Opinion
Civil Action No: 98-3116, Section: "R"(1)
September 29, 2001
ORDER AND REASONS
I. Background
Steel Coils, Inc. seeks $550,000 in damages to a shipment of steel coils carried aboard the M/V LAKE MARION from ports in Latvia to ports in the United States. Steel Coils sued Lake Marion, Inc., the owners of the M/V LAKE MARION; Western Bulk K/S Oslo, the time charterer of the vessel; Bay Ocean Management, Inc., the manager of the vessel; and the M/V LAKE MARION, in rem. Lake Marion filed a cross-claim for indemnity, contribution, and recovery against Western Bulk, who then filed a cross-claim against Lake Marion and Bay Ocean. Western Bulk also filed third-party complaint against Itochu International, Steel Coils' parent company and the voyage charterer of the vessel, seeking indemnity, contribution, and recovery.
The dispute culminated in a one day bench trial. After reviewing the evidence presented at trial and the applicable law, the Court finds that defendants are liable to plaintiff for the damage to its cargo. Lake Marion is liable to Western Bulk for indemnity and contribution under the Time Charter. All other cross-claims, counterclaims, and the third-party complaint are dismissed. This determination is based on the following findings of fact and conclusions of law.
II. Findings of Fact
A. The Parties
Plaintiff, Steel Coils, Inc., has its principal office and place of business in Deerfield, Illinois, and it is engaged in the business of distributing flat rolled steel products. James Pinkert, the president and former purchasing manager of Steel Coils, testified that Steel Coils received orders for the cargo in issue from various customers and then placed orders to import the steel from a mill in Russia. ( See Pinkert Deposition at 9.) Its parent company, Itochu, financed the steel purchases. At Steel Coils' request, Itochu opened a letter of credit with the Russian mill or its representatives, purchased the steel for Steel Coils, and then invoiced Steel Coils for the steel plus a fee. ( See Id. at 9-10.) Itochu also chartered the LAKE MARION for Steel Coils to ship the cargo to the United States. ( See Pinkert Deposition at 91, 119-20; Olivera Deposition, at 28.) Steel Coils paid the freight rate directly to Western Bulk, and it procured insurance on the cargo. ( See Pinkert Deposition at 128; Olivera Deposition at 30-31.) The transaction in issue was typical of the way Itochu and Steel Coils had procured carriage for steel cargo for a number of years. ( See Olivera Deposition at 29-30; Pinkert Deposition at 90.) The Court finds that Itochu was acting as Steel Coils' agent in these transactions.
The LAKE MARION was an ocean going cargo ship built in 1980, and it was engaged in the common carriage of cargo for hire. ( See Joint Statement of Uncontested Material Facts 7a., Pre-Trial Order.) Lake Marion, Inc. owned and operated the LAKE MARION. ( See Joint Statement of Uncontested Material Facts 7b., Pre-Trial Order.) Bay Ocean Management, Inc. served as the manager of the LAKE MARION. ( See Joint Statement of Uncontested Material Facts 7b., Pre-Trial Order; Exhibit 98.) As the LAKE MARION's captain testified, Bay Ocean employed the master and crew of the vessel and was responsible for ensuring that the vessel was properly maintained, manned and equipped for the voyage. Western Bulk . Carriers served as the "middleman" in the operation. It time-chartered the LAKE MARION from its owners (Exhibit 98), and it entered into a voyage charter with Itochu, for the LAKE MARION to carry the cargo in issue. (Exhibit 97)
B. The Charter Parties
Western Bulk voyage chartered the LAKE MARION to Itochu or its guaranteed nominee. ( See Exhibit 97.) The par standard GENCON form with a type-written "rider." Under Clause 31, the owner warranted that the vessel would equipped to carry the cargo. ( See Ex. 97.) Clause 31 of the rider incorporates a number of standard shipping terms in Charter party as if written in extenso. ( See id.) In particular, Clause 31 incorporates the USA Paramount Caluse:
Also referred to as a "U.S.A. Clause Paramount." See Brown Root, Inc. v. M/V Peisander, 648 F.2d 415, 420 (5th Cir 1981).
Chamber of Shipping, Voywar 1950, New Jason Clause, PI Bunkering Clause, New Both-to-Blame Collision Clause and USA Paramount Clause are to be fully incorporated in this Charter Party.
The USA Paramount Clause, not specifically set out in the Charter Party, provides that:
Bills of lading shall have the following clause: This bill of lading shall have effect subject to the provisions of the Carrier of Goods by Sea Act, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of a of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. The provisions stated in said Act (except as may be otherwise specifically provided herein) shall govern before the goods are loaded on and after :they are discharged from the ship and throughout the entire time the goods are in the custody of the carrier. Brown Root, Inc., 648 F.2d at 420.
Additionally, Clause 32 provided that the agents at the load port would be the agents of the Owner, or Western Bulk. ( See Ex. 97.) Tommas Lygrell, Western Bulk's operations manager for the voyage, and Juan Olivera, an Itochu representative, testified that the designated agent at the load port, Riga Shipping Agency, also acted as an agent for Itochu. ( See Olivera Deposition at 40.) Riga issued the bills of lading and signed them "on Behalf of the Master." ( See Bills of Lading, Exhibits 4, 5, 6, 7, 16, 18, 20, 22, 24, 33, 41, 50, 52, 61, 70, 79.) Despite the language of Clause 31 of the Voyage Charter, the bills of lading did not contain the USA Clause paramount. ( See id.)
Under Western Bulk's Time Charter of the LAKE MARION, Bay Ocean acted as Lake Marion's agent. ( See Exhibit 98.) The Time Charter was on a New York Produce Exchange form, and it attached a "rider" of 72 clauses. of particular importance, Clause 36 provided for the incorporation of the USA Clause paramount in the bills of lading in the same manner as described for the Voyage Charter:
U.S.A. Clause Paramount, New Jason, New Both-to-Blame, Conwartime 1993 (as attached), Chamber of Shipping Nuclear Clause to apply and form part of this Charter Party.
Clause 42 provided that the owners authorized the charterers or their agents to sign the bills of lading in accordance with mate's receipts on behalf of the master. Clause 53 provided that liability for cargo claims would be allocated in accordance with the Inter Club New York Produce Exchange Agreement, which provides that claims for cargo damage due to unseaworthiness will be 100% for owner, and claims for cargo damage due to bad stowage or handling will be 100% for charterers. ( See Exhibit 111.)
C. Preparation For and Loading of the Steel
Hot rolled coils, cold rolled coils, and galvanized coils were loaded into the vessel at the load ports in Riga and Ventspils, Latvia. ( See Bills of Lading, Exhibits 4, 5, 6, 7, 16, 18, 20, 22, 24, 33, 41, 50, 52, 61, 70, 79.) When the hot rolled cargo was loaded from outdoor storage, it was wet from atmospheric moisture and covered with atmospheric rust. ( See id.) Captain Musial, the LAKE MARION's captain, testified that the cold rolled and galvanized coils were loaded from enclosed warehouses. Atmospheric moisture was present on the steel wrappers around some of the cold rolled and galvanized coils loaded at Ventspils, and there were a few dents and tears in some of the cargo wrappers. ( See id.) Silver nitrate tests performed on the cargo at loading were negative, indicating that the cargo had not been exposed to chlorides before it was loaded. ( See Sia Elmers Report No. AD/97-110/UJL-F, Exhibit 99.) Captain Musial stated that the LAKE MARION'S two previous cargoes were rock salt and steam coal. ( See also 3D Marine USA, Inc. Report No. TMS/3027/JRM/97H, Exhibit 100.)
