Opinion
01 Civ. 3493 (CSH)
November 10, 2003
MEMORANDUM OPINION AND ORDER
In this admiralty case involving alleged damage to refrigerated cargoes carried by sea from South Africa to New York, the plaintiff shipper and the defendant ocean carrier have cross-moved for summary judgment, entire or partial. These motions raise complex issues of liability and damages. The initial briefs of counsel contained relatively perfunctory discussions of the issues they perceived, and failed to perceive (and discuss) other issues. Accordingly the Court directed counsel to file supplemental briefs addressing those latter issues. Counsel have done so. The Opinion which follows is based upon such assistance as could be derived from the briefs of counsel and the Court's independent research.
I. INTRODUCTION
A. Background
Plaintiff Sunpride (Cape) (PTY) Ltd. ("Sunpride"), an export agent for South African produce, brings this admiralty action against defendant Mediterranean Shipping Co., S.A. ("MSC"), a common carrier by sea, and defendant Maher Terminals, Inc., ("Maher Terminals"), a marine terminal operator and stevedore. (Compl. at 1-3.) In its Complaint, plaintiff alleges that defendant MSC agreed to transport six shipments of citrus from Cape Town, South Africa, to New York, New York, and to maintain a "cold treatment protocol" with regard to the citrus. Id. at 3-13. Plaintiff alleges further that defendant MSC transported the shipments in refrigerated containers on one or another of several vessels (see n. 18, infra) to Elizabeth, New Jersey, off-loaded them into the care of its agent, defendant Maher Terminals, and that the temperature required by the cold treatment protocol was not maintained either during the voyage, in the case of one container on one vessel, or during or after the discharge. Id.
The shipments in suit included both Clementines and navel oranges. The parties' papers refer to them collectively as "citrus," a word more commonly used as an adjective, as in the phrase "citrus fruits," rather than as a noun. In this Opinion I will adopt the parties' terminology, except where separate discussion of Clementines and navel oranges is required.
The term "cold treatment protocol" refers to the United States Department of Agriculture (U.S.D.A.) Plant Protection and Quarantine protocol T-107(e). This protocol requires that Clementines and navel oranges grown in the Western Cape Province of South Africa "be chilled to a temperature of not more than 31.5° F. for 72 hours and then mandates that the temperature be precisely maintained for a period of 22 consecutive days." (Def.'s Mem. in Supp. at 2.) If the temperature at which the citrus is stored exceeds 34° F., the entire twenty-two day treatment protocol must be begun again. Id. The protocol is set by the U.S.D.A. and must be satisfied for covered shipments that seek to enter the United States. In the present case, the protocol would have required that defendant(s) keep the citrus at a temperatures below 34° F. both during the voyage and during and after discharge.
Specifically, plaintiff brings claims with regard to the following shipments: consignment of 1400 cartons of citrus delivered to MSC in Cape Town on June 5, 2000, and arrived in Elizabeth on June 20, 2000; consignment of 7200 cartons of citrus and 5770 cartons of citrus delivered to MSC in Cape Town on June 5, 2000, and arrived in Elizabeth on June 20, 2000; consignment of 1400 cartons of citrus delivered to MSC in Cape Town on June 22, 2000, and arrived in Elizabeth on July 12, 2000; consignment of 7200 cartons of citrus and 3720 cartons of citrus delivered to MSC in Cape Town on June 25, 2000, and arrived in Elizabeth on July 12, 2000; consignment of 1400 cartons of citrus delivered to MSC in Cape Town on July 1, 2000, and arrived in Elizabeth on July 19, 2000; consignment of 1400 cartons of citrus delivered to MSC in Cape Town on May 28, 2000, and arrived in Elizabeth on June 15, 2000. Id. at 3-13.
The parties appear to agree that the temperature in container CRLU 9137295 on the M/V Stefania was elevated during the voyage and prior to discharge. (Def.'s Reply at 10.) ("MSC maintained the required temperature of the containers, with the exception of container CRLU 9137295 on the M/V Stefania, throughout the voyages, and thus met any cold treatment obligations that would have been added if the contracts of carriage were amended as alleged by plaintiff") (Compl. at 13.) ("When the vessel arrived at its intended place of destination . . . [CRLU 9137295] was found to have sustained damage due to the failure of MSC to maintain proper temperatures during the transit.") With regard to the rest of the claims, the Complaint alleges that the elevation in temperature occurred during or after discharge.
The process of discharge involves unplugging the refrigerated containers from ship power, removing the containers to the dock and mounting them on a chassis, and transporting the containers to a storage yard where they are connected to shore power; when the containers are without power, the refrigeration units are likewise not powered. (Def.'s Mem. in Supp. at 3-4.) Plaintiff rented Ryan recorders (temperature recording devices that are inserted into refrigerated cargo) from defendant MSC to monitor the temperature of the citrus during transit; plaintiff became aware of the temperature problem when plaintiffs receiver, arriving at the storage yard to accept delivery of the shipments, discovered that the pulp temperature of the citrus was elevated. (Compl. at 4.) Plaintiff alleges that the defendant(s) failed to maintain temperatures consistent with the cold treatment protocol either during the voyage or during or after the discharge process, and seeks damages allegedly caused by that failure. (Compl. at 4-13.)
Plaintiffs claim for damages arises not because the temperature at which the citrus was kept directly and physically harmed the citrus, but specifically from the fact that because the temperatures specified in the cold treatment protocol had not been maintained, the shipments did not meet quarantine standards set by the U.S.D.A. (Pl.'s Mem. in Opp. at 1.) The shipments were examined by a U.S.D.A. representative who determined in each case from a review of the data provided by the Ryan recorders that the temperature of the citrus had exceeded that required of the cold treatment protocol. (Pl.'s Supp. Aff. at Exh. 17, 24, 26, 28, 32, 34, 41.) Where a citrus shipment fails inspection, it must either be re-treated, destroyed, or shipped elsewhere. (Pl.'s Counter-Statement of Material Facts at ¶ 71.) Thus, in order to sell the shipments in the United States as originally intended, plaintiff would have had to submit the shipments to an additional quarantine period lasting twenty-two days. (Pl.'s Mem. in Opp. at 11.) Plaintiff, fearing that during this time the Clementines would physically deteriorate and the market for navel oranges would decline, instead sold the shipments of citrus in Canada (which does not have the same quarantine restrictions in place). (Pl.'s Mem. in Opp. at 1.) Plaintiff states that it seeks damages based on the difference between the market value expected from sale of the citrus at it expected delivery date in the United States and the amount actually received from sale of the citrus in Canada.
B. Procedural History and Description of Claims
The parties have brought cross-motions for summary judgment. Defendant MSC (hereinafter "defendant") moves for summary judgment against plaintiff on five grounds. Defendant first argues that plaintiffs Complaint should be dismissed on the ground plaintiff has not established a prima facie case under the Carriage of Goods by Sea Act ("COGS A"), 46 U.S.C.A. §§ 1300-1315, because plaintiff has failed to show outturn of the citrus shipments in damaged condition. (Def.'s Mem. in Supp. at 7.) Defendant contends that plaintiff has shown neither physical damage to the citrus shipments nor damage occasioned by delay and loss of market.
Of note, in its Answer, defendant MSC asserted two cross-claims against co-defendant Maher Terminals, Inc., seeking indemnification and/or contribution from Maher Terminals on the grounds that "[i]f plaintiff's subject shipments sustained any damage or failed any U.S. government law or regulation as a result of not being properly refrigerated, which is denied, then it resulted from Maher breaching its . . . contractual duties . . . which it owed to MSC," and/or that any damage to plaintiff resulted from Maher Terminals' negligence. (Answer at 8-9.) Defendant MSC does not raise these or any other claims against Maher Terminals in its motion for summary judgment, plaintiff does not raise any claims against Maher Terminals in its cross-motion for partial summary judgment, nor has Maher Terminals participated in briefing the summary judgment motions.
Defendant next argues that plaintiffs claim should be dismissed because defendant did not have an obligation to maintain the cold treatment protocol. Id. at 8-11. Defendant urges that it did not have this obligation because the bills of lading do not reference the cold treatment protocol, the reverse sides of the bills of lading contain provisions that relieve defendant of liability, and defendant's tariff allows for a plus or minus 5° F. variance in temperature during the carriage of refrigerated cargoes (and a fluctuation in this range would have disrupted the cold treatment protocol even if the citrus had been carried at the temperature requested by plaintiff). Id.
These provisions are found at paragraph 8 ("Export or Import Impediments") and paragraph 24 ("Customs, Etc.").
Defendant's third and fourth grounds for summary judgment claim that the damages suffered by plaintiff fall within two of the "Uncontrollable causes of loss" exceptions set out in § 1304(2) of COGS A. Pursuant to this section, "[n]either the carrier nor the ship shall be responsible for loss or damage arising or resulting from . . . (h) Quarantine restrictions; (i) Act or omission of the shipper of the goods, his agent or representative." § 1304(2). Defendant contends that because plaintiffs damage occurred as a result of the threatened imposition of quarantine restrictions by the U.S.D. A., it falls within the scope of the quarantine restriction exception and that "[a]s such, MSC is excepted from any liability that may arise as a result of the cold treatment protocol for these shipments." (Def.'s Mem. in Supp. at 12.) Defendant contends additionally that plaintiff did not provide it with information about the need to conduct the cold treatment protocol and the procedures for doing so, which constituted an act or omission of plaintiff. Defendant argues that it should be absolved of any liability for failure of the cold treatment protocol and seeks dismissal of plaintiff's Complaint. Id. at 15, 19.
The final contention in defendant's motion for summary judgment is that because plaintiffs "decision to sell the citrus in Canada at a lower market price was not . . . forseeable damage under the terms of the contracts," plaintiffs claim for consequential damages should be dismissed. Id. at 20-21.
Plaintiff, in addition to resisting the grounds for summary judgment discussed above, asserts three cross-motions for partial summary judgment. First, plaintiff argues that it has carried its burden of proving a prima facie case under COGSA because the cold treatment failure prevented it from selling the citrus in its originally intended market, it suffered a financial loss a result thereof, and damages resulting from delayed delivery may be used to establish a prima face case under COGSA. (Pl.'s Mem. in Opp. at 9-14.) Plaintiff seeks summary judgment that its prima facie case has been met.
Second, plaintiff seeks a summary judgment ruling that defendant "failed to properly care for the cargo." Id. at 14. Plaintiff advances two main theories to support this contention — 1) that defendant was obligated pursuant to § 1303(2) of COGSA to recognize the need for and complete the cold treatment protocol and 2) that defendant was contractually obligated to recognize the need for and complete the cold treatment protocol. With regard to its first theory of duty arising under § 1303(2), plaintiff argues that defendant had actual knowledge of the cold treatment protocol requirements and was therefore required by § 1303(2) of COGSA to satisfy them and, alternatively, that even if defendant did not have actual knowledge, defendant had a duty under COGSA to "use reasonable care to learn the special handling requirements of the cargo" and satisfy them. (Pl.'s Mem. in Opp. at 19.) With regard to its second theory of duty arising under contract, plaintiff argues that defendant was contractually bound to follow the cold treatment protocol even though it was not referenced in the bills of lading because other documents submitted to plaintiff described the cold treatment requirements. Id. at 14-24.
Essentially, plaintiff argues that defendant was obligated to maintain the cold treatment protocol and did not.
This is my own characterization of plaintiff's theories; plaintiffs briefs do not draw a clear distinction between its theories that arise under § 1303(2) and those arising under contract. While I recognize that the minimum requirements set out in COGSA are incorporated into and part of the governing contract and the COGSA requirements and the bills of lading thus give rise to legal obligations as a single, functional whole, I find it useful to distinguish between them here for purposes of simplicity and clarity.
Third, plaintiff seeks a summary judgment ruling that consequential damages are warranted as a matter of law in this case because the damages it sustained were foreseeable by the parties. Id. at 32-36. Specifically, plaintiff claims that the damages were foreseeable because defendant had actual knowledge of the cold treatment protocol, or even if defendant did not have such actual knowledge, defendant was charged with such knowledge as a result of its statutory obligations under COGSA, and, finally, that once defendant became aware that the first shipment shipped in August 1999 had been rejected by the U.S.D. A., it was necessarily aware of the consequences of the failure of cold treatment with regard to the remaining shipments. Id. at 35-36.
In addition to these three cross-motions for partial summary judgment, plaintiff makes two arguments that are not styled as motions for partial summary judgment, although they could have been and I will treat them as such. Plaintiff requests that paragraph 8 ("Export or Import Impediments") and paragraph 24 ("Customs, Etc.") on the reverse side of defendant's bill of lading and defendant's tariff provision allowing for a 5° F. temperature variance be "declared null and void as a violation of COGS A section 1303(8)." Id. at 23, 29. Plaintiff also argues that if this Court finds that defendant has established an excepted cause under § 1304(2), the "Court must find MSC responsible for the full extent of Sunpride's damages" because defendant "has not, and cannot, segregate the portion of Sunpride's damage not attributable to its own negligence." Id. at 32.
The initial briefs of counsel unaccountably failed to discuss the fundamental question of whether the parties' rights and obligations are governed by COGSA or the Harter Act, 46 U.S.C.A. §§ 190-96. The Court directed that supplemental briefs be submitted on that question.
C. Applicable Law and Standard of Review
COGSA applies to "the period from the time when the goods are loaded on to the time when they are discharged from the ship." United States v. Ultramar Shipping Co., Inc., 685 F. Supp. 887, 894 (S.D.N.Y., 1987 ), aff'd without opinion, 854 F.2d 1315 (2dCir. 1988). See also § 1301(e). The Harter Act "applies during the time period following discharge of cargo from the ship and prior to its delivery; this coverage during the unloading period continues until proper delivery has been made to a fit and customary wharf." Ultramar Shipping, 685 F. Supp. at 894. In this case, both parties indicate that, with the exception of one container, CRLU 913725 on the M/V Stefania, the event causing the loss occurred after discharge by defendant MSC to defendant Maher Terminals and before delivery to plaintiff. Thus, pursuant to the relevant statutory provisions, COGSA would normally govern the claim relating to container CRLU 9137295 on the MTV Stefania, while the Harter Act would normally govern with regard to the balance of the claims.
