Opinion
95 Civ. 3303 (MGC), 96 Civ. 0008 (MGC).
March 9, 2001.
James P. Krauzlis, Esq., BADIAK WILL RUDDY, LLP Insurance Company of North America a/s/o Burlington Coat Factory 120 Broadway, Suite 1040 New York, New York 10271-1040. Attorneys for Plaintiffs.
Stephen H. Vengrow, Esq. and Elizabeth A. Keane, Esq. CICHANOWICZ, CALLAN, KEANE, VENGROW TEXTOR, LLP Senator Linie GmbH Co. KG a/k/a Senator Lines 61 Broadway, Suite 3000 New York, New York 10006-2802. Attorneys for Plaintiff.
Nicholas E. Pantelopoulos, Esq. and Christopher Losquadro, Esq. BIEDERMANN, HOENIG, MASSAMILLO RUFF Zen Continental and Sunway Line 90 Park Avenue New York, New York 10016. Attorneys for Defendants.
Chris X. Lin, Esq. CHEN, LIN, LI JIANG, LLP Tianjin Chemicals Import Export Corp. a/k/a Sinochem 2 World Trade Center, Suite 1832 New York, New York 10048 Attorneys for Defendant.
Chen Huan Zhong, Esq. CC LAW OFFICE Tianjin Chemicals Import Export Corp. a/k/a Sinochem 13th Floor Capital Mansion Chao Yang District Beijing, China 100004 Attorneys for Defendant.
FINDINGS OF FACTS AND CONCLUSIONS OF LAW
This suit arises out of an incident on March 28, 1994 aboard the M/V Tokyo Senator off the coast of Norfolk, Virginia. Plaintiff Insurance Company of North America ("INA"), sues the Tokyo Senator; Conti Capitano Schiffahrts GmbH Co., the shipowner; Senator Linie GmbH Co. a/k/a Senator Lines, the time charterer of the ship, Cho Yang Shipping Co. LTD t/a Cho Yang Line, the slot charterer of the ship (Conti, Senator Lines and Cho Yang are hereinafter collectively referred to as "Senator Lines"); Tianjin Chemicals Import and Export Co. ("Sinochem"), Sunway Line, Inc., and Eastern Sunway Line, Inc.
In a related case, Senator Lines sues Zen Continental Co., Eastern Sunway Line, Inc., and Sinochem. Zen Continental, Sunway and Eastern Sunway are hereinafter collectively referred to as "Zen Continental."
The cases were consolidated for trial. After considering all of the evidence as well as the demeanor and credibility of the witnesses who testified in the courtroom, I make the following findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).
Findings of Fact:
1. I adopt the Undisputed Facts as stipulated by the parties in the Joint Pretrial Order.
2. There was credible testimony that the exothermic reaction in container TRIU 3300792 (the "TDO container") was accompanied by a fire inside the container. William Lloyd, plaintiff's fire expert, testified that the fiber drums that held the TDO and the plywood floor of the container were charred, which indicates the presence of fire inside the container. He testified further that the fire itself was limited to the inside of the TDO container. In addition, both Captain Unger and First Officer Peters of the M/V Tokyo Senator testified that they saw smoke coming from the ventilation ducts of the hold in which the TDO container was stowed.
3. The damage to the Burlington shipment of coats, as well as the damage to the vessel, was the result of the combined effect of the exothermic reaction and the accompanying fire.
4. There are several possible causes of the exothermic reaction in the TDO container. There was testimony that excessive heat, moisture and the presence of metals such as iron, manganese and zinc, alone or in conjunction, could have caused or contributed to the reaction. However, Dr. Dickstein, Sinochem's extremely credible chemistry expert, testified persuasively that without exposure to high temperature, the reaction could not have occurred. Plaintiffs have failed to prove the actual cause of the exothermic reaction in this case, and, accordingly, that a particular party was responsible.
5. At the time of the incident in question, the vast majority of the available literature did not describe an exothermic reaction as a likely result of the decomposition of TDO. The materials proffered as evidence of the knowledge of the characteristics of TDO in the industry at the time of the incident include several Material Safety Data Sheets, a description of TDO from the Senator Lines Dangerous Goods and Marine Operations Department, and excerpts from a refined chemical handbook and a treatise on refined petrochemicals. Only one of the pieces of literature submitted by the plaintiffs, a document from the FMC Corporation, refers to an exothermic reaction. There is no evidence that the FMC document was available in China at the time of the incident. Moreover, the FMC document states only that contact of reducing agents with chemicals similar to TDO, like hydrogen peroxide, can result in an exothermic reaction. The other materials show, at most, that it was known in the industry that TDO may decompose at high temperatures in the presence of moisture and form a gas. Each of the other proffered technical sources, however, including the description of TDO by Senator Lines' own Dangerous Goods and Marine Operations Department, described TDO as a stable compound. None of the literature received into evidence was sufficient to put any party on notice that an exothermic reaction of the severity of the one in this case was possible during the transport of the TDO.