The pre-loading condition of the cargo was noted on the mate's receipts and transferred to the bills of lading. The bills of lading contained exceptions for the abovementioned conditions of the cargo. ( See Bills of Lading, Exhibits 4, 5, 6, 7, 16, 18, 20, 22, 24, 33, 41, 50, 52, 61, 70, 79.) None of the conditions described in the exceptions on the bills of lading is the subject of the claims involved in this action.
Western Bulk retained SKS International Cargo Service in Riga to inspect the holds of the vessel before the cargo was loaded. SKS issued a certificate that noted various deficiencies in the hatch covers and hatch cover closing appliances of the LAKE MARION. ( See SKS International Cargo Service RIGA Holds Condition Certificate No. 10837/97-5, Exhibit 90.) The hatch covers should have been watertight when closed. Specifically, the inspector noted:
"The hatch-cover tightening rubbers are deformed (pressed inside) more or less everywhere. Also, the ends of these rubbers are pressed out or glued out on the extremes of the hatch covers (Hold No. 3)." Id.
The "rubbers" referred to in the report provide the seal between the folding hatch cover sections and the hatch coamings. Captain Sparks, Steel Coils' expert on shipping steel by sea, testified that if the rubbers are deformed, compressed, out of place, and/or not well secured, the hatch cover cannot provide a weather tight seal. ( See Sparks Deposition at 56-57.) Further, the SKS report observed:
"The condition of hatch trackways and coamings found as satisfactory but rust and with the traces of corrosion. The compression bar is partly bent (deformed) somewhere due to wear and tear." Exhibit 90.
Rusty and corroded trackways and bent compression bars will prevent a watertight seal by compromising the hatch covers' ability to align properly with and close with sufficient pressure on the coaming. ( See Sparks Deposition at 43, 56-57, 59, 62.) Captain Musial testified that the LAKE MARION's crew usually conducted hose tests of the hatch covers to ensure that they were water tight before any cargo was loaded, but the crew did not conduct hose tests in this instance. Additionally, Western Bulk, as the time charterer, did not conduct an ultrasound test of the hatch covers to determine if they were fit for the voyage.
Before the cargo was loaded at the first load port, the crew washed the cargo holds with seawater from the Baltic Sea, but failed to rinse them with fresh water as is customary before loading steel cargoes. ( See 3D Marine USA, Inc. Report No. TMS/3027/JRM/97H, Exhibit 100; Sparks Deposition at 51-54.) Captain Musial confirmed that salt residue was found in the cargo holds while the cargo was being loaded at Ventspils on March 4, 1997. ( See Alpha Shipping Agency Statement of Facts, Exhibit 91.) Western Bulk was advised of the presence of chlorides in the holds, but took no steps to rinse the holds with freshwater before the cargo was loaded.
D. The Voyage and Discharge
The vessel departed from Ventspils on March 7, 1997 and arrived at its first stop, Camden, New Jersey, on March 28, 1997. During the voyage, the vessel encountered rough weather. The vessel's logs reported that the worst weather that the vessel encountered was wind that reached Beaufort Scale Force of 11-12 f or about one hour on March 26. ( See M/V LAKE MARION Logs, March 26, 1997, Exhibit 92.) Captain Musial testified that he was aware that he might encounter Force 12 winds in the North Atlantic during the late winter. During the rest of the voyage, the vessel did not encounter winds exceeding Beaufort Scale 10, and most readings were below Beaufort Scale 9. ( See Exhibit 92.) Although Captain Musial filed a Note of Protest at the first port of call, he did not claim any structural damage to the ship as a result of the weather that the vessel had encountered during the voyage.
At the first discharge port, Camden, the vessel discharged cold rolled coils from holds No. 1, 2, 4, and 7. Attending surveyors reported evidence of seawater entry into all of the these holds. ( See Mclarens Toplis Survey Report No. 9736472/MSCD/LR, Exhibit 87.) Another report at Camden criticized the vessel's condition and noted specific deficiencies in each of the seven hatch covers and hatch cover closing fixtures. ( See Seaspan Marine Consultants Report No. 4875/97, Exhibit 100.)
The vessel then traveled to New Orleans, where it discharged hot rolled coils, cold rolled coils, and galvanized coils from holds No. 1, 2, 3, 4, 6, and 7. Captain Rasaretnam, the cargo surveyor in attendance, reported that the vessel's hatch covers were in "apparent non-watertight condition, with signs of leakage and/or water ingress into all holds." ( See McLarens Toplis Survey Report No. 97024014, Exhibit 88; Rasaretnam Deposition at 19-20.) The survey indicated positive silver nitrate reactions on the cargo in the stow of holds 1, 3, 4, 6, and 7, which confirmed that seawater had entered the holds. ( See Exhibit 88; Rasaretnam Deposition at 30-44.) In New Orleans, the No. 1 hold of the vessel flooded up to 16 inches as a result of a crack in the plating that separated the No. 1 hold from the port wing ballast tank. ( See id.) Rasaretnam observed the flooding and inspected the crack. He believed that the crack was an extension of an old crack over which a doubler plate had been welded. ( See id.) As a result of the flooding, 123 cold rolled and galvanized coils sustained additional rust damage. ( See id.) Bennett Woods, a surveyor retained by Steel Coils, testified that he surveyed the hot rolled coils in Chicago several months after they had been transported by river barge from New Orleans. Woods conducted silver nitrate tests and obtained negative results, but he sent a sample of the rusted steel to a laboratory to analyze the rust. ( See Woods Deposition at 12-13, 16-18; McLarens Toplis Supplemental Report of Survey CHI 98/21926/8, Exhibit 32.) The laboratory analysis confirmed that the steel was contaminated by seawater. ( See Wal-Henius Letter, Exhibit 49.) After Woods received the laboratory results, he concluded that the damage to the steel coils was the result of seawater contamination.
As a result of the damage to the cargo discharged in New Orleans, the Court finds that the value of the cargo was reduced as follows:
1. Under Steel Coils, Inc. ("SCI") claim reference CA 2489A, Steel Coils retained the 211 cold rolled coils at a depreciation of 30% from their sound market value of $409,301.46, for a loss of $122,790.43. In addition, it incurred survey fees of $3,952.87 in connection with that claim. ( See Exhibits 1 through 12, inclusive.) Thus, the total for that claim is $126,743.30.
2. Under SCI claim reference CA 2489B, Steel Coils retained the 66 galvanized steel coils at a depreciation of 20% from their sound market value of $182,045.23, for a loss of $36,409.05. In addition, it incurred survey fees of $3,610.64 in connection with that claim. ( See Exhibits 13 through 29, inclusive.) Thus, the total for that claim is $40,019.69.