In its Complaint, plaintiff states with regard to each cause of action (except for that involving a container aboard the M/V Stefania) that "MSC and/or Maher Terminals failed to ensure that proper temperatures were maintained on the aforementioned container while the said container was in the custody and control of Maher Terminals and prior to defendant Mediterranean Shipping Co. having effected delivery of the consignment to the consignee or its representative." (Compl. at 4-13.) Defendant observed in its summary judgment motion: `"The subject containers were discharged from the various MSC vessels at defendant Maher Terminals by Maher longshoreman. Each of the subject containers was unplugged and without power during the discharge operation. The length of time without power experienced by each subject container varied, but in each case was apparently sufficient to cause a failure of the cold treatment protocol." (Def.'s Mem. in Supp. at 6-7.) The parties appear to agree that the temperature in container CRLU 9137295 on the M/V Stefania was elevated during the voyage and prior to discharge. (Def.'s Reply at 10.) ("MSC maintained the required temperature of the containers, with the exception of container CRLU 9137295 on the M/V Stefania, throughout the voyages, and thus met any cold treatment obligations that would have been added if the contracts of carriage were amended as alleged by plaintiff.") (Compl. at 13.) ("When the vessel arrived at its intended place of destination . . . [CRLU 9137295] was found to have sustained damage due to the failure of MSC to maintain proper temperatures during the transit."). See also supra note 4.
However, parties may contract to apply COGS A during the period before delivery and after discharge and COGSA will be applied when the contract employs sufficiently express language of incorporation. Colgate Palmolive Co. v. S/S Dart Canada, 724 F.2d 313, 315 (2d Cir. 1983), cert. denied, 466 U.S. 963 (1984); Ultramar Shipping, 685 F. Supp. at 896. In this case, the back of the relevant bills of lading state that "[i]f goods are shipped to or from the United State, [sic] this Bill of Lading shall exclusively be subject to U.S. Carriage of Goods by Sea Act 1936 (hereinafter called "COGSA")," and, under "Period of Responsibility," that "If goods are shipped to or from the U.S.A., U.S. COGSA shall apply before loading and after discharge as long as the goods remain in custody and control of the Carrier." (Flood Aff., Ex. 1.) Because the bills of lading expressly state that COGSA applies post-discharge, they are sufficiently specific to extend COGSA through contract to the period after discharge and before delivery, even where the Harter Act would otherwise govern. R.B.K. Argentina S.A. v. M/V Dr. Juan B. Alberdi, 935 F. Supp. 358, 366-67 (S.D.N.Y. 1996) (applying COGSA even though the Harter Act would normally apply where bill of lading stated that COGSA "shall govern before the goods are loaded on an dafter they are discharged from the ship. . . ."); Mamiye Bros. v. Barber Steamship Lines, Inc., 241 F. Supp. 99 (S.D.N.Y. 1965) (applying COGS A post-discharge where bill of lading stated that COGS A will "apply to and govern the rights and obligations of the Carrier and the goods owner before the goods are loaded on and after they are discharged from the vessel. . . ."), aff'd, 360 F.2d 774 (2d Cir.), cert. denied, 385 U.S. 835 (1966).
COGS A, therefore, is the law governing this case, with one important caveat, with regard to which I requested that the parties submit further briefing. Where COGS A is extended through the bills of lading to cover the period after discharge and before delivery, it functions as a contractual provision (not having statutory force of law), Aisin Seiki Co. Ltd. v. Union Pacific Railroad Co., 236 F. Supp.2d 343, 348 (S.D.N.Y. 2002), and cannot be applied where COGSA is inconsistent with the Harter Act and where its application would exonerate the carrier from liability in a manner not permitted under the Harter Act. Ultramar Shipping, 685 F. Supp. at 896. See also R.L. Pritchard Co., Inc. v. S.S. Hellenic Laurel et al., 342 F. Supp. 388, 391 (S.D.N.Y. 1972) ("Insofar as the provisions of COGSA are inconsistent with the Harter Act, they cannot be incorporated into a bill of lading to cover the responsibilities of the carrier after discharge and before delivery of the cargo."). With regard to the majority of the claims and defenses raised in this case, the extension of COGSA does not conflict with the Harter Act and, therefore, COGSA is properly applied. However, a question is raised with regard to defendant's attempt to invoke the quarantine exception set forth in § 1304(2)(h) of COGSA, which provides that "[n]either the carrier nor the ship shall be responsible for loss or damage arising or resulting from . . . (h) Quarantine restrictions." There is no quarantine exception in the Harter Act, suggesting the possibility that the invocation of this defense would potentially exonerate defendant in a manner not permitted under the principle set forth in Ultramar Shipping and other cases. This question involves only the quarantine exception, and I will discuss it in Part DLD of this Opinion.
Having determined that COGS A is properly invoked and applies to the claims and defenses raised in this case (and having reserved for later discussion the propriety of defendant's invocation of the quarantine exception), it is useful to summarize COGSA's pertinent provisions.
Under COGS A, a "shipper . . . who wishes to recover against the carrier for damage to goods bears the initial burden of proving both delivery of the goods to the carrier . . . in good condition, and outturn by the carrier or by the stevedore . . . in damaged condition." Vana Trading Co., Inc. v. S.S. "Mette Skou", 556 F.2d 100, 104 (2d Cir. 1977), cert. denied, 434 U.S. 892 (1977). If the shipper is able to prove its prima facie case, the burden shifts to the carrier to "show by `significant probative evidence' that it exercised due diligence under 46 U.S.C. § 1303(2)," or to show that the loss or damage falls within one of the COGSA exceptions set forth in 46 U.S.C. § 1304(2). Royal Insurance Co. of America v. S/S Robert E. Lee, et al., 756 F. Supp. 757, 762 (S.D.N.Y. 1991) ("After the cargo owner . . . carries the prima facie burden of demonstrating clean delivery and cargo damage during transport or upon discharge, the order of proof shifts to the ocean carrier . . . to affirmatively show by `significant probative evidence' that it exercised due diligence under 46 U.S.C. App. § 1303(2) . . . or failing the exercise of such due diligence, that any negligent conduct resulting in damage to the cargo falls under one of the excepted causes of § 1304(2)."). See also Amerada Hess Corp. v. SS Phillips Oklahoma, 558 F. Supp. 1164, 1167 (S.D.N.Y. 1983) ("Under the Carriage of Goods by Sea Act of 1936, once a prima facie case has been established the burden of proof is on the carrier to establish that the damage was not due to its negligence, or that it was occasioned by one of the `excepted causes' listed in § 1304(2)."). If defendant carries its burden of proof of showing due diligence or establishes its freedom from fault under § 1304(2)(q), it is completely exonerated. However, if "a COGS A exception [§ 1304(2)(a)-(p)] is established, the burden then returns to the shipper . . . to `show that there were . . . concurrent causes of loss in the fault and neglect of the carrier.'" Vana Trading Co., 556 F.2d at 105, quoting J. Gerber Co. v. S.S. Sabine Howaldt, 437 F.2d 580, 588 (2d Cir. 1971). Finally, "[a]ll the previous burdens being satisfied, the final burden rest[s] with [the carrier] to show what ascertainable amount of damage was attributable" to each party and if the carrier fails in the burden, it bears the entire loss. Id. at 105.
The parties make cross-motions for summary judgment pursuant to Rule 56, Fed.R.Civ.P. Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party moving for summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact; this burden is satisfied if the moving party can point to the absence of evidence necessary to support an essential element of the non-moving party's claim. Goenaga v. March of Dimes Birth Defects Foundation, 51 F.3d 14, 18 (2d Cir. 1995). If there is "any evidence in the record from any source from which a reasonable inference could be drawn in favor of the non-moving party," then summary judgment should not be granted. Chambers v. TRM Copy Centers Corp., 43 F.3d 29737 (2d. Cir. 1994). The substantive law will identify which facts are material. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986) ("Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.").
A party resisting summary judgment "may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). As Judge Motley aptly stated in an analogous context in Eppendorf-Netheler-Hinz v. Enterton Co., 89 F. Supp.2d 483, 485 (S.D.N.Y. 2000):
[J]udges . . . [are not] required to submit a question to a jury merely because some evidence has been introduced by the party having the burden of proof, unless the evidence be of such a character that it would warrant the jury in finding a verdict in favor of that party. . . . [I]n every case, before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed.
(citing and quoting Anderson, 477 U.S. at 251). See also Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) ("The non-movant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture.") (citations and internal quotation marks omitted). Thus, the party resisting summary judgment must "come forward with specific facts to show there is a factual question that must be resolved at trial." Donahue v. Artisan, No. 00-8326, 2002 WL 523407, at *1 (S.D.N.Y April 8, 2002).
These standards apply to the present cross-motions. The Second Circuit has confirmed that the general standard for summary judgment set out above applies in cases that arise under COGS A. "[T]he treatment of a summary judgment motion under COGS A is no different from the way similar motions are dealt with in any other litigation. For the establishment of a COGS A prima facie case . . . entails no special considerations for summary judgment. As a result, a district court sitting in admiralty will, as courts regularly do, simply determine the existence of genuine issues of material fact." Transatlantic Marine Claims Agency, Inc. v. M/V "OOCL INSPIRATION," 137 F.3d 94, 101 (2d. Cir. 1998).
II. DISCUSSION
A. Has plaintiff established its prima facie case under COGS A by showing that the cargo was "damaged" at outturn?
A "shipper . . . who wishes to recover against the carrier for damage to goods bears the initial burden of proving both delivery of the goods to the carrier . . . in good condition, and outturn by the carrier or by the stevedore . . . in damaged condition." Vana Trading Co., 556 F.2d at 104 (2d Cir. 1977). See also Transatlantic Marine Claims Agency, Inc., 137 F.3d at 98 ("[T]he initial burden of persuasion [under COGS A] falls on the plaintiff to make out a prima facie case that the goods were, indeed, damaged while in the defendant's care."). Defendant moves for summary judgment on the ground that plaintiff has not established its prima facie case because it has not shown that the shipments of Clementines and navel oranges were outturned in damaged condition; plaintiff cross-moves for summary judgment declaring that it has established its prima facie case. (Def.'s Mem. in Supp. at 7.) (Def.'s Reply at 1-2.) (Pl.'s Mem. in Opp. at 14.)
The parties do not dispute that the citrus was delivered to the carrier in good condition and I do not address the issue further here except to note that this initial condition is deemed satisfied.
Defendant argues that plaintiff cannot establish statutorily cognizable damage to the citrus shipments because they were not physically damaged. (Def.'s Mem. in Supp. at 7.) Defendant argues additionally that even if damage under COGS A can include non-physical damage, plaintiff has not proved damage under a theory of market loss due to delay because plaintiff "has offered no evidence as to the market value of the citrus either on the dates the various shipments were delivered or on the dates following a hypothetical re-treatment of the citrus." (Def.'s Rep. at 2.) Plaintiff responds that physical damage would have resulted absent its proper mitigation efforts and that it suffered financial loss, thereby establishing damage. (Pl.'s Mem. in Opp. at 9-14.)
For the following reasons, I conclude that non-physical damage resulting from delay is cognizable under COGS A and that plaintiff has proved its prima facie case by showing loss or damage at outturn.
It is established that "damaged condition" as the term is used in COGSA Section 4, 46 U.S.C. § 1303, includes both physical damage and financial loss caused by delay. Commercio Transito Internazionale Ltd. v. Lykes Bros. Steamship Co., 243 F.2d 683, 686 (2d Cir. 1957) ("This statement would seem to indicate that the defaults covered were not limited to any particular narrow field, such as physical loss or damage. We conclude that `loss or damage' includes loss or damage caused by delay. . . ."). See also Mitsui Marine Fire and Insurance Co., Ltd. v. Direct Container Line, Inc., 119 F. Supp.2d 412, 414 (S.D.N.Y. 2000) ("The concept of Moss or damage' in COGSA Section 4 includes both physical damage and loss or damage caused by delay. Therefore, a carrier can be liable under COGSA for financial loss caused by delayed delivery.") (citation omitted), aff'd, No. 00-9519, 2001 WL1230662 (2d Cir. Oct. 12, 2001). And necessity for additional time in quarantine has been treated as as a delay in delivery. Hearty v. Ragunda, 114 F. Supp. 869, 871 (S.D.N.Y. 1953) (noting that where plaintiff shipper sought compensation on the ground that pears were not refrigerated properly during carriage, the pears were subsequently required to undergo an additional quarantine procedure, and the market price received therefore was lower after quarantine than it would have been had the pears been saleable upon arrival, plaintiff "[i]n effect . . . seek[s] to recover for undue delay in delivery. . . ."). Thus, I hold in principle that, where goods are physically damaged as a result of additional time in quarantine, or where market loss is occasioned by additional time in quarantine, the "loss or damage" requirement of a prima facie case under COGSA Section 4 is satisfied.
I recognize that in Hellenic Lines, Ltd., v. Embassy of Pakistan, 467 F.2d 1150, 1156 (2d Cir. 1972), the Second Circuit said that "[COGSA] applies to the carriage of goods. The provision `loss or damage' in § 1304(3) refers to physical loss or damage to the goods. Neither this section nor any other section of COGSA was intended to limit claims for delay in discharging cargo. Detention is wholly unconnected with physical loss or damage to goods and is a matter which COGSA left to be dealt with by contract between the parties." However, both Hellenic Lines and the case that it cites in support of the above proposition, Alcoa S.S. Co. v. Elmhurst Contracting Co., 61 F. Supp. 6, 11 (E.D.N.Y. 1945), involved an attempt by a carrier to seek damages from a shipper for costs accrued during delay in loading or discharge pursuant to § 1304(3). As such, the circumstances are distinguishable from those in the present case; the present case falls comfortably within precedent allowing a shipper to bring a claim under COGSA for a delay in delivery. See the cases discussed in text.