6. The Senator Lines bill of lading clearly identified the cargo as thiourea dioxide in the marks and numbers column. However, the TDO was not labeled as a hazardous cargo by the exporter, Sinochem, or the NVOCC, Zen Continental. In 1994, TDO was not named as a hazardous cargo in the International Maritime Dangerous Goods Code ("IMDG Code") or the Department of Transportation Hazardous Materials Table. Therefore the crew of the M/V Tokyo Senator did not know, nor should it have known, that TDO was a hazardous cargo. Similarly, the crew did not know, nor should it have known, that TDO was capable of undergoing exothermic decomposition, resulting in damage to other cargo.
7. According to the testimony of Captain Unger and First Officer Peters, even had the crew of the Tokyo Senator known that the TDO container was a hazardous cargo and should be kept away from excessive heat and moisture, it would have stowed the TDO container in the same area on the vessel. They both testified that the forward hold, where the TDO was stowed, is the best place to store cargo that is sensitive to heat and moisture.
8. The actions taken by the crew of the Tokyo Senator upon discovery of the fire in the TDO container, closing the ventilation ducts and releasing carbon dioxide into the hold to smother the fire, were the proper response to a fire in the hold.
9. Plaintiff INA has proferred no evidence of negligence on the part of Senator Lines, Cho Yang or Conti Capitano which caused or contributed to the damage to the Burlington coats.
10. Plaintiffs have failed to show by a preponderance of the credible evidence that there was a defect in the design or manufacture of the TDO at issue. There was testimony by Zen employees that an unidentified employee of Sinochem had said that the cause of the exothermic reaction may have been excessive humidity in the manufacturing process. This testimony about a speculation that would place responsibility on another party was not credible. Moreover, there was insufficient evidence to show that moisture alone could have caused the exothermic reaction. Anything is possible. That is why the law requires probability. I also gave no weight to the photographs of the Dinzhou factory, because no witness testified as to the time at which these photographs were taken or connected the photographs to an identifiable cause of the reaction of the TDO in this case. The speculation of John Pedneault, plaintiffs' chemical expert, that the exothermic reaction was caused by contaminants in the manufacturing process, based solely on traces of metals found three years later in samples of the post-reaction residue, was not persuasive. Dr. John Atherton, plaintiffs' other expert, was a credible witness who admitted that he could not identify the actual cause of the reaction of the TDO in this case, but believed by a process of elimination that there was probably some feature in the cargo itself which was responsible.
11. Employees of Sinochem testified that it was the customary practice to pack all chemicals, including TDO, with polyethylene liners inside the fiberboard drums. Polyethylene liners were also required by the sales contract between Sinochem and Itochu. Sinochem did not specifically instruct Dinzhou to use polyethylene liners in the packing of the TDO at issue. Based on the testimony of the chemical experts that there was no evidence of plastic or polyethylene remnants in the TDO container after the exothermic reaction, I find that the TDO was not packed with polyethylene liners inside the drums.
12. A preponderance of the credible evidence does not show that the TDO drums were improperly stuffed in the container. To the contrary, Dr. Atherton testified persuasively that the TDO drums were a block stow, and there was very little room for the drums to move.
13. In any event, there is no evidence that Zen Continental or Sinochem, or any of its employees, stuffed the TDO container or were present when it was stuffed.
14. Plaintiff Senator Lines has proven damage to the vessel, including clean-up costs, in the amount of $ 439,785.88.
15. Plaintiff INA has proven damage to its cargo of coats in the amount of $ 116,000.
16. Earlier in the litigation, I noted the default of defendant Dinzhou Phosphoric Fertilizer Factory.Conclusions of Law:
1. Under COGSA, a carrier shall not be held liable for loss or damage resulting from fire unless caused by the actual fault or privity of the carrier. 46 U.S.C. § 1304(2)(b). The Second Circuit has held that, once a carrier shows that the damage was caused by fire, it becomes the cargo plaintiff's burden to prove that the carrier's negligence caused the damage. In re Ta Chi Nav. Corp., 677 F.2d 225, 229 (2d Cir. 1982).
2. A fire need not directly ignite cargo to be the cause of loss such that the carrier is entitled to the fire defense. Banana Serv., Inc. v. M/V Tasman Star, 68 F.3d 418, 421 (11th Cir. 1995).
3. Plaintiff INA has failed to show by a preponderance of the credible evidence that Senator Lines, Cho Yang or Conti Capitano were negligent. The motion for judgment by those entities on INA's claim is therefore granted.
4. General maritime law recognizes the theory of strict products liability against the seller of a product made unreasonably dangerous by a defect in design or manufacture which causes physical damage to property other than the product itself. East River Steamship Co. v. Transamerica Delaval, 476 U.S. 858 (1986).