3. Under SCI claim reference CA 2679, Steel Coils sold portions of the 79 hot rolled coils For salvage: The salvaged material had a sound market value of $12,697.59. The salvage value was $7,911.00, for a loss of $4,786.59. In addition, Steel coils incurred survey fees of $3,952.87 in connection with that "claim. ( See Exhibits 30 through 37, inclusive.)' Thus, the total for that claim is $5,216.30.
4. Under SCI claim reference CA 3101A, Steel Coils sold portions of the 27 hot rolled coils for salvage. The salvaged material had a sound market "value of $77,489.84. The salvage value was $55,355.08, for a loss of $22,134.76. In addition, "it incurred survey' fees of $345.50 in connection with that: claim: ( See Exhibits 38 through 45, inclusive.) Thus, the total for that claim is $5,216.30.
5. Under SCI claim reference CA 3031 and 3031B, Steel Coils sold portions of the 79 hot rolled coils salvage. The salvaged material had a sound market value of $181,414.31. The salvage value"was' $132,814.54, for a loss of $48,599.77. In addition, it incurred survey fees of $366.50 in' connect: those claims. ( See Exhibits 46 through 57, Thus, the total for those claims is $48,966.27
Surveyor Ben Woods opined that these "amounts were fair and reasonable. ( See Woods Deposition at 20-21, 27, 30, 32.) The' Court finds that the total for all claims for cargo discharged in New Orleans is $243,426.09.
The last discharge port was Houston, where the vessel discharged hot rolled plates from holds No. 2, 3, and 6. ( See McLarens Toplis Marine Cargo Survey Report No. HOU/97304633, Exhibit 60.) The attending cargo surveyor, Keith Burges had experience with the use and maintenance of the brand of hatch covers found on the LAKE MARION. He observed that the LAKE MARION was "very poorly maintained," and the hatch covers were "in extremely poor condition," which resulted in "severe sea water ingress." ( See id.; Burges Deposition at 18-24.) Burges took rust scrapings from the damaged hot rolled plate at Houston and hand delivered them to Dixie Services for laboratory analysis. ( See Burges Deposition at 26-27). Dixie Services performed a "seawater analysis" on the rust scrapings and concluded that the rust was the result of exposure to seawater and another substance of unknown origin. ( See M. Renz Deposition at 10-14, 16-33; Exhibits 2, 3, 4 of Renz Deposition; Exhibit 60.)
The Court finds that it was necessary to clean and re-coat the plates as a result of the seawater rust damage to the cargo discharged at Houston. ( See Duval Deposition at 40-41.) The cleaning and re-coating work was done by Houston Tubulars, Inc. ( See id.) The following claims were made for the cleaning and re-coating costs:
1. Claim CA 2489A for $134,833.61 plus survey fee of $7,026.54 for a total claim of $141,840.15. ( See Exhibits 58 through 66, inclusive.)
2. Claim CA 2489B for $49,824.50 plus survey fee of $2,645.09 for a total claim of $52,469.59. ( See Exhibits 67 through 75, inclusive.)
3. Claim CA 2489C for $64,250.58 plus survey fee of $3,372.53 for a total claim of $67,623.11. ( See Exhibits 58 through 66, inclusive.)
The total of the cost of cleaning, re-coating, handling, and extra storage is $261,932.85. The Court finds that these costs are fair and reasonable, based on the testimony of the surveyor and as demonstrated by the survey reports submitted. ( See Duval Deposition; Exhibits 60, 69, and 78.) In total, the Court finds that Steel Coils' sustained loses, inclusive of survey fees, of $505,358.94.
E. 5Q Survey
At Houston, the vessel's PI Club commissioned a separate survey of the vessel's hatch covers, known as the 5Q Survey. ( See 5Q Survey, Exhibit 93.) "The survey photographs reveal the extremely deteriorated condition of the LAKE MARION's hatch covers and closing appliances. These include, but are not limited to, extreme rusting and wastage of the trackways, compression bars and closing appliances; torn, missing, and unsecured sections of rubber gaskets; missing drain valves; and defective cross joint wedges and rusted coamings. ( See photographs included in Exhibit 93.) The Court finds that the conditions described in the Camden and Houston surveys and depicted in the 5Q Survey photographs show clear evidence of seawater ingress due to unseaworthy conditions that could not have arisen during the course of a single voyage, but were the result of an extended period of neglect.' ( See Sparks Deposition at 99-106, 109-115, 121-123; Ex. 93.) The Court further finds that at the beginning of the voyage, the LAKE MARION's hatch covers could not have kept water out of the holds. ( See Sparks Deposition at 123.)
III. Conclusions of Law
A. Rule 60 Motion — The Package Limitation
Under Rule 60(b)(2), a court may relieve a party from a final judgment on the basis of "newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b)." FED. R. CIV. PROC. 60. In order to succeed on a motion brought under Rule 60(b)(2), "the movant must demonstrate (1) that it exercised due diligence in obtaining the information and (2) [that] the evidence is material and controlling and clearly would have produced a different result if presented before the original judgment." Government Financial Services One Limited Partnership v. Peyton Place, Inc., 62 F.3d 767, 770-71 (5th Cir. 1995) ( quoting New Hampshire Ins. Co. v. Martech USA, Inc., 993 F.2d 1195, 1200-01 (5th Cir. 1993)). "The newly discovered evidence must be in existence at the time of trial and not discovered until after trial." Id. ( quoting Longden v. Sunderman, 979 F.2d 1095, 1102-03 (5th Cir. 1992)). Moreover, a district court may grant relief under Rule 60(b) only upon a "sufficient showing of unusual or unique circumstances," Prior V. U.S. Postal Service, 769 F.2d 281, 286 (5th Cir. 1985). The movant bears the burden of demonstrating the exceptional circumstances that warrant relief. See Lavespere V. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 173-74 (5th Cir. 1990), abrogated on other grounds, Little V. Liquid Air Corp., 37 F.3d 1069, 1075 n. 14 (5th Cir. 1994) ( en banc)
Defendants move the Court to revisit its summary judgment rulings, which found the $500 per-package limitation inapplicable to the cargo damage. See Steel Coils, Inc., 2000 WL 777916, *2 (E.D. La. 2000); Order and Reasons, October 25, 2000 (restating previous ruling on same grounds). The Court finds that defendants have presented new evidence of the relationship between Steel Coils and Itochu as it relates to the transactions involved in this case, which compels the Court to reconsider its ruling. The Court finds that defendants exercised due diligence in obtaining the information because they could not discern the nature of the Steel Coils/Itochu relationship until they deposed a Steel Coils' representative. Defendants did not take this deposition until after the summary judgment motions were decided. ( See Pinkert Deposition, December 14, 2000.) Further, the information obtained at the deposition regarding the Steel Coils/Itochu relationship is material because it relates to the essence of defendants' claim, namely, that Steel Coils should be bound by the package limitation because the voyage charter is the appropriate contract of carriage and because Steel Coils had a fair opportunity to avoid the package limitation and claim a higher value for the cargo.
