deck

stowage and that it was only because of a stowage problem

that arose after issuance of the bill that the carrier found

it necessary to stow part of the cargo on deck. The carrier

itself so regarded its own bill of-lading throughout the pre-

trial proceedings * and the entire presentation of evidence

in the trial. It was not until the defendant carrier filed its

post-trial brief that any mention of Clause 13 of its bill of

lading was made. Hither it was thrown in as a possible

make-weight or the carrier itself had forgotten about the

clause, lost as it was in the obscurity of the barely decipher-

® See note 6, ante.

dla

- ppendix C

able columns of print in which the bill’s many provisions

were contained. .

At the trial below, the defense did not rest upon Clause 13

as authorizing stowage on deck but on custom of the port.

_When for the first time in its brief the carrier mentioned

Clause 13 as a defense to breach of contract of carriage, the

trial court made this the cornerstone of its decision and gave

in a footnote only a brief elance in passing at the issue of

a custom in the port of carrying goods in containers on

deck, in the following words:

‘‘Indeed, if a finding on this issue were required

in this case, I would tend to the view that defendant,

through its witnesses Rand and Sembler, established

that in recent years there has been a growing prac-

tice of stowage of containerized cargo on weather

decks of container ships and general cargo vessels.”’

The parties have continued to contest the issue of custon#

on appeal and some comment is called for. The carrier

argues that there is a custom in the shipping industry of

carrying containerized cargo on deck, regardless of the pro-

visions of the bill of lading. If there is such a custom, the

bill of lading will be presumed to have been issued subject

to it and the shipper may not claim liability on the part

of the carrier for on deck stowage. See The Delaware, 81

U.S. [14 Wall.] 579, 605 (1871) ;° St. John -Corp. v. Com-

panhia Geral, supra.

The record in this case discloses that the carrier did

not prove the existence of such a custom in the Port of

’° Of course if the bill of lading specifically stipulates that there

shall be under deck stowage, a custom to the contrary would not over-

ride the stipulation, and on deck stowage in such circumstances would

be an unjustified deviation.

fa ew Me rs peer ot

32a

Appendix C

New York. It produced-two witnesses who testified on this

point. The first, one Rand who was a representative of the

Grace Line, stated that his company would stow any con-

tainer on deck even if the shipper desired under deck stow-

age. Such testimony is certainly insufficient to show a cus-

tom of the port. A party cannot claim to have proved a

valid custom merely by showing that it is the habit of some

carriers to stow goods on deck contrary to the wishes or

knowledge of shippers. The mere habit of a carrier to stow

cargoes anywhere it chooses, even if it is in breach of its

contract, cannot be said to establish a custom. See The

Royal Exchange Shipping Co. v. W. S. Dixon ds Co., 12

App. Cas. 11 (House of Lords 1886).

The gist of the testimony of the earrier’s second witness,

William Sembler, was that he knew it to ‘be the practice

of certain ships to carry containers on deck because they are

“small ships designed for island trade.’’ This testimony

has no bearing on any custom of stowing containers on the

decks of general ocean-going cargo vessels in international

trade."’ This witness also testified that he had seen con-

tainers on the decks of various ships in the New York

harbor. But again, this is not evidence of a custom in the

port. Incoming vessels from foreign ports would not show

custom in the Port of New York. The fact that containers

are at times carried on deck does not create a custom. They

't Sembler testified that.cargo was stowed on deck i the island

trade because the ship’s own gear had to be used to unload cargo

at many small island ports. He noted that in such a situation it was

not practical to stow the containers under deck. He also testified

_ that certain refrigerated containers were stowed on deck because

there were no electrical outlets for the refrigeration units below deck.

None of these considerations is pertinent to the stowage issue in the

present case.

fis tavbat wo era we

33a

Appendix C

could be on deck pursuant to contract or in violation of

contract as well as pursuant to a custom,"

After examining all the testimony introduced on this

point, we conclude that as a matter of Jaw the carrier has

presented no evidence which even tends to show that sueh a

custom existed. The carrier is, therefore, not justified in

claiming that the on deck stowage was permissible for that

reason. We conclude that there was no custom in the port

which justified Universal’s stowage of the containers on

deck nor can the carrier rely upon the authority_of Clause

15 of its bill of lading for its action. In consequence the

bill of lading must be treated as a clean bill importing

below deck stowage. The slowing of the six containers on

the weather deck was, therefore, an unreasonable deviation.

It is not disputed that the damage to the cargo was caused

by sea water to which it was exposed by being stowed on

deck. The carrier is liable for the full amount of damages

sustained without the benefit of the $500 limitation per

package of COGSA. Jones v. The Flying Clipper, 116 F.

Supp. 386 (S.D.N-Y. 1953). The measure of damages is

the fair market value at Yokohama, Japan, of the damaged

sets in the condition they were in when shipped, less any

salvage. St. Johns ( ‘orp. v. Companhia Geral, supra, at 125;

The Ansaldo San Giorgio I v. Rheinstrom Brothers Co.,

294 U.S. 494, 496 (1935); R. 7. Jones Lumber Co. v. Roen

Steamship Co., 270 F.2d 456, 459 (2 Cir. 1959).

' The defendant repeatedly madg_reference to the fact that so-

called “container ships” carry containers on deck. This fact has no’

bearing on the propriety of on deck stowage in the present case. A

container ship is specially--outfitted safely to stow containers on deck.

The Hong Kong Producer is a general cargo vessel and has no spe-

cial rigging for the purpose. What may be an established custom for

container ships is not proof of a custom in the port for general cargo

vessels.

34a

Appendix C

The judgment of the district court is reversed and the

ease is remanded for the determination of the issne of

damages.

Hays, Circuit Judge (dissenting) :

It is unlikely that, except for the district judge, who in

the course of his careful opinion never once mentioned

COGSA, anyone will be more astonished at the majority

opinion-in this case than the appellant who in a forty-nine

page brief addressed two pages to an almost pro forma

argument on“COGSA.

I suppose that nobody would deny that a carrier and a

shipper can agree.that cargo is to be stowed on deck. Not

only has some cargo always been carried in this. way, see

Davidson v. Flood Bros., 30 F.2d 279 (9th Cir.), cert. de-

nied, 279 U.S. 853 (1929); The Peter Helms, 24 F. Supp.

461 (W.D. Wash. 1938); American Tobacco Co. v. The

_ Katingo Hadjipatera, 81 F. Supp. 438 (S.D.N.Y. 1948),

modified, 194 F.2d 449 (2 Cir. 1951), cert. denied, 343 U.S.

‘978 (1952); Givaudan Delawanna v. The Blijdendijk, 91

F’. Supp. 663 (S.D.N.Y. 1950), but the district judge in. the

present case said that-if a finding were required he’ would

“*tend to the view that defendant ... established that in

recent years there has been a growing practice of stowage

of containerized cargo on weather decks... .”’

COGSA itself recognizes that the contract of carriage

ean properly provide that cargo is to be carried on deck

(46 U.S.C. § 1301(¢) (1964)).

85a

Appendix C

The only issue in this case is the simple question of

whether the shipper agreed that the carrier could, if it so

chose, stow the’ cargo on deck.!

From the majority opinion one might gather that devil-

ishly clever Chinese carriers were dealing with the un,

worldly professors who write the articles for the Eneyclo-

paedia. In facf not only does the Encyclopaedia Britannica,

Ine. regularly ship books tcumll parts of the world, but in’

. the present instance it hired an agent, the sole business

of which consists of assembling and shipping cargo and

which conducts this business everyday with many different

shipping lines. Moreover, whatever the need for protection

of small, individual shippers from being forced into ‘‘con-

tracts of adhesion’’ by large carriers, one might well ques-

tion whether carriers may seek to curry favor with ship-

ping agents such as we have here who conduct a large busi-

ness in assembling cargo from many shippers for carriage

in containers.

The shipper was made aware,of the existence of the_

regular bill of lading by the reference in the short form

bill of lading which was delivered to it. It was the duty of

the shipper’s agent as an ordinary prudent businessman

‘gularly engaged in the shipping business to examine the:

conditions under which the shipper accepted the cargo for

shipment. If the shipping agent chose to ship the cargo

without knowing anything whatever about the terms and

conditions of the contract of carriage (as it now declares

_' The majority seeks to make fuch of a clause in the bill of lading

which purports in certain cases fo shift the burden of proof, claiming

that the clause is ineffective /by reason of contrary provision in

COGSA. But, even assuming the majority is right as to the clause

they question, the whole issue is totally irrelevant, since in the pres-

ent case there is no issue of burden of proof. Surely the presence

of a single clause that may be repugnant to COGSA does not serve

to invalidate the entire bill of lading:

36a

Appendix C

it did) it cannot now complain that that contract was not

to its liking. Nor can the Eneyclopaedia Brittanica, Ine.

recover on the ground that its agent accepted a contract

without knowing its terms.

The shipping agent was, of course, familiar with the al-

most universal practice of delivering the bill of lading after

receipt ef the goods.

‘It is true that the bill of lading is generally not

issued until after the contract has been made; both

parties, however, undoubtedly contemplate the issu-

,ance~of a bill of lading, and the courts have found

little difficulty in holding that the terms of the bill of

lading constitute a part of the contract.’’ Poor,

Charter Parties and Ocean Bills of Lading § 59, at

134-1385 (Sth ed. 1968) : ; see Luckenbach S.S. Co.

American Mills Co., 24 F.2d 704 (5th Cir. 1928) ,

Dietrich v. United States Shipping Board Emergency

Fleet Corp., 9 F.2d 733, 740-41 (2d Cir. 1925), cert.

denied, 278 U.S. 647 (1928).

If the agent had been interested in the terms of the

contract, it could have requested a copy of the form in_

advance of delivery. If it was not interested the shipper

cannot now complain of those terms.

a IL.

In any event, the shipper’s recovery should be limited

to $000 per package pursuant to Section 4(5) of COGSA

(46 U.S.C. § 1804(5) (1964)). Atlantic’ Mutual Insurance

Co.,v. Poseiden Schiffahrt G.m.bH1., 313 F.2d 872 (7th Cir.), |

: Gere: denied, 375 U.S: 819 (1963). By a express aoe that

section applies ‘‘in any event.’’

Ra BARES

37a

Appendix C .

Perhaps if the stowage of the cargo on deck had con-

stituted a breach of the contract of carriage, its provisions

would be’ inapplicable. But it seems highly unlikely that

Without including some more specific statutory direction

the draftsman of COGSA nitended that a breach of con-

‘tract should relieve the carrier and the shipper of their

rights and duties under the Act. The provisions of COGSA

apply independently of any contract. See Benedict, 1 The

Law of American Admiralty 291 n. 35 (Knauth ed. 1940),

Indeed, it is generally accepted that COGSA_modified the

doctrine of deviation in maritime law at least to the extent

that insurer’s liability’ attaches only when the damage is

causally related to the unreasonable deviation. See Searoad

Shipping Co. v. E. 1. du Pont de Nemours and Co., Inc., 361

12d 833, 835-36 (5th Cir.), cert. denied, 385 U.S. 973

(1966) ; Gilmore and Black, The Law of Admiralty §§ 3-40

‘and 3-41 (1957). It is difficult ‘to understand how the

majority opinion ean take the position that it is so impor-

tant to protect an experienced shipper from losing the

benefits of COGSA by agreeing to on deck stowage and yet

can adopt the view that a breach of the contract of carriage

nullifies the carefully balanced provisions of the Act.

Furthermore, it seems to me that each container as a unit

is the package to which the $500 limitation should be

applied. In Standard Electrica, S.A. v. H amburg Sudamer-

thanische, Etc., 8375 F.2d 943 (2d Cir.), cert. denied, 389

U.S. 831 (1967), this court held that the per package limita-

tion applied to each of nine pallets, each containing six

cardboard cartons of 40 television tuners and fastened with

metal straps. In reaching this decision, the court relied

on the characterizations of the parties, including document

descriptions, the fact that it was the shipper who made up

the cartons into a pallet for convenience and safety in

handling, and the fact that the shipper had the option under

38a

. Appendia C -

section 4(5) to obtaih full coverage ie declaring the value

_ of the goods and paying a higher tariff.

Here the containers were delivered to the carrier by the

shipper’s agent already packed with the individual cartons

of encyclopedias. On the bill of lading delivered to the

agent by the carrier upon receipt of the containers, the

‘‘No. of Pkgs.’’ and the ‘‘Description of Packages and

Goods’’ were given as, e.g., ‘‘(1) One metal container No.

UCC-5230 said to contain: 536 ctns. bound books.’’ The

shipper made no objection to this description. I would thus

hold that the parties intended each individual container to

be considered as the functional packing unit, that consider-

ing the containers as the packages promotes uniformity and

predictability, and, accordingly, that the $500 per paekage

limitation applies to the containers.

~ -®

Appendix D

(Judgment)

UNITED STATES COURT OF APPEALS | Be 4

FOT THE SEconpD Circuit

At a Stated Term of the United States Court

of Appeals, in and for the Second Cirtuit,

held at the United States Courthouse in’thé

' City of New York, on the thirtieth day of °

October, one thousand nine hundred and sixty-

nine, pe -

Present:

Hon.. Lzonarp P. Moorz,

Hon. Paut R. Hays, |

How. Rosert P. AnpERson,

Circuit Judges.

ra’

eee

Encycvoparpia Brirannica Inc.,

Plaintiff-A ppellant,

S.S. Hone Kone Propucer, her engines, ete., and

UniversaL Marine Corporation,

, Defendants,

Universa MaRInE Corporation,

Defendant: Appellee.

Appeal from the United States District Sours for the

Southern District of New York, ,

40a

Appendix D

7 This cause came on to be heard on the transcript of

2) record from the United States District Court for the South-

ern District of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF, it is now hereby ordered, ad-

judged, and decreed that the judgment of said District

Court be and it hereby is reversed and that the action be

and it hereby is remanded to said District Court for fur-

ther proceedings in accordance with the opinion of this

court with costs to be taxed against the appellee.

A. Din F'usaro

Clerk

4la

Appendix E

(Order of the Court of Appeals Denying Rehearing)

‘UNITED STATES COURT OF APPEALS

Sreconp Circuit »

fa} —

s 4 ‘

Eweyctoparpia Britannica Inc.,

_Plaintiff-A ppellant,

Vv.

S.S. Hone Kone Propucer, her engines, ete. ~ /

UniversaL Marine Corporation,

Defendants-Appeéllees.

fay

A petition for a rehearing having been filed ends by

counsel for the appellees,

re}

Upon consideration thereof, it is

Ordered that said petition be and it hereby is Dem.

Lreonarp P. Moéore

Pau R. Hays

~ Rosert P. /ANDERSON te

Epona a at as SO Circutt Judges

November 18, 1969.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.