5. It has not been established in the maritime context that the strict products liability theory applies to property damage sustained by entities that are not users or consumers of the defective product. See Alfa Romeo, Inc. v. S.S. Torinita, et al, 499 F. Supp. 1272, 1277 (S.D.N.Y. 1980).
6. Nevertheless, to recover on a strict products liability theory, plaintiffs must prove the existence in the product of a design or manufacturing defect that caused the damage. Id. at 1277-78. Plaintiffs in this case have failed prove either the existence of a defect or causation by a preponderance of the credible evidence.
7. With respect to Senator Lines, the Tokyo Senator and INA, both Sinochem and Zen Continental are shippers. 46 U.S.C. App. § 1702(17) and (21).
8. Plaintiffs assert claims against Zen and Sinochem based on their failure to warn the carrier about the inherent dangers of TDO. Senator Lines relies on COGSA, specifically 46 U.S.C. § 1304(6), to support its claims against the shippers. The general rule under COGSA is that "a shipper shall not be responsible for loss or damage sustained by the carrier or the ship . . . without the act, fault, or neglect of the shipper." 46 U.S.C. § 1304(3). But COSGSA also provides that the shipper of goods of an inflammable, explosive, or dangerous nature shall be liable for all losses out of or resulting from such shipment when the carrier has not consented with knowledge of their dangerous character. Id. at § 1304(6). Under § 1304(6), a shipper that knowingly ships hazardous cargo without disclosing the hazardous nature of the cargo to the carrier will be liable for damage that results regardless of whether it otherwise exercised due care. That provision does not, however, impose an absolute warranty on the part of the shipper as to the safe nature of its cargo. A shipper "is chargeable only with that knowledge that is actually or constructively within its possession." See Borgships, Inc. v. Olin Chemical Group, No. 96 Civ. 6734 (LAP), 1997 WL 124127, at *4 (S.D.N.Y. March 19, 1997); Sucrest Corp. v. M/V Jennifer, 455 F. Supp. 371, 385 n. 20 (D.Maine 1978).
9. INA argues that the general maritime law imposes an absolute warranty on the part of the shipper that its cargo is not hazardous. It cites the 19th Century English case Brass v. Maitland, 6 E. B. 471, 26 L.J. (Q.B.) 49, and Pierce v. Windsor, 19 F.Cas. 646 (D. Mass. 1861) (relying on Brass). However, the Second Circuit has rejected the absolute warranty theory. See The William J. Quillan, 180 F. 681, 682-84 (2d Cir. 1910). Moreover, Brass itself did not impose an absolute warranty. Acatos v. Burns, 3 L.R. Exch. Div (1877-78) 282, 292 ("As to the question of warranty, neither Brass v. Maitland nor any other case shews that there is an absolute warranty by the shipper that the goods shipped have no concealed defects at the time of shipment.")(Brett, L.J.); see generally Ionamar Compania Naviera v. Olin Corp., et al., 666 F.2d 897, 904 (5th Cir. 1982) (holding that a shipper has a duty to warn the carrier only of the foreseeable hazards inherent in its cargo). Plaintiffs have failed to prove by a preponderance of the credible evidence that Zen or Sinochem knew or should have known based on the knowledge in the industry, that TDO could decompose exothermically.
9. Plaintiffs also assert that defendants were negligent in failing properly to label the TDO as a hazardous cargo as required by the Department of Transportation regulations, 49 C.F.R. Part 176. The captain and first officer of the Tokyo Senator admitted, however, that even if they had known that the TDO was hazardous, they would have stowed the TDO in the same place. The failure to label the cargo, assuming there was a duty to do so, could not, therefore, have been the proximate cause of the exothermic reaction.
10. Plaintiffs also assert that defendants were negligent in packing the TDO drums without polyethylene liners and in improperly stuffing the drums in the container. Plaintiffs have failed to prove by a preponderance of the credible evidence that the container was stuffed improperly. Plaintiffs have not proven that Zen was responsible for the packing or stuffing of the cargo. Sinochem may have been negligent in failing to insure that the TDO was packed in polyethylene liners. However, plaintiffs have failed to prove by a preponderance of the credible evidence that the absence of polyethylene liners caused the exothermic reaction.
11. Plaintiff Senator Lines also claims that defendants are liable for breach of warranty under the bill of lading. Bills of lading, however, are subject to COGSA, and are only enforceable to the extent that they do not conflict with its provisions. To the extent that the bill of lading warranties purport to hold the shippers strictly liable, they are not enforceable. Excel Shipping Corp. v. Seatrain International, 584 F. Supp. 734 (E.D.N.Y. 1984).
12. The motions of Defendants Sinochem and Zen Continental for judgment on each of plaintiffs' claims is granted.
13. Since plaintiffs have proven damages at trial, a default judgment against Dinzhou for all of plaintiffs' damages may be entered.
Defendants are directed to settle judgment on two days notice in accordance with the foregoing findings of fact and conclusions of law.
SO ORDERED.