Maritime law embraces the principles of agency. Cactus Pipe Supply Co., Inc. v. M/V MONTMARTRE, 756 F.2d 1103, 1111 (5th Cir. 1985) ( citing West India Industries, Inc. v. Vance Sons AMC-Jeep, 671 F.2d 1384 (5th Cir. 1982)). Federal courts may rely "on the general common law of agency," and the Restatement (Second) of Agency is a "useful beginning point for a discussion of general agency principles." Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, 755-56, 118 S.Ct. 2257, 2265-66 (1998). An agency relationship may be express or de facto. J.R. Stripling v. Jordan Production Company, LLC, 243 F.3d 863, 870 (5th Cir. 2000). In order to demonstrate that a principal/agent relationship exists, it must be' shown (1) that the principal indicated that the agent was acting for it, (2) that the agent acted or agreed to act on the principal's behalf, and (3) that the agent was subject to the principal's control. See Restatement (Second) of Agency § 1 cmt. a (1958). Further, a corporation may become an agent of another corporation: "Thus a subsidiary may become an agent for the corporation which controls it, or the corporation may become the agent of the subsidiary." Restatement (Second) of Agency § 14M cmt. a (1958) (emphasis added). The principal is affected by the knowledge that the agent has when it acts for him. See Restatement (Second) of Agency § 278. In other words, the knowledge of the agent is imputed to the principal. See Metropolitan Wholesale Supply, Inc. V. M/V ROYAL RAINBOW, 12 F.3d 58, 62 (5th Cir. 1994) ( citing Granger v. Deville, 583 So.2d 583, 586 (La.Ct.App. 3d Cir. 1991)).
The Court finds that the evidence adduced at the deposition of James Pinkert, Steel Coils' president and former purchasing manager, and of Juan Olivera, an employee of Itochu's logistics department, establishes that Itochu was acting as Steel Coils' agent when it financed the purchase of steel from the mill and entered into the Voyage Charter with Western Bulk for the shipment of the steel. After it received orders from its customers, Steel Coils placed orders with the Russian steel mill or its selling agents. ( See Pinkert Deposition at 9.) The mill produced the steel and shipped it to the load port. ( See id.) Itochu financed the steel purchases by opening a line of credit with the mill and purchased the steel for Steel Coils. Steel Coils repaid Itochu the purchase price plus a fee. ( See id.) Steel Coils negotiated the price of the steel with the mill or its representative. ( See id. at 112-114.) Therefore, the Court finds that Steel Coils was the principal in the purchase of the steel, and Itochu acted as its agent.
Then, in order to ship the steel to ports in the United States, Pinkert testified that Steel Coils asked Itochu to charter a vessel for it:
Q: Did you ask Itochu to charter a vessel for you?
A: Did we ask them? Steel would get to the port, Itochu, we need a ship. ( Id. at 119.)
Olivera confirmed that the parent and subsidiary had an agency arrangement in which Steel Coils would instruct Itochu to charter a vessel to ship cargo Steel Coils had ordered whenever Steel Coils needed it to do so:
Q: In this instance, when you charter for your subsidiary, how does that go and how does that work? How do you first get involved in the charter?
A: Steel Coils would notify us of their intended cargo and we would charter the vessel with owners. (Olivera Deposition at 28.)
Although Itochu charged Steel Coils a fee for the chartering, the freight costs were charged directly to Steel Coils. Pinkert testified:
Q: Does Itochu pay the freight or does Steel Coils pay the freight to, in this instance, Western Bulk?A: I'm pretty sure we pay the freight.
Q: Directly?
A: Yes. (Pinkert Deposition at 128.)
Again, Olivera confirmed Pinkert's description of the arrangement between Steel Coils and Itochu:
Q: When you say that you were responsible for passing the freight bills for payment, in this instance of the LAKE MARION, to whom did you pass those freight bills to?A: To Steel Coils.
Q: And who did Steel Coils pay?
A: Western Bulk.
Q: Directly?
A: Yes. (Olivera Deposition at 31.)
In all, the evidence demonstrates that (1) Steel Coils asked Itochu to act for it, (2) that Itochu agreed to work on Steel Coils' behalf, and (3) that Itochu was subject to Steel Coils' control because it financed the steel purchases and chartered the vessel on Steel Coils' behalf whenever Steel Coils needed it to do so. Therefore, the Court finds that Itochu acted as an agent on behalf of its principal, Steel Coils, when it financed the steel purchase from the mill and entered the voyage charter with Western Bulk.
The discovery that Itochu acted as Steel Coils' agent when it entered into the Voyage Charter with Western Bulk is an exceptional circumstance warranting relief from the Court's judgment that the package limitation does not apply. This follows because the bills of lading can no longer be considered the contract of carriage for determining the rights and responsibilities of the parties. When a bill of lading has been transferred for value to a third party not a party to the charter party, it constitutes an undertaking independent of the charter party except as to provisions of the charter party expressly incorporated into it. See Cargill Incorporated v. Golden Chariot MV, 31 F.3d 316, 318 (5th Cir. 1994) ( quoting Associated Metals and Materials Corporation V. M/V Venture, 554 F. Supp. 281, 283 (E.D. La. 1983)). Essentially, when a bill of lading is negotiated to a third-party that was not a party "to the charter agreement, the bill of lading constitutes the contract of carriage. See id., Associated Metals, 554 F. Supp. at 283. ("third parties, since they are strangers to the charter party, should be able to rely on clean bills of lading free from the restraint of agreements between the shipowner and charterer, as to which the third parties have no notice."), see also 2 Thomas J. Schoenbaum, Admiralty and Maritime Law, § 11-6, at 210 (3d ed. 2001).
Here, because Itochu entered the Voyage Charter as Steel Coils' agent, Itochu's knowledge of the terms of the contract can be imputed to Steel Coils, even though Steel Coils is not named in the Voyage Charter. See Metropolitan Wholesale Supply, Inc., 12 F.3d at 62. Further, Pinkert testified that Steel Coils may have kept a copy of the Voyage Charte'r between Itochu and Western Bulk in its files. ( See Pinkert Deposition at 92, 94.) Pinkert also testified that Steel Coils was involved in and controlled the steel transaction from its inception. This places Steel Coils in a far different position than a third-party purchaser who is unrelated to the charterer. See GOLDEN CHARIOT MV, 31 F.3d at 316-318 (finding bill of lading was contract of carriage when third party merely entered contract to buy goods from the charterer). Therefore, because the Court finds that Steel Coils cannot claim to be a stranger to the voyage charter, the charter party, not the bills of lading, is the appropriate contract of carriage for the voyage. See Cargill Ferrous International v. M/V ARCTIC CONFIDENCE, 1994 WL 97787, *3 (E.D. La. 1994) ("So long . . . as the bill of lading is held by the charterer, it would appear that the charter party terms govern") (citation omitted).
Since the Court finds that the contract of carriage is the charter party that was negotiated on Steel Coils "s behalf, the Court must re-evaluate the issue of whether COGSA's $500 per package limitation applies to the cargo shipped. See 46 U.S.C. § 1304 (5). Initially, the Court refused to apply the package limitation to Steel Coils' cargo claims because the Court found that defendant carriers were unable to carry their burden of providing prima facie evidence the shipper had been given a fair opportunity to avoid the limitation by declaring the value of the cargo and paying a higher freight rate. See Steel Coils, Inc., 2000 WL 777916 at *2. The decision was made without the benefit of knowing the relationship between Itochu and Steel Coils and the nature of their transactions, from the procurement of the steel from the mill to the procurement of the voyage charter. The Court is ummpressed by the argument that a party like Steel Coils that is so closely tied to the procurement of the charter party can claim that the terms of the charter party are inapplicable. See M/V ARCTIC CONFIDENCE, 1994 WL 97787 at *3 (finding shipper that negotiated terms of charter party had fair opportunity to declare higher package value). This is especially true since Steel Coils may have had a copy of the Voyage Charter in its possession. In an almost analogous situation, the court in M/V ARCTIC CONFIDENCE, supra, held that when "the party who argues that the charter party terms are inapplicable was in privity of contract as well as provided the terms which are the point of the dispute, the Court finds that the charter party terms are the terms of the contract of carriage." Id.
The fair opportunity doctrine reflects the intent of Congress when it enacted COGSA, the protection of shippers. See M/V ARCTIC CONFIDENCE, 1994 WL 97787 at *4 (citations omitted). Specifically, one of the purposes of COGSA was to eliminate the necessity for a shipper to make a detailed study of fine print clauses contained in a carrier's bill of lading in every instance before shipping a package. See Encyclopedia Britannica, Inc. v. S/S Hong Kong Producer, 422 F.2d 7, 11-12 (2d Cir. 1969), cert. denied, 397 U.S. 964, 90 S.Ct. 998 (1970). Additionally, as Steel Coils points out, the fair opportunity doctrine is intended to protect innocent holders of bills of lading who procure the documents of title through the stream of commerce. See P1's Post-Trial Brief at 16.
Here, Steel Coils cannot claim that it was unaware that COGSA and its package limitation applied because the bills of lading failed to expressly or by reference incorporate COGSA. Steel Coils is not an innocent holder of the bills of lading, nor is it a shipper who was unaware of the intended terms of the bills of lading. Itochu, acting on behalf of its subsidiary Steel Coils, incorporated the package limitation into, the charter party. With full knowledge of the value of the steel cargo, that it had paid for, Itochu negotiated the freight rate, which was paid by Steel Coils. The rate was based on the terms of the Voyage Charter, including the package limitation. The Court finds that Itochu, as agent for its principal Steel Coils, had a fair opportunity to declare a higher value for the cargo and to avoid the application of the package limitation. Itochu's litigation history shows that it had experience with Clause 31 of the Voyage Charter and its consequences. See Itochu International, Inc. v. M/V HAVJO, 1998 WL 12195, *4 (E.D. La. 1998) (finding COGSA fully incorporated into charter party that contained identical language to Clause 31 of present Voyage Charter); Itochu International, Inc. v. M/V WESTERN AVENIR, 1997 WL 537698, *5 (E.D. La. 1997) (same).
It is simply inequitable for Steel Coils, which directly benefitted from the lower freight rate negotiated by its agent, Itochu, to claim now that it should also benefit from the inapplicability of the package limitation. This finding is buttressed by Steel Coils' access to the charter party and by Tommas Lygrell's testimony that the parties used Itochu's forms for the bills of lading. As the testimony of Pinkert and Olivera demonstrates, the transactions between Steel Coils and Itochu were not arms length transactions. Therefore, the Court grants defendants' Rule 60 motions and finds that the package limitation applies to Steel Coils' cargo claims.
B. The COGSA Claims
Under COGSA, a plaintiff establishes a prima facie case by proving that the cargo for which bills of lading were issued was loaded in an undamaged condition, and discharged in a damaged condition. See Tubacex, Inc. v. M/V RISAN, 45 F.3d 951, 954 (5th Cir. 1995); United States v. Central Gulf Lines, 974 F.2d 621, 628 (5th Cir. 1992), cert. denied, 507 U.S. 917, 113 S.Ct. 1274 (1993). Once the plaintiff has presented a prima facie case, the burden shifts to the carrier to prove that it either exercised due diligence to prevent the damage or that the loss was caused by one of the exceptions set out in Section 1304(2) of COGSA. See id. (citing Sun Company, Inc. v. S.S. Overseas Arctic, 27 F.3d 1104, 1109 (4th Cir. 1994)); Tenneco Resins, Inc. V. Davy International, AG, 881 F.2d 211, 213 (5th Cir. 1989). If the carrier rebuts the plaintiff's prima facie case with proof of an exception listed in Section 1304(2) (a)-(p), the burden returns to the plaintiff to establish that the carrier's negligence contributed to damage or loss. See id. Then, if the shipper is able to establish that the carrier's negligence was a contributory cause of the damage, the burden switches back to the carrier to segregate the portion of the damage due to the excepted cause from that portion resulting from the carrier's own negligence." See id.
COGSA also contains a catch-all clause upon which carriers may rely to rebut a shipper's prima facie case. See Section 1304(2)(q). This section provides that the carrier may exonerate itself from loss from any cause other than those listed in Section 1304(2)(a)-(p) by proving that the loss or damage occurred "without the actual fault and privity of the carrier. . ." Id. The carrier bears not only the burden of production, but also the ultimate burden of persuasion on the issue of the applicability of Section 1304(2)(q). See United States v. Ocean Bulk Ships, Inc., et al., 248 F.3d 331, 338 (5th Cir. 2001).
The Court finds that Steel Coils demonstrated its prima facie case. First, the Court finds that the cargo was delivered to the LAKE MARION in good order and condition. Steel Coils presented mates receipts, bills of lading containing comments on the condition of the cargo, and a cargo survey taken at the load port in Riga that contained commentary about and photographs of the cargo. ( See Mates Receipts and Bills of Lading, Exhibits 4-7, 16, 18, 20, 22, 24, 33, 41, 50, 52, 61, 70, 79, 102; International Inspection Services, Ltd. Inspection Report No. 267//97, Exhibit 85.) Although the bills of lading and the load port survey contain notations regarding atmospheric rust on the hot rolled coils and damage to the wrapping of the cold rolled and galvanized coils, the evidence reflects that these conditions did not damage the coils. ( See Sparks Deposition at 47-48.) Further, the Fifth Circuit has held that a finding of good condition is not precluded by exceptions on bills of lading which note rust. See Couthino, Caro Co., v. M/V SAVA, 849 F.2d 166, 168 (5th Cir. 1988). Additionally, none of the exceptions refers to seawater rust damage, the damage on which plaintiff's claim is based. The only silver nitrate tests conducted on any of the cargo before loading was on hot rolled coils loaded at Ventspils, and those tests were negative. ( See Sia Elmers Report No. AD/97-110/UJL-F, Exhibit 99.) Further, 123 wrapped coils were damaged as a result of flooding of the No. 1 hold while the vessel was in New Orleans. Although these coils also showed evidence of seawater wetting and positive silver nitrate tests ( see Rasaretnam Deposition, at 26-28), no one disputed that the No. 1 hold did in fact flood, and the coils were damaged as a result of the flooding. Therefore, the Court finds that the exceptions on the bills of lading and the notes in the pre-load survey do not foreclose plaintiff from establishing a prima facie case.
Steel Coils demonstrated that the cargo was unloaded at the ports of New Orleans and Houston in a damaged condition. All of the surveyors at the discharge ports testified that the cargo was damaged when it was discharged ( see Rasaretnam and Burges Depositions generally), and their survey reports support their testimony. ( See Exhibits 3, 15, 78, and 89.) The testimony of the surveyors who performed damage surveys of the cargo ( see Duval and Woods, Depositions) and their survey reports ( see exhibits 32, 40, 48, 49, 60, 69, and 88), as well as testimony of the chemists who concluded that the rust damage was a result of seawater contamination ( see Van der Kloot and Renz Depositions) and their respective laboratory reports ( see exhibits 49 and 60) also support this conclusion. The Court was not persuaded by the testimony of defendant's expert, Mr. Sanchez, who maintained that the cargo was not contaminated by seawater ingress into the holds. Notably, Mr. Sanchez did not do any follow up tests on the steel after his initial observations in order to confirm the cause of the rust marks. Therefore, the Court finds that plaintiff established its prima facie case, thereby shifting the burden to defendants.
Once the shipper has presented a prima facie case, the burden shifts to the carrier to prove that it either exercised due diligence to prevent the damage or that the loss was caused by one of the exceptions set out in Section 1304(2) of COGSA. See Tubacex, Inc., 45 F.3d at 945. Under COGSA, a carrier has the nondelegable duty to ensure that the ship is seaworthy before the commencement of the voyage and to "make the holds . . . fit and safe for their reception, carriage, and preservation" of cargo. 46 U.S.C. § 1303(1)(a); see also Jamaica Nutrition Holdings, LTD. v. United Shipping Co., LTD, 643 F.2d 376 (5th Cir. 1981) ("COGSA . . . imposed a nondelegable duty on [carrier] to exercise due diligence to make the vessel fit for carriage of the cargo shipment"). Seaworthiness is defined as "reasonable fitness to perform or do the work at hand." Farrell Lines, Inc. V. Jones, 530 F.2d 7, 10 n. 2 (5th Cir. 1976), rehearing denied, 532 F.2d 1375 (1976)
The Court finds that the carriers failed to exercise due diligence to ensure the seaworthiness of the vessel before the commencement of the voyage. First, the carriers failed to test the watertight integrity of the hatch covers and to make the necessary repairs to the covers. The SKS Holds Condition Certificate reported that "[t]he hatch cover tightening rubbers are deformed (pressed inside) more or less everywhere. ( See Exhibit 90.) Also, the ends of these rubbers are pressed out or glued out on the extremes of the hatch covers (Hold No. 3)." ( See id.) Although the report concluded that the hatch covers were watertight, the Court concludes, based on the testimony of Captain Sparks and the surveys conducted at the discharge ports, that the hatch covers were not capable of preventing seawater from entering the holds. Further, the Court finds that the carriers had notice of deficiencies in the hatch covers that should have triggered the testing and repairs. ( See Sparks Deposition at 62-63; Seaspan Marine Consultants Report No. 4875/97, Exhibit 100.) No tests were conducted to determine whether the hatch covers actually provided a watertight seal, and consequently no repairs were performed on the covers. Further, the carriers failed to wash the cargo holds with fresh water to remove any remaining corrosive salt residues left over from the earlier cargo. The SKS Certificate noted slightly positive silver nitrate tests on the holds before the voyage began. (See Exhibit 90.) Therefore, the Court finds that carriers failed to exercise due diligence to make the vessel fit to carry the cargo.
Additionally, the Court finds that the COGSA defenses in Section 1304(2) are not applicable. First, the peril of the sea defense is inapplicable because, as both Captain Sparks and Captain Musial testified, the winds and waves encountered by the vessel were foreseeable in the North Atlantic during the late winter months ( see Sparks Deposition at 82-83.) See Thyssen, Inc. v. S/S EUROUNITY, 21 F.3d 533, 539 (2d Cir. 1994) ("courts also must be cognizant that their ultimate conclusions should turn on whether the weather conditions were foreseeable, given the location and time of year."). Furthermore, no damage to the vessel resulted from the voyage because the conditions noted in the surveys at the discharge ports indicated pre-existing damage as a result of prolonged neglect. ( See Sparks Deposition at 96-99.) Additionally, both Rasaretnam and Sparks testified that the crack in Hold No. 1 could not have been caused during the voyage because if it had, the crack would have occurred where the plates meet or where the plating meets the ship's framework, not in the middle of the plate, as was the case here. ( See Rasaretnam Deposition at 93-95; Sparks Deposition at 115-118.)
Second, there was no showing of an act or omission by the shipper. Defendants argued that the damage resulted from deficiencies in the loading and/or stowage of the cargo. Since. there was no evidence that the cargo was improperly loaded and stowed, the Court finds that this defense is inapplicable. Third, defendants failed to prove that the hatch cover deficiencies or the crack in metal plating in the No. 1 hold were latent defects. Captain Rasaretnam testified that the crack was an extension of an old crack, as evidenced by the double plate welded in place immediately adjacent to the crack. ( See Rasaretnam Deposition at 46-49.) Fourth, the evidence presented by defendants failed to prove that the coils were packaged improperly. Defendants' argument that the plastic sheeting used to cover the cargo was inadequate fails because plaintiff's experts established, without impeachment by defendants, that the cargo was packed in accordance with industry standards. ( See Duval Deposition at 28-29; Rasaretnam Deposition at 23; Sparks Deposition at 46-47.) Finally, defendants failed to carry their burden to demonstrate that loading and stowage were the causes of the damage to the cargo under Section 1304(2)(q). See Ocean Bulk Ships, Inc., 248 F.3d at 338. Therefore, the Court concludes that defendant carriers have failed to rebut the plaintiff's prima facie case. Accordingly, the Court finds that the cargo was loaded in an undamaged condition and was damaged during the voyage as a result of the carrier's failure to exercise due diligence to ensure the seaworthiness of the vessel.
C. Negligence Claim against Bay Ocean
Steel Coils asserted a general maritime negligence claim against Lake Marion's managing agent, Bay Ocean. Bay Ocean contends that COGSA provides plaintiff with its exclusive remedy and that it cannot be found liable for its independent negligence. Defendant's contentions are wrong. First, in Herd Co. v. Krawill Machinery Corporation, 359 U.S. 297, 79 S.Ct. 766 (1959), the Supreme Court recognized that COGSA does not preclude independent negligence actions against the agents of a carrier when it affirmed a judgment against a negligent stevedore which had been sued separately from the shipper. See 359 U.S. at 308, 79 S.Ct. at 772; see also Associated Metals and Minerals Corporation V. ALEXANDER'S UNITY M/V, 41 F.3d 1007, 1017 (5th Cir. 1995) (while COGSA governs certain aspects of claims for damages to cargo and provides carriers with certain defenses, it "does not precluded claims in tort for negligent damage to cargo."); Citrus Marketing Board of Israel v. J. Lauritzen A/S, 943 F.2d 220, 222-23 (2d Cir. 1991) (district court erred in dismissing complaint on basis that COGSA, standing alone, precluded a separate negligence action against vessel manager). Second, a multitude of cases have recognized that an agent in a maritime action may be fully liable for its acts of negligence. See, e.g., Herd, 359 U.S. at 302, 79 S.Ct. at 769; Quinn v. Southgate Nelson Corporation, 121 F.2d 190, 191 (2d Cir. 1941) ("That a principal is liable for a wrong does not necessarily immunize his agent.") (citations omitted); In re Delphinus Maritima, S.A., 523 F. Supp. 583, 597-98 (S.D.N Y 1981); Cerro Sales Corporation v. Atlantic Marine Enterprises, 403 F. Supp. 462, 568 (S.D.N.Y. 1975) (failure of managing agent to provide a proper crew and to properly counsel about fire protection once it had assumed managerial function was negligent; vessel owner and its managing agent were jointly and severally liable to cargo claimants); National Material Trading v. M/V KAPTAN CEBI, 1997 WL 915000, *8 (D.S.C. 1997) (denying motion to dismiss filed by managing agent because independent cause of action may exist against manager if it was responsible to make vessel seaworthy and failed to do so). Therefore, the Court finds that plaintiff's independent tort claim against Bay Ocean is proper.
To establish maritime negligence, a plaintiff must "demonstrate that there was a duty owed by the defendant to plaintiff, breach of that duty, injury sustained by [the] plaintiff, and a causal connection between the defendant's conduct and the plaintiff's injury." Canal Barge Company, Inc. v. Torco Oil Company, 220 F.3d 370 376 (5th Cir. 2000) ( quoting In re Cooper/T. Smith, 929 F.2d 1073, 1077 (5th Cir. 1991)). Furthermore, the resultant injury must have been foreseeable. See In re Cooper/T. Smith, 929 F.2d at 1077. The determination of whether a party owes a duty to another depends on a variety of factors, "most notably the foreseeability of the harm suffered by the complaining party." Id. at 377 ( quoting Consolidated Aluminum Corporation v. C.F. Bean Corporation, 833 F.2d 65, 67 (5th Cir. 1987))
Here, Captain Musial testified that Bay Ocean, as managing agent of the vessel, was responsible for maintaining the condition of the vessel and for repairing any deficiencies in the vessel so that the vessel would be seaworthy for the voyage. Bay Ocean was negligent in its maintenance of the vessel's hatch covers. The SKS Holds Condition Certificate establishes that Bay Ocean was aware of the deficient conditions of the hatch covers and, as Captain Musial testified, the crew failed to perform the usual hose tests on the covers to ensure that they would function properly. ( See Exhibit 90). The Court has already ruled that the hatch covers were in no condition to keep water out of the holds, and therefore, seawater ingress and the resultant damage to plaintiff's cargo was foreseeable. See discussion, infra. at 30. Furthermore, the surveyors' reports and testimony demonstrate that the seawater that damaged the steel was able to enter the holds because of the deficient conditions of the hatch covers, and therefore establish the causal link between the seawater damage and the failure of Bay Ocean to maintain and repair the hatch covers. ( See Exhibits 32, 49, 60, 88; Depositions of Rasaretnam, Woods, Burges, Renz.) Therefore, the Court finds that Bay Ocean was negligent in its maintenance of the vessel.
D. Liability and Damage Calculations
Under COGSA, a cargo owner may recover only from the carrier of goods. See Thyssen Steel Company v. M/V KAVO YERAKAS, 50 F.3d 1349, 1351 (5th Cir. 1995) (citations omitted). A "carrier" is "the owner or the charterer who enters into a contract of carriage with a shipper." 46 U.S.C. § 1301 (a). Neither Lake Marion nor Western Bulk disputes its status as a carrier. Both Lake Marion and Western Bulk are entitled to limit their liability to COGSA's $500-per package limitation. The question remains whether Bay Ocean, Lake Marion's managing agent, may also rely on the package limitation.
In Herd, the Supreme Court held that while the $500-perpackage limitation of COGSA does not extend to stevedores or agents of the carrier, a carrier is free to contract with the owner of cargo to limit the liability of the carrier's agents. See Herd, 359 U.S. at 302-305, 79 S.Ct. at 769-771; see also Brown Root, 648 F.2d at 422-423 (discussing limit of liability for stevedores under Himalaya clause); Secrest Machine Corp. v. S.S. TIBER, 450 F.2d 285, 286 (5th Cir. 1971) (per curiam). In determining whether to extend the protection of the package limitation beyond the carrier, the Court must be guided by the principle that "contracts purporting to grant immunity from, or limitation of, liability must be strictly construed and limited to intended beneficiaries." Herd, 359 U.S. at 305, 79 S.Ct. at 771.
Plaintiff argues that Bay Ocean, as a non-carrier whose liability sounds in negligence, is not entitled to limit its liability under the package limitation incorporated in the charter party. Bay Ocean has pointed to no provision, such as a Himalaya clause, in any of the relevant documents that purports to extend the per-package limitation to the carrier's agents. Accordingly, the Court finds that Bay Ocean's liability is not limited by COGSA's per-package limitation.
Subject to the package limitation, Lake Marion, Bay Ocean, and Western Bulk are liable jointly and in solido to plaintiff for the losses it sustained as a result of the damage to the cargo because a fair allocation of liability cannot be made among the defendants. See Project Hope v. M/V IBN SINA, 250 F.3d 67, 76 (2d Cir. 2001) (recognizing that "[w]here a fair allocation of liability cannot be made among multiple tortfeasors, the federal common law permits imposition of joint and serval liability.") (citation omitted); see also Rockwell International Corp. V. M/V INCOTRANS SPIRIT, 998 F.2d 316, 319 (5th Cir. 1993) (applying comparative fault principles to maritime claims). Lake Marion and Western Bulk are liable for breach of the duty to exercise due diligence to ensure that the vessel was seaworthy. See Constructores Tecnicos v. Sea-Land Service, Inc., 945 F.2d 841, 850 (5th Cir. 1991). Bay Ocean is liable for its negligence in failing to test and repair the hatch covers.
The Court finds that the total number of packages that were damaged was 524. Through the introduction of statements of adjustment made by Sumitomo Marine, plaintiff's insurance company, plaintiff demonstrated that 170 coils that were discharged in New Orleans sustained damages. ( See Exhibits 2, 14, 30, 39, and 47.) In the same manner, plaintiff also demonstrated that 354 coils and plates discharged in Houston were damaged. ( See Exhibits 59, 68, and 77.) Steel Coils' total loss is $505,358.94. As limited by the $500 per-package limitation, the total liability of Lake Marion and Western Bulk is $262,000. Bay Ocean is liable for the full $505,358.94.
Plaintiff has a duty to mitigate damages such as by selling the damaged-goods at salvage for the best price obtainable. See Tennessee Valley Sand Gravel Co. v. M/V DELTA, 598 F.2d 930, 932 (5th Cir. 1979); Compagnie De Navigation Fraissanet CyprLen Fabre, S.A. v. Mondial United Corp., 316 F.2d 163, 171 (5th Cir. 1963); see also Schoenbaum, supra, § 10-36 at 170. Essentially, the injured party must act reasonably under the circumstances to limit the extent of its damages. See M/V DELTA, 598 F.2d at 932. First, the Court finds that Steel Coils properly mitigated its damages as evidenced by deposition testimony of surveyors Woods and Duval. They testified that Steel Coils obtained fair and reasonable prices on the salvage market for the cargo discharged in New Orleans. ( See Woods Deposition at 20-21, 27, 30-32; Duval Deposition at 61-62.) Defendants contend that plaintiff failed to act reasonably because it "slit" (cut coils into smaller pieces) coils before they were inspected by surveyors, which decreased the marketability of the pieces after they were rejected. Although the Court agrees that the value of the steel decreased as a result of the slitting, the Court nevertheless finds that slitting the coils was reasonable under the circumstances because, as Pinkert testified, Steel Coils slit the steel in order to conform the coils to customers' specifications. ( See Pinkert Deposition at 33.)
Plaintiff is also entitled to recover reasonable expenses incurred in determining the nature and extent of the loss, including survey fees. See Orduna S.A. v. Zen-Noh Grain Corp., 913 F.2d 1149, 1154 (5th Cir. 1990) (upholding district court's allowance of plaintiff's recovery of survey fees); Shiboumba Overseas, LTD. V. M/V PIONEER SEVERODVINSKA, 1997 WL 675320, *6 (E.D. La. 1997); Sugar Industry Authority v. M/V TRADE WINDS, 1992 WL 116100, *8 (E.D. La. 1992); see also Schoenbaum, supra, § 10-36, at 172. The Court finds that Steel Coils is entitled to $25,272.54 in survey fees for the surveys conducted in New Orleans ($12,228.38) and Houston ($13,044.16) to determine the nature and extent of the loss. See id.
Defendants did not contest the reasonableness of the surveys nor the cost of the surveys submitted by plaintiff and supported by surveyors Woods and Duval. ( See Woods Deposition at 20-21, 27, 30-32; Duval Deposition at 61-62, 46-49.)
Pre-judgment interest from the date of the loss is the rule rather than the exception in admiralty cases. See Todd Shipyards Corp. v. Turbine Services, Inc, 674 F.2d 401, 415 (5th Cir.), cert. denied, 459 U.S. 1036, 103 S.Ct. 447 (1982); In re M/V VULCAN, 553 F.2d 489, 490 (5th Cir.), cert. denied, 434 U.S. 855, 98 S.Ct. 175 (1977). The Court finds that there are no peculiar circumstances in this case that would make it inequitable for defendants to pay pre-judgment interest. See Probo II London v. M/V ISLA SANTAY, 92 F.3d 361, 363 n. 2 (5th Cir. 1996) ( citing Reeled Tubing, Inc. V. M/V CHAD G, 794 F.2d 1026, 1028 (5th Cir. 1986)); Todd Shipyards Corp., 674 F.2d at 41; In re M/V Vulcan, 533 F.2d at 490-91. Admiralty courts have broad discretion in setting the rate of pre-judgment interest and may use any reasonable guidepost which provides a fair level of compensation, including state law. See Randolph v. Laeisz, 896 F.2d 964, 969 (5th Cir. 1990); Marine Overseas Services Inc. v. Crossocean Shipping Co., 791 F.2d 1227, 1236 (5th Cir. 1986); Reeled Tubing Inc., 794 F.2d at 1029. Accordingly, the Court awards prejudgment interest from the date of delivery in New Orleans, the discharge port where the first cargo claims arose, at the rate established by Louisiana Civil Code art. 2924(B). Pursuant to Federal Rule of Civil Procedure 54 (d), plaintiff is also permitted to recover costs.
E. The Cross-Claim, Counter-Claim, and Third-Party Complaint
Lake Marion and Bay Ocean assert a cross-claim against Western Bulk as the charterer of the vessel for indemnity, contribution and recovery based on alleged breaches of the Time Charter. Western Bulk, in turn, filed a cross-claim against Lake Marion and Bay Ocean on the same grounds, and it filed a counterclaim against Steel Coils and a third-party complaint against Itochu, based on the terms of the Voyage Charter.
Lake Marion and Bay Ocean assert their cross-claim against Western Bulk based on three theories: (a) that Western Bulk is responsible for cargo damage caused by condensation because the Time Charter incorporated the New York Produce Exchange Agreement, which apportions cargo damage caused by condensation 50% to owners and 50% to charterers ( See Exhibit 111); (b) that Western Bulk, as charterer under the Time Charter, was responsible for loading and stowage of the cargo and is therefore responsible for any damages caused by such acts; and (c) that Western Bulk is liable for any damage amounts above the package limitation because under the terms of the charter party, Western Bulk was responsible for including COGSA, or a reference to it, in the bills of lading. As to claims regarding responsibility for the damages to the cargo, the Court dismisses both claims because, as discussed above, the Court finds that the damage to the cargo resulted from the unseaworthiness of the vessel, not from any defects in loading or stowage or from condensation. See discussion, infra. at 25-33. Finally, because the Court has determined that the package limitation applies to Steel Coils' cargo claims, Lake Marion's third claim is moot. Bay Ocean has no claim against Western Bulk because Western Bulk had no duty to extend COGSA defenses to Lake Marion's agents. Accordingly, the cross-claims of Lake Marion and Bay Ocean are rejected.
Western Bulk's counterclaim and third-party complaint are based on the theories that the damage to the cargo resulted from improper loading and stowage, for which Itochu and/or Steel Coils is responsible, and because Steel Coils and/or Itochu failed to fulfill their obligations under the charter party by improperly issuing the bills of lading without reference to COGSA and the package limitation. These claims are dismissed on the same grounds as stated above for denying Lake Marion's and Bay Ocean's claims against Western Bulk. See discussion, infra at 42-43.
As to Western Bulk's cross claim, Western Bulk is entitled to indemnity from Lake Marion for any amount it pays to plaintiff for the damage that resulted from the unseaworthiness of the vessel because the New York Produce Exchange, which is incorporated in the Time Charter at Clause 531 apportions 100% of "[c]aims for loss of or damage to cargo due to seaworthiness" to "Owners." (Exhibit 111.)
Accordingly,
IT IS ORDERED that there be a judgment in favor of plaintiff Steel Coils against M/V LAKE MARION, her engines, boilers, tackle, in rem, and Lake Marion, Bay Ocean and Western Bulk in person am jointly, severally, and in solido in the amount of $262,000, with pre-judgment interest from April 8, 1997, plus costs.
IT IS FURTHER ORDERED that Bay Ocean is liable to Steel Coils for an additional amount of $243,358.94, plus pre-judgment interest.
IT IS FURTHER ORDERED that Lake Marion's cross-claim against Western Bulk is dismissed with prejudice.
IT IS FURTHER ORDERED that Western Bulk's counter claim and Third-party claims against Steel Coils and Itochu are dismissed with prejudice, respectively.
IT IS FURTHER ORDERED that Western Bulk is entitled to indemnity from Lake Marion for any amount it pays to plaintiff