Although the additional time in quarantine was only threatened in this case, I find that the theory of loss or damage caused by delay as a result of quarantine is properly invoked by plaintiff under these circumstances, even though plaintiff did not actually submit its produce to the delaying quarantine procedure. The quarantine procedure that plaintiff avoided through diversion of the citrus to Canada was certain it was based on independent government guidelines and plaintiff has submitted evidence that quarantine restrictions would certainly have been imposed on the shipments. Specifically, plaintiff submitted uncontradicted evidence showing that the U.S.D. A. had determined that the various shipments failed the Codling Moth Cold Treatment. (Pl.'s Supp. Aff. at Exh. 17, 24, 26, 28, 32, 34, 41.) Thus, the shipments were effectively delayed as a result of quarantine because they were not saleable upon arrival at the delivery destination as a result of quarantine rules and, but for the plaintiffs undertaking of mitigation measures (diversion to Canada), the shipments would have been subject to quarantine delay. Plaintiffs undertaking of mitigation measures does not alter the circumstance that gave rise to its need to mitigate. Plaintiff may therefore establish its prima facie case under COGSA by showing loss or damage (physical or non-physical) as a result of the threatened delay by quarantine, even though the citrus was not actually submitted to a second cold treatment protocol.
Defendant argues that plaintiff cannot show physical damage to the citrus and that, even under a delay theory, plaintiff has not shown that it actually suffered a financial loss, and therefore that plaintiff does not meet its burden in establishing its prima facie case. Plaintiff argues that it has satisfied its prima face case because, in the absence of the mitigation measures that it undertook, the citrus would have physically decayed and because it suffered financial loss as a result of loss of market.
I first address whether plaintiff has shown physical damage at outturn. Considering whether plaintiff has shown physical damage at outturn, it is useful to set out with specificity plaintiffs claims, as they differ slightly with regard to the shipments of Clementines and the shipments of navel oranges. With regard to the Clementines, plaintiff claims that, as a result of ripening and decay, the Clementines could not have withstood a second quarantine period without devastating physical deterioration and that its decision to sell the Clementines in Canada was an appropriate mitigation of damages that would have resulted from physical deterioration. See Sotomayor Dep., Pl.'s Supp. Aff. at p. 37-38, 51-52, 128-29 (testifying that Clementines are a soft citrus with a limited shelf life and expressing concern over the fact that the product that had been sitting for 8-10 days after arrival in the U.S.); ("I know in the case of Clementines, it's been my experience that you just don't want to recold treat Clementines for another 21 days, you'll have Clementine soup, it's not a wise decision. You try to cut your losses with and protect the quality of the product at all times."); ("I would have to say the number one reasoning is because Clementines, 21 days additional cold treatment, we were fearful that the product would not hold up and, therefore, would not be sellable under the same terms that we need them to be, that's the underlining factor on Clementines."). With regard to the navel oranges, plaintiff acknowledges that they could have physically withstood a second quarantine period and states that its decision to sell them in Canada was based upon its belief that the U.S. market at the end of a second quarantine procedure would be unfavorable and sale in Canada was preferable to mitigate damages. Id. at p. 51, 129 (testifying that with regard to the navels after a second cold treatment they would "have head on competition with domestic."); ("[Navel oranges are] a sturdier commodity so it would either have to have been a market decision or a decision where we did not want to risk having a quality problem and then, therefore, hurting our overall label and market."). Thus, plaintiff's claim with regard to the navel oranges is based solely on market loss due to delay, while plaintiffs claim with regard to the Clementines involves market loss as a result of potential physical deterioration due to delay.
Plaintiff argues that because physical damage of the Clementines would necessarily have resulted from the quarantine delay, it has demonstrated actual loss pursuant to the "physical damage" prong, thereby satisfying its burden in establishing its prima facie case. Plaintiffs claim is that the Clementines, a perishable fruit subject to ripening, would have suffered severe physical damage as a result of a second quarantine period. Although the Clementines never actually suffered physical damage, plaintiffs submissions suggest that the anticipation of physical deterioration coupled with plaintiffs duty to mitigate its damages warrants a finding that the Clementines were physically damaged at outturn. For example, in its Reply Memorandum, plaintiff argues that it has established damages because of the common sense notion that "[p]erishable fruit, by its very nature, deteriorates with age." (Pl.'s Reply at 2.) Plaintiff then argues that a discount must be applied to sell old fruit and that because it is "axiomatic that the cargo receiver will act to obtain the best price for the fruit because it is in its financial interest to do so," the cargo receiver's efforts to mitigate should be trusted, especially since the burden is on the carrier to show that plaintiff failed to properly mitigate. Id. ("Who better to judge the net benefit of shipping the fruit to Canada but the cargo receivers who are knowledgeable of the market conditions and the fruit's shelf life."). Plaintiff emphasizes that it was under a duty to mitigate its damages and that, but for such mitigation, physical damage would necessarily have occurred. Plaintiff builds on this by suggesting that its capability of establishing a prima facie case should not be hampered by its reasonable efforts to mitigate.
Of note, defendant disputes the assertion that the citrus would have physically deteriorated after going through a second quarantine. (Decl. of Patrick E. Brecht.) "Navels and Clementines can undergo a second cold treatment depending on their inherent susceptibility to chilling injury, fruit condition and existing shelf life." ¶ 11. I have cited to the Brecht Declaration and find this an appropriate place to resolve questions raised as to its admissibility. Plaintiff argues that the Brecht Declaration should be disregarded because defendant failed to identify and describe Dr. Brecht and his testimony in a timely fashion in accordance with the proscriptions of Fed.R.Civ.Proc. 26(a)(2). Pl.'s Reply at 7. Plaintiff states that the Brecht testimony was noticed and provided on July 19, 2002, uponservice of defendant's reply papers. Id. Plaintiff states that "[p]rior to receipt of MSC's Opposition to Sunpride's Cross-Motion for partial Summary Judgment, . . . [it] was not informed that MSC had retained Dr. Brecht as an expert and to date, has not received Dr. Brecht's Rule 26 Disclosures." (Casey Supp. Aff. at 1.) Pursuant to the Scheduling Order in effect in this case issued on November 27, 2001, all expert discovery and motions related thereto were to be completed by May 3, 2002; the date for completion of expert discovery was subsequently extended upon various applications by the parties to September 14, 2002. See Order dated June 26, 2002. Rule 26(a)(2) requires that a party seeking to employ an expert witness disclose the identity of that witness and provide opposing counsel with a report signed by the witness that contains "a complete statement of all opinions to be expressed and the basis and reasons therefor; any exhibits to be used as a summary of or support for the opinions; the qualifications of the witness, including a list of all publications authored by the witness within the preceding ten years; the compensation to be paid for the study and testimony; and a listing of any other cases in which the witness has testified as an expert at trial or be deposition within the preceding four years." Fed.R.Civ.Proc. 26(a)(2)(B). This disclosure "shall be made at the times and in the sequence directed by the court." The Brecht Declaration appears as Exhibit A to the Supplemental Affidavit of Edward Flood, filed in conjunction with defendant's Memorandum of Law in Opposition to Plaintiffs Cross-Motion for Partial Summary Judgment and in Reply to Plaintiffs Opposition to MSC's Motion for Summary Judgment. The declaration sets forth the qualifications of Dr. Brecht, but does not otherwise provide information required be included in expert reports pursuant to Rule 26(a)(2). Rule 26 provides that the required disclosures should be made "at the times and in the sequence directed by the court." In this case, the only directive to the parties from this Court with regard to the timing of expert discovery was that all expert discovery was to be completed by September 14, 2002. Plaintiffs submission attesting that the appropriate expert disclosures had not been made is dated July 24, 2002. Thus, on the record before the Court, there is not sufficient information to preclude the testimony of Dr. Brecht on the grounds of failure to comply with the disclosure requirements of Rule 26 because the only conclusion that can with certainty be reached from the present record is that the required disclosures had not been made as of July 24, 2002, which is two months before the court-mandated deadline for completing expert discovery. As such, the required disclosures could have been made after Plaintiffs submission, but before the court-mandated deadline. I therefore conclude find that there is not a sufficient basis to preclude the Court's consideration of the testimony of Dr. Brecht on these cross-motions.
Defendant, on the other hand, argues that plaintiff cannot establish physical damage because the Clementines were not subjected to the second quarantine treatment and never actually reached a state of physical decay — essentially, that physical damage as contemplated in COGS A incorporates actual physical damage, but not anticipated physical damage.
Plaintiff correctly characterizes its duty to mitigate. "The damage rule in admiralty cases generally does not differ from ordinary contract rules. As in any other action for contract damages, a shipper is under a duty to mitigate his losses." M Golodetz v. Lake Anja, 751 F.2d 1103, 1112 (2d Cir. 1985) (citations omitted), cert. denied, 471 U.S. 1117 (1985). The Second Circuits holding in Golodetz on mitigation furnishes some guidance. The carrier in that case did not properly heat the shipper's cargo of tallow, thereby reducing its quality. Id. at 1108. Upon delivery, the party to whom the shipper had contracted to sell the tallow refused to accept it because of the diminished quality. Instead of selling the tallow on the market to a different buyer, the shipper engaged in a protracted arbitration dispute with the contracted-for buyer in an effort to force it to purchase the tallow. Id. During this time, the tallow's value continued to diminish. The shipper was ultimately unsuccessful in arbitration and by the time that it finally sold the tallow, it was able to receive only a salvage price. Id. The Second Circuit held that the shipper had failed to mitigate its damages by not selling the tallow before it decayed, reasoning that "the ocean carrier cannot properly be charged with the tallow's diminution in value between the moment [the shipper] learned of [the contracted buyer's] rejection and the time of the eventual sale," and affirming the district court's calculation of damages as the difference between the original contract price (had the tallow been of suitable quality upon delivery and been accepted) and the fair market value at the time of rejection of the shipment, rather than the difference between the contract price and the amount subsequently realized through the salvage sale. Id. at 1112. This reasoning would appear to support Sunpride's decision to mitigate promptly through a sale on the Canadian market, rather than to incur the delay of running through the entire cold treatment protocol.
Defendant urges that plaintiff was required to allow actual physical deterioration of the Clementines to occur in order to establish its prima facie case through the physical damage prong; plaintiff emphasizes that had it followed this course of action by allowing the Clementines to go through the second quarantine period, plaintiff would have been vulnerable to a charge that it had failed to properly mitigate damages and that its mitigation choice is entitled to some deference — "Where a choice has been required between two reasonable courses, the person whose wrong forced the choice can not complain that one rather than the other was chosen. The rule of mitigation of damages may not be invoked by a contract breaker as a basis for hypercritical examination of the conduct of the injured party or merely for the purpose of showing that the injured person might have taken steps which seemed wiser or would have been more advantageous to the defaulter." In re Kellett Aircraft Corp., 186 F.2d 197, 198-199 (3d Cir. 1950). See also Federal Insurance Co. v. Sabine Towing Transportation Co., Inc., 783 F.2d 347, 35 (2d Cir. 1986) ("The burden of showing that a plaintiff unreasonably failed to minimize damages rests with the wrongdoer.").
While plaintiff has properly characterized its duty to mitigate, it has not demonstrated how its mitigation choice alters its legal burden to establish a prima facie case. Plaintiff seems to suggest that establishing damage by way of physical damage would be easier than establishing financial loss as a result of market loss and, therefore, that it should not be stripped of the "easier" route of proving its prima facie case because of its reasonable mitigation measures. This argument is unconvincing. While it is true that had plaintiff failed to mitigate, the resulting physical deterioration of the citrus would likely have independently satisfied the damage prong of COGS A, this fact in no way excuses plaintiff from satisfying its prima facie case under a market loss due to delay theory where no physical deterioration actually occurred. As such, I decline to hold that the threat of likely physical deterioration coupled with plaintiffs duty to mitigate to avoid such gives rise to a sort of constructive physical deterioration sufficient to satisfy a prima facie case under COGS A. In the absence of actual physical deterioration, plaintiff must demonstrate damage or loss occasioned by delay in the manner discussed below.
Defendant disputes whether there would have been significant physical deterioration of the citrus after a subsequent quarantine period. (Brecht Decl. at ¶ 11) ("Navels and Clementines can undergo a second cold treatment depending on their inherent susceptibility to chilling injury, fruit condition and existing shelf life.") (Def.'s Objections to Sunpride's Rule 56.1 Counter-Statement at ¶ 72) ("The shelf life of Clementines is three to five weeks after arrival in the United States and can allow for re-treatment after discharge in the U.S. There is no evidence in the record that these Clementines could not withstand another cold treatment.").
The question therefore arises: where there is no physical damage to the cargo, what showing must a plaintiff make in order to show damage or loss by delay as an element of its prima facie case under COGS A? Plaintiff argues that the mere fact of not being able to sell in the initially intended market is itself enough to establish damage or loss: "Inasmuch as Sunpride was no longer in a position to sell the product to its intended customers in its intended market, plaintiff respectfully submits that it has satisfied its burden of providing that the citrus consignments were not in the same good order and condition at discharge as the consignments were in when delivered into the custody and control of MSC in Cape Town." (Pl.'s Mem. in Opp. at 12.) Plaintiff also contends that it "has established to the Court that it has sustained a financial loss due to the negligent handling of the product by MSC." Id. Defendant argues that plaintiff must make a detailed showing of actual loss, by showing "evidence as to the market value of the citrus either on the dates the various shipments were delivered or on the dates following a hypothetical re-treatment of the citrus," and that it has failed to do so. (Def.'s Reply at 2.)
The parties' briefs do not cite, and my research has not revealed, a case under COGSA directly addressing the first argument raised by plaintiff — that the mere fact of delay gives rise to damage and satisfies its prima facie case. However, for the following reasons, I think it doubtful that delay, standing alone, satisfies the damage requirement for a prima facie case under COGS A.
"Hearty v. Ragunda, 114 F. Supp. 869 (S.D.N.Y. 1953), dealt with factual circumstances similar to those of the present case, but did not address the issue of how a plaintiff can satisfy a prima facie showing of damage or loss in a quarantine delay case. Judge Weinfeld held that special damages (shore storage expenses and the difference in value between the date=of actual delivery and the date that the pears were ultimately released from quarantine) may be available where "respondents' [carrier's] knowledge that a breach of their obligation to maintain the required temperatures would result in the quarantine expenses to libelants [shipper] as well as possible loss to them due to differences in market values from the date of discharge to the date of release from quarantine." Id. at 871. However, although the court noted that the shipper alleged both that the pears were physically damaged at initial delivery (in a "ripening condition") and that the pears were "commercially damaged" after going through quarantine because the market values for the pears had decreased, the court did not address the standard a plaintiff must satisfy to show loss or damage to establish its prima facie case under COGSA in a case where delay is occasioned by quarantine restrictions. Id. at 870. Also of note, in B.F. McKernin Co., Inc. v. United States Lines, Inc., 416 F. Supp. 1068, 1070-1072 (S.D.N.Y. 1976), the court dismissed a claim for compensatory damages brought by a shipper against a carrier where a shipment of brassware was delayed by two months. The shipper in that case sold the brassware for the price it had initially sought. Id. at 1070. The court concluded that "[s]ince the remedies provided in COGSA are exclusive," and pursuant to § 1304(5) a carrier shall not be "liable for more than the amount of damage actually suffered," there is "no right to recovery where the full price has been received." Id. at 1071. The court dismissed the claim for failure to show damage, but did not base that dismissal on plaintiffs failure to establish a prima facie case.
First, it is important to recall that the establishment by plaintiff of damage or loss is an expressly required element of a prima facie case under COGS A and has special import because COGS A is a burden-shifting statute. Under COGS A, "[o]nce the shipper establishes a prima facie case, under the `policy of the law' the carrier must `explain what took place or suffer the consequences. [T]he law casts upon [the carrier] the burden of the loss which he cannot explain or, explaining, bring within the exceptional case in which he is relieved from liability.'" Transatlantic Marine Claims Agency, Inc., 137 F.3d at 98 (citation omitted). The consequences of finding that a plaintiff has established its prima facie case are, therefore, significant, which counsels against making such a finding unless plaintiff has clearly established all the required elements. Additionally, § 1304(5) of COGSA provides that "[i]n no event shall the carrier be liable for more than the amount of damage actually sustained." Thus, where there is no damage, there can be no liability.
Second, in looking to COGSA cases where plaintiffs successfully brought claims for loss or damage as a result of delay, plaintiffs did demonstrate actual loss or damage. For example, in Mitsui Marine Fire and Insurance Company, Ltd. v. Direct Container Line, Inc., 119 F. Supp.2d 412, 417 (S.D.N.Y. 2000), plaintiffs damages were based on a tabulation of cost, insurance and freight value (based on invoice price) minus the net proceeds from sale of the delayed shipment for salvage. Although in this case the shipper conceded liability for delayed delivery and breach of the contract of carriage and the court did not have occasion to examine plaintiffs satisfaction of a prima facie case for purposes of burden shifting under the statute, the court did note that even though defendant had conceded liability on the grounds of delay, plaintiff still had "the burden of proving the amount of damages." Id. at 417.
Finally, it is worth observing that in some non-COGSA cases involving delayed delivery of produce the plaintiff has been required show that it suffered some actual loss or damage (either physical damage to the cargo or financial loss) as a result of the delay in order to state a claim (not just for purposes of measuring damages). In these cases, merely showing delay does not prove damage or loss — in order to state a case based on delay, the plaintiff must first show some actual loss or damage. E.g., Barren v. Van Pelt, 268 U.S. 85, 92 (1925) (holding that loss not shown with regard to late delivery of a shipment of eggs where plaintiff did not establish date when eggs should have been delivered and market price on that date) ("The date when the eggs should have been delivered to consignee and the market value at that time were essential to respondent's case. In the absence of either, the amount of loss, if any, cannot be determined."); Great Atlantic Pacific Tea Co., Inc., 333 F.2d 705, 710 (7th Cir. 1964) ("Unexcused and unreasonable delay in shipment does not establish, ipso facto, actual damage. In the absence of a showing of, e.g., a decline in retail price, physical damage or deterioration, or sale at a reduced price on a `quick-sale' counter due to delay and anticipated spoilage we fail to see how A P has established actual damage.") (holding that plaintiff had not established a "wrong" where delivery of plums was delayed by two days, but plums were sold at the same price that they would have been sold at absent delay), cert. denied, 379 U.S. 967 (1965); Hams Express, Inc. v. Joseph Land Co., Inc., 506 F. Supp. 209, 211-13 (E.D. Perm. 1980) (holding in action for damages as a result of delay in shipment of produce that plaintiff must establish the fact of damage "with reasonable certainty" and that plaintiff had failed to establish damage where it merely provided testimony that the market had declined) (citation omitted), aff'd, 661 F.2d 914 (3rd Cir. 1981). See also 13 Am. Jur.2d Carriers § 435 ("A plaintiff generally must show it has been damaged by a carrier's delay in transportation or delivery of property before the carrier may be held liable for loss or injury caused by the delay.").
Thus, it is a questionable proposition in law that the mere fact of delay is sufficient to prove a plaintiffs prima facie case under COGS A. However, I need not decide that question in the case at bar, since plaintiff has provided some evidence of loss and does not rely solely on the mere fact of delay to establish damage and satisfy its prima facie case. Because plaintiff furnishes some evidence of financial/market loss, the question presented is whether the evidence provided by plaintiff is sufficient.
In the seeming absence of any case law directly addressing the question of where, on the scale from no evidence of actual loss to evidence proving the loss with exact particularity, the type of evidence of loss necessary to satisfy prima face case under COGS A falls, it is useful to consider the general standard for proving the measure of damages.
Although plaintiff would certainly not need, for purposes of establishing a prima facie case, to establish damages with the same particularity as it would to prove the measure of damages, discussing this standard is useful as a reference point. Actual loss or the measure of damages in a delay case may be shown by demonstrating the difference between the market value of the goods on the expected date of delivery and the market value when they did arrive. Pioneer Import Corp. v. The Lafcomo, 159 F.2d 654, 655 (2d Cir. 1947), cert denied, 331 U.S. 821 (1947); Mitsui Marine Fire and Insurance Co., Ltd. v. Direct Container Line, Inc., 119 F. Supp.2d 412, 417 (S.D.N.Y. 2000) ("The measure of damages in the case of delay normally is the difference between the goods' fair market value at the time and place they should have arrived and their market value when they actually did arrive.").
Of course, the present circumstances present a variation on the normal delay case. Here, the delay was not a failure of the goods to physically arrive at the intended port, but the threatened imposition of a second quarantine procedure and plaintiff avoided that threat by a mitigation resale in a different market.
However courts have some flexibility in determining how damages should be calculated, especially where the calculation of precise damages is difficult. Internatio, Inc. v. M.S. Taimyr, 602 F.2d 49, 50 (2d Cir. 1979) ("The test of market value is at best but a convenient means of getting at the loss suffered. It may be discarded and other more accurate means resorted to if, for special reasons, it is not exact or otherwise not applicable.'"), quoting Illinois Central Railroad v. Crail, 281 U.S. 57, 64-65 (1930); Pacol v. M/V Minerva, et al., 523 F. Supp. 579, 583 (S.D.N.Y. 1981) ("The fair market value rule, however, is not the sole method of ascertaining the cargo owner's loss. It has been discarded in exceptional cases, such as where there exists no market value at destination or where there is available a more accurate means of computing the loss. The assessment of damages in particular situations has called for the development of lesser rules, the use of common sense and the creation of exceptions, all to the end that the shipper whose property has been affected be made whole.") (citations and internal quotation marks omitted). See also FJ. Walker, Ltd. v. Motor Vessel "Lemoncore" 561 F.2d 1138, 1146-47 (5th Cir. 1977) (affirming district court's estimate of damages based on "before and after values which indicated what the open market estimated the loss to be" where shipment of meat deteriorated after delay in delivery and the computation of actual damages "can not be deduced with any reliability"). The guiding principle is to set damages at "the amount necessary to put the injured parties in the exact position they would have been in had there been no breach"; computation of damages is a factual issue for decision by the trial court, and will be affirmed unless it is clearly erroneous. Seguros Banvenez, S.A. v. S/S Oliver Drescher, 761 F.2d 855, 860-61 (2dCir. 1985).
Thus, typically a plaintiff would prove its damages in a delay case is by showing, 1) the market price at which the cargo could have been sold had it been delivered in saleable condition without delay; and 2) the market price for the cargo at the time the cargo was available for sale following the delayed delivery. But the case at bar is not one of typical delay. Plaintiff, faced with a certain and substantial delay if the cold treatment protocol was implemented after discharge from the vessels, and concerned that such delay would lead to a dramatic diminution in the value of the citrus, decided to fulfill its duty to mitigate damages by means of a salvage sale in the Canadian market, where this form of delay could be avoided entirely. In these circumstances, plaintiff calculates its damages on difference between the market value of the citrus on the shipments' dates of arrival in New York and the amounts received for the sales of the citrus in Canada pursuant to the salvage sale.
The discussion in text assumes that the carrier could not sustain its burden of proving that plaintiffs mitigation efforts were unreasonable or that the damages were not foreseeable.
Applying these criteria, I conclude that plaintiff has submitted sufficient evidence to establish that it suffered market damage or loss (and therefore satisfy its prima facie case) as a result of the threatened quarantine delay. In its Objections to MSC's Rule 56.1 Statement of Material Facts at ¶ 44, plaintiff states: "Plaintiff bases its damages on the market price realized by the Canadian sales and the market price that could have been obtained in the United States. [Sunpride Exh. 2 — Sotomayor deposition pp. 93-95]." In light of plaintiffs obligation to undertake reasonable mitigation efforts, see discussion supra, this would be an appropriate method of proving damages. Accordingly I will consider the relevant portions of the Sotomayor deposition.
Ms. Sotomayor acts as the Director of Imports for Sealt Sweet LLC, the cargo receiver for certain of the citrus shipments. (Flood Supp. Aff. at Ex.C.) In that capacity, she testified that she handles "all communications, logistics, negotiations and sales of imported products for Seald Sweet." Id.
Sotomayor's testimony at pages 93-95 discusses the roughly $108,000 total claim value "that Seald Sweet issued to MSC before Sunpride took it over," which involved four containers, two on the M/V SCL Infanta and two on the M/V Glory. During the course of her testimony, Sotomayor relied on Exhibits 9-A and 9-B (a cover letter and documentation from Seald Sweet's files presenting its claim to MSC with regard to the containers on the SCL Infanta) and Exhibits 10, 10-A and 10-B (a cover letter and documentation from Seald Sweet's files presenting its claim to MSC with regard to the containers on the Glory).
Seald Sweet had a contract with plaintiff whereby plaintiff provided citrus to Seald Sweet; Seald Sweet was the cargo receiver for some of the citrus shipments that are the subject of plaintiffs suit. (Sotomayor Dep. at 18-25.) It appears from Sotomayor's deposition that Seald Sweet initially issued a claim against defendant MSC with regard to two containers aboard the SCL Infanta and two containers aboard the Glory, which plaintiff subsequently took over. "Id. at 90.
Sotomayor's testimony does not address all of plaintiff's claims. I will review those claims that her testimony does discuss. Sotomayor testified that Seald Sweet was seeking $50,194.11 from MSC with regard to the SCL Infanta Clementine cargo, which represented the "market price of the product, deducted the amount received, I would imagine expenses incurred and came up with a claim amount." She testified further that market price was determined by "show[ing] what Seald Sweet was selling the product for during the same time period to other customers," and that the amount actually received for the SCL Infanta Clementine cargo was shown by "copies of our invoice to Baizer [the Canadian purchaser] and check receipts from Baizer of what they paid for the product and their account of sales." (Sotomayor Dep. at 94.) Sotomayor also testified as to the claim value that Seald Sweet was claiming from MSC with regard to two containers from the Glory ($58,049), noting that the method of proof of damages was the same as for the shipments carried on the SCL Infanta-Seald Sweet "showed proof of other sales during the same time period to customers and showed check receipts of those sales and also presented invoices to Baizer and check receipts from Baizer." (Id. at 97.) Finally, with regard to the manner in which both claims were tabulated, Sotomayor stated that it represented "[t]he difference between price we could have sold the product for and price that we obtained from Baizer less expenses." Id.
The containers and amounts testified to by Sotomayor do not account for the total number and value of claims levied by plaintiff. Plaintiffs claims as set forth in its Complaint are more extensive (totaling over $295,000) and include claims arising from shipments not just on the SCL Infanta and the Glory, but also on the M/V Nomzi and the M/V MSC Stefama — Specifically, plaintiffs claims include: 1400 cartons of Clementines aboard the M/V SCL Infanta for $14,210.00; 7200 cartons of Clementines plus 5770 cartons of Clementines (shipped in different containers) aboard the M/V SCL Infanta for $67,100.19; 1400 cartons of Clementines aboard the M/V Glory for $12,295.50; 7200 cartons of Clementines plus 3720 cartons of Clementines (shipped in different containers) aboard the M/V Glory for $87,739.32; 1400 cartons of Clementines aboard the M/V Nomzi for $14,922.60; 1400 cartons of Clementines aboard the M/V MSC Stephania for $100,000. Thus, Sotomayor's testimony at pages 93-95 discusses the roughly $108,000 total claim value "that Seald Sweet issued to MSC before Sunpride took it over," and not the roughly $100,000 remainder of plaintiff's claim.
This testimony reflects the proper inquiry for establishing damages in this case (by focusing on the difference between the sales price on the vessel's arrival date and the price actually received upon mitigation resale) and is sufficient to enable plaintiff to resist defendant's motion for summary judgment relating to the establishment of its prima facie case. Although Sotomayor's testimony directly addresses only four specific containers and does not reference all of the cargo damage that forms the basis of plaintiff's claim, I still find the evidence sufficient to support plaintiff s prima facie case. Sotomayor's testimony provides evidence that the Seald Sweet containers were sold for a lower price in Canada than they could otherwise have been sold for on the expected date of delivery and this suggests that the same is likely true with regard to the other containers. The standard for showing measure of damages in a delay case is a flexible one, Internatio, Inc., 602 F.2d at 50 ("The test of market value is at best but a convenient means of getting at the loss suffered. It may be discarded and other more accurate means resorted to if, for special reasons, it is not exact or otherwise not applicable.'"), quoting Illinois Central Railroad, 281 U.S. at 64-65, and here, in the context only of establishing a prima facie case, I am satisfied that plaintiff has shown that it did, indeed, suffer a loss and that it need not show damages with full particularity at this stage of the proceeding.
Having held as a matter of law that plaintiff may establish its prima facie case by showing loss as a result of delay as evidenced by the price differential between the expected sale price on the expected delivery date and the mitigation resale price, I grant partial summary judgment to plaintiff to the extent of holding that plaintiff has established its prima facie case. There is no dispute of material fact as to whether the citrus in those shipments was resold at a lower price as testified to by Sotomayor and summary judgment on this issue is therefore appropriate. I accordingly hold that plaintiff has established its prima facie case and, having done so, turn to consider the balance of the issues raised by the parties in their motions and cross motions for summary judgment.
Defendant has submitted evidence tending to show that the citrus could have withstood a second cold treatment and that the market for citrus did not decline between the expected delivery date and the time when the citrus would have completed a second cold treatment. (Brecht Decl. at ¶ 18.) ("Based on the USDA Federal-State Market News Service statistics, US East Coast pricing for oranges either increased or stayed the same from May to August 2000."); (Karstel Dep. at 14-16) (With regard to the shelf life of Clementines (how long after arriving in the destination market it can stay in good condition, Mr. Karstel testified that it was "at least three weeks," and up to five weeks.) This evidence, however, merely challenges plaintiffs decision to mitigate through resale in Canada and, although it may be relevant in a subsequent challenge to the exact amount of damage plaintiff can show, it does not affect the analysis with regard to plaintiffs establishment of its prima facie case.
This ruling is confined to a holding that plaintiff has showed damage sufficient to support its prima facie case and does not reach the specific amount of damage suffered.
B. Did plaintiff have a duty to carry out the cold treatment protocol?
The determination of whether defendant had a duty to carry out the cold treatment protocol is central to the parties' claims and defenses. A defendant can rebut a plaintiffs prima facie case by "affirmatively show[ing] by `significant probative evidence' that it exercised due diligence under 46 U.S.C. App. § 1303(2)," or by showing "that any negligent conduct resulting in damage to the cargo falls under one of the excepted causes of § 1304(2)." Royal Insurance Co. of America, 756 F. Supp. at 762. Defendant moves for summary judgment declaring that it did not have a duty to carry out the cold treatment protocol; although not stating its defensive theory in these precise terms, defendant argues in essence that, because it did not have a duty to carry out the cold treatment protocol, it exercised due diligence in accordance with § 1303(2). Plaintiff cross-moves for partial summary judgment seeking a determination that defendant did have a duty to carry out the cold treatment protocol.
Analysis of whether defendant had a duty to carry out the cold treatment protocol involves a number of smaller, independent inquiries. First, it is necessary to determine whether, as argued by plaintiff, the duty of care set forth in § 1303(2), when coupled with the well-established proposition under COGS A that when a carrier accepts cargo, it is charged as a matter of law with knowledge of its characteristics and is obligated to give it the care required," Amerada Hess Corp., 558 F. Supp. at 1168, independently gave rise to a duty to carry out the cold treatment protocol. If this query is answered in the negative, it is then necessary to determine whether the bills of lading (including the exceptions contained on their reverse side) gave rise to a duty to carry out the cold treatment protocol, either on their face or when read in the context of defendant's actual knowledge, experience, and custom.
1. Did carrier's duty pursuant to § 1303(2) to "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried" include a duty to know and apply the cold treatment protocol?
Plaintiff contends that defendant had a duty as a matter of law to complete the cold treatment protocol, even without actual knowledge or a contractual obligation, because MSC's obligations under COGSA § 1303(2) gave rise to a duty to investigate, know of, and satisfy the particular requirements of the products its vessels were carrying. (Pl.'s Mem. in Opp. at 19.) ("Assuming that the Court were to ignore the evidence that MSC had actual knowledge of the handling requirements for citrus shipments from South Africa to the United States, once MSC agreed to carry citrus consignments from South Africa to the United States it had an obligation to use reasonable care to learn the special handling requirements of the cargo.") For the following reasons, I reject this argument and hold as a matter of law that defendant did not have a duty arising solely from § 1303(2) to inspect the citrus, adduce that cold treatment was required, and comply with the cold treatment requirements merely because it agreed to load and carry citrus.
The fact that the cargo was citrus did not give rise to a duty by defendant to conduct the cold treatment protocol. Plaintiff cites a number of cases for the general proposition that under § 1303(2) of COGS A, a carrier has a duty to know the shipping requirements of products that it carries and to satisfy them, or to decline to accept the products. Amerada Hess Corp., 558 F. Supp. at 1168 ("It is well settled that, when a carrier accepts cargo, it is charged as a matter of law with knowledge of its characteristics and is obligated to give it the care required.") (citing Levatino Co. v. American President Lines, Ltd., 233 F. Supp. 697, 701 (S.D.N.Y.), aff'd. 337 F.2d 729 (2d Cir. 1964)). I find that while this general proposition is properly applied to basic carriage requirements (such as refrigeration of a perishable product to avoid spoilation), it is not properly applied to more individualized and specific carriage requirements that go beyond basic care and storage of the cargo. The maintenance of the temperature required by the cold treatment protocol was not necessary to prevent spoilation of the citrus, nor was it a measure applied generally to all ocean carriage of citrus; rather, the protocol is generated by specific United States government quarantine requirements applied to citrus shipped from South Africa. A duty with regard to this idiosyncratic, detailed requirement might arise from custom or prior experience (see discussion of defendant's contractual obligations infra), but cannot be imputed under the statute from the mere fact that citrus, was being shipped.
Cases decided in this circuit support that distinction. In O`Connell Machinery Company, Inc. v. M. V. "Americana", 797 F.2d 1130, 1134-35 (2d Cir. 1986), plaintiff shipper brought suit against defendant carrier when a large piece of machinery, covered by a tarp when delivered to the ship, was stowed on deck, became dislodged during the voyage, and was damaged. The trial court held that the defendant carrier had sustained the defense of improper packaging under COGS A; plaintiff appealed on the ground that it overcame this defense because defendant was negligent in not inspecting the shipment, discovering the improper packaging, and determining its special stowage needs. Id. The court held that "[a]bsent . . . apparently inadequate packing or other extraordinary circumstances" the shipper did not have a duty to inspect the cargo to determine its special qualities; "[r]ather, the shipper had an obligation to inform the carrier of special requirements regarding stowage location, and to make such special arrangements in advance of stowage, including payment of additional fees for special services when indicated." Id. at 1134 (citation omitted). Key to the court's holding was the trial court's finding that the shipper was not on notice of the special stowage requirements-"there was nothing about the cargo that notified them of any special stowage needs," and the "district court did not find that any such inadequate packing was so patent and material that Italia personnel knew or should have known that special inspection and possible remedial measures were necessary." Id. at 1134-35.
Plaintiff, seeking to advance its contention that the fact that the products being shipped were citrus gave rise to a duty by defendant to inspect the citrus and identify the need for cold treatment protocol, cites the following language from O'Connell Machinery:
Where a shipper sustains its burden of proving that the particular cargo possessed abnormal characteristics in comparison to other cargo with which the carrier deals or is equipped to deal, and that the carrier thereby recognized or should have recognized as a matter of custom or usage consequential special stowage needs and failed to provide for such needs or to apprise the shipper of them, the shipper might recover for damage caused by the carrier's negligence. Such abnormal characteristics might include excessive weight or size given the particular ship's stowage capacities, patently and materially inadequate packaging, or cargo known to be perishable or otherwise vulnerable to risks associated with particular forms of stowage.Id. at 1135 (citation omitted). This language, while it supports the proposition that if defendant had actual or constructive notice arising from custom, trade practice or prior experience it might have a duty to ascertain the need for and provide special treatment, does not support the proposition that the mere fact that the product being shipped was citrus gave rise to this duty. The reference above to "cargo known to be perishable" suggests that a carrier, on notice that cargo is perishable, must make efforts to prevent spoilation; it does not indicate that a carrier is required to ascertain additional and more idiosyncratic needs of the cargo, like those at issue here.
In other cases where this proposition is invoked, the care that carriers have been held required to provide to goods being shipped is similarly related to more basic maintenance of the physical integrity of the goods, rather than more specialized carriage requirements. In Amerada Hess Corp., 558 F. Supp. at 1168-69, for example, the issue was failure to heat oil sufficiently to prevent it from congealing on the inside of the ship, thereby frustrating off-loading and reducing the total amount of oil delivered. In Amerada Hess, the characteristics with which the carrier was charged with knowledge related to the basic, physical maintenance of the oil (to heat it sufficiently to prevent it from congealing) and the care that it was obligated to give was to prevent this physical deterioration. Similarly, in Atlantic Banana Co. v. M. V. "Calanca", 342 F. Supp. 447 (S.D.N.Y. 1972), the court invoked this principle to hold a carrier liable where its refrigeration equipment failed and it did not keep a shipment of bananas cool enough to prevent spoilation, noting "[t]he delicate nature of bananas, which necessitates special care in transportation" and that "[a]n ocean carrier is required to know the special characteristics of the cargo it accepts for carriage." The court went on to quote a treatise titled Stowage: The Properties and Stowage of Cargoes:
The successful carriage of bananas requires much more refrigeration power than is necessary for meat or other refrigerated carriers, so that while the banana carrier is quite suitable to carry citrus fruits, apples, etc., a vessel designated and equipped solely for the carriage of the latter would not necessarily carry bananas satisfactorily over a long voyage.Id. at 451-52. The basic physical maintenance of the bananas (avoidance of spoilation) was at issue; not special temperature requirements imposed by a specific quarantine treatment enforced by one nation (the United States) but not all (e.g., Canada). For other examples of cases where this principle was invoked, but basic physical maintenance and care was at issue, see also Italusa Corp. v. M/V Thalassini Kyra, 733 F. Supp. 209, 216 (S.D.N.Y. 1990) (declining to hold carrier liable under Harter Act for discharging cheese onto an unrefrigerated pier where "there is not proof that it is generally known that cheese of this type would melt if not stored in a refrigerated warehouse during high temperatures, and where, concededly, no specific information as to that fact was brought to the attention of the carrier."); Fabbri Co. v. Universal Shipping Corporation, 310 F. Supp. 964, 967 (S.D.N.Y. 1969) (holding that carrier was "bound to know and to follow required precautions for avoiding damage to, or destruction of, the property entrusted to it for safe carriage and delivery" where metal tubes were exposed to rain and rusted).
Therefore COGS A § 1303(2) did not impose upon MSC a duty to carry out the cold treatment protocol solely because it accepted citrus shipments for ocean carriage. However, that conclusion does not resolve the question of what contractual duty MSC may have owed plaintiff as the result of the terms of the contract, trade practice and custom, prior dealings of the parties, and actual knowledge on the part of MSC of the need to follow the cold treatment protocol. I turn to that question.
2. Did defendant have a contractual duty to carry out the cold treatment protocol?
The bills of lading do not specifically direct defendant to carry out the cold treatment protocol. They state only that the cargo is "CLEMENTINES." (Flood Aff., Ex. 1.) For the following reasons, I find that this contractual language, by itself, does not give rise to a duty by defendant to implement the cold treatment protocol.
The case most closely on point, cited and discussed by both parties, is Hearty v. Ragunda, 114 F. Supp. 869 (S.D.N.Y. 1953). In Hearty, plaintiff shipper contracted with defendant carrier to transport pears from Buenos Aires to New York. Endorsements on the bills of lading stated that the pears would be refrigerated and that the ship was equipped with quarantine facilities. Id. at 870. The pears were not, however, refrigerated and failed quarantine; after quarantine, their market value was reduced and plaintiff sought expenses and the difference in market value from the date of discharge to the date of release from quarantine. Id. at 870-71. Defendants objected on the ground that "libelants `seek to hold the vessel responsible for failure to give the pears disinfestation treatment' although the bills of lading contain no such undertaking." Id. at 870. In analyzing whether the contract was breached and whether a maritime lien was warranted, Judge Weinfeld reasoned:
It is true that the libel does not allege that the bills of lading contained an express provision requiring respondents to disinfest the fruit. However, it specifically pleads that the respondents agreed to carry the pears in `refrigerated chambers equipped with quarantine facilities.' This allegation is based on the endorsement `stowed in refrigerated chambers' appearing in all the bills of lading and an additional endorsement contained in three of the bills, to wit, `vessel is equipped with quarantine facilities.' The clear purport of the allegation, which undoubtedly could have been more explicitly stated, is that respondents undertook to carry the pears in such refrigerated compartments at sufficiently low temperature to avoid quarantine. The use of the words `vessel is equipped with quarantine facilities' in three of the contracts implies maintenance of adequate temperatures to protect the fruit. In any event, evidence of trade custom and use is admissible to explain the endorsements. If they impose an obligation upon respondents to maintain adequate temperatures to prevent quarantine of the pears, it is clear that libelants are asserting a breach of the maritime contract and they are entitled to a maritime lien on the vessel and a right of action to enforce the lien.Id. at 870-71. The court did not hold that the bills of lading created a duty for the carrier to maintain quarantine conditions; it merely held that such a conclusion was possible and the claim did not fail as a matter of law. Further, the language in this contract included a specific reference to "quarantine facilities." As discussed above, the bills of lading in this case make no reference to quarantine procedures or to the particulars of cold treatment protocol. Thus, on their face and independent of any trade custom and practice or pertinent prior experience of the carrier, the bills of lading did not obligate defendant to carry out the cold treatment protocol.
A further question is raised with regard to whether other communications, separate and apart from the bills of lading, between the parties that included information about the cold treatment protocol became part of the contract. Plaintiff cites numerous instances where instructions regarding the cold treatment protocol were communicated to defendant. Specifically, plaintiff contends that the freight forwarders provided instructions to defendant with the booking notes to carry the cargo at — 1.5° C. (29.3° F.), (Pl.'s Mem. in Opp. at 14), that the shipping instructions issued by the Perishable Products Export Control Board ("PPECB") (an independent organization providing food quality and safety review for perishable products exported from South Africa) (Def.'s Statement of Material Facts at 2.) and delivered to the vessel and to defendant's office in Cape Town included instructions to carry the citrus at — 1.5° C. (29.3° F.), (Pl.'s Mem. in Opp. at 14), and that defendant had copies of the USDA and PPECB manuals describing the requirements of cold treatment protocol. (Pl.'s Mem. in Opp. at 15-16.)
Upon review of the relevant case law, I hold that these written communications did not, merely by being provided to defendant and/or its agents, become part of the contract of carriage. One court held in similar circumstances that the acknowledgment of receipt of temperature instructions by the carrier did not alter the terms of the bill of lading, thereby contractually obligating the, carrier to follow those instructions. Albany Insurance Co. v. M/V "Sealand Uruguay", No. 00-3497, 2002 WL 1870289, at *4 (S.D.N.Y. Aug. 13, 2002). The court noted that "the Second Circuit has expressed its reluctance to bind a carrier to instructions that would modify a bill of lading where the only affirmative statement by the recipient was that the instructions had been received." Id. The Albany Insurance court cited the Second Circuit's opinion in M. Golodetz Export Corp. v. Lake An/a, 751 F.2d 1103, 1109 (2d Cir. 1985), cert. denied, 471 U.S. 1117 (1985). In that case, the Second Circuit held that a carrier was liable for heating instructions that were not included in the bill of lading where (1) a letter detailing the heating instructions was forwarded by the shipper to the master of the vessel, who acknowledged receipt of the letter; and (2) there was uncontested testimony "that instructions similar to those transmitted to the carrier have been employed in the shipping trade for many years." Id. at 1109. The court noted further that the vessel was equipped specifically to carry the damaged item (tallow) and that "[a]n experienced carrier knowing the nature of his cargo and aware of its special heating or cooling requirements, cannot be heard to complain that the bill of lading neglected to mention those requirements." Id. at 1110 (citation omitted). Ultimately, the court rested its decision on point (2), holding that "[a]ssuming the signed receipt of the heating instructions did not effect a binding modification of the contract of affreightment, we are nonetheless impelled to the conclusion that the ocean carrier was bound by those instructions in light of their longstanding use in the tallow trade." Id.
Although the letters were delivered to the master of the vessel, the district court held that the master of the vessel, as the carrier's agent, could accept the special heating instructions such that "the instructions became part of the contract of affreightment." Golodetz, 751 F.2d at 1009.
The written communications at issue in the case at bar, as with those in Albany Insurance and Golodetz, were provided to defendant but were not identified as contract modifications. In that circumstance, I decline to hold that solely as the result of being provided to defendant, the communications in question became a part of the contract of carriage.
This does not, however, end the inquiry. As discussed in Golodetz, a carrier may have a duty to provide care for cargo that arises from custom, trade practice and/or prior experience. Thus, if defendant had actual or constructive notice (arising from custom, trade practice and/or prior experience) of the cold treatment requirement, it may be held to have had a duty, as a matter of law, to attend to the cold treatment protocol even though such was not specifically provided for in the bills of lading.
This approach to contract interpretation is permissible only when the contract terms are ambiguous and there is nothing expressly contrary to the term sought to be included through experience and custom in the written contract. Albany Insurance, 2002 WL 1870289, at *3 ("[W]hile . . . bills of lading are presumed to be issued subject to custom, and . . . evidence of custom and usage may be used to explain endorsement in the bills of lading, custom and usage cannot be used to contradict the plain terms of the bills of lading."). Accordingly, before conducting an analysis of whether experience and custom gave rise to a duty by defendant to carry out the cold treatment protocol, I must first consider whether the following language, included on the back of the bills of lading, is expressly contrary to imposing such a duty on defendant, thereby precluding a contractual analysis of this sort.
The language in question provides: "8. EXPORT OR IMPORT IMPEDIMENTS. Should the goods be refused exportation or importation by any government or authority, or by anybody purporting to act with the authority of any government or authority . . . [t]he Merchant shall bear the risk for the goods and the cost directly or indirectly incurred. . . ." and "24. CUSTOMS, ETC. The shipper and receiver are obligated to fulfill all regulations relative to the cargo of all port, Customs, and other authorities." (Def.'s Mem. in Supp. at 10.) Plaintiff objects that this language, if applied so as to defeat its claims, would improperly exonerate defendant and is therefore void, pursuant to the COGSA provision that "[a]ny 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 provided in this section . . . shall be null and void and of no effect." § 1303(8). Defendant contends, however, that these are valid contractual terms, demonstrating that it cannot be held to have a contractual duty to implement the cold treatment protocol.
I consider first whether these quoted bill of lading provisions are permissible under COGSA. To the extent that the section 8, entitled "EXPORT OR IMPORT IMPEDIMENTS," would exonerate defendant from liability even where an import impediment was caused by its own negligence and failure to properly care for the cargo (in this case, defendant's allegedly negligent failure to maintain temperatures in accordance with the cold treatment protocol), I find that this section "reliev[es] the carrier . . . from liability for loss . . . arising from negligence . . . in the duties and obligation" to "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried," and is therefore void and unenforceable under COGSA. § 1303(8JL Numerous courts have found that provisions that similarly limit a carrier's liability are void. E.g., Associated Metals Minerals Corp. v. M/V Arktis Sky, 978 F.2d 47, 49-50 (2d Cir. 1992) (holding that bill of lading clause providing for "fee in and out, stowed" that shifted liability to the shipper for improper stowage or discharge was void under COGSA). Defendant cannot, therefore, rely on this language.
Courts have, however, enforced against a shipper provisions similar to that in section 24 of the bills of lading in this case, titled "CUSTOMS, ETC." in cases governed by COGS A. See, e.g. Resources Recovery, Inc. v. China Ocean Shipping, No. 96-4409, 1998 WL 474134, at *2-3 (S.D.N.Y. July 11, 1998) (concluding that the shipper's failure to provide information necessary to complete customs paperwork precluded shipper from holding the carrier liable for rejection of goods by customs, where bill of lading provided that "[t]he Merchant [a term including the shipper] shall comply with all regulations or requirements of any Customs, port and other authorities . . ." Such a provision merely places the burden of complying with customs regulations on the shipper, and compliance with customs regulations is not a duty of the carrier set forth in COGS A § 1303(2). Section 24 in the present bills of lading, therefore, does not exonerate the carrier from liability for negligence in conducting its statutorily-mandated duties, and consequently does not run afoul COGSA's prohibition against contract provisions that function to "reliev[e] the carrier . . . from liability for loss . . . arising from negligence . . . in the duties and obligations" set forth in COGSA. § 1303(8). Accordingly I conclude that section 24 in the bill of lading is not rendered null and void by COGSA, and turn to consider whether this section is directly contrary to the proposition that defendant had a duty to maintain the cold treatment protocol.
Cases such as Resources Recovery involve issues relating to the filing of the proper paperwork and other administrative details relating to customs, uncomplicated by other factors implicating the carrier's performance of the contract of carriage. In the case at bar, the maintenance of proper temperatures for the cargo during the voyage was necessarily controlled by the the carrier. In that quite different circumstance, I find an ambiguity in the bills of lading as to whether the "CUSTOMS" section encompasses the matter of refrigeration and temperature maintenance. during voyage, as opposed to technical compliance with customs paperwork and regulations. Although plaintiffs desire to have defendant maintain a certain temperature arose from a need to meet certain quarantine regulations, the temperature at which cargo is shipped is a matter that seems to relate more closely to the care of the cargo than to the fulfillment of customs documentation. Additionally, even if this section is interpreted to mean that plaintiff was responsible for ensuring that the cold treatment protocol was complied with such that the shipments were customs compliant, if (as plaintiff alleges) plaintiff gave the appropriate temperature instructions to defendant which defendant then failed to follow, then plaintiff would have fulfilled its responsibilities under this section. As such, I find that the language contained in the "CUSTOMS" section does not clearly provide that defendant did not have a duty to maintain the cargo at a certain temperature and that there is sufficient ambiguity to proceed to consider whether experience and custom, when read in light of the bills of lading and COGS A, gave rise to such a duty.
In Golodetz, 751 F.2d at 1109, the court found the following factors relevant in determining that, although not incorporated into the bill of lading, the carrier was bound by heating instructions provided to the ship in a separate document: "instructions similar to these transmitted to the carrier have been employed in the shipping trade for many years," tallow requires heating during shipment, and the ship was "equipped precisely for that purpose." The court in Albany Insurance, while holding that evidence of custom or usage cannot override expressly contradictory language in a bill of lading, reconfirmed that "where the bill of lading is unclear or where custom supplements the express terms of the bill of lading" it may modify the bill of lading. 2002 WL 1870289, at *3.
Thus, I consider whether plaintiff has submitted sufficient evidence to establish, under the summary judgment standard, that experience and custom bound defendant to carry out the cold treatment protocol or, in the alternative, whether defendant has submitted sufficient evidence to establish, under the summary judgment standard, that there is no experience or custom sufficient to give rise to a duty by defendant to carry out the cold treatment protocol.
Plaintiff argues 1) that defendant had actual knowledge that plaintiffs cargo was required to be kept at certain specified temperatures because plaintiff and/or plaintiffs agents provided defendant with written instructions to this effect apart from the bills of lading; and 2) that defendant was an experienced carrier and had institutional knowledge of the requirements of cold treatment for citrus shipped from South Africa. Plaintiff submits the following in support of its contention that defendant had actual knowledge that plaintiffs cargo needed to be maintained at cold treatment protocol temperatures:
• The freight forwarders provided instructions to MSC with the booking notes to carry the cargo at — 1.5° C." (Pl.'s Mem. in Opp.)
• The PPECB issued Shipping Instructions that were delivered to the vessel and to MSC's Operations/Logistics Office in Cape Town mandating that the cargo be carried at — 1.5° C plus/minus 0.1° C. . . ." (Pl.'s Mem. in Opp. at 15.)
• A letter in the PPECB packet that was provided to MSC includes a letter addressed to the USDA that specifies that the cargo is undergoing cold treatment. (Pl.'s Mem. in Opp. at 20-21.)
• An employee of defendant testified that MSC "was aware of the USDA cold treatment protocol at the time of [the relevant] shipments." (Pl.'s Mem. in Opp. at 15.)
Plaintiff submits the following in support of the contention that defendant is an experienced carrier of citrus shipments from South Africa and that the maintenance of such shipments at temperatures in accordance with the cold treatment protocol is customary:
• An MSC employee in charge of operations and logistics testified that she had been informed by the PPECB and was aware of the temperature requirements for citrus shipments from South Africa to the United States. (Pl.'s Mem. in Opp. at 15.),
• MSC's Cape Town office was in possession of a manual published by PPECB describing the proper handling of citrus treatments to the United States. (Pl.'s Mem. in Opp. at 15.)
• MSC had carried citrus consignments that were subject to the USDA protocol for two years prior to their engagement for these eight shipments and had previously been placed on notice of the consequences of the proper temperatures not being maintained during transit." (Pl.'s Mem. in Opp. at 16.)
• The PPECB issued Shipping Instructions that were delivered to the vessel and to MSC's Operations/Logistics Office in Cape Town mandating that the cargo be carried at — 1.5° C plus/minus 0.1° C," and these same form instructions "w[ere] issued to each MSC vessel carrying citrus fruits from South Africa to the United States in 1998, 1999, and 2000, as well as to all other carriers in the South Africa-United States citrus trade." (Pl.'s Mem. in Opp. at 15, 20.)
Defendant argues 1) that it did not have actual notice of the care to be afforded plaintiffs shipments because the documents provided to defendant were not sufficiently specific (they did not clearly identify that the shipments were undergoing cold treatment protocol and that the temperatures had to be maintained during discharge); 2) that defendant did not have significant experience in shipping citrus from South Africa; and 3) that there was no custom with regard to conducting in-transit cold treatment protocol.
Defendant submits the following in support of its contention that plaintiff failed to provide it with sufficient information to give it actual notice of the need to maintain certain temperatures in accordance with cold treatment protocol:
• The bills of lading do not include temperature instructions or reference to "USDA requirements, including any cold treatment or quarantine instructions." (Def.'s Mem. in Supp. at 5.)
• The booking notes sent by Sunpride's freight forwarders requested a carriage temperature of 29.3° F, but did not reference "any USDA regulations, including cold treatment or quarantine instructions, or request any special handling requirements." (Def.'s Mem. in Supp. at 5.)
• The "Letter to Commander" furnished to the MSC vessels (referred to by plaintiff as the PPECB Shipping Instructions) "provides very little information other than a request for zero variance carrying temperature," and does not provide specific information about the cold treatment protocol, or even identify that the cargo is undergoing cold treatment protocol. (Def.'s Mem. in Supp. at 16-17.)
• The PPECB form letter requires only that the temperature be maintained throughout the voyage and the PPECB manual requires that temperatures be maintained until discharge; in most instances the temperatures were raised during or after discharge. (Def's Reply at 9-10.)
• Sunpride was aware of the need to expedite off-loading for cargo undergoing cold treatment protocol, but "provided no warning or instructions to MSC about the need to re-plug these containers in an expeditious manner at discharge." (Def.'s Mem. in Supp. at 14.)
• Sunpride relied on the PPECB to advise MSC about the specific requirements of conducting cold treatment protocol, but PPECB "does not provide any specific handling instructions to the ocean carrier." (Def.'s Mem. in Supp. at 14.)
• MSC's tariff provides for a 5° temperature variance and if the carrying temperature requested by Sunpride was varied as provided for in the tariff, the temperature of the citrus would have exceeded that allowed for the successful completion of cold treatment protocol. (Def.'s Mem. in Supp. at 11.)
• The rate charged to MSC did not include a higher freight rate that would have been charged to complete the cold treatment protocol. (Def.'s Reply at 12.)
Defendant further argues that it did not have significant experience in shipping citrus from South Africa:
• "Sunpride did not have a prior relationship with MSC and was using MSC for the first time when its freight forwarder placed a booking with MSC in May of 2000." (Def.'s Mem. in Supp. at 5.)
Defendant submits the following in support of its contention that there is no custom regarding conducting cold treatment protocol in-transit:
• At the time that the subject shipments were carried, there had been only two years of de-regulated trade in fruit shipments from South Africa and, therefore, there was not sufficient time for longstanding custom to develop. (Def.'s Reply at 8.)
• To the extent that there was a custom, the custom was for cold treatment protocol to finish before discharge. (Def.'s Reply at 8.)
Defendant's assertion in this regard is based on part on testimony provided by Deirdre De Klerk, the Perishable Products Manager for MSC (PTY). Plaintiff has challenged the admissibility of various portions the De Klerk declaration, and I here resolve the issue. Plaintiff submits in its Reply that ¶ 17 of the De Klerk declaration, found in Def.'s Ex. B, should be disregarded as inadmissible hearsay. Upon review of the paragraph in question, I conclude that it is admissible testimony culled from De Klerk's observations and experience that does not run afoul of hearsay proscriptions, and accordingly find it appropriate to consider the testimony. Plaintiff submits further that paragraphs 13 and 19 of De Klerk's declaration are inconsistent with her deposition testimony, found in Pl.'s Ex. 47, and should accordingly be disregarded. Having reviewed the testimony in question, I find that De Klerk's testimony in her declaration specifically referenced communications involving cold treatment protocol and discharge procedures, while her deposition testimony involved carrying temperatures more generally. As such, the testimony is not contradictory and the testimony is properly before the Court. Finally, plaintiff argues that De Klerk's testimony should be disregarded because she works for MSC (PTY), not directly for Defendant, and because she does not set forth in her declaration the basis for her knowledge and therefore runs afoul of F.R.E. 602, which provides that "[a] witness may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter." MSC (PTY) is the South African agent of Defendant MSC and I accordingly find no issue with De Klerk testifying as to her work experience as an employee of MSC (PTY). Additionally, De Klerk's employment by MSC (PTY) renders her capable of making statements from personal knowledge about the practices, procedures, and knowledge of MSC (PTY) employees. Accordingly, I find no bar to my consideration of the De Klerk testimony.
On the basis of this record, defendant seeks summary judgment absolving it of liability on the ground that it had no obligation to carry out the cold treatment protocol and plaintiff seeks a partial summary judgment that defendant did have such an obligation. A motion for summary judgment must be denied if there is "any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party." Donahue, 2002 WL 523407 at *1. Additionally, the process of adducing whether custom or experience sufficient to modify a bill of lading is present is a fact-intensive inquiry. See generally Encyclopaedia Britannica, Inc. v. SS Hong Kong Producer, 422 F.2d 7, 17-18 (2d Cir. 1969) (reviewing the record, including the testimony of witnesses, developed in the trial court in detail during consideration of whether a certain custom existed), cert denied, 397 U.S. 964 (1970).
While from a different circuit, I find the case of Konica Business Machines v. Vessel Sea-Land Consumer, 47 F.3d 314 (9th Cir. 1995), on remand, No. 91-6401, 1996 WL 468770 (C.D.Cal. May 24, 1996), aff'd, 153 F.3d 1076 (9th Cir. 1998), closely on point and instructive. In that case, the shipper brought suit against the carrier for cargo that was stowed on-deck and lost overboard. The district court granted summary judgment to the shipper because the bill of lading was "clean" and did not evidence that the shipper had elected on-deck stowage. The carrier appealed on the ground that there was a port custom permitting on-deck stowage. The Ninth Circuit reversed the district court. The court of appeals first noted that there is a general presumption of below-deck stowage if above-deck stowage is not elected in the bill of lading. Id. at 315. It went on to observe that "[e]vidence of custom in the trade is . . . an exception to the general rule," and to hold that the district court had improperly granted summary judgment because there was a "dispute as to the existence of either a port or trade custom." Id. at 315. Specifically, the court of appeals held that an issue of material fact was created as to the relevant port and trade custom by an affidavit submitted by a Senior Manager of South Pacific Vessel Operations for the carrier, which stated in part:
In my experience with this vessel, with Sea-Land, and with the Japan-to-U.S. West Coast trade lane, I am familiar with the customs and practices of the carriage of containerized cargo on-deck or purpose-built container vessels such as M/V. SEA-LAND CONSUMER. Such carriages are made under bills of lading which do not specify on-deck or under-deck carriage according to the customs and practices of the trade.Id. at 315. The court of appeals concluded that "[t]he affidavit was at least sufficient to establish a dispute as to the existence of either a port or trade custom," and reversed and remanded the case to the district court to determine whether such custom existed.
There are instructive similarities between Konica Business Machines and the present case. In both cases, the issue is how to interpret the duties of the parties by looking to a bill of lading when read in light of custom and experience. And in both cases, parties seek to supplement the bill of lading by reference to custom and experience. In the present case, defendant cites portions of the PPECB manual that support its contention that the relevant custom is for cold treatment protocol to be completed during the voyage and to the testimony of its Perishable Products Manger that "it was quite common for South African shippers in the Spring and Summer of 2000 to arrange it so that cold treatment was completed during the ocean voyage." (Def.'s Reply at 8.) (Flood Supp. Aff. Ex. B.) Plaintiff cites the testimony of various employees of defendant indicating that they were familiar with the use of cold treatment protocol in citrus shipments from South Africa to the Unites States, references testimony and various exhibits in support of its contention that "MSC had carried citrus consignments that were subject to the USDA protocol for two years prior to their engagement for these eight shipments and had previously been placed on notice of the consequences of the proper temperatures not being maintained during transit," and references different portions of the PPECB manual and shipping instructions that describe cold treatment protocol. (Pl.'s Mem. in Opp. at 15-20.) I find that both parties have submitted evidence comparable to the affidavit submitted in Konica Business Machines, which led the Ninth Circuit to hold that case presented a factual dispute precluding summary disposition.
Accordingly, and based on the foregoing review of the record, I conclude that there is a genuine issue of material fact with regard to whether the communications by plaintiff to defendant, when viewed in light of custom and defendant's experience, gave rise to an obligation by defendant to carry the citrus at the specified temperatures and in the specified manner. Specifically, there are disputed issues of fact as to defendant's knowledge of the need for and procedures attending cold treatment protocol, the scope of defendant's experience in handling citrus shipments subject to in-transit cold treatment and as to the scope of custom, if any, with regard to the application of in-transit cold treatment to citrus shipments from South Africa. I therefore decline to grant defendant's motion for summary judgment on the ground that it did not have a duty to conduct the cold treatment protocol and I likewise decline to grant plaintiffs motion for partial summary judgment seeking a determination that defendant did indeed have such a duty.
C. Is defendant entitled to invoke the protection of the "act or omission of shipper" exception set out in § 1304(2)(i)?
The act or omission of shipper exception provides that "[n]either the carrier nor the ship shall be responsible for loss or damage arising or resulting from . . . [an] [a]ct or omission of the shipper or owner of the goods, his agent or representative. . . ." § 1304(2)(i). Defendant's lengthy proffer as to why it is entitled to invoke this exception advances two basic arguments.
First, defendant argues that plaintiff, through its own fault, failed to provide it with sufficient information as to the need to carry out the cold treatment protocol and the method for carrying out the cold treatment protocol. (Def.'s Mem. in Supp. at 13-19.) It is true that if defendant can show that plaintiff bore the responsibility for carrying out the cold treatment protocol or advising defendant of the specific manner of carrying out such, it is entitled to invoke the act or omission of shipper defense. Albany Insurance, 2002 WL 1870289, at *2 ("Although Defendant does not specifically invoke § 1304(2)(i), Defendant does argue that even if Plaintiff can make out a prima facie case, Defendant is not liable because Plaintiff had the duty of properly setting the container temperature. If Plaintiff did have such a duty, Plaintiffs failure to set the temperature would constitute an omission under § 1304(2)(i), and the burden would shift back to Plaintiff.") (citation omitted). However, because this argument essentially recapitulates defendant's argument that it did not have a duty to carry out the cold treatment protocol, and I have previously held in this Opinion that there is a disputed issue of fact in this regard, I decline to grant defendant's motion for summary judgment that it is entitled to invoke the act of shipper defense on this basis.
In a related but distinct vein, defendant argues that because its tariff provides for a 5° F. temperature variance and, if carried at the temperature requested by plaintiff (1.5° C., 29.3° F.), temperature fluctuations within this variance would have resulted in the failure of cold treatment, plaintiffs decision to ship the citrus with this variance in place constituted an act or omission of shipper. (Def.'s Mem. in Supp. at 11.) (Def.'s Reply at 13.) Defendant relies on Pueblo International Inc. v. Puerto Rico Marine Management, Inc., No. 86-1773, 1988 WL 124050, at *1-2 (D. Puerto Rico, Nov. 10, 1988), wherein the court held that a tariff could properly incorporate a temperature variation under COGS A and that it was an act or omission of shipper for a shipper to request a carrying temperature which, when subject to temperature variations as provided for in the tariff, resulted in damage to the goods carried. Plaintiff responds that the tariff provision allowing the 5° F. temperature variation violates COGSA § 1303(8) and is void, and that this Court should reject the holding set forth in Pueblo International and other District of Puerto Rico cases, and additionally, that even if the tariff is deemed valid, the temperatures of the shipments fluctuated far in excess of 5° F., thereby barring defendant from invoking the act or omission defense. (Pl.'s Mem. in Opp. at 23, 25-29.)
I hold that, even if temperature variations set forth in tariffs are recognized as valid under COGSA in this circuit, defendant has not proved sufficient facts to avail itself of the act or omission of shipper defense based on the temperature variation provided for in its tariff. Accordingly I need not determine the validity of the defendant's tariff under COGSA., and so it is unnecessary to decide that particular question in this case. The court in Pueblo International did recognize as valid a tariff provision allowing a 5° F. temperature variation and held it to be a basis for establishing a defense under the act or omission of shipper exception, but the court also required that the defendant demonstrate that "[t]he actual temperature variance . . . was at no time greater than the expected plus or minus 5 degrees, and there was no malfunction of the refrigeration system" such that "[t]he damage can therefore be said to have resulted from an `act of the shipper'". Pueblo International Inc. v. Puerto Rico Marine Management, Inc., 1988 WL 124050 at *2. Defendant bears the burden of proof to establish that it falls within one of the enumerated COGSA exceptions. Royal Insurance Co. of America, 756 F. Supp. at 769. Here, plaintiff has submitted evidence that the relevant temperature in each container exceeded the temperature requested by plaintiff by 12° F. to 15° F. and that allowed by defendant's tariff in by 7° F. to 10° F. (Pl.'s Mem. in Opp. at 23.) The only evidence submitted by defendant with regard to the temperature maintained in the containers is a declaration to the effect that readings taken from the portable recorders and from the container temperature sensors (when the power is off) as cited to by plaintiff are unreliable. (Brecht Decl. at 2-3.)
On this record, it is clear that defendant, while submitting evidence to call into question the temperature evidence submitted by plaintiff, has not affirmatively shown that the temperature did not exceed that provided for by the requested carrying temperature as modified by the tariff temperature variation and consequently has not on this record established a defense under the shipper's act or omission exception based on the temperature variation provided for in its tariff.
Defendant's motion for summary judgment that it is entitled to invoke a defense pursuant to § 1304(2)(i) is denied.
D. Is defendant entitled to invoke the protection of the quarantine exception set out in COGSA § 1303(2)(h)?
Defendant submits that because plaintiffs alleged loss was a result of threatened quarantine restrictions and § 1304(2)(h) provides that "Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from . . . (h) Quarantine restrictions," defendant is necessarily "excepted from any liability that may arise as a result of the cold treatment protocol for these shipments." (Def.'s Mem. in Supp. at 12.) Plaintiff responds that COGSA § 1304(2)(h) is not a defense where the quarantine became necessary as a result of defendant's negligence and that, regardless, the quarantine exception cannot be invoked through contract where the Harter Act would normally apply. (Pl.'s Mem. in Opp. at 31.) (Pl.'s Supplemental Mem. at 3-7.)
I consider first whether defendant must make a showing that its negligence did not give rise to the need for quarantine as a prerequisite to invoking the quarantine exception or, alternatively, whether defendant may invoke the quarantine exception without making such a showing, but plaintiff may rebut such by showing that defendant's negligence caused the need for quarantine. Plaintiff points to language in Hearty v. Ragunda, 114 F. Supp. at 871, 869, 871 (S.D.N.Y. 1953), where the court said that "[u]nder the Carriage of Goods by Sea Act, neither the carrier nor the ship is responsible for loss or damage arising from or resulting from `quarantine restrictions.' However, this provision does not serve as exoneration where the quarantine was occasioned by, and the result of, a breach of contractual obligation." In Hearty, the court held that plaintiff had stated a claim where it alleged that defendant did not properly refrigerate pears at a particular temperature such that they failed inspection and were subjected to additional quarantine; defendant's contention that it could not be liable because the loss fell within the quarantine exception was rejected. Id.
This distinction is relevant for present purposes to determine the proper posture of the case; whether defendant must show that its negligence did not occasion the need for quarantine or whether, defendant having invoked the quarantine exception, plaintiff must show that defendant's negligence occasioned the need for quarantine.
While both parties profess to find support for their positions in Hearty, Judge Weinfeld's discussion is relatively brief. His statement that the quarantine exception "does not serve as exoneration where the quarantine was occasioned by, and the result of, a breach of contractual obligation", given what is perhaps its most natural reading, could be taken to mean that the defendant cannot invoke the quarantine exception at all if the quarantine was occasioned by its own negligence. In support of this reading, I note that the term "exoneration" has been used in a COGSA case to signify the ability to access a COGSA exception in the first instance, and not complete freedom from liability. J. Gerber Co. v. S.S. Sabine Howaldt, 431 F.2d 58, 588 (2dCir. 1971) (using the term "exoneration" to signify ability to access an exception under COGSA in the first instance and not total freedom from liability by observing that "[w]hile in general the rule is that the carrier, to be exonerated, must prove that it comes within one of the exceptions 2(a-p) of § 1304, once it has done so, the burden resets upon the shipper to show that there were, at least, concurrent causes of loss in the fault and neglect of the carrier. . . ."). However, the court's language in Hearty could also be read to mean that the defendant can invoke the quarantine exception (thereby shifting the burden to plaintiff to show a concurrent cause of loss), but will not be absolved from liability if plaintiff can show that the quarantine resulted from defendant's negligence. I refer to this approach as the "burden-shifting interpretation". Once a defendant properly invokes an excepted cause it is not absolutely absolved of liability; the burden instead shifts to the plaintiff to show concurrent causes of negligence. Vana Trading Co., Inc., 556 F.2d at 105.
In the case relied on in Hearty, Cheek Neal Coffee Co. v. Osaka Shosen Kaisha, 36 F.2d 256 (E.D.La. 1929), aff'd, 39 F.2d 1021 (5th Cir. 1930), the burden-shifting interpretation (that defendant may access the quarantine exception, but plaintiff may then point to defendant's negligence relating to the quarantine to show concurrent negligence) was used. In Cheek Neal, defendant carrier transported coffee from Brazil to New Orleans. Upon arrival in New Orleans, the ship was quarantined as a result of a suspected outbreak of bubonic plague and the U.S. Public Health Service required fumigation of the ship and its cargo, during the course of which plaintiffs coffee was placed on an open lighterage and damaged by rain. Id. at 256-58. The court held that where defendant carrier had invoked the quarantine exception (in this case, set forth in the bill of lading as opposed to COGS A), the burden shifted back to plaintiff to show that defendant was negligent. Id. at 257 ("Having concluded that the goods were shipped in good order and condition, and it being conceded that they were delivered in a damaged condition, it is incumbent on the respondent to show, since that is his defense, that the injury was occasioned by one of the perils from which he is exempted by the bills of lading. This the respondent has done by clearly establishing the fact that the damage falls within the exceptions against quarantine, consequently the burden is upon the shipper to prove the carrier's negligence as the affirmative lies upon it."). Notably, the court did not require defendant in Cheek Neal to demonstrate that it was free from negligence or breach of contract prior to invoking the quarantine exception; it did, however, allow plaintiff to attempt to show that defendant was negligent with regard to the quarantine process, noting that "even where evidence has been thus given bringing the particular loss or damage within one of the dangers or accidents of navigation, it is still competent for the shippers to show, that it might have been avoided by the exercise of reasonable skill and attention on the part of the persons employed in the conveyance of the goods; for, then, it is not deemed to be, in the sense of the law, such a loss as will exempt the carrier from liability, but rather a loss occasioned by his negligence, and his inattention to his duty." Id. at 257. The court ultimately concluded that plaintiff had not sustained its burden of showing that defendant's negligence caused the damage, holding that defendant had established its due diligence by proffering evidence that it had taken steps to avoid infection of the ship with the plague (specifically, precautions to avoid rat infestations) and that the government had mandated the fumigation procedures during which the coffee was damaged. Id. at 257-58.
The burden-shifting interpretation, allowing the defendant to invoke the quarantine exception but allowing the plaintiff to prove, if it can, the defendant's concurrent negligence with regard to the excepted cause, was employed in a case involving the restraint of princes exception (an exception similar to the quarantine exception), Lekas Drivas, Inc., 306 F.2d 426, 431-32 (2d Cir. 1962). In Lekas, the question was whether, where goods were delayed as a consequence of restraint of princes (§ 1304(2)(g)), defendant, in order to invoke the exception and shift the burden, had to show that it was not otherwise negligent in dealing with the delay and caring for the cargo during the delay. The court held that defendant did not have to make that showing, reasoning that "[t]o hold that when a carrier has shown that the loss arose as a consequence of restraint of princes . . . it still has the burden of negating any other fault or neglect of its agents or servants would be to read the qualification of (q) into (a)-(p), although Congress did not put it there. It follows that libelant had the burden of showing circumstances from which a trier of the facts could properly conclude that the master's failure to dispose of the cheese at Aden was a breach of § 3(2)." Id. at 432.
The Second Circuit also applies the burden-shifting approach in cases involving the exception to a carrier's liability found in the Fire Statute, 46 U.S.C. § 182, as well as in COGSA, 46 U.S.C. § 1304(2)(b), exceptions which the court treats "as being the same," In re Ta Chi Navigation (Panama) Corp., 677 F.2d 225, 228 (2d. Cir. 1982). In this circuit, it is well established that in order to invoke the fire exception, a carrier need only show that fire caused the loss; the burden then falls on the shipper to show concurrent negligence on the part of the carrier. See Ta Chi, 677 F.2d. at 227-29 (citing cases). In fire exception cases the Second Circuit uses language sufficiently broad to suggest that a prerequisite showing of non-negligence by the carrier is necessary only to access COGSA's catch-all subsection "q" exception; all other COGSA excepted causes would then be governed by the burden-shifting interpretation. Ta Chi, 677 F.2d at 229 ("When Congress wanted to put the burden of proving freedom from fault on a shipowner claiming the benefit of an exemption, it specifically said so. See 46 U.S.C. § 1304(2)(q). We adhere to our prior holdings that, if the carrier shows that the damage was caused by fire, the shipper must prove that the carrier's negligence caused the fire or prevented its extinguishment.").
But it does not necessarily follow that the burden-shifting approach the Second Circuit employs in fire cases should be applied in the case of the quarantine exception as well. COGSA's fire exception was tailored so as to conform to the burdens of proof forming a part of the previously enacted Fire Statute; in Ta Chi, 677 F.2d 225 at 228, the Second Circuit looked to the legislative history indicating the intent of Congress that "COGSA shall not affect the rights and obligations of the carrier under the Fire Statute." Id. at 228 ("We have adopted the reasoning of this Circuit and treat the COGSA fire exemption as being the same as that of the Fire Statute."). That intention to conform to an earlier statutory exception does not arise with respect to COGSA's quarantine exception; there was no earlier "Quarantine Statute." Thus it is not immediately apparent that the broad language and reasoning employed by the Second Circuit when analyzing the fire exception should be extended to other excepted causes.
Additionally, while Cheek Neal and Lekas applied burden-shifting with respect to the quarantine and restraint of princes exceptions respectively, in those cases it was not alleged that defendant's negligence caused the quarantine or excepted event; rather they involved instances where it was alleged that defendant was negligent in caring for the cargo during the event in question. In Hearty and the present case, by contrast, the negligence was alleged to have actually occasioned the quarantine.
One treatise, Schoenbaum, 2 Admiralty and Maritime Law § 10-29 (West 3d ed. 2001), discussing which party bears the burden of proof where a defendant seeks to invoke a human force majeure exception (including the quarantine exception), says at § 10-29:
The burden of proof problem here will often be crucial. Here it appears a distinction should be drawn. On the one hand, where the alleged fault of the carrier has to do with the human force majeure itself, as where the carrier is responsible for a quarantine [citing to Hearty], or for prolonging or failing to avert a strike, the burden of proof should be on the carrier, because this goes to the very existence of the cause of exoneration. On the other hand, where the issue is the reasonableness of the carrier's actions with respect to caring for, inspecting, or handling the cargo in the face of force majeure, the burden of proof should be on the shipper in accordance with the usual burden of proof rule in clause (a) to (p) (but not (q)) where the burden shifts to the shipper [citing to Lekas].Id. And in Mamiye Bros, et al. v. Barber Steamship Lines, Inc., et al., 241 F. Supp. 99, 107 (S.D.N.Y. 1965), a case decided before the more recent fire exception cases involving force majeure generally (not human force majeure), the district court held that "the Act of God exception is not available to the carrier if the carrier was negligent in failing to guard against the natural event claimed to be the Act of God," and that the carrier, in order to invoke the exception, bears "the burden of persuasion [to show] that damage from [the natural event] could not have been guarded against by reasonable care on [its] part."
It is a close question under the present law of this circuit whether a carrier must make a preliminary showing of freedom from negligence in order to invoke the quarantine exception at all, or whether the burden-shifting interpretation governs. For the following reasons, I conclude that, under current Second Circuit authority, the burden-shifting interpretation should be applied.
Hearty, a 1953 district court case (albeit authored by Judge Weinfeld), while arguably pointing in the other direction, nonetheless relied on a quarantine exception case where the burden-shifting exception was employed, and so it is also possible to read Hearty as consistent with the burden-shifting interpretation, depending on the meaning given to the term "exoneration." The distinction between burdens of proof broadly stated by the Schoenbaum treatise has been expressly rejected by the Second Circuit, at least in the context of fire exception. Ta Chi, 677 F.2d at 229; Asbestos Corp. Ltd. v. Compagnie de Navigation Fraissinet et Cyprien Fabre et al., 480 F.2d 669, 672-73 (2d Cir. 1973) (declining to draw a distinction between negligence that causes a fire and negligence that exacerbates the damage caused by a fire). I think that the rationale of the Second Circuit's cases defining the more limited showing a carrier must make to invoke the fire exception also applies to all COGS A § 1304(2)(a-p) exceptions, there being no principled difference between them, and mandates the burden-shifting interpretation in all such cases. That is the way at least one district court reads Ta Chi; see In re Tecomar S.A., 765 F. Supp. 1150, 1174 (S.D.N.Y. 1991), affd. 9 ("[I]n the context of COGSA's fire exception, the Second Circuit has explicitly noted . . . that none of the § 1304(2)(a-p) exceptions places the burden of proving freedom from fault on the carrier."). While the question is not free from doubt, I hold that defendant MSC need not make a showing that the need for quarantine was not occasioned by its own negligence in order to invoke the quarantine exception.
In the present case, defendant bears the burden of proof to establish that any cargo loss or damage falls within one of the enumerated COGS A exceptions. Royal Insurance Co. of America, 756 F. Supp. at 769. As discussed supra, the immediate cause of the alleged loss was the threatened application of quarantine restrictions as a result of the failure of the cold treatment protocol and the subsequent sale of the citrus in Canada. With regard to container CRLU 9137295 on the M/V Stefania (which is governed by COGS A, see fn. 2, supra), I find that defendant has shown that the loss was occasioned by quarantine and that defendant may invoke the quarantine exception set forth at § 1304(2)(h). The burden accordingly shifts to plaintiff to show `"that there were . . . concurrent causes of loss in the fault and neglect of the carrier.'" Vana Trading Co., 556 F.2d at 105 (citation and internal quotation marks omitted). Having held previously in this Opinion that there is a disputed issue of material fact as to whether defendant had an obligation to carry out the cold treatment protocol, I also hold that there is a disputed issue of material fact as to whether defendant's conduct created a concurrent cause of loss, an issue on which plaintiff bears the burden of proof, and whose existence precludes summary disposition. Accordingly, with regard to container CRLU 9137295, defendant's motion for summary judgment that it falls within the quarantine exception is granted; plaintiffs motion for summary judgment that it has shown a concurrent cause of loss is denied. Moving forward, the burden is shifted and plaintiff bears the burden to show a concurrent cause of loss, an issue of fact not appropriate for summary disposition.
With regard to the remaining claims, which would (but for the purported contractual extension of COGS A) fall under the Harter Act, I hold that defendant is barred from invoking the quarantine exception and that defendant's motion for summary judgment on this issue is denied.
The Harter Act provides at § 190:
It shall not be lawful for the . . . owner of any vessel . . . to insert in any bill of lading or shipping document any clause, covenant, or agreement whereby it . . . shall be relieved from liability for loss or damage arising from negligence, fault, or failure in proper loading, stowage, custody, care, or proper delivery of any and all lawful merchandise or property committed to its . . . charge. Any and all words or clauses of such import inserted in bills of lading or shipping receipts shall be null and void and of no effect.
In accordance with this proscription, various courts have weighed the issue of whether different COGSA provisions can be properly extended by contract where the Harter Act would otherwise apply. Although the case law does not provide an entirely consistent guide, certain principles emerge.
Courts have held that attempts to invoke COGSA provisions by contract where the Harter Act would usually apply are invalid 1) where there are equivalent exception provisions in COGSA and the Harter Act, but the Harter Act requires a showing of seaworthiness as a precondition to invoking an excepted cause and COGSA does not and the seaworthiness of the vessel is in issue, Ultramar Shipping, 685 F. Supp. at 894-97 (holding that COGSA could not be invoked by contract to period after discharge and before delivery where the seaworthiness of the vessel was in question, defendant sought to rely on an exception for error in navigation, and the Harter Act renders "[t]he carrier's duty of due diligence to make the vessel seaworthy . . . a condition precedent to its enjoyment of any of the Harter Act's exemptions," while COGSA requires a causal link between the unseaworthiness and the loss); and 2) where there is no Harter Act equivalent of the COGSA provision sought to be invoked and the COGSA provision would excuse a carrier's negligence by exonerating the carrier from liability in a manner not provided for in the Harter Act. R.L Pritchard Co., Inc. v. S. S. Hellenic Laurel et al, 342 F. Supp. at 391 (holding that the COGSA fire exception, which provides that the carrier shall not be liable for loss resulting from "[f]ire, unless caused by the actual fault or privity of the carrier," § 1304(2)(b), could not be extended by contract where the Harter Act would otherwise apply).
There is no Harter Act equivalent of the COGSA fire exception.
Courts have, however, permitted the incorporation of COGS A by contract where the COGSA provision in question operated merely to limit the liability of the carrier, or stopped short of relieving the carrier entirely of the consequences of its negligence. See, e.g., Allied Chemical International Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476, 482-84 (2d Cir. 1985) (striking some bill of lading clauses relieving carrier of liability in the time after discharge and before delivery, but noting that, by invoking COGSA, carrier could potentially avail itself of the COGSA exception at § 1304(2)(q), which provides that a carrier is not liable if it can prove that loss did not result from "the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier. . . ."), cert denied, 475 U.S. 1099 (1986); Leather's Best v. S.S. Mormaclynx, 451 F.2d 800, 804 (2d Cir. 1971) (applying COGSA $500 package limitation where the Harter Act would, absent a contractual provisions invoking COGSA, normally apply); Mamiye Bros., et al. v. Atlantic Stevedoring Co., et al., 241 F. Supp. 99, 107 (S.D.N.Y. 1965) (noting that the Harter Act makes `"null and void' any provision `relieving from liability for negligence,'" and holding that the COGSA Act of God exception can be invoked where the Harter Act would normally apply because "the Act of God exception is not available to the carrier if the carrier was negligent in failing to guard against the natural event claimed to be the Act of God."), off' d, 360 F.2d 774 (2d Cir. 1966), cert denied, 385 U.S. 835 (1966)).
The COGSA Act of God exception provides that "[n]either the carrier nor the ship shall be responsible for loss or damage arising or resulting from . . . (d) Act of God." § 1304(2)(d).
Thus, a statutory conflict requiring application of the Harter Act arises where the Harter Act and COGS A contain comparable provisions, but the Harter Act imposes as a precondition a showing of due diligence regarding seaworthiness (and COGS A does not impose the same precondition), or where an exception that appears only in COGS A relieves a carrier from the consequences of its negligence. But there is no conflict where a provision that appears only in COGSA merely limits the liability of the carrier or does not otherwise exonerate the carrier's negligence. This explains the acceptability of invoking the COGSA (q) clause, Act of God exception, statutory time limits, and $500 package limitation through contract where the Harter Act would otherwise apply, and likewise the bