Petition for Writ of Certiorari — M/V IKAN SELAYANG v. Sogem-Afrimet, Inc.
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FILED
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No.9? 96 8 DEC 1 1 1997
OFFICE OF THE CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM, 1997
>_>
M/V IKAN SELAYANG, her engines, boilers, etc.,
and FEDNAV LIMITED,
Petitioners,
SOGEM-AFRIMET, INC..,
Respondent.
ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
PETITION OF M/V IKAN SELAYANG AND
FEDNAV LIMITED FOR WRIT OF CERTIORARI
CHRISTOPHER H. MANSUY
One Battery Park Plaza
New York, New York 10004
(212) 344-4700
Attorney for Petitioners
LEROY S. CORSA
DE ORCHIS, WALKER & CORSA, LLP
Of Counsel
QUESTION PRESENTED FOR REVIEW
Does the U.S. Carriage of Goods by Sea Act prohibit an
ocean carrier from relying on the certification by an inde-
pendent inspector appointed by the cargo owner that the
designated cargo hold is “fit and suitable” for the ocean car-
riage of the particular cargo?
ii
LIST OF PARTIES AND RULE 29.1 LIST
Respondent Sogem-Afrimet, Inc., plaintiff-appellee below,
is a wholly-owned subsidiary of Sogem-Afrimet, S.A., a pri-
vately held Belgian corporation.
Petitioner M/V IKAN SELAYANG was a Singapore flag
vessel owned by claimant Selayang Shipping Pte. Ltd., a Sin-
gapore corporation and a subsidiary of Pacific Carriers Pte.
Ltd.
Petitioner Fednav Limited is a privately held Canadian
company with no public parents, affiliates or subsidiaries.
Pacific Carriers Pte., Ltd., not a party to this petition, is a
Singapore company which is publicly held.
Chrisholm Trading Pte., Ltd., not a party to this petition,
was a subsidiary of Pacific Carriers Pte., Ltd.
ill
TABLE OF CONTENTS
PAGE
QUESTION PRESENTED FOR REVIEW............. i
LIST OF PARTIES AND RULE 29.1 LIST............ ii
TAME AUTON SD occ cccccccccccccccscccscenes iv
PETITION OF M/V IKAN SELAYANG
AND FEDNAV LIMITED FOR WRIT
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REASONS FOR GRANTING THE WRIT............. 6
I. STATUTORY FRAMEWORK ..............00000. 6
Il. JUDICIAL INTERPRETATION .................. 7
A. STATUTORY INTERPRETATION BY
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B. STATUTORY INTERPRETATION BY
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C. STATUTORY INTERPRETATION BY
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D. STATUTORY INTERPRETATION BY
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E. DISCUSSION BY SUPREME COURT...... 12
III. IMPORTANCE OF THE ISSUE .................. 12
APOGEE a ub. 6550 00 RACON ees baceseevswrss evencuntues 18
TABLE OF AUTHORITIES
Cases: PAGE
Associated Metals & Minerals Corp. v. M/V ARKTIS
SKY, 1992 AMC 1217 (S.D.N.Y. 1992) (not
officially reported), rev'd 978 F.2d 47 (2d Cir.
SPP Rana tess edhe deh sen daka oe eee Naas 1]
Associated Metals & Minerals Corp. v. M/V ARKTIS
SAT, FTE F408 SF (26 CM. ISG) ccc scdnciccusscss 8,12
Atlas Assurance Co., Ltd. v. Harper, Robinson Ship.
Co., S06 F268 1351 C50 Car. C975)... oc cccsivcincess 7,9
Aunt Mid, Inc. v. Fjell-Oranje Lines, 458 F.2d 712
(7th Cir.), cert. denied, 409 U.S. 877 (1972)..... 16
Bache v. Silver Line Limited, 110 F.2d 60
ae ty akc saha ba wal Ga wae Co a ee Ha wax de 16
Blommer Chocolate Co. v. Nosira Sharon Ltd., 776
F. Supp. 760 (S.D.N.Y. 1991), aff’d without
opinion, 963 F.2d 1522 (2d Cir. 1992)............ 8
Blue Chips Stamps v. Manor Drug Stores, 421 U.S.
Fee PE 3 25Gb anos he eee east cea ean kesewesKe 9
Caemint Food Inc. v. Lloyd Brasileiro, 647 F.2d 347
Se ee EE i eee leks aremiiulns wat akon duena 13
Dempsey & Associates, Inc. v. §.S. SEA STAR,
461 F.26 TOG CRB CM. BFF) once recs cembeccs cncsus 8,10
Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) .... y
Federal Insurance Co. v. Sabine Towing &
Transportation Co., 783 F.2d 347 (2d Cir. 1986). 16
Vi
PAGE
Italusa Corporation v. M/V THALASSINI KYRA, 733
F. Supp. 209, aff’d without opinion, 916 F.2d 709
CRI: TE a ceccenecaccchdawhdchwecuessesaneees 15
Margarine Verkaufsunion G.m.B.H. v. M.T. G.C.
Brovig, 318 F. Supp. 977 (S.D.N.Y. 1970)........ 14
Martin v. The Southwark, 191 U.S. 1 (1903) .......... 16
Nichimen Company v. M.V. FARLAND, 462 F.2d 319
COR Clee, FG TED cic cccctcevsibvesbeccksaatiderewveunye 8, 10
Propeller Niagra v. Cordes, 62 U.S. (21 How.) 7, 23
(1859)..... $40ebeen bbb cdueeds ceeAbyee Pen aenTwanes 15
Sigri Carbon Corp. v. Lykes Bros. S.S. Co., Inc., 655
F. Sapp. 1455 COs Be THOT? cs vecseccsctscviace 10
Sumitomo Corporation of America v. M/V SIE KIM,
632 F. Supp. 824 (S.D.N.Y. 1985) ........seceeees 10, 11
Tubacex, Inc. v. M/V RISAN, 45 F.3d 951 (5th Cir.
EDP) « cvncavevesrndaselevowkarewewoeuteetecseedttes 9
Vimar Seguros Y Reaseguros, S.A. v. M/V SKY
REESE Bs STS UB. Fae CARP shi bc cacccvecssesccdss 12
Waterman Steamship Corp. v. United States,
SOS FBG FE CLOG: BIT se ic ksiciest A lini 7
Statutes and Rules:
We Sie Bos & TASTES) cc va vercescicesiuuxsepecciacatebwius 2
Oe U BA. BEGG isckcsscrssicieciriGii iene 2
46 U.S.C. app. §§ 1300-1315 (1997)................... 2
O6-U BA... GRR © Taes vc cccccisiciceecesveccessaseesne 4,6,7
MUS. sa. © UID io ovisc vercciicesaeaee 6,7, 8
Vil
PAGE
OG Tass BOG BPE ido dsc dicetcdctivsacwuccees 4,5,6,8
GO UB Ae BOD: OS EDIE) 6 cs ieviccsccedacccdenesccocecasi 6,8
46 U.S.C. app. § 1SOS(S). ...osscvcscccccccsccces 4,7, 8,9, 15
ie Br ee MN Ae vc eb ve canteseresccstnccuansowess 6, 7, 27
46 U.S.C. Gi. F LSOGANA) occ cc ccscccsccccsswaces 4,7,9, 15
PD Wes GE, BD LPO) 6a cscedscersekcderveconcesss 9
Federal Rules of Civil Procedure, Rule 9(h) .......... 2
Supreme Court Rule 10(c) .........ccsscccccccccssccecs 6
Other Authorities:
2A Benedict on Admiralty § 94 (6th ed. 1977)......... 1]
Julian Cooke, Timothy Young, Andrew Taylor,
John D. Kimball, David Martowski & LeRoy
Lambert, Voyage Charters (1993), 589-590...... 13
Hegarty, A COGSA Carrier’s Duty To Load and Stow
Cargo Is Non-Delegable, Or Is It?: Associated
Metals & Minerals Corp. v. M/V ARKTIS SKY,
1B TUONO BEAT. £..5. 125 CIFFS) cc cccecescvccccess 10
Grant Gilmore & Charles L. Black, Jr., Law of
Admiralty (2d ed. 1975) ..........cccecees |) AD ee Oe
Scrutton on Charterparties, (18th Ed. 1974)........... 13
William Tetley, Marine Cargo Claims (2d ed. 1978).. 1]
IN THE
Supreme Court of the United States
OCTOBER TERM, 1997
M/V IKAN SELAYANG, her engines, boilers, etc.
and FEDNAV LIMITED,
Petitioners,
—
SOGEM-AFRIMET, INC..,
Respondent.
ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
>
PETITION OF M/V IKAN SELAYANG AND
FEDNAV LIMITED FOR WRIT OF CERTIORARI
M/V IKAN SELAYANG and Fednav Limited respectfully
petition for a writ of certiorari to review the judgment and
opinion of the United States Court of Appeals for the Second
Circuit in order to resolve a conflict between the Second and
Fifth Circuits and the Ninth Circuit and thereby establish a
uniform method of interpreting and applying an important
maritime statute.
OPINIONS BELOW
The summary order and mandate of the Court of Appeals
for the Second Circuit dated September 15, 1997 affirming
aa aie nibs
the district court’s judgment is set forth at Appendix la-4a
(hereinafter “App. __a”). The Opinion, Findings of Fact and
Conclusions of Law of the United States District Court for the
Southern District of New York dated December 20, 1996 in
favor of respondent Sogem-Afrimet, Inc. is reported at 951
F. Supp. 429 and is reprinted at App. 5a-35a. The judgment
entered thereon on December 24, 1996 is reprinted at App.
36a and 37a and the corrected judgment entered on October 4,
1997 is reprinted at App. 38a and 39a.
JURISDICTION
Petitioners seek review of the summary order of the Court
of Appeals for the Second Circuit dated September 15, 1997.
The jurisdiction of this Court is invoked under 28 U.S.C.
§ 1254(1).
STATUTE INVOLVED
Sections 1300 through 1304 of the United States Carriage
of Goods by Sea Act, 1936), 46 U.S.C. app. §§ 1300-1315
(1997) (hereinafter “COGSA”) are set forth at App. 40a-47a.
STATEMENT OF THE CASE
On November 3, 1993, plaintiff-respondent Sogem Afrimet,
Inc. (hereinafter “Sogem” or “plaintiff”) filed a complaint
against defendants-petitioners M/V IKAN SELAYANG, her
engines, tackle, apparel, in rem, and Fednav Limited and
defendants Chrisholm Trading Pte. Ltd. and Pacific Carriers
Pte. Ltd., in personam, in the United States District Court for
the Southern District of New York under the admiralty and
maritime jurisdiction of that court, 28 U.S.C. § 1333 and Rule
9(h) of the Federal Rules of Civil Procedure. The complaint
alleged money damages in the amount of $316,645.38 for
contamination damage to a bulk shipment of zircon sand
carried under an ocean bill of lading dated September 17,
1991 from Brisbane, Australia to Brownsville, Texas, pur-
suant to a charter party between Sogem and Fednav Limited
dated July 23, 1991.
The action was tried without a jury before The Hon.
Bernard Newman! on September 4, 5, and 9, 1996. In its deci-
sion dated December 20, 1996, the district court awarded
Sogem $270,161.49 representing the loss in value caused by
contamination of the cargo of zircon sand by rust particles
which originated in the cargo hold of the M/V IKAN
SELAYANG. The district court dismissed plaintiff’s claims
ar ainst Chrisholm Trading Pte., Ltd. and Pacific Carriers Pte.,
Ltd. The district court deduced that the rust that contaminated
the zircon sand was hard scale rust? that was loosened from
the upper reaches of the vessel’s No. 6 cargo hold by vibra-
tions and by a clam shell bucket that “may have” struck a
bulkhead during an earlier port call at Wilmington, North Car-
olina where approximately 3,400 metric tons were unre-
markably discharged from No. 6 hold. Generic “red primer
paint” subsequently found on some rust also implicated the
vessel as the source. App. 23a and 24a. The district court con-
cluded that
[djefendant could have prevented the risk of rust falling
into plaintiff’s cargo but did not and therefore cannot be
said to have exercised due diligence.
App. 28a.
Judgment was entered on December 24, 1996. Petitioners
then appealed to the United States Court of Appeals for the
Senior Judge, United States Court of International Trade, sitting
by designation.
. Even though the eyewitnesses, the master, chief officer and
charterer’s inspector, saw no problematic rust (App. 48a and 55a), the
district court found that there was rust relying on the expert “assumption”
of Mr. Alder at trial who had never seen the ship. App. 49a.
4
Second Circuit. In a summary order dated September 15,
1997, the court of appeals affirmed the district court’s
decision.
This petition involves the interpretation of four provisions
of COGSA (§§ 1302, 1303(1), 1303(8) and 1304(2)(i)) as
applied to a common maritime contract.
Clause 35 of the charter, entered into by Fednav, as vessel
owner, and Sogem, as charterer, incorporated COGSA through
a short-hand expression, “U.S.A. Clause Paramount.” App.
54a. Fednav agreed to provide space aboard the M/V IKAN
SELAYANG for maximum 4,200 metric tons of zircon sand
for carriage from Brisbane, Australia to two U.S. discharge
ports designated by Sogem as Wilmington, North Carolina
and Brownsville, Texas. The charter, dated July 23, 1991, also
provided, in pertinent part, as follows:
10. Cargo shall be loaded, spout/grab trimmed and
discharged at the risk and expense of the Charterer
by stevedores nominated, employed and paid by
Charterer... .
App. 53a.
38. All holds, decks and stanchions are to be swept and
cleaned suitable for this cargo before vessel tenders
for loading. Owners to have vessel passed by Char-
terer’s representative as clean and ready to load
cargo prior to tender. . . . (It is understood that
the vessel cannot tender Notice of Readiness until
passed.)
App. 54a.
On August 16, 1991, the master of the vessel, then in
Pusan, Korea, reported by telefax to Fednav that the condition
of No. 6 hold was “not so good” in anticipation of loading
Sogem’s cargo. App. 57a. The vessel thereafter proceeded
5
southward and stopped at Masinloc, Republic of the Philip-
pines where a shore gang was hired and worked to clean the
vessel's No. 6 hold. App. 11a.
En route to Australia, the crew of M/V IKAN SELAYANG
continued to “chip and scrape” the surfaces of No. 6 hold in
preparation for loading zircon sand. The chief officer of the
M/V IKAN SELAYANG, Zbigniew Stasiak, testified that he
inspected the No. 6 hold and found no hard scale rust, no
loose rust, and no paint chips and concluded that the condi-
tion of the hold was “very good.” App. 48a. Upon arrival at
the loadport of Brisbane, Australia on September 17, 1991,
Michael Pearson, an independent surveyor appointed on
behalf of Sogem, inspected the vessel’s Nos. 3 and 6 holds
and certified each of the holds to be “fit and suitable” for the
transport of mineral sands. App. 55a. The requirements of
clause 38 of the charter party were thus fulfilled. The char-
terer commenced to load the vessel pursuant to clause 10 of
the charter party. Pearson testified later that the vessel had
exercised due diligence to make the hold fit. App. 48a. The
vessel sailed from Brisbane, Australia on September 18, 1991.
Petitioners’ defense at trial was inter alia that the testimony
of the vessel’s chief officer describing the efforts to prepare
No. 6 hold coupled with Pearson’s written approval and tes-
timony that the crew had been diligent proved that the carrier
had satisfied its obligations under Section 1303(1)(c),
COGSA, to make the hold fit and safe. Despite clear error by
the district court in ruling against petitioners, the court of
appeals affirmed this finding without comment.
Of the 4,200 metric tons loaded into hold No. 6 at Brisbane,
approximately 3,400 tons were discharged at Wilmington,
North Carolina. There were no complaints regarding the
condition of any of the zircon sand discharged uneventfully
at Wilmington. App. 14a. On November 6, 1991, Sogem
discharged the balance of the zircon sand from No. 6 hold
at Brownsville, Texas. The discharge was observed by the
product manager of Sogem. The zircon sand looked “okay.”
App. 50a. The district court opinion does not mention this tes-
timony or that of two other eyewitnesses present at the dis-
charge. App. 48a and Sla. The district court opinion also does
not mention Sogem’s independent laboratory analysis that the
rust and other contaminants were not of shipboard origin.
App. 56a.
For purposes of this petition, the Court may assume, as the
district court found, that the rust originated on the vessel. The
legal issue squarely presented is whether the charterer’s
inspector’s approval of the fitness of the hold exonerates the
ocean Carrier.
REASONS FOR GRANTING THE WRIT
This case presents in clear form the important question aris-
ing under federal law and within admiralty whether the pro-
visions of section 1303 of COGSA should be interpreted as
superior or equal to the provisions of section 1304. This case
is an excellent vehicle for this Court’s review under Rule
10(c) because it does not involve conduct but, rather, judg-
ment, i.e., the opinion of the cargo owner’s inspector that the
cargo hold was fit.
I. STATUTORY FRAMEWORK
Section 1302 of COGSA exposes the ocean carrier “in rela-
tion to the loading, handling, stowage, carriage, custody, care
and discharge” of goods to the “responsibilities and liabili-
ties” and “rights and immunities set forth in Sections 1303
and 1304. . . .” Relevant to the facts of this case is the obli-
gation imposed by section 1303(1)(c) “to exercise due dili-
gence” before and at the beginning of a voyage to make the
cargo hold “fit and safe” for the “reception, carriage and
preservation” of cargo. Section 1303(2) imposes upon the car-
rier the affirmative obligation to “properly and carefully load,
a
handle, stow, carry, keep, care for and discharge the goods
Section 1303(8) provides that:
any clause, covenant or agreement in a contract of
Carriage relieving the carrier or the ship from liability
for loss or damage arising from negligence, fault or
failure in the duties and obligations provided in this
section or lessening such liability otherwise than as pro-
vided in this chapter shall be null and void and of no
effect. . ;
Section 1304(2)(i) provides that the carrier shall not be
responsible for loss or damage arising from “[a]ct or omission
of the shipper or owner of the goods, his agent or represen-
tative.”
II. JUDICIAL INTERPRETATION
A. STATUTORY INTERPRETATION BY
SECOND CIRCUIT
Notwithstanding the provisions of section 1302 which
establish an equality of the affirmative obligations imposed
by section 1303 and the affirmative defenses prescribed by
section 1304, the Second Circuit Court of Appeals has held
for twenty-five years that the affirmative obligations pre-
scribed by section 1303 are “non-delegable” notwithstanding
that the shipper or owner of goods has undertaken tasks?
described in section 1303. In affirming the district court, the
; Contracts of carriage often include “free in, out” (“FIO”) lan-
guage, similar to clause 10 of the IKAN SELAYANG charter. App. 53a.
This is a “common and commercially acceptable practice” which places
the costs and responsibility for loading and discharging on the cargo
owner. Atlas Assurance Co., Ltd. v. Harper, Robinson Ship. Co., 508 F.2d
1381, 1389 (9th Cir. 1975). Thus, the carrier provides “transportation
services only” but not stevedoring services. Waterman Steamship Corp.
v. United States, 595 F.2d 91, 92 (2d Cir. 1978).
Court of Appeals for the Second Circuit followed a line of
cases that posit that duties imposed on an ocean carrier by
sections 1303(1) and (2) of COGSA are “non-delegable.”
Nichimen Company v. M.V. FARLAND, 462 F.2d 319, 330 (2d
Cir. 1972); Dempsey & Associates, Inc. v. S.S. SEA STAR, 461
F.2d 1009, 1014-15 (2d Cir. 1972) and Associated Metals &
Minerals v. M/V ARKTIS SKY, 978 F.2d 47, 50 (2d Cir. 1992).
See also Blommer Chocolate Co. v. Nosira Sharon Ltd., 776
F. Supp. 760, 776 (S.D.N.Y. 1991), aff’d without opinion, 963
F.2d 1552 (2d Cir. 1992).
The Second Circuit reasoned in Associated Metals v. M/V
ARKTIS SKY, 978 F.2d at 50, that:
The plain language of Section 1303(8) forbids enforce-
ment of agreements to relieve carriers of liability for
negligence in carrying out the duties set forth in Section
3 of COGSA.
The court rejected the carrier’s argument that the phrase “oth-
erwise than as provided in this chapter” in Section 1303(8) per-
mitted a shipper or owner of the goods to undertake and be
responsible for one or more of the tasks described in Section
1303 by reasoning that the quoted language only
modifies the damage limitation (“lessening such liabil-
ity”) set forth in COGSA, which provides a $500
per package ceiling on damages. See 46 U.S.C. app.
§ 1304(5). The phrase does not affect the statute’s pro-
hibition on agreements relieving carriers of liability for
negligence in carrying out their duties under the Act.
Id. Specifically, the court held that an FIOS clause “is ‘null and
void’ under the statute because it purports to relieve a carrier
of liability for negligence in one of its duties, the stowing of
cargo.” Id.
The issue that petitioners request this Court to consider is
whether the Second Circuit Court of Appeals reads the statute
correctly in according Sections 1303(1) and (2) dominance.
ee —
9
Narrowly stated, the issue is whether the court of appeals is
correct when it interprets the statute’s word “chapter” to mean
only one sub-section.‘
B. STATUTORY INTERPRETATION BY
FIFTH CIRCUIT
In Tubacex, Inc. v. M/V RISAN, 45 F.3d 951, 956 (Sth Cir.
1995), the Court of Appeals for the Fifth Circuit agreed with
the analysis of the Second Circuit in M/V ARKTIS SKY that
Section 1303(8) bars “a provision in the bill of lading shift-
ing liability for the duties set out in Section 1303(2). . . .”
Nevertheless, the court affirmed the district court’s granting
summary judgment in favor of the carrier because the cargo
damage was caused by stevedores employed by the cargo
owner. The affirmative defenses afforded by sections
1304(2)(i) and (q) were enforced.
C. STATUTORY INTERPRETATION BY
NINTH CIRCUIT
In Atlas Assurance Co., Ltd. vy. Harper, Robinson Ship. Co.,
508 F.2d 1381 (9th Cir. 1975), shipper Sterling voyage-char-
tered a vessel from Cargill on “FIO” terms and placed marine
Cargo insurance “to order” with Atlas. Sterling’s stevedore
loaded the cargo. Sterling sold the cargo to the consignee and
conveyed the ocean bill of lading and insurance certificate.
The consignee made a claim for damage caused during load-
ing against Atlas the insurer, which Atlas paid. As a subrogee,
Atlas sued the carrier Cargill which impleaded Sterling for
indemnity based on the FIO charter. Sterling then claimed
against Atlas for indemnity under the insurance policy. In
resolving the dispute between Sterling and Atlas, the court
4
Statutory construction begins with the language of the act. Ernst
& Ernst v. Hochfelder, 425 U.S. 185, 197 (1976) (citing Blue Chips
Stamps v. Manor Drug Stores, 421 U.S. 723, 756 (1975) (Powell, J.,
concurring).
10
observed that Atlas’s subrogation rights against Cargill were
modified by the FIO charter:
Although the consequence of this is to deprive Atlas of
the COGSA bill of lading presumptions against Cargill,
this is only to say that Cargill is not liable for what it has
not done, viz., stevedoring. See Carriage of Goods by
Sea Act, 46 U.S.C.A. 1300, et seq.
Id. at 1389. The court thereby permitted a delegation by the
carrier of its duty to load and stow.°
D. STATUTORY INTERPRETATION BY
DISTRICT COURTS
This difference of interpretation amor, the circuits mani-
fests itself much more energetically in the district courts
which have considered the issue.
In Sumitomo Corporation of America v. M/V SIE KIM, 632
F. Supp. 824 (S.D.N.Y. 1985), the contract of carriage pro-
vided that cargo was to be loaded and stowed by the shipper
and discharged by the carrier (“Free in, Liner out” (“FILO”)).
The district court rejected the cargo plaintiff’s argument that
the carrier was responsible for the manner in which the cargo
was stowed by the shipper dismissing the Nichimen and
Dempsey “non-delegable” duty discussions as “somewhat
casual dicta.” Jd. at 836. In analyzing the provisions of
COGSA, the district court reconciled them in terms of “con-
trol” rather than “non-delegability.” Jd. at 837.
In Sigri Carbon Corp. v. Lykes Bros. S.S. Co., Inc., 655 F.
Supp. 1435 (W.D. Ky. 1987), the cargo was shipped “free
in/out stowed” (“FIOS”). The court rejected all of the prece-
dents which speak of non-delegability because the courts that
had asserted the doctrine offered “neither authority nor
; Hegarty, A COGSA Carrier’s Duty to Load and Stow Cargo Is
Nondelegable, Or Is It? Associated Metals & Minerals Corp. v. M/V
ARKTIS SKY, 18 Tulane Mar. L.J. 125, 130 (1993).
1]
analysis.” Relying on Sumitomo Corp. of America v. M/V SIE
KIM, 632 F. Supp. 824, William Tetley, Marine Cargo Claims
264 (2d ed. 1978) and 2A Benedict on Admiralty § 94 (6th ed.
1977), the district court embraced the tenet that “control”
should be the operative word.
The district court in Associated Metals & Minerals Corp. v.
M/V ARKTIS SKY, 1992 AMC 1217 (S.D.N.Y. 1992) (not offi-
cially reported), rev’d 978 F.2d 47 (2d Cir. 1992) considered
the cargo plaintiff’s contention that cargo damaged during
loading by the stevedores engaged by the shipper under an
FIOS contract was, nonetheless, the responsibility of the car-
rier. The district court weighed the dicta in Nichimen and
Dempsey against the logical analysis in Sigri and Sumitomo
and held:
Accordingly, the Court adopts their conclusion that a
carrier’s duty to properly and carefully load and stow
cargo under § 1303(2) is not genuinely non-delegable,
and holds that a carrier is not responsible for the conse-
quences of improper stowage performed by agents of the
shipper pursuant to an FIOS bill of lading. This is not to
say that the carrier is exonerated for its own acts of neg-
ligence. Rather, the carrier is liable sole’ for its negli-
gence, and not the negligence of paz: < not in its
control.
Id. at 1225.
Of course, the Second Circuit reversed but, in so doing,
failed to account for the simple fact that its result makes the
carrier an insurer of the shipper’s acts, omissions or negli-
gence, a result not intended by the statute.®
. Grant Gilmore & Charles L. Black, Jr., Law of Admiralty 150
(2d ed. 1975) [hereinafter Gilmore & Black], (“[T]he carrier’s insurer’s
liability is a thing of the past.”)
12
E. DISCUSSION BY SUPREME COURT
The impetus for this petition is this Court’s treatment of the
issue obiter dictum in Vimar Seguros Y Reaseguros, S.A. v.
M/V SKY REEFER, 515 U.S. 528 (1995). The cargo owner
attempted to avoid enforcement of a forum selection clause in
the contract of carriage requiring arbitration at Tokyo by
arguing that the Japanese version of the Hague Rules does not
impose on the carrier the non-delegable obligation to properly
and carefully stow the goods as articulated in Associated Met-
als & Minerals Corp. v. M/V ARKTIS SKY, 978 F.2d 47 (2d
Cir. 1992). This Court countered this substantive legal argu-
ment as follows:
But see COGSA § 4(2)(i), 46 U.S.C. § 1304(2)(i)
(“[NJeither the carrier nor the ship shall be responsible
for loss or damage arising or resulting from. . . [a]ct or
omission of the shipper or owner of the goods, his agent
or representative”); COGSA § 3(8), 46 U.S.C. App.
§ 1303(8) (agreement may not relieve or lessen liability
“otherwise than as provided in this chapter”); Hegarty,
A COGSA Carrier's Duty To Load and Stow Cargo Is
Non-Delegable, Or Is It?: Associated Metals & Minerals
v. M/V ARKTIS SKY, 18 Tulane Mar. L. J. 125 (1993).
Whatever the merits of petitioner's comparative reading
of COGSA and its Japanese counterpart, its claim is pre-
mature... .
Vimar Seguros Y Reaseguros, S.A. v. M/V SKY REEFER, 515
U.S. at 539-40. The facts of the case at bar are ripe for reso-
lution of this issue.
Ill. IMPORTANCE OF THE ISSUE
The misinterpretation by the Second Circuit Court of
Appeals of the duties and defenses set forth in COGSA places
upon all ocean carriers more than mere burdens in respect of
“FIO” contracts of carriage in maritime commerce wherein
the cargo owner furnishes stevedores to load and to discharge
13
the cargo. The unfairness of the interpretation lies in the fact
that the carrier is held responsible for that which he did not
agree to do, did not do, did not pay for, received no benefit
from and did not control. Practically speaking, the master of
a vessel bound to an “FIO” contract has little supervisory
control over how the cargo is prepared for loading, loaded,
and/or discharged. Typically, his control is limited to matters
affecting the stability and seaworthiness of the vessel. When
a cargo Owner undertakes to perform tasks for his own
account and relieves the ocean carrier of making the neces-
sary arrangements, the cargo owner does so freely and for its
Own purposes, whether cost saving, discretion to appoint
familiar stevedores or simply control over the processes. This
allocation of responsibilities is negotiated and agreed to by
commercial people who share the common interest of trans-
porting cargo safely and economically.
The interpretation of COGSA which the Second Circuit
Court of Appeals has forced upon the maritime community
impairs such contractual agreements and unjustifiably
increases carriers’ exposure to liability for matters not within
their control. For example, Sogem and Fednav had entrusted
pertinent decision-making authority to the master and the
inspector. The master opened No. 6 hold to Sogem’s inspec-
tor at Brisbane for the inspector to determine whether the
efforts by the carrier in preparing the cargo hold for zircon
sand were sufficient. The cargo owner has knowledge about
the idiosyncrasies of its cargo far superior to the general
knowledge of the master. See Caemint Food, Inc. v. Lloyd
Brasileiro, 647 F.2d 347, 354 (2d Cir. 1981). Under the terms
of clause 38 of the charter, the master was unable to tender
notice of readiness until after the cargo hold had been passed
by the charterer’s inspector. In charter party terms, this meant
that the time waiting for the vessel to pass inspection was for
the carrier’s account.’ If the hold did not pass inspection,
=
See generally, Gilmore & Black, supra note 6, at 210; Scrutton
on Charterparties, 143-44 (18th Ed. 1974): Julian Cooke, Timothy
14
the vessel would have been required to correct whatever defi-
ciencies were noted. Clause 38 of the contract gives the char-
terer’s inspector absolute discretion—a veto power. The
master has no recourse to any other arbiter. But here, char-
terer’s inspector inspected No. 6 hold and certified that it was
“fit and suitable” to receive zircon sand. App. 55a.
The district court’s retrospection more than five years after
the vessel loaded at Brisbane that charterer’s inspector’s
determination was “of no persuasive value” (App. 27a, fn. 11)
ignores the exigencies of the moment. The master did not
have such contemplative luxury. The charter explicitly pro-
vided that, once the hold is passed by the inspector, the load-
ing process can begin. The hold had been cleaned, scraped
and chipped to the satisfaction of the vessel’s officers. Even
if the master disregarded the charterer’s inspector’s opinion
as “unpersuasive,” what more was there for him to do? The
master had already given the job his best effort. Contractually,
he had no alternative but to allow the vessel to be loaded. And
Sogem had a contractual expectation that its cargo would
begin the voyage it bargained for. The parties placed confi-
dence in their on-scene representatives to do a good job. The
courts should not retroactively interfere in this commercially
reasonable allocation of tasks.
In retrospect, the condition of the cargo hold was either fit
or unfit when Pearson conducted his inspection. If it were in
fact fit and Pearson so certified, then the carrier exercised due
diligence to make it so.* If the hold were unfit, and Pearson
certified it nonetheless, then the proximate cause of all that
followed was the cargo owner’s representative’s decision to
pass the vessel. Simply put, where the charterer’s inspector
Young, Andrew Taylor, John D. Kimball, David Martowski & LeRoy
Lambert, Voyage Charters (1993), 589-590.
. “Examination and testing of the vessel” by a competent and
experienced surveyor constitutes due diligence. Margarine Verkaufsunion
G.m.B.H. v. M.T.G.C. Brovig, 318 F. Supp. 977 (S.D.N.Y. 1970) (Wein-
feld, J.).
15
makes a mistake in certifying that the hold is fit to receive
zircon sand, the vessel should not be held accountable for that
mistake. At the very least, the carrier has been diligent in the
eyes of the party to whom the duty was owed.
Petitioners do not contend that the carrier did not have the
responsibility to do the work necessary to make the hold fit.
The ocean carrier under the terms of the charter incorporating
COGSA had the obligation to clean the vessel’s No. 6 cargo
hold to the satisfaction of the charterer’s inspector. The time
and expense necessary to Satisfy the charterer’s inspector
were for the account of the carrier. If the charterer’s inspec-
tor were not satisfied, the vessel would have had to do more.
The issue is not, “Who is responsible to do the work?” Rather,
the issue is, “Who decides when the work has been com-
pleted?” Sogem reserved that task for itself in Clause 38.
Since section 1304(2)(i) insulates the carrier from liability for
acts of the shipper or owner of the goods, section 1303(8)
Should not be interpreted to render allocation of the inspection
task “nu’l and void” as the Second Circuit has.
Affirmative defenses grounded in the acts of the cargo
owner or the cargo itself “arise out of considerations of sim-
ple justice and existed at common law.”® The language of sec-
tion 1304(2)(i) is noteworthy in that there is no fault
component in the words “act or omission of shipper or owner
of the goods, its agents or representatives.” The section does
not require an evaluation of the quality of the “act or omis-
sion,” merely whether it occurred. Other courts have held
cargo Owners accountable for the decisions made by them rel-
ative to the conditions of shipment. In /talusa Corporation v.
M/V THALASSINI KYRA, 733 F. Supp. 209, 217, aff’d with-
out opinion, 916 F.2d 709 (2d Cir. 1990), the court held the
cargo Owner responsible for melted cheese where it had nei-
ther requested a refrigerated container nor given special
° Gilmore & Black, supra note 6, at 167. See also Propeller Nia-
gara v. Cordes, 62 U.S. (21 How.) 7, 23 (1859).
16
instructions to the carrier. In Aunt Mid, Inc. v. Fjell-Oranje
Lines, 458 F.2d 712, 716 (7th Cir.), cert. denied, 409 U.S. 877
(1972), the shipper’s decision to opt for ventilated rather than
refrigerated stowage caused the loss for which the carrier was
not liable. In Bache v. Silver Line Limited, 110 F.2d 60, 61-62
(2d Cir. 1940) (Hand, L., J.), the court discusses, in the con-
text of packaging, the practical countervailing interests that
form the natural tension between cargo owners and carriers
which their contracts and the law must accommodate. In Fed-
eral Insurance Co. v. Sabine Towing & Trans. Co., 783 F.2d
347, 350 (2d Cir. 1986), the court, under the rubric of “avoid-
able consequences,” limited the liability of the carrier to only
the test sample of bulk liquid cargo where the cargo owner’s
inspector had information that should have caused him to stop
loading.
“Fitness” is a subjective term. Martin v. The Southwark,
191 U.S. 1, 9 (1903). What constitutes “clean” for a cargo of
logs, railroad ties or coal is manifestly different than clean-
liness for wheat, corn or household goods. Sogem’s reserva-
tion of a veto power in clause 38 permits Sogem to bring its
special knowledge to bear in deciding whether the hold is
clean enough for bulk zircon sand. The charterer is not
required to nor expected to judge the water tight integrity of
the vessel or her ability to weather wind and sea—just
whether the hoid was clean enough. The interpretation of
COGSA by the Second Circuit Court of Appeals makes the
ocean carrier an insurer of the acts or omissions of the owner
of the cargo. In this case, the district court, in effect, con-
cluded that the charterer’s inspector did a bad job. App. 13A
and 27a. Nevertheless, the court held that the carrier is
responsible because COGSA does not permit the carrier to
rely upon the judgment of its contract partner, the owner of
the goods.
COGSA was intended to reduce the carrier’s burden from a
“warranty of seaworthiness” to an obligation of “due dili-
17
gence.”!° The decision of the district court as affirmed by the
court of appeals not only effectively but also literally revived
and reinstated a warranty component into the carrier’s obli-
gations under COGSA. The district court held:
The law of the Second Circuit interpreting this provision
is equally unambiguous, COGSA does not permit the
carrier to divest itself of the duty to insure the proper
stowage of the cargo.
App. 29a, (Emphasis added).
Earlier, the court wrote:
Defendant could have prevented the risk of rust falling
into plaintiff’s cargo but did not and, therefore, cannot
be said to have exercised due diligence.
App. 28a.
This is another way of expressing absolute liability. The
district court effectively held that, because cargo was dam-
aged, the carrier could not have exercised due diligence. Such
reasoning vitiates many affirmative defenses in section 1304
which in all cases only become relevant after cargo is dam-
aged.
Cargo owners and carriers are de facto partners in every
ocean voyage with equal expectations of success. COGSA
sets forth the duties, responsibilities and immunities. No con-
sistent pattern of interpretation by the courts allows cargo
owners and carriers to understand and anticipate where the
line of responsibility will be drawn.
” Gilmore & Black, supra note 6, at 151.
18
CONCLUSION
For the reasons stated above, the petition should be granted.
Dated: New York, New York
December 9, 1997
CHRISTOPHER H. MANSUY
One Battery Park Plaza
New York, New York 10004
(212) 344-4700
Attorney for Petitioners
LEROY S. CORSA
DE ORCHIS, WALKER & CORSA, LLP
Of Counsel
APPENDIX
eae Rea
la
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
No. 97-7108
Filed September 15, 1997
d SUMMARY ORDER
THIS SUMMARY ORDER WILL NOT BE PUBLISHED IN
: THE FEDERAL REPORTER AND MAY NOT BE CITED AS
PRECEDENTIAL AUTHORITY TO THIS OR ANY OTHER
; COURT, BUT MAY BE CALLED TO THE ATTENTION OF
THIS OR ANY OTHER COURT IN A SUBSEQUENT
STAGE OF THIS CASE, IN A RELATED CASE, OR IN
; ANY CASE FOR PURPOSES OF COLLATERAL ESTOP-
PEL OR RES JUDICATA.
E At a stated Term of the United States Court of Appeals for
the Second Circuit, held at the United States Courthouse,
Foley Square, in the City of New York, on the 15 day of
September one thousand nine hundred and ninety-seven.
Present: HONORABLE AMALYA L. KEARSE,
HONORABLE JOSEPH M. MCLAUGHLIN,
Circuit Judges,
HONORABLE DAVID G. TRAGER,
District Judge*.
. Honorable David G. Trager, of the United States District Court
for the Eastern District of New York, sitting by designation.
2a
SOGEM-AFRIMET INC.,
Plaintiff-Appellee,
— |
M/V IKAN SELAYANG, her engines, tackle, apparel, in rem,
CHRISHOLM TRADING PTE. LTD, PACIFIC CARRIERS
PTE. LTD., FEDNAV LIMITED, in personam,
Defendants-Appellants,
SELAYANG SHIPPING PTE. LTD.,
Claimant.
Appearing for Appellant: Christopher H. Mansuy, Walker
& Corsa, N.Y., N.Y.
Appearing for Appellees: John T. Lillis, Jr., Kennedy,
Lillis, Schmidt & English, N.Y.,
N.Y.
Appeal from the United States District Court for the South-
ern District of New York.
This cause came on to be heard on the transcript of record
from the United States District Court for the Southern District
of New York, and was argued by counsel.
ON CONSIDERATION WHEREOF, it is now hereby ordered,
adjudged, and decreed that the judgment of said District Court
be and it hereby is affirmed.
Defendants M/V Ikan Selayang (“Ikan”), et al., appeal from
a judgment entered in the United States District Court for the
Southern District of New York following a bench trial before
3a
Bernard Newman, Judge of the United States Court of Inter-
national Trade, sitting by designation, awarding plaintiff
Sogem-Afrimet Inc. (“Sogem”) damages under the Carriage
of Goods by Sea Act (“COGSA”), 46 U.S.C. App. § 1300 er
seq., for contamination of Sogem’s zircon sand during car-
riage aboard the Ikan. On appeal, defendants principally urge
that we reverse the district court’s liability finding by aban-
doning our longstanding adherence to the doctrine that duties
imposed on a carrier by COGSA are nondelegable, see gen-
erally Associated Metals & Minerals Corp. v. M/V Arktis Sky,
978 F.2d 47, 49-50 (2d Cir. 1992): Nichimen Co. y. M.V. Far-
land, 462 F.2d 319, 330 (2d Cir. 1972); see also Demsey &
Associates v. S.S. Sea Star, 461 F.2d 1009, 1014 (2d Cir
1972), and they contend that the district court erred in com-
puting Sogem’s damages. Finding no basis for reversal, we
affirm.
We affirm the district court’s liability ruling substantially
for the reasons stated in Judge Newman’s Opinion, Findings
of Fact, and Conclusions of Law dated December 20, 1996.
We decline defendants’ invitation to revisit this Court’s con-
sistent application of the nondelegable-duty doctrine.
Defendants’ strongest challenge to the district court’s dam-
ages award concerns 191 metric tons of zircon sand as to
which defendants contend Sogem failed to prove ownership.
We are unpersuaded. The district court’s findings of fact after
a bench trial may not be set aside unless they are clearly erro-
neous. See Fed. R. Civ. P. 52(a); McAllister vy. United States,
348 U.S. 19, 20 (1954). Assessments of the weight to be
given to any piece of evidence fall Squarely within the
province of the factfinder, and where there are two permis-
sible views of the evidence, and competing inferences could
be drawn, “the factfinder’s choice between them cannot be
clearly erroneous.” Anderson v. Bessemer City, 470 U.S. 564,
574 (1985); see United States v. Yellow Cab Co., 338 U.S.
338, 342 (1949). Although defendants contend that Sogem did
not introduce an invoice indicating that it had paid Elf
Atochem North America, Inc., for the 191 tons in question,
4a
the record includes evidence that Sogem sold 130 tons of that
sand for its own account and that it attempted to sell the
remaining 61 tons. It also includes evidence that defendants
had invoiced Sogem for freight with respect to the entire
quantity of sand on board the vessel. In the circumstances, we
cannot say that the district court clearly erred in implicitly
finding that Sogem owned the 191 tons of sand.
We have considered all of defendants’ contentions on this
appeal and have found in them no basis for reversal. The
judgment of the district court is affirmed.
/s/ AMALYA L. KEARSE
AMALYA L. KEARSE, U.S.C.J.
/s/ JOSEPH M. MCLAUGHLIN by ALK
JOSEPH M. MCLAUGHLIN, U.S.C.J.
/s/ DaAvip G. TRAGER by ALK
DAVID G. TRAGER, U.S.D.J.
Sa
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
93 Civ. 7538 (BN)
SOGEM-AFRIMET, INC.,
Plaintiff,
Vv.
M/V IKAN SELAYANG, her engines, boilers, machinery, etc.,
in rem, FEDNAV LIMITED, PACIFIC CARRIERS PTE., Lrp.,
and CHRISHOLM TRADING PTE., LTD., in personas,
Defendants.
BERNARD NEWMAN Senior Judge
OPINION
Appearances:
KENNEDY LILLIS SCHMIDT & ENGLISH
Attorneys for Plaintiff
100 Maiden Lane, 23rd Floor
New York, NY 10038
Of Counsel: John T. Lillis, Jr., Esq.
Thomas C. Murphy, Esq.
WALKER & CORSA
Attorneys for Defendants
One Wall Street Court
New York, NY 10005
Of Counsel: Christopher H. Mansuy, Esq.
William E. Lakis, Esq.
6a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
93 Civ. 7538 (BN)
SOGEM-AFRIMET, INC.,
Plaintiff,
Vv.
M/V IKAN SELAYANG, her engines, boilers, machinery, etc.,
in rem, FEDNAV LIMITED, PACIFIC CARRIERS PTE., LTD.,
and CHRISHOLM TRADING PTE., LTD., in personas,
Defendants.
OPINION, FINDINGS OF FACT,
AND CONCLUSIONS OF LAW
Bernard Newman, Senior Judge:'
Sogem Afrimet, Inc. (“plaintiff’) brings this action
grounded in Admiralty against Fednav Limited (“defen-
dant”)*. Plaintiff seeks money damages in the amount of
$270,161.49, plus interest and costs, for the marine miscar-
riage of zircon sand from Brisbane, Australia to Brownsville,
Texas. After discharge at Brownsville, plaintiff maintains that
there was rust found mixed with the zircon sand. Although
attempts were made to purify the sand, plaintiff asserts that
because of the contamination, plaintiff’s buyers refused to
, Bernard Newman, Senior Judge of the United States Court of
International Trade, sitting as United States District Judge by designation.
2 ‘The court granted defendant’s motion to dismiss all claims
against Pacific Carriers PTE., LTD., and Chrisholm Trading PTE., LTD.
(R. 299).
Ta
accept the sand. Plaintiff maintains that defendant’s failure to
properly prepare the vessel’s hold was the cause of the rust
contamination.
Defendant, a Canadian operator and time-chartered owner
of the motor vessel Ikan Selayang contends that it imple-
mented its normal procedures to prepare the vesse!’s hold to
carry plaintiff’ zircon sand. Defendant argues that the rust
found on the zircon sand was not caused by any miscarriage
of the cargo or deficiency of care aboard the ship. In response
to plaintiff’s clams, defendant suggests several alternative
scenarios as to how plaintiff’s sand became contaminated. In
any event, defendant states that it exercised due diligence in
its transport of plaintiff’s sand and that plaintiff’s represen-
tative had declared the hold fit to carry the cargo. Addition-
ally, defendant argues that plaintiff failed to give it proper
notice of any harm to the cargo and did not sufficiently
attempt to mitigate its damages.
THE RECORD
Plaintiff presented six witnesses: Holly Chapell, Manager
of Exotic Materials for Sogem-Afrimet; Rigoberto Gonzalez,
Dock Superintendent for Dix Shipping Company; David
Lapeyre, General Manager for the Brownsville Gulfside
Warehouse; Robert Naegele, employee of Ewig International
Marine Corporation; Dr. Brandt Rising, President and Labo-
ratory Director of Umpire and Control Services: and Captain
John Alder, President of John Alder & Company. Defendant
presented two witnesses: Renée Lessard, Ship operator for
Fednav LTD.; and Clinton Barrans, Claims Manager for Fed-
nav LTD. In all, 133 exhibits were admitted into evidence at
the trial.
Pursuant to agreement by counsel and E.R.C.P. Rule
32(a)(3)(E), the depositions of Gregory Dunn, Manager for Aus-
tralian Laboratory Services; Cecil Martin, Shipping Manager for
Consolidated Rutile Limited; Neal Stewart, Processing Manager
for Consolidated Rutile Limited; Paul Vogel, employee of Aus-
ee en eee
8a
tralian Laboratory Services; Michael Pearson, Director of Plum-
ley, Pearson & White; Hector Gonzalez, employee of Ewig
International Marine Corporation; Kenneth Jones, Plant Man-
ager of Elf Atochem; Anne Marie Philippaerts, employee of J.
Haenecour & Co.; Zbigniew Stasiak, Chief Officer of the Ikan
Selayang; and Captain Malcolm Gater, Master of the Ikan
Selayang, were admitted into evidence.
FINDINGS OF FACT
Plaintiff, a New York based buyer, seller, and trader of
non-ferrous minerals and metals, had an exclusive arrange-
ment to buy zircon sand’ from Consolidated Rutile Limited
(hereinafter “CRL”), an Australian Company, for resale in
North America and Mexico. Defendant, a Canadian operator
and time-chartered owner of the motor vessel Ikan Selayang,
entered into a charter party with plaintiff for the vessel to
transport plaintiff’s cargo (Exh. 2). The cargo, in the instant
case, consisted of 700 metric tons of premium grade zircon
sand to be delivered from Brisbane, Australia to Brownsville,
Texas aboard the M/V Ikan Selayang. A charter broker com-
pany, M.I.D. Ship Marine Inc. (“MID”), was used to obtain
the space aboard the ship for the carriage of the cargo. MID
received and relayed all communications between defendant
and the plaintiff. In the contract of carriage, defendant war-
ranted that Hold 6 of the M/V Ikan Selayang its decks and its
stanchions would be swept, cleaned, and be made suitable for
the bulk shipment of plaintiff’s zircon sand before the vessel
was brought to Brisbane for loading.
On August 20, 1991 plaintiff purchased 700 metric tons
of premium grade zircon sand from CRL for A$340.00
(Australian dollars) per metric ton F.O.B. vessel, a total of
A$238,000.00*. CRL operates a mill in Pinkemba, Brisbane
3
Zircon sand is a highly refined mineral sand used in the manu-
facture of glazes for tiles and other sanitary ware.
. Based upon existing exchange rates at the time of the sale, the
price for the zircon sand in United States Currency was approximately
$266.56 per metric ton for a total of $186,592.
9a
that subjects the zircon sand to a rigorous separating process
in order to meet the premium grade specifications. At the
CRL mill, the zircon sand passes through several stages of
electromagnetic Processing to separate conductive material
from nonconductive material. The zircon sand was subjected
to further treatment by putting it through a vibrating screen
with 2 centimeter holes and a second screen with 1 millimeter
holes. After the larger material had been separated, the zircon
sand was subjected to 8 high voltage electrostatic rotating
rolls designed to remove the magnetic rust and iron from the
non-magnetic sand. The final result of this process should
result in premium grade zircon sand that contained a mini-
mum of 66.0% zircon silicate and which has had virtually all
contaminants eliminated.
The finished premium grade zircon sand is held in “product
bins” at CRL’s dry mill before being transported from the mill
to a storage location at the Hamilton Wharf in Brisbane. The
sand was thereupon loaded into tipper trucks® inside the dry
mill by pulling the cargo beds of the trucks directly beneath
the product bins inside the dry mill. The product bins them-
selves were fully enclosed to prevent contamination of its
contents. Furthermore, the dry mill was covered by a roof to
prevent any contamination while the trucks were being
loaded. During the transport to the Hamilton Wharf, the
trucks were fully tarped in order to avoid any form of con-
tamination of the zircon sand, and the tarps remained on the
trucks during the discharge of the load at the storage facility.
After the zircon sand was unloaded at the storage facility,
it was loaded onto the ship using a series of mobile and fixed
conveyor belts. Prior to the actual loading but after the sand
was placed onto the conveyor belts, Australian Laboratory
Services (“ALS”) took samples of the zircon sand for analy-
sis. The purpose of this analysis was to ensure that no rust or
other foreign material entered the cargo beds when the trucks
Tipper trucks have a mechanism that allows the body of the
truck to be tilted so the material will flow out of the body at a certain
angle.
10a
transported the material from the mill in Pinkenba to the
Hamilton Wharf.
Defendant contends that prior to the loading of the zircon
sand onto the vessel, the sand was moved around from point
to point ashore in Australia by CRL and that this travel
exposed the sand to rust, iron, pebbles, and dirt from various
sources including other bulk cargoes, trucks, metal roofs, and-
conveyor belts. The court, however, finds that the evidence
fails to support this conclusion. Neal Stewart, Processing
Manager for CRL, testified regarding the processing of the
zircon sand prior to loading onto the ship. CRL took samples
of the zircon sand every two minutes on its way to the prod-
uct bins inside the dry mill, and automatic samples of the final
zircon sand product were tested daily by ALS. Although CRL
processes Ilmenite, as well as zircon sand, which has a 33%
iron content and can be magnetic, the tests of the zircon sand
taken by CRL and ALS in the twelve months preceding the
loading of the M/V Ikan Selayang were within contract spec-
ifications and failed to reveal any contamination. Hence, no
prior history of any contamination existed with respect to the
operating procedures of the laboratory.
Furthermore, the tipper trucks used to transport the zircon
sand from the mill to the loading wharf were used only to
transport zircon sand in order to avoid any contamination with
other mineral sands or rust. Consequently, the proof in this
case establishes that no rust contamination had ever been
introduced to the tipper trucks and that they were clean and
free from contaminants. CRL’s Shipping Manager, Cecil Mar-
tin, testified that the trucks were covered at all times with
tarpaulins to protect the material inside the cargo beds from
being contaminated during transport. During the loading
period of the zircon sand in the CRL mill, the trucks and the
mill were protected by a roof above the mill. The tarpaulins
contemporaneously remained on the trucks during the journey
from the CRL mill to the Hamilton Wharf, and were designed
to discharge the zircon sand at the wharf without removing
the tarps covering the cargo beds.
lla
Nor could the contamination come from the warehouse. The
roof on the warehouse and the roof covering the conveyor
belts were made of galvanized iron in order to guard against
rust.
Further, the mobile and fixed conveyor belts were made of
rubber and did not come in contact with any metal or iron that
would have contaminated the zircon sand while being trans-
ported on the conveyor belts. Therefore, the court finds that
the zircon sand was not contaminated prior to loading onto
the M/V Ikan Selayang.
Before the transfer of the zircon sand to the M/V Ikan
Selayang, defendant and the vessel’s officers prepared the
vessel’s No. 6 Hold for the zircon sand pursuant to defen-
dant’s “Standard Requirements” for hold cleanliness. These
included the following pertinent instructions:
All loose rust scale must be removed from the hold prior
to loading, with particular attention being given to the
underside of the hatch covers, the coaming faces, the
underdeck spaces at both ends of the hold, the undersides
of the top tanks, the inner surfaces of the ship’s shell
plating, the “hidden flanges of the frames and the upper
and lower frame brackets, the fore and aft’r bulkheads
including ladder flanges and ledges, ventilator trunkings
ledges and grills and tank tops.
Before the M/V Ikan Selayang reached Brisbane, Australia
for the loading of the zircon sand, the ship dropped anchor in
Masinloc, Phillippines. In Masinloc, defendant hired shore
labor to clean the vessel’s hold because No.6 Hold was
described in the Master’s Report as “not so good” (Exh. K-3).
About twenty shore laborers were hired to remove hard rust
scale from the steel surface inside of the hold. Sledge ham-
mers, chipping hammers, and scrapers were used only on the
areas of the ship that the laborers could physically reach from
the floor of the hold. Neither scaffolding nor mobile man lifts
were used to reach the upper reaches of the hold. Subse-
quently, as testified by the Chief Mate, the upper reaches of
12a
the hold could not be hammered and scraped of hard rust
scale, but instead, the upper parts of the hold were sprayed
with pressurized water “just for removing loose paint and
loose rust over there and the residue of any cargo if that
existed” (Deposition of Zbigniew Stasiak, p. 89). It should be
emphasized that the pressurized water spray was not designed
for removing hard rust scale.
Apparently, defendant did not believe scaffolding was nec-
essary to properly clean No. 6 Hold and thus, did not instruct
the ship’s crew to assemble scaffolding to reach the upper
areas of the hold (Stasiak Deposition, pp. 85-89). After leav-
ing the Phillippines, the crew of the Ikan Selayang continued
to chip and scrape excess rust and paint from inside No. 6
Hold. At no time, however, were the upper regions of the hold
manually chipped or scraped.
Upon the vessel’s arrival in Brisbane, CRL on behalf of
plaintiff appointed Michael Pearson, an independent surveyor,
to inspect the holds number 3 and 6 prior to the loading of the
zircon sand. According to Pearson, he inspected both Hold
number 3 and Hold number 6 within a span of approximately
10-15 minutes. His responsibilities included, among other
things, inspecting the hatch coaming and drainage channels
around the perimeter of the hatch opening, inspecting the out-
sides and insides of the hatch cover panels, descending par-
tially down the access ladder on the forward bulkhead of one
hold, and descending further down the forward bulkhead lad-
der to another landing and again inspect the ship’s structures
in the vicinity of the ladder. Hold no. 6 is 19.8 meters long
and the hatch aperture is 9.6 meters long. Pearson did not
bring any light into the No. 6 Hold in order to assist his
inspection, despite the examination’s requirement of visual
inspections from distances ranging between five and
thirty-five feet away. In his deposition, Pearson stated that it
is possible that hard rust scale could come off the sides of the
ship’s hold if it was struck by a heavy object (Pearson Depo-
sition, p. 57). He further testified that the opening and clos-
ing of hatch covers could cause prior cargo residues or rust
13a
scale to become dislodged and fall down onto the remaining
cargo. After his examination, Pearson certified each of the
holds to be fit for the transport of zircon sand.
Plaintiff's expert, Captain John Alder, testified that a 10-15
minute inspection of holds 3 and 6 was “extremely cursory,”
and that a proper inspection of the holds should have taken
one hour. Captain Alder added that without the proper equip-
ment, such as scaffolding and man lifts®, only a spot check of
certain areas could be accomplished. After observing Captain
Alder in court and closely examining his testimony, the court
believes him to be entirely credible and finds that the evi-
dence suggests that the inspection performed by Mr. Pearson
was wholly incomplete and unsatisfactory. From the deck to
the bottom of No. 6 Hold aboard the M/V Ikan Selayang was
approximately 43 feet (R. 256). It is difficult to imagine that
Pearson could possibly have had adequate time to check, in
any way, all areas of the two holds within 10-15 minutes, let
alone examine these areas closely.
Moreover, the record further suggests the absence of proper
tools and equipment for the inspection. When this is consid-
ered in conjunction with the short time in which Pearson con-
ducted the inspection, the evidence unequivocally supports
the opinion of Alder. Therefore, notwithstanding Pearson’s
definitive declaration of the fitness of the holds to Carry Zir-
con sand, the court finds his opinion to be of little probative
value.
Prior to the arrival of the M/V Ikan Selayang in Browns-
ville, Texas, the vessel stopped in Wilmington, North Carolina
in order to discharge thirty-five hundred metric tons of zircon
sand. To facilitate the offloading, a crane with a bucket was
used to discharge the sand from the vessel’s No. 6 Hold. The
. Captain Alder testified that in some cases mobile man lifts, such
as cherry pickers where men will sit in a basket, have been used to clean
as well as inspect the higher up areas of the holds. The record does not
reflect whether mobile man lifts were available on the vessel or at any
time during the inspection by Pearson, and he never mentioned that he
used any similar devices.
14a
delivery of this shipment was uneventful, and there were no
complaints regarding the condition of any of the zircon sand
delivered to Wilmington.
On November 5, 1991, the M/V Ikan Selayang arrived in
Brownsville, Texas. The following day on November 6, 1991
discharge of the zircon sand from No. 6 Hold commenced at
7:40 a.m. at which time Rigoberto Gonzalez, the dock super-
intendent for Dix Shipping Co., witnessed the hatches being
open for the first time. Gonzalez testified that he noticed
approximately 50 specks of what appeared to be rust less than
three inches in size. Continuing, Gonzalez notified the chief
mate of the rust specks, at which time the chief mate sent one
of the crewmen down into the hold to pick up the specks.
After the specks of rust had been picked up by one of the
crewmen, Mr. Gonzalez testified that he had notified his boss
of the discovery of the rust at the Brownsville dock. With
respect to such alleged notification, the testimony of Gon-
zalez is unclear as to whether he notified Chapell of the spots
he observed. Based upon the testimony of Chapell and her
lack of reaction at the dock, the court finds that there was no
effective communication respecting Gonzalez’s observations
of contamination in the zircon sand.
The unloading of the zircon sand continued throughout the
day by means of a clam shell bucket on a crane which emptied
the sand directly into dump trucks. Prior to its use, the clam
shell bucket was fully inspected by Gonzalez who testified
that he did not observe any rust, dirt or debris. Furthermore,
Mr. Gonzalez inspected the seven or eight dump trucks used
in the transport of the zircon sand. Gonzalez also stated that
he commenced inspection of the trucks at 7:45 a.m. the day of
the unloading by having the beds of the trucks lifted up so
that he could visually inspect the inside of the trucks. He con-
cluded that the dump trucks did not contain any contaminants.
The zircon sand that was loaded onto the dump trucks was
taken directly from the Ikan Selayang to the Brownsville
Gulfside Warehouse.
lSa
Defendant contends that there was a rust mist on the out-
side of the clam shell buckets due to Storage of the equipment
outside. Specifically defendant points to a portion of Gon-
zalez’s testimony where he stated that a red mist covered the
clam shell buckets when they are about to be used early in the
morning. Gonzalez also testified that the clam shell buckets
contained no rust because they are constantly being used.
Indeed, Gonzalez’s testimony was extremely unclear, and
after careful review the court believes that the fair inference
which can be drawn from his testimony is that there may be
some type of mist which appears on the buckets in the
early morning but that there was no rust in the bucket which
could have produced the large amount of particles found in
the sand.
At the Brownsville Gulfside Warehouse, the zircon sand
was placed onto a concrete pad which was specially laid for
the receipt of zircon sand. The shipment of zircon sand was
the first cargo ever to rest upon the new pad. The warehouse
containing the sand was completely covered at all times. Once
the entire shipment of 891 metric tons of zircon sand was
placed in the Brownsville Gulfside Warehouse, there was a
primary pile of sand and a secondary pile consisting of
sweepings. The sweepings pile contained the last of the sand
contained in the ship’s hold, as well as, any sand that was
dropped from the trucks or on the ground between the ware-
house and the ship.
Of the 891 metric tons of zircon sand contained in the
warehouse, plaintiff contends that 700 metric tons were con-
tracted to be sold to Derivados Metal-Organicos, S.A. De C.V.
(“Demosa”). Defendant counters that plaintiff did not furnish
adequate evidence in support of its claim that there was a
valid contract of sale entered into by plaintiff and Demosa. In
resolving this factual dispute, the court finds that plaintiff has
sufficiently established that it did have a contract to sell 700
metric tons of its zircon sand to Demosa.
Although the copy of the contract of sale presented to the
court was unsigned, other evidence indicates that there was a
l6a
valid contract of sale (Exh. 7). Initially, Chapell specifically
testified that there was a contract between the parties for the
terms incorporated in the unsigned copy of the document.
Moreover, Chapell explained that it was within the usual prac-
tice in business dealings between plaintiff and Demosa for the
buyer not to return a signed copy of the contract. Importantly,
the evidence indicates that there was performance by the par-
ties which corresponded to the contract terms. Plaintiff did
send an initial shipment of sand to Demosa and although it
was rejected, Demosa complained of the quality of the sand
and did not refuse delivery because there was no purchase
agreement. Thus, based upon the document itself, the testi-
mony of Chapell, and proof of performance, the court con-
cludes that plaintiff sustained its burden to prove the
existence of a contract for sale of zircon sand for $342 per
metric ton between plaintiff and Demosa.
One truckload of zircon sand from the Brownsville Gulfside
Warehouse was bagged and sent to Demosa in November,
1991. Although the first shipment of sand was dispatched,
Demosa rejected the goods because the sand had been darker
and yellower than Demosa’s standard and would have yielded
a final product with a yellow tinge. According to Gregory
Dunn, manager of ALS, the presence of rust particles in the
zircon sand could account for the sand’s apparent yellow
tinge. Consequently, Demosa did not accept the remainder of
the 700 metric tons of zircon sand and considered its contract
with Sogem no longer binding.
Of the remaining 891 metric tons of zircon sand, plaintiff
contracted to sell 61 metric tons to Ferro Mexicana (“Fer-
romex”). On February 25, 1992 approximately 21.5 metric
tons of zircon sand was sent from the Brownsville Gulfside
Warehouse to Ferromex. After receiving the sand, Ferromex
discovered rust contamination and demanded that the rust
contamination be removed before completing the delivery.
Plaintiff, upon hearing of the alleged contamination, notified
David Lapeyre, the warehouse manager, who inspected the
pile for rust. Lapeyre randomly drew samples of the sand with
—————————————vo
17a
his hand and discovered pieces of rust in the large pile of zir-
con sand. On April 2, 1992 representatives of Sogem and Fer-
romex held a meeting at the warehouse in which 1,000 pounds
of the zircon sand was poured over a magnet. The magnet
removed approximately one-quarter cup of iron pieces. Hope-
ful that this process would remove the rust from the sand, on
April 7, 1992 Lapeyre, at the direction of plaintiff, used a
triple grid magnet to attempt to remove the rust scale from the
zircon sand.
A hopper was constructed which would direct the flow of
the sand over three layers of grate mzgnets. The zircon sand
was poured over the magnets and rust contaminate was caught
by the magnets. Over 100 pounds of rust scale was removed
from the sand by this method. Despite the fact that some of
the rust was being filtered out of the pile after the sand was
run past the three magnets, rust contaminate stil] remained
mixed with the filtered sand. The entire process was neces-
Sarily stopped after every 6,000 pounds of sand was put
through the hopper so that the rust could be cleaned off the
magnets. On April 9, 1992 the warehouse notified plaintiff
that the magnetic hopper was successful in removing much of
the rust but that there was still a Significant amount of con-
tamination contained within the sand.
On April 21, 1992 a second truckload of zircon sand was
sent to Ferromex which had also been found to have con-
tained rust scale. Subsequently, plaintiff sought the advice of
CRL on suggestions how to remove the contamination from
the sand. CRL suggested passing the zircon sand through a
screen either 0.600 millimeter or 0.850 millimeter woven wire
and then poured over magnets. Although this information was
conveyed to Brownsville Gulfside Warehouse, Lapeyre tes-
tified that, at the time, no facility could be located which
could provide the type of screen sufficient to initiate this pro-
cess. Moreover, Dr. Rising, who specializes in geochemistry,
testified that it is doubtful that CRL’s suggested process
would have returned the zircon sand to it premium condition.
Accordingly, unable to sell the zircon sand under its contracts,
18a
plaintiff was compelled to sell the sand for salvage. The sale
of the salvaged zircon sand amounted to $15,355.
During his inspection of plaintiff’s cargo, Hector Gonzalez
took samples of the zircon sand. The samples, in which he
observed rust particles, were delivered to plaintiff’s counsel
through the Ewig Company and subsequently sent to Dr. Ris-
ing at Umpire & Control Services. Dr. Rising’s analysis of the
samples found contamination of the sand with rust scale, rust
dust, and rust scale coated with red primer paint (Exh. 70).
During the return of the samples by Dr. Rising, one of the five
samples was lost. No explanation was offered to account for
the missing sample. Despite the loss of one sample, the court
finds that the evidence sufficiently supports plaintiff’s con-
tention that the returned samples were, in fact, zircon sand
taken from the Brownsville warehouse.
By written correspondence dated April 16, 1992, plaintiff
notified defendant of the zircon sand contamination. The noti-
fication of defendant was addressed to plaintiff “C/O M.I.D.-
Ship Marine Inc.,” the broker used by plaintiff to arrange the
transport of this cargo. Plaintiff had previously always com-
municated with ship owners through a broker and specifically,
in this case, had only contacted defendant through M.I.D.-
Ship Marine Inc.
CONCLUSIONS OF LAW’
This case involves claims by the owner of premium grade
zircon sand against an ocean carrier arising from an alleged
breach of contract of carriage. The matter, therefore, falls
within the court’s admiralty jurisdiction. Allied Chemical v.
Companhia de Navegacao, 775 F.2d 476, 481 (2d Cir. 1985),
cert. denied, 475 U.S. 1099 (1986). The private contract of
carriage is the charter party which incorporates the United
States Carriage of Goods by Sea Act (““COGSA”). 46 U.S.C.
’ Any conclusion contained within this section that also consti-
tutes a factual determination should be deemed a finding of fact.
Re ee |
19a
§ 1300 et seg., Associated Metals & Minerals Corp. v. S.S.
Jasmine, 983 F.2d 410, 413 (2d Cir. 1993). Consequently,
COGSA is the governing law in this matter.
Plaintiff insists that the defendants are liable for the loss of
cargo under COGSA. In order for a party to enforce its rights
under COGSA, “litigants must engage in the ping-pong game
of burden shifting mandated by sections 1303 and 1304 of the
Act.” Tubacex Inc. v. M/V Risan, 45 F.3d 951, 954 (Sth Cir.
1995). Initially, the burden falls on the plaintiff shipper, who
must establish a prima facie case of loss. This burden is
Satisfied if the shipper can demonstrate delivery of the cargo
in good condition to the carrier and either the arrival of
less cargo than was loaded or delivery of the goods in dam-
aged condition. See 46 U.S.C. §§ 1303(3) and 1304; see also,
Thyssen, Inc. v. S/S Eurounity, 21 F.3d 533, 538 (2d Cir.
1994); New York Marine & Gen. v. S/S Ming Prosperity, 920
F.Supp. 416, 422 (S.D.N.Y. 1996). It is only after a plaintiff
establishes a prima facie case, does the burden then shift,
requiring the carrier to establish that any loss falls within one
of COGSA’s exceptions. Westway Coffee Corp. v. M.V.
Netuno, 675 F.2d 30, 32 (2d Cir. 1982); Judy - Philippine Inc.
v. S/S Verazano Bridge, 781 F.Supp. 253, 258 (S.D.N.Y.
1991).
A.
As a threshold matter, the court must address the issue of
notice*. Defendant contends that the failure of plaintiff to give
8 The court rejects defendant’s argument that plaintiff’s decision
to notify it through the broker M.I.D.-Ship Marine was improper. While
it is true that plaintiff could have notified defendant directly, its ordinary
course of business was to contact and receive messages from defendant
through M.I.D.-Ship Marine, Inc. In correspondences dated April 16,
1992, plaintiff sent notification of the contamination of the cargo
addressed to defendant c/o M.I.D.- Ship Marine Inc. The overwhelming
evidence is that the parties communicated through the broker. For exam-
ple, the invoices were sent to plaintiff by defendant through the broker,
as were notices required under the Charter Party, and indeed, even the
20a
notice until five months after the discharge of the sand defeats
plaintiff’s claim by operation of statute. Section 3(6) of the
COGSA provides in relevant part:
Unless notice of loss or damage and the general nature of
such loss or damage be given in writing to the carrier or
his agent at the port of discharge before or at the time of
the removal of the goods into the custody of the person
entitled to delivery thereof under the contract of car-
riage, such removal shall be prima facie evidence of the
delivery by the carrier of the goods as described in the
bill of lading. If the loss or damage is not apparent the
notice must be given within three days of the delivery.
46 U.S.C. § 1303(b). In this case the failure of the plaintiff to
give notice to defendants within three days creates a pre-
sumption in favor of defendants that the cargo was delivered
in good condition. Absent any contrary evidence, the pre-
sumption of the notice provision would defeat plaintiff’s
claim altogether. See e.g., M.W. Zack Metal Co. v. the S.S.
Birmingham City, 291 F.2d 451, 453 (2d Cir. 1961); Leather’s
Best Intern., Inc. v. MV Lloyd Sergipe, 760 F.Supp. 301,
309-10 (S.D.N.Y. 1991). Notwithstanding the foregoing,
“fajny such presumption of good delivery falls, however,
once the plaintiff adduces any credible evidence tending to
show that the cargo was damaged prior to delivery.” Fer-
rostaal Corp. v. M.V. Singa Wilguard, 838 F.Supp. 757, 767
(S.D.N.Y. 1993); see also, Pacific Employers Ins. Co. v. M/V
Gloria, 767 F.2d 229, 238 (Sth Cir. 1985); C. Itoh & Co. v.
Hellenic Lines, Ltd., 470 F.Supp. 594, 597 (S.D.N.Y. 1979).
As will be discussed more fully below, the record does,
indeed, show that plaintiff has produced evidence that the rust
contamination took place while the zircon sand was in defen-
dants’ custody. The plaintiff has, therefore, put forth credible
voyage instructions provided that the ship was to send required notices
through M.I.D.-Ship Marine. Considering the undeniable fact that plain-
tiff and defendant had established a course of business which required
information to be conveyed through the broker, it is entirely reasonable
that plaintiff would notify defendant in this same manner.
2la
evidence which rebuts the presumption afforded to defendant
as a result of receiving late notice. Accordingly, having found
that the late notice does not bar plaintiff’s case, the court will
address the substantive merit of plaintiff’s claim.
B.
Merely overcoming the presumption of good delivery does
not mean that plaintiff prevails on the ultimate issue. As pre-
viously stated, plaintiff is required to establish that it deliv-
ered the cargo to defendant in good condition but at outturn
the cargo was damaged. Plaintiff argues that defendant
received the zircon sand in good condition but delivered the
sand in damaged condition due to contamination by rust.
To establish a prima facie case, the shipper must adduce
evidence that, standing alone, establishes both prongs of
the claim. R.B.K. Argentina v. M/V Dr. Juan B. Alberdi, 935
F.Supp. 358, 368 (S.D.N.Y. 1996). In this case, the court finds
that the plaintiff has established a prima facie case against the
defendants.
The first part of the test requires that plaintiff establish that
it delivered the cargo in good condition. Here, the evidence
clearly illustrates that the sand was not contaminated by rust
when it was received by defendant. Initially, there is the unre-
butted testimony of plaintiff’s Australian witnesses that all of
the sand loaded into No. 6 Hold was in good condition. The
record demonstrates the meticulous processing to which the
sand was subjected. Indeed, it appears that every precaution
was taken by the CRL mill to ensure that its sand was not
infiltrated with impurities. Moreover, there is the laboratory
evidence supporting plaintiff’s claim that it delivered the sand
in good condition. Gregory Dunn testified that random sam-
ples of the sand were taken as it was moved to the ship and
these samples were analyzed at the ALS laboratory and no
rust contamination was found.
Defendant concludes that because the samples for the first
700 metric tons of sand loaded into the No. 6 Hold were dis-
22a
carded, the is no reliable measure of the condition of the sand
that was ultimately delivered to Brownsville. The court does
not agree with defendant’s conclusion. Initially, the Aus-
tralian witnesses testified that the entire shipment of sand was
in good order. Moreover, even assuming a defect in the sam-
pling of the sand ultimately bound for Texas, defendants’
argument ignores the fact that before any sand was loaded the
No. 6 Hold, more than 5000 tons of rutile sand was loaded
into No. 3 hold, using the same conveyorbelt. Yet, there was
no rust contamination of the rutile sand. Surely, if the con-
veyor belt was responsible for contaminating the zircon sand,
it would have had the same effect on the previous load of
sand. Finally, there was abundant evidence that many appro-
priate precautions were taken to ensure that the loading con-
veyors were maintained rust-free and that contaminants from
prior cargo. As Judge Friendly aptly noted, one method of
demonstrating good condition of goods at delivery “would be
to show that the goods were prepared and packaged in accor-
dance with proper procedures and were carried to the ship
under conditions that should have prevented any damage to
the contents en route.” Caemint Food v. Lloyd Brasileiro, 647
F.2d 347, 354 n. 6 (2d Cir. 1981). Accordingly, even if the
court did not consider the chemical analysis of the samples,
plaintiff has clearly sustained its burden by establishing the
careful procedures employed in loading the sand and the
demonstrating that none of the cargo, other than the zircon
sand unloaded in Texas, suffered any rust contamination.
Therefore, the plaintiff has established the first prong of its
prima facie case.
The court likewise finds that plaintiff has sufficiently sus-
tained it burden of demonstrating that the cargo was damaged
at outturn. There is no question that defendant was aware of
the refined nature of plaintiff’s sand. Defendant’s own “stan-
dard requirements” regarding zircon sand demonstrate its
knowledge of the importance of thorough cleaning. The
requirements state:
23a
ALL loose rust scale must be removed from the hold
Prior to loading, with particular attention being given to
the underside of the hatch covers, the coaming faces, the
underdeck spaces at both ends of the hold, the undersides
of the topside tanks, the inner surfaces of the ships shell
plating, the “hidden” flanges of the frames and the upper
and lower frame bracket, the fore and aft’r bulkheads
including ladder flanges and ledges, ventilator trunkings
ledges and grills and the tank tops.
Exh. J-1.
Moreover, it is also undisputed that at the time the revised
stowage plan was presented to defendant the condition of No.
6 hold of the vessel was stated in the Master’s Report to be
“Not So Good” (Exh. K-3). The degree of rust and rust scale
present in the hold was so problematic that a shore crew was
retained to chip and scrape No. 6 Hold in preparation for the
zircon sand. Despite, however, the presence of “heavy rust,”
as described by the vessel’s Chief Mate, the shore crew phys-
ically chipped and scraped rust only to those areas which they
could reach. The only attempt to clean the upper portions of
No. 6 Hold was to use high pressure water spray, which
according to the Chief Mate, was not designed to remove hard
scale rust but only used to remove “loose paint and loose
rust” and could not remove all of the rust.
Coupled with the Showing of severe rust in No. 6 Hold, was
the credible testimony of plaintiff’s expert Alder who testified
that there were many places in the upper areas of the hold
which were likely to contain rust and may have even been in
worse condition than the lower area. In addition, Alder
explained that as the hold became less full, the increased
vibrations of the ship would act to dislodge layers of rust
scale. In point of fact, Pearson Provides additional explana-
tions that hard scale rust could have become dislodged if a
grab had banged into the wall of the hold. Certainly, as the
sand was unloaded at Wilmington, it is reasonable to conclude
that the grab, used to offload the Cargo may have struck some
24a
area of the hold, thereby causing rust to fall upon the remain-
ing sand which was delivered to Texas. Finally, the fact that
analysis® of the rust found a coating of red primer paint fre-
quently used in preparing the surfaces of steel ships for paint-
ing, creates another basis to determine that the rust originated
in the No. 6 Hold. The short of the matter is that all of this
evidence demonstrates the damage occurred while it was in
the hold of defendant’s vessel, and therefore the plaintiff has
established its prima facie case. See Arkwright Mut. Ins. Co.
v. M.V. Oriental Fortune, 745 F.Supp. 920, 923 (S.D.N.Y.
1990); A.J. Cunningham Packing Corp. v. M/V Australian
Exporter, 719 F.Supp. 258, 259 (S.D.N.Y. 1989).
Defendant asserts that there were “numerous opportunities
for the zircon sand to have picked up bits of rust during the
discharge” in an attempt to cast doubt upon plaintiff’s alle-
~~ gations as to what occurred. Specifically, defendant hypoth-
esizes the rust may have come from a clamshell bucket used
to discharge the zircon sand in Texas, that the front end loader
may have contaminated the sand, that the rust came from
either steel coils or a prior cargo of bulk sodium cargo which
was stored at the Brownsville warehouse, and finally, defen- -
dant maintains that the sweepings of the zircon sand could
account for the rust. The court finds that none of these asser-
tions rise beyond mere possibility and are generally refuted
by the evidence presented in this case.
Initially, as previously noted the testimony of Gonzalez was
hardly clear as to whether there was rust on the clamshell
bucket. No evidence was ever presented that definatively
illustrated that rust existed on the clamshell bucket and if so,
how extensively was the bucket rusted. Moreover, even
assuming that some rust was present on the bucket, the logi-
cal conclusion to defendant’s argument, that over 100 pounds
9 — The court finds that the deposition testimony of H. Gonzalez and
the live testimony of Dr. Rising demonstrated by the fair preponderance
of the evidence that the samples tested by Dr. Rising were, in fact, sam-
ples of plaintiff’s zircon sand taken from Texas. Fed. R. Evid. 901(a); see
also, United States v. Grant, 967 F.2d 81, 82 (2d Cir. 1992), cert. denied,
113 S.Ct. 1293 (1993).
25a
of rust chips were the result of the clamshell bucket strains
credulity to its breaking point.
Nor does the evidence suggest that the trucks were respon-
sible for the rust. Plaintiff provided evidence of the careful
inspection and cleaning of the trucks prior to the discharge of
the sand. The deposition testimony of the vessel’s Chief Offi-
cer and the trial testimony of Adler each point to the far more
likely conclusion that the No. 6 Hold was responsible for the
rust contamination.
It is even less likely that the rust was the result of any con-
tamination in the warehouse. The testimony of Lapeyre is
uncontested with respect to the special precautions taken in
making the warehouse ready for plaintiff’s sand. In particu-
lar, was the fact that the sodium nitrate cargo was not even
present at the time when the zircon sand was brought to the
warehouse and that an entirely new concrete pad was created
so that the sand would not be contaminated by any residue left
on the previous floor of the warehouse. Plaintiff’s sand was
the first bulk cargo to be laid upon the new pad, hence, any
previous rust residue that existed on the original floor of the
warehouse could not have affected the sand.
Defendant's conjecture that the steel coils were somehow
responsible for the approximately 100 pounds of rust is
unsupported by the evidence. The coils were not present when
the zircon sand shipment arrived. More, no evidence was
introduced suggesting that the steel coils became rusty. In
addition, the concrete pad would have prevented any prior
contamination in the warehouse from affecting the sand, and
the two piles of zircon sand were covered with plastic sheets
at the Warehouse. Consequently, defendant’s theory regarding
the coils obviously does not diminish plaintiff’s proof estab-
lishing its prima facie case.
Finally, defendant seeks to imply that perhaps some of the
sweepings were co-mingled with the primary pile and thereby
accounting for the rust contamination. Defendant rests this
assertion upon the shaky foundation of alleged inconsistent
testimony of Gonzalez and Lapeyre. While Gonzalez states
26a
that two trucks carried the sweepings, Lapeyre indicated that
there was only one. Defendant’s entire argument rests on the
proposition that Lapeyre was incorrect and there is a missing
load of sweepings which defendant contends may have been
dumped on the primary pile'®. The court does not find the tes-
timony to warrant such a conclusion. Repeatedly throughout
his testimony, Lapeyre reminded the court that the events to
which he was testifying occurred nearly five years ago and
that his recollection was not perfect. Moreover, when he
spoke about one truckload of sweepings, Lapeyre’s answer
was not in response to a question asking how many trucks
carried the sweepings. Essentially, defendant is attempting to
take Lapeyre’s testimony out of the context in which it was
given. Considering Lapeyre’s statements regarding his diffi-
culty in recalling minor details due to lapse of time and the
fact that he was never specifically asked how many trucks
carried the sweepings, the court is not persuaded that any true
contradiction exists.
In any case, defendant offers nothing more than speculation
that there was a commingling of the primary pile and the
sweepings. Further, even if the sweepings pile held the 100
pounds of rust which was discovered in the sand, the sweep-
ings came out of the same hold as did the primary pile. There-
fore, even accepting defendant’s theory of what happened,
that version does not discount the likelihood that the rust con-
tained in the sweepings originated from No. 6 Hold. Each of
the scenarios put forth by defendant rest upon “surmise and
conjecture” which may not be substituted for proof. See
Minemet, Inc. v. M.V. Mormacdraco, 536 F.Supp. 769, 775
(S.D.N.Y.), aff'd, 714 F.2d 115 (2d Cir. 1982). Upon exami-
nation, the fair preponderance of credible evidence supports
plaintiff’s allegation that it delivered the cargo to defendant
in good condition and received damaged goods at outturn.
10 It is noteworthy that defendant, in its post-trial brief does not
provide a citation to support its claim that “Mr. Lapeyre thought that
there was on truckload of sweepings.” Defendant’s Memorandum of law,
p. 13-14.
ee
27a
Accordingly, the court finds that plaintiff has sustained its
burden of proving its prima facie case. Goya Foods, Inc. v.
S/S Italica, 561 F.Supp. 1077, 1083 (S.D.N.Y.), aff’d, 742
F.2d 1434 (2d Cir. 1983),
c.
The duty imposed by COGSA upon a shipowner is to
exercise due diligence in providing a seaworthy ship. 46
U.S.C. § 1303(1)(a). “Thus, even if unseaworthiness caused
the loss, the shipowner can still be exonerated from liability
under COGSA if it establishes that it exercised due diligence
in attempting to make the ship seaworthy.” Complaint of
Tecomar S.A., 765 F.Supp. 1150, 1179 (S.D.N.Y. 1991).
Defendant argues that the actions it undertook to prepare No.
6 Hold demonstrate that it exercised due diligence, employed
all reasonable precautions, and should therefore not be held
liable". After careful review of the entire record, the court
cannot accept defendant’s argument.
There is no question that defendant was experienced at
handling mineral sands. Indeed, the record plainly demon-
Strates that defendant’s own “standard requirements” for the
Carriage of mineral sands Stated, respecting zircon sand, that
“any form of contamination is harmful” Exh. J-|. Likewise,
defendant, after being informed that the hold was “not so
good,” hired a shore crew to come aboard the ship to chip and
Scrape away the hard scale rust which had accumulated on the
hold. The problem with defendant’s actions stem from the fact
that in its guidelines for handling mineral sands, such as
‘| Defendant’s reliance on the survey conducted by Pearson is mis-
placed. As previously discussed, the court accepts the expert opinion of
Alder who opined that the examination of the Number 3 and 6 holds
could not have been complete. Pearson simply did not spend enough time
to be able to adequately make a determination of the fitness of the hold.
Accordingly, his conclusion that the hold was fit for zircon sand and that
the rust contaminate did not originate in the hold if of no persuasive
value.
28a
plaintiff’s cargo, defendant states that “all” rust must be
removed from the hold. As noted, defendant did hire a shore
crew to eliminate the rust in the hold, but erected no scaf-
folding to permit the clearing of rust on the upper level of
rust. While there was a pressurized water spray applied to the
upper areas of the hold, the Chief Mate himself admitted that
the water spray was designed to adequately dislodge already
loose rust and paint chips, but not to scrape hard scale rust.
Accordingly, the hard scale rust which would have been
located in the upper portion was left virtually untreated in the
hold. Since this rust could be knocked loose by the increased
vibrations of a nearly empty hold during an ocean voyage,
heavy machinery which may be utilized to unload the sand, or
by the opening and closing of the hatch, defendant failed in
its duty of due diligence under COGSA. See Siderius v. M.V.
Amilla, 880 F.2d 662, 66 (2d Cir. 1989). Defendant could
have prevented the risk of rust falling into plaintiff’s cargo
but did not and therefore cannot be said to have exercised due
diligence.
D.
Defendant argues that even if the court finds that defen-
dant’s vessel was not fit for receipt of the cargo, the act of
plaintiff’s inspector certifying the fitness of the hold estab-
lishes an affirmative defense which exonerates defendant.
Defendant first points to the charter party which provides that
the owners are to have the charterer’s representative pass the
holds as clean or ready. Since plaintiff’s representatives did
judge No. 6 Hold to be fit for the zircon sand, defendant
asserts the applicability of the section of COGSA providing
“neither the carrier nor the ship shall be responsible for loss
or damage arising or resulting from. . . [any] act or omission
of the shipper or owner of the goods, his agent or represen-
tative” 46 U.S.C. § 1304(2)(i). Because plaintiff’s inspector
certified the hold as fit to store plaintiff’s zircon sand, defen-
dant maintains that such certification was an “act or omission
29a
of the shipper” precluding a finding of liability on defendant.
The court, however, does not accept defendant’s claim.
Section 1303(1) of COGSA provides:
The carrier shall be bound, before and at the beginning
of the voyage, to exercise due diligence to make the
holds, refrigerating and cooling chambers, and all other
parts of the ship in which goods are carried, fit and safe
for their reception, Carriage and preservation.
46 U.S.C. § 1303(1). It has long been recognized that stowage
falls within the scope of a carrier’s warranty of seaworthiness.
Nuzzo v. Rederi, A/S Wallenco, 304 F.2d 506, 508 (2d Cir.
1962); Bloomer Chocolate Co. v. Nosira Sharon Ltd., 776
F.Supp. 760, 776 (S.D.N.Y. 1991), aff’d, 963 F.2d 1552 (2d
Cir. 1992). In a situation similar to the case at bar, the court
found that rust scale which caused damage to stowed cargo
constituted a breach of the warranty of seaworthiness. GTS
Industries S.A. v. S/S Havtjeld, 887 F.Supp. 531, 537
(S.D.N.Y. 1994), aff’d, 68 F.3d 1535, 1535-36 (2d Cir. 1995).
The plain language of COGSA demonstrates that the Charter
Party may not lessen any obligations imposed upon the car-
rier. Specifically, the law states:
Any clause, covenant, or agreement in a contract of car-
riage relieving the carrier or the ship from liability for
loss or damage to or in connection with the goods, aris-
ing from negligence, fault, or failure in the duties or
obligations provided in this Section, or lessening such
liability otherwise than as provided in this chapter, shall
be null and void and of no effect.
46 U.S.C. § 1303(8). The law of the Second Circuit inter-
preting this provision is equally unambiguous, COGSA does
not permit the carrier to divest itself of the duty to insure the
Proper stowage of the cargo. Associated Metals & Minerals
Corp. v. M/V Arktis Sky, 978 F.2d 47, 50 (2d Cir. 1992);
Nichimen Co. v. M.V. Farland, 462 F.2d 319, 330 (2d Cir.
1972). No matter what provisions existed within the Charter
30a
Party, it was defendant’s responsibility alone to maintain the
No. 6 hold, in an manner fit to stow plaintiff’s zircon sand.
Defendant offers a unique argument” as to why the court
should depart from the explicit holding of the Second Circuit.
In its reading of a recent decision by the Supreme Court,
defendant maintains that the Supreme Court has questioned
the concept of non-delegable duties arising under Section
1303 of COGSA as expressed by the Second Circuit, in light
of the statutorily expressed exception to carrier liability as set
forth in Section 1304(2)(i). Vimar Seguros Y Reaseguros, S.A.
v. M/V Sky Reefer, 115 S.Ct. 2322, 2329 (1995).
After examining the Sky Reefer decision, the court finds
that defendant has misapplied that case. First, as defendant
candidly admits, the entire discussion of the matter is merely
dicta, and thus, at best, may only be used persuasively. Sec-
ondly, it is clear that when acknowledging the differing inter-
pretations of COGSA, the Supreme Court was merely laying
out the respective arguments set forth by the petitioner and
respondent in that case. Indeed, in the very next paragraph,
the Court stated that petitioner’s claim regarding non-dele-
gable duties was “premature.” Jd. In light of such language,
the only reasonable reading of Sky Reefer requires the ulti-
mate conclusion that the Court chose not to pass judgment,
even in dicta, upon the Second Circuit’s established view.
Defendant’s argument must therefore be rejected.
E.
Having found that the plaintiff has established its burden
and that defendant has failed to set forth any valid defense,
the court now turns to the issue of damages. Defendant makes
two claims with respect to the proper calculation of damages.
First, defendant argues that the plaintiff has failed to submit
12 Defendant also seeks to rely upon the reasoning articulated in a
Note published in the Tulane Maritime Law Journal. In light of the Sec-
ond Circuit’s established rulings on this issue, the court finds the sub-
mission of this publication to be unpersuasive.
3la
sufficient evidence of its contract with Demosa. Second,
defendant maintains that plaintiff did not adequately mitigate
its damages. The court finds each of these claims to be with-
out merit.
The parties are not in dispute as to how damages are to be
properly calculated under the law. It is well settled that “the
general measure of damages is the difference between the fair
market value of the goods at their destination in the condition
in which they should have arrived and the fair market value of
the goods in the condition in which they actually did arrive.”
Texport Oil Co. v. M/V Amoltntos, 11 F.3d 361, 365 (2d Cir.
1993); Kanenmatsu-Gosho Ltd. v. M/T Messiniaki Aigli, 814
F.2d 115, 118 (2d Cir. 1987); Valerina Fashions vy. Hellman
Intern. Forwarders, 897 F.Supp. 138, 140 (S.D.N.Y. 1995).
The parties agree that in a case where a contract exists, the
proper measure of a plaintiff’s damage is the price plaintiff
was to receive under the contract minus the amount of money
plaintiff received by selling the damaged goods. /d. at 365:
see also, Pacol (Canada) Ltd. v. M/V Minerva, 523 F.Supp.
579, 582-83 (S.D.N.Y. 1981).
Here, the court has determined that there was sufficient evi-
dence to find that there was two contracts, one between plain-
tiff and Demosa and one between plaintiff and Ferromex. Of
course an actual contract for resale is not even requried for
the plaintiff to sustain its burden of proving lost profits:
rather, the agreived party “need only proffer proof tending to
show its loss.” Valenrina Fashions, 897 F.Supp. at 141; see
also, Goldberg v. World Wide Shippers & Movers, 236 F.2d
198, 202 (7th Cir. 1956) (in order to properly establish lost
profits, “no greater degree of certainty of proof is required
than for any other fact essentail to be established in a civil
action”). Therefore, even if the court were to find that the
proof of contract between plaintiff and Demosa was lacking,
there is still sufficient evidence based on the previously
Signed contract that the market price for plaintiff’s zircon
sand is what plaintiff claims. In any event, the expected return
upon the contract with Demosa for 700 metric tons of zircon
32a
| sand was $239,400 less the salvage proceeds of $12, 950 for
a total of $226, 450. With respect to the 61 metric tons of zir-
| con sand rejected by Ferromex, the expected return on the
| contract constituted a total of $5,737.27. Finally, the measure
| of damage for the additional 130 metric tons of zircon sand,
for which there was no sale contract, should properly be cal-
culated from its FOB purchase value plus freight charges
minus any proceeds from salvage. Here the cost of the addi-
tional zircon sand carried from Willimington and retained in
the Brownsville Gulfside Warehouse including the freight’
less salvage proceeds of $2,405 amounts to $37,974.22. Upon
the complete calculation, the total measure of damages sus-
tained by plaintiff is $270,161.49. Accordingly, defendant is
liable to plaintiff for this amount. See Valerina Fashions, 897
F.Supp. at 140 (under COGSA damage calculations are
designed to return to plaintiff what was actually lost).
Defendant also maintains that plaintiff failed to properly
mitigate its damages. Specifically, defendant points to plain-
tiff’s rejection of CRL’s suggestion that the sand be filtered
through a .6 millimeter screen and then run through a series
of magnets in order to attempt the removal of additional rust.
While the plaintiff is always under a duty to reasonably mit-
igate the damages it sustains, the burden to show failure to
mitigate lies with the defendant. Emmco Ins. Co. v. Wallenius
Caribbean Line, S.A., 492 F.2d 508, 514 (Sth Cir. 1974);
C. Itoh & Co. (America) v. M/V Hans Leonhardt, 719 F.Supp.
479, 510 (E.D.La. 1989) (citing Emmco); C. Itoh & Co.
Etc. v. Hellenic Lines, Ltd., 470 F.Supp. 594, 599 (S.D.N.Y.
1979) (citing Emmco). Here, defendant has failed both in
demonstrating that the measures taken by plaintiff did not
constitute a reasonable effort and in showing the portion of
= Defendant contends that the freight costs to plaintiff was $34.50
per ton. However, according to the Charter Party, Clause 61, the ocean
freight rate from delivery to Wilmington was $34.50. The cost of ocean
freight for delivery to Brownsville Texas, however, was $39.75 (Exh. 2,
p. 4). Thus, the court finds plaintiff’s calculation as to the cost of ocean
freight to be correct.
33a
the loss caused by plaintiff’s failure to take additional steps.
C. Itoh & Co. (America) v. M/V Hans Leonhardt, 719 F. Supp.
at 510.
It is undisputed that when plaintiff discovered the fact that
its zircon sand was contaminated with rust, measures were
taken to rectify the situation. For several days, the zircon sand
was passed through three separate magnets but significant rust
still remained in the sand. Clearly, plaintiff took action to
eradicate the problem. Moreover, defendant presents no evi-
dence to suggest that the screen would have reduced the rust
content in the zircon sand to an acceptable level. It is impor-
tant to note the very detailed processing the sand undergoes
when it is manufactured. Included in the process is the use of
eight electrostatic separators spinning at 350 rpm and charged
with 25,000 volts of electricity in an effort to remove con-
ductive contaminates such as iron. It is difficult to imagine
that filtering the zircon sand through a screen onto magnets
would significantly reduce the levels of rust contained in the
sand anymore than Lapeyre’s previous attempts.
Additionally, at the time when CRL Suggested the use of
the screen and magnets, plaintiff’s representative could not
locate the type of screen that was needed"4. Finally, Dr. Ris-
ing stated that it was not possible to guarantee that this
method would filter out all of the contaminants. Dr. Rising
testified that the only method he thought “would probably
work” to clean the sand to an acceptable level would be a
chemical wash (R. 214). Because, of the amount of sand
involved in this case, the time it would take to employ such
a measure, and the expense plaintiff would incur in order
to achieve the desired results, a chemical wash was not
feasible.
14
The fact that, well after the fact, defendant was able to locate
a screen manufacturer is of no moment. The court has no reason to
doubt that plaintiff and its agent engaged in a reasonably diligent search
for the screen. At the time, plaintiff was still hoping to sell its sand under
the contract and would therefore have every reason want the sale to
proceed.
34a
In short, defendant has not established any evidence tend-
ing to show that plaintiff failed to take reasonable steps to
mitigate the damage to the sand. More, defendant has not
been able to demonstrate that the screen method it urges
would have had any greater effect than the method employed.
Lastly, the only evidence presented regarding other methods
available to plaintiff, supports plaintiff’s view that use of the
screen would have most likely been futile. Thus, the court
finds that defendant has not shown that the methods used by
plaintiff were insufficient or that defendant’s proposed
methed of mitigation would have substantially improved the
zircon sand.
Finally, plaintiff seeks prejudgment interest and costs in
connection with the prosecution of this case. With respect to
interest, plaintiff proposes that the rate should be based upon
the average yield of a six-month Treasury Bill and run from
the date of delivery of the damaged cargo. It is well settled
that “the allowance of interest is the general rule, and dis-
allowance is supportable only in the face of exceptional
circumstances.” Bloomer Chocolate, 776 F.Supp. at 779.
Notwithstanding, that general rule, the award of interest still
rests within the sound discretion of the court and may be dis-
allowed “where peculiar circumstances would make such an
award inequitable.” Reeled Tubing, Inc. v. M/V Chad G, 794
F.2d 1026, 1028 (Sth Cir. 1986). The court finds circum-
stances within this case to render any award of prejudgment
interest inequitable.
The record is replete with instances of delay occasioned by
plaintiff. Initially, while it does not impact on plaintiff’s abil-
ity to recover its actual losses, plaintiff did not notify defen-
dant of any damage until five months after discharge.
Moreover, plaintiff did not file this action until nearly two
years after the initial discharge. Throughout the course of the
trial plaintiff, while never acting improperly, often allowed
long delays before documents were produced to defendant.
Considering the circumstances, it would be manifestly unjust
to allow plaintiff to collect interest for periods of elapsed time
35a
considering that many Significant delays were occasioned
solely by plaintiff’s actions. Plaintiff should not be permitted
to profit from lapses of times it predominately caused.
Accordingly, plaintiff’s request for interest and costs is
denied.
CONCLUSION
The court finds defendant to be liable to plaintiff for the
damage sustained to plaintiff’s zircon mineral sand. In accor-
dance with this opinion, plaintiff shall recover $270,161.49 in
compensatory damages. Plaintiff’s request for pre-judgment
interest is hereby denied. Each side shall bear its own costs.
The Clerk of the Court is directed to enter judgment
accordingly.
IT IS SO ORDERED
Dated: December 20, 1996
New York, New York
/s/ BERNARD NEWMAN
Bernard Newman, U.S.D.]J.,
by designation
36a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
93 Civil 7538 (BN)
Filed December 23, 1996
SOGEM-AFRIMET, INC.,
Plaintiff,
—against—
M/V IKAN SELAYANG, her engines, boilers, machinery, etc.,
in rem, FEDNAV LIMITED, PACIFIC CARRIERS PTE., LTD.,
and CHRISHOLM TRADING PTE., LTD., in personas,
Defendants.
JUDGMENT
Whereas the above entitled action having been assigned to
the Honorable Bernard Newman, United States District Judge,
who on December 20, 1996 having issued his Opinion
(77777), finding in favor of the plaintiff in the amount of
$270,161.49, it is,
ORDERED, ADJUDGED AND DECREED: That pursuant to the
Court's Opinion (77777) dated December 20, 1996, the defen-
dant is liable to plaintiff for the damage sustained to plain-
tiff's zircon mineral sand; plaintiff shall recover $270,161.49
in compensatory damages, it is further,
37a
ORDERED, ADJUDGED AND DECREED: That plaintiff’s
request for prejudgment interest is hereby denied; each side
shall bear its own costs.
DATED: New York, New York
December 23, 1996
JAMES M. PARKISON:
CLERK
By: ROBERT H. Donos
DEPUTY CLERK
THIS DOCUMENT WAS ENTERED ON
THE DOCKET ON 12/24/96.
38a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
93 Civ. 7538 (BN)
Filed October 9, 1997
SOGEM-AFRIMET, INC.,
Plaintiff,
ee
M/V IKAN SELAYANG, her engines, boilers, machinery, etc.,
in rem, FEDNAV LIMITED, PACIFIC CARRIERS PTE., LTD.,
and CHRISHOLM TRADING PTE., LTD., in personas,
Defendants.
CORRECTED JUDGMENT
Whereas the above-entitled action was assigned to the Hon-
orable Bernard Newman, Senior Judge of the United States
Court of International Trade, sitting by designation, who on
December 20, 1996 issued his Opinion, Findings of Fact and
Conclusions of Law (77777), finding in favor of plaintiff
Sogem-Afrimet, Inc. in the amount of $270,161.49, it is
ORDERED, ADJUDGED AND DECREED: That, pursuant to
the Court's Opinion (77777) dated December 20, 1996, defen-
dant Fednav Limited, in personam, and defendant M/V IKAN
|
39a
SELAYANG, in rem, are liable to plaintiff Sogem-Afrimet, Inc.
in the amount of $270,161.49 and it is further
ORDERED, ADJUDGED AND DECREED: That, pursuant to
the Court's Opinion (77777) dated December 20, 1996, plain-
tiff's complaint is dismissed as against defendant Pacific Car-
riers PTE., Ltd. and as against defendant Chrisholm Trading
PTE., Ltd., and it is further
ORDERED, ADJUDGED AND DECREED: That plaintiff's
request for pre-judgment interest prior to December 23, 1996
is denied, and that no party shall recover costs as against any
other party.
Dated: New York, New York
August 7, 1997
ENTER,
BERNARD NEWMAN
Honorable Bernard Newman.
U.S.D.J., By Designation
THIS DOCUMENT WAS ENTERED ON
THE DOCKET ON 10/4/97.
§ 1301. Definitions
When used in this chapter—
(a) The term “carrier” includes the owner or the charterer
who enters into a contract of carriage with a shipper.
(b) The term “contract of carriage” applies only to con-
tracts of carriage covered by a bill of lading or any similar
document of title, insofar as such document relates to the car-
riage of goods by sea, including any bill of lading or any sim-
ilar document as aforesaid issued under or pursuant to a
charter party from the moment at which such bill of lading or
similar document of title regulates the relations between a
carrier and a holder of the same.
(c) The term “goods” includes goods, wares, merchandise,
and articles of every kind whatsoever, except live animals and
cargo which by the contract of carriage is stated as being car-
ried on deck and is so carried.
(d) The term “ship” means any vessel used for the carriage
of goods by sea.
(e) The term “carriage of goods” covers the period from
the time when the goods are loaded on to the time when they
are discharged from the ship.
Apr. 16, 1936, c. 229, § 1, 49 Stat. 1208.
§ 1302. Duties and rights of carrier
Subject to the provisions of section 1306 of this title, under
every contract of carriage of goods by sea, the carrier in rela-
tion to the loading, handling, stowage, carriage, custody, care,
and discharge of such goods, shall be subject to the respon-
sibilities and liabilities and entitled to the rights and immu-
nities set forth in sections 1303 and 1304 of this title.
April 16, 1936, c. 229, § 2, 49 Stat. 1208.
a ee ee Te
4la
§ 1303. Responsibilities and liabilities of carrier and ship
Seaworthiness
(1) The carrier shall be bound, before and at the beginning
of the voyage, to exercise due diligence to—
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers,
and all other parts of the ship in which goods are carried, fit
and safe for their reception, Carriage, and preservation.
Cargo
(2) The carrier shall properly and carefully load, handle,
stow, carry, keep, care for, and discharge the goods carried.
Contents of bill
(3) After receiving the goods into his charge the carrier, or
the master or agent of the carrier, shall, on demand of the
shipper, issue to the shipper a bill of lading showing among
other things—
(a) The leading marks necessary for identification of the
goods as the same are furnished in writing by the shipper
before the loading of such goods starts, provided such marks
are stamped or otherwise shown clearly upon the goods if
uncovered, or on the cases or coverings in which such goods
are contained, in such a manner as should ordinarily remain
legible until the end of the voyage.
(b) Either the number of packages or pieces, or the quan-
tity or weight, as the case may be, as furnished in writing by
the shipper.
(c) The apparent order and condition of the goods: Pro-
vided, That no carrier, master, or agent of the carrier, shall be
42a
bound to state or show in the bill of lading any marks, num-
ber, quantity, or weight which he has reasonable ground for
suspecting not accurately to represent the goods actually
received, or which he has had no reasonable means of check-
ing.
Bill as prima facie evidence
(4) Such a bill of lading shall be prima facie evidence of
the receipt by the carrier of the goods as therein described in
accordance with paragraphs (3)(a), (b) and (c), of this section:
Provided, That nothing in this chapter shall be construed as
repealing or limiting the application of any part of sections 81
to 124 of Title 49.
Guaranty of statements
(5) The shipper shall be deemed to have guaranteed to the
carrier the accuracy at the time of shipment of the marks,
number, quantity, and weight, as furnished by him; and the
shipper shall indemnify the carrier against all loss, damages,
and expenses arising or resulting from inaccuracies in such
particulars. The right of the carrier to such indemnity shall in
no way limit his responsibility and liability under the contract
of carriage to any person other than the shipper.
Notice of loss or damage; limitation of actions
(6) Unless notice of loss or damage and the general nature
of such loss or damage be given in writing to the carrier or his
agent at the port of discharge before or at the time of the
removal of the goods into the custody of the person entitled
to delivery thereof under the contract of carriage, such
removal shall be prima facie evidence of the delivery by the
carrier of the goods as described in the bill of lading. If the
| loss or damage is not apparent, the notice must be given
within three days of the delivery.
ee en on
43a
Said notice of loss or damage may be endorsed upon the
receipt for the goods given by the person taking delivery
thereof.
The notice in writing need not be given if the state of the
goods has at the time of their receipt been the subject of joint
survey or inspection.
In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the date
when the goods should have been delivered: Provided, That if
a notice of loss or damage, either apparent or concealed, is
not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within
one year after the delivery of the goods or the date when the
goods should have been delivered.
In the case of any actual or apprehended loss or damage the
carrier and the receiver shall give all reasonable facilities to
each other for inspecting and tallying the goods.
“Shipped” bill of lading
(7) After the goods are loaded the bill of lading to be
issued by the carrier, master, or agent of the carrier to the
shipper shall, if the shipper so demands, be a “shipped” bill
of lading: Provided, That if the shipper shall have previously
taken up any document of title to such goods, he shall sur-
render the same as against the issue of the “shipped” bill of
lading, but at the option of the carrier such document of title
may be noted at the port of shipment by the carrier, master, or
agent with the name or names of the ship or ships upon which
the goods have been shipped and the date or dates of ship-
ment, and when so noted the same shall for the purpose of
this section be deemed to constitute a “shipped” bill of lading.
ia aia stinks
44a
Limitation of liability for negligence
(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
similar clause, shall be deemed to be a clause relieving the
carrier from liability.
Apr. 16, 1936, c. 229, § 3, 49 Stat. 1208.
§ 1304. Rights and immunities of carrier and ship
Unseaworthiness
(1) Neither the carrier nor the ship shall be liable for loss
or damage arising or resulting from unseaworthiness unless
caused by want of due diligence on the part of the carrier to
make the ship seaworthy, and to secure that the ship is prop-
erly manned, equipped, and supplied, and to make the holds,
refrigerating and cool chambers, and all other parts of the
ship in which goods are carried fit and safe for their recep-
tion, carriage, and preservation in accordance with the
provisions of paragraph (1) of section 1303 of this title.
Whenever loss or damage has resulted from unseaworthiness,
the burden of proving the exercise of due diligence shall be
on the carrier or other persons claiming exemption under this
section.
An Hie sata ae Ck a
Uncontrollable causes of loss
(2) Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from—
(a) Act, neglect, or default of the master, mariner, pilot, or
the servants of the carrier in the navigation or in the man-
agement of the ship;
cman ils
45a
(b) Fire, unless caused by the actual fault or privity of the
Catrier;
(c) Perils, dangers, and accidents of the sea or other nav-
igable waters;
(d) Act of God;
(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or
seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods,
his agent or representative;
G) Strikes or lockouts or stoppage or restraint of labor
from whatever cause, whether partial or general: Provided,
That nothing herein contained shall be construed to relieve a
carrier from responsibility for the carrier’s own acts;
(k) Riots and civil commotions:
(1) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage
arising from inherent defect, quality, or vice of the goods;
(n) Insufficiency of packing;
(0) Insufficiency or inadequacy of marks:
(p) Latent defects not discoverable by due diligence; and
(q) Any other cause arising without the actual fault and
privity of the carrier and without the fault or neglect of the
agents or servants of the carrier, but the burden of proof shall
be on the person claiming the benefit of this exception to
show that neither the actual fault or privity of the carrier nor
the fault or neglect of the agents or servants of the carrier
contributed to the loss or damage.
46a
Freedom from negligence
(3) The shipper shall not be responsible for loss or damage
sustained by the carrier or the ship arising or resulting from
any cause without the act, fault, or neglect of the shipper, his
agents, or his servants.
Deviations
(4) Any deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall not be
deemed to be an infringement or breach of this chapter or of
the contract of carriage, and the carrier shall not be liable for
any loss or damage resulting therefrom: Provided, however,
That if the deviation is for the purpose of loading or unload-
ing Cargo or passengers it shall, prima facie, be regarded as
unreasonable.
Amount of liability; valuation of cargo
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per
package 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, unless the nature
and value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This dec-
laration, if embodied in the bill of lading, shall be prima facie
evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That
such maximum shall not be less than the figure above named.
In no event shall the carrier be liable for more than the
amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any
event for loss or damage to or in connection with the trans-
47a
portation of the goods if the nature or value thereof has been
knowingly and fraudulently misstated by the shipper in the
bill of lading.
Inflammable, explosive, or dangerous cargo
(6) Goods of an inflammable, explosive, or dangerous
nature to the shipment whereof the carrier, master or agent of
the carrier, has not consented with knowledge of their nature
and character, may at any time before discharge be landed at
any place or destroyed or rendered innocuous by the carrier
without compensation, and the shipper of such goods shall be
liable for all damages and expenses directly or indirectly aris-
ing out of or resulting from such shipment. If any such goods
shipped with such knowledge and consent shall become a dan-
ger to the ship or cargo, they may in like manner be landed at
any place, or destroyed or rendered innocuous by the carrier
without liability on the part of the carrier except to general
average, if any.
Apr. 16, 1936, c. 229, § 4, 49 Stat. 1210.
48a
Excerpt from Transcript of Deposition
Testimony of Michael Pearson
[36] Q. In your opinion, as a surveyor, had the owners of
Ikan Selayang exercised due diligence in preparing the hold?
PLAINTIFF’S ATTORNEY: I object. It calls for a legal con-
clusion.
Q. You can go ahead and answer. Did you hear the question
because the objection cut out my question?
A. I understand the question. Yes.
* * *
Excerpts from Transcript of Deposition
Testimony of Zbigniew Stasiak
[31] Q. During the course of the discharge did you observe
any contamination in the sand?
A. No.
* * *
[116] Q After the ship’s crew used the SIBI Press equip-
ment on the upper wing tanks in the number 6 hold did you
visually inspect the quality of the work?
A Yes.
Q And what was the result of your inspection?
A Very good.
Q Was there any hard scale rust left?
A No.
Q Was there any loose rust left?
A Nothing like that.
Q Were there any flakes of paint chips?
A Cannot be possible.
49a
Excerpts of Trial Testimony of John Alder
[267] Q. Do you have an opinion as to whether that action
would have been appropriate here?
A. Well, I never saw the ship, but from the description
of the condition of the lower part of the hold, where the
chief mate said there was heavy rust scale, which had to be
removed because of the nature of the cargo they were going to
load, I would assume that those inaccessible areas high up in
the top of the—upper parts of the hold would be at least as
bad as the lower parts. That’s my personal experience because
people—people don’t get to those areas very often to maintain
them.
* * *
[285] Q. Did you read the master’s transcript?
A. What was the name of the master?
Q. Grater.
A. I think I read it a year ago. I have no real recollection of
it.
Q. Have you seen any evidence in anything you’ve looked
at that there was rust scale in the upper portions of the No. 6
hold on the /kan Selayang?
A. There is a portion of the chief mate’s deposition where
he is asked about seeing rust scale in the upper portion of the
No. 3 holds and he says, yes, he did.
And then there is some reference to No. 6, but it is rather
confused in the transcript, and I don’t really understand
whether he is referring to No. 6 as well as No. 3 in that par-
ticular part of his deposition. :
* * *
50a
Excerpts of Trial Testimony of Holly Chapell
[23] Q. What was the purpose for you to journey from
here to Brownsville?
A. To make certain that the cargo was well received and
that it was unloaded correctly.
*x * *
Q. As far as you were concerened, was the cargo unloaded
correctly?
A. Yes.
* * *
[24] Q. At that time did the cargo look okay to you?
A. Yes, it did.
~ ~ «
[68] Q. Now, did you at any time ever receive from
Demosa a complaint that there were iron or rust particles in
the zircon sand?
A. No.
Q. You received word that they were unhappy with the
quality of the product that they were producing with the zir-
con sand, correct?
A. What I got was a copy of their lab report that was in
Spanish and made reference to the fact that something, I don’t
know if it was an—a more advanced product or this product.
was darker and yellower than the standard they were using to
compare it with.
Q. But they didn’t attribute that to anything, did they?
A. I don’t remember exactly. I don’t think so.
Sla
Excerpt of Trial Testimony of David Lapeyre
[168] Q. Now, during your participation on November 6,
[169] 1991, am I correct that at no time did you observe any
contamination of any kind in the sand?
A. No, I did not.
52a
[Excerpts from Exhib. 2]
[LETTERHEAD OF MID-SHIP MARINE, INC.}
It is this Day Mutually Agreed, between FEDCOM, A DIvI-
SION OF FEDNAV LIMITED, Montreal as Owners, Time-Char-
tered or Disponent Owners of the Motorship M/V “IKAN
SELAYANG” or SUITABLE SUBSTITUTE (See Clauses 43 &
47), of ____ Built at , of Tons Net Reg-
ister, Classed Highest at Lloyd’s or Equivalent now expected
load ready in accordance with Cls. 43 & 47, and SOGEM
AFRIMET, INC., New York, Charterers.
1. That the said Steamship being tight, staunch and strong,
and in every way fitted for the voyage, with liberty to take
outward cargo for Owner’s benefit, shall with all convenient
speed sail and proceed to one safe berth BRISBANE, QUEENS-
LAND, AUSTRALIA, and lie always safely afloat, and there
load a part cargo of MINERAL SANDS IN BULK (ZIRCON),
Minimum 3,500 Metric Tons/Maximum 4,200 Metric Tons,
Quantity in Charterers’ option, See Clause 59, not exceeding
what she can reasonably stow and carry over and above her
cabin, tackle, apparel, provisions, fuel and furniture; which
the Charterers bind themselves to ship, and being so loaded
the Steamer shal! proceed to one safe berth WILMINGTON,
NORTH CAROLINA, or in Charterers’ option, one safe berth
WILMINGTON, NORTH CAROLINA and one safe berth
BROWNSVILLE, TEXAS, See Clause 59, and there, always
safely afloat, deliver the cargo as customary, at such wharves,
docks or other safe places as Charterers or their Agents may
direct on arrival, in accordance with Bills of Lading, in con-
sideration whereof Charterers shall pay the Vessel freight as
outlined in Clause 61. Freight payable in New York in U.S.
Currency and to be 90% prepaid within 5 days after vessel's
departure from load port and release of Bills of Lading.
Balance of freight is payable after right and true delivery of
the cargo and settlement of demurrage/despatch. All freight
to be considered earned as cargo is loaded on board and is
53a
non-returnable, ship and/or cargo lost or not lost. Charterers’
privilege to deduct commissions from freight payment.
Freight payable in U.S. Currency on Bill of Lading quantity
via MID-SHIP MARINE, INC. (to Owners’ New York nomi-
nee).
2. It is also mutually agreed that the Carrier shall not be
liable for loss or damage occasioned by causes beyond his
control, by the perils of the seas or other waters, by fire from
any cause or wheresoever occurring, by barratry of the Mas-
ter or crew, by enemies, pirates or robbers, by arrest and
restraint of Princes, Rulers or People, by explosion, bursting
of boilers, breakage of shafts or any latent defect in hull,
machinery or appurtenances, by collisions, Stranding or other
accidents of navigation of whatsoever kind (even when occa-
sioned by negligence, default or error in judgment of the
pilot, Master, mariners or other servants of the Ship Owner,
not resulting, however, in any case from want of due diligence
by the Owners of the Ship or any of them, or by the Ship’s
Husband or Manager). Charterers also not liable for loss or
damage occurring by restraint of Princes, Rulers or People.
10. Cargo shall be loaded, spout/grab trimmed and dis-
charged at the risk and expense of Charterer by stevedores
nominated, employed and paid by Charterer. Shore winchmen
at loading and discharging ports to be for account of Char-
terers. Cargo shall be spout/grab trimmed under the supervi-
sion and to the satisfaction of the Master. Charterer,
Charterers’ Stevedores and Charterers’ Agents shall not be
responsible for stowage, or any consequences arising there-
from. Any leveling required by Master to be for Owners’ risk,
time and expense.
12. Cost of weighing cargo at discharging port or ports to
be for account of Charterers and/or their Agents.
54a
13. Any dunnage, excepting shifting boards, required is to
be provided by Charterers and Charterers’ expense, but Char-
terers to have use of such dunnage as on board ship, free of
charge.
* * x
32. At port of loading, Master to tender notice of readiness
and apply for cargo to Charterers’ nominee. At port of dis-
charge, Master to tender notice of readiness to Charterers’
nominee.
7 * *
35. U.S.A. Clause Paramont, New Both to Blame Collision
Clause, New Jason Clause and Chamber of Shipping War Risk
Clauses | and 2 to be incorporated in this Charter Party.
* * *
37. Charterers have the option to arrange for a cargo/draft
survey at load port to ascertain cargo on board after com-
pletion of loading at Charterers’ time and expense.
38. All holds, decks and stanchions are to be swept and
cleaned suitable for this cargo before vessel tenders for load-
ing. Owners to have vessel passed by Charterers’ represen-
tative as clean and ready to load cargo prior to tendering.
Vessel’s tank tops, manhole covers and shaft tunnel, if any, to
be adequately protected by ceiling and sheathing to prevent
damage during loading and/or discharging by mechanical
trimmers and grabs, also all limbers of bilges to be properly
covered and protected to prevent cargo from entering these
spaces, unless damaged by stevedores during loading/dis-
charging operations, failing which vessel to be responsible for
all consequences including extra labor and extra time used. In
the event vessel is fitted with cargo battens and same not
removed prior to loading, any extra expenses incurred in load-
ing and/or discharging by reason of cargo battens being fitted
to be for Owners’ account. (It is understood that the vessel
cannot tender Notice of Readiness until passed.)
55a
[Exhib. 3]
[LETTERHEAD OF JAMES, PLUMLEY AND PEARSON]
SURVEY REPORT
18th September, 1991.
This is to certify that the undersigned did, at the request of
Consolidated Rutile Ltd., attend on board the m.v. “IKAN
SELA YANG” at Hamilton Wharf, Brisbane River on the 17th
September, 1991 in order to survey Nos. 3 and 6 Holds for the
carriage of Mineral Sands in bulk.
~---- And now report - - - - -
T HAT in conjunction with the Chief Officer, I inspected
the abovementioned compartments and found them to be
clean, dry and suitable.
Wells were made sand tight with hessian and tape.
I now certify that at 0845 hours, local time, on the 17th
September 1991, Nos. 3 and 6 Holds were passed as being fit
and suitable, in my opinion, for the Carriage of Mineral Sands
in bulk.
GIVEN at Brisbane this 18th day of September, 1991.
/s/ (ILLEGIBLE)
Marine Surveyor
56a
[Exhib. 70]
UMPIRE AND CONTROL SERVICES INC.
May 28, 1993
The large quantity of rust/scale debris isolated from the
sand and submitted to us as “Rust Sifted from Random Bucket
of Sand” suggested the possibility that identification of this
debris as from a shipboard source would be possible if evi-
dence of sea water elements could be found. The leach tests
conducted and the results presented in Table VII show that the
sand and the rust contaminant contain only traces of chloride
and have critical ratios of sea water elements which correlate
poorly with the composition of average sea water. These
results obviously do not prove a shipboard origin.
S7a
[Exhib. K3]
TO : FEDCOM MTL
FM : MASTER IKANSELAYANG
16/8-91
IRT + RL/MGB - ‘I SELAYANG’ WITH LATEST PRO-
POSED STW PLAN MIN SANDS NOW TO BE IN NMBRS
1 4 AND 6 — NMBR 6 CONDITN NOT SO GOOD BUT
MSTR REALISED THIS N WILL DO BEST TO PREPARE
B RGDS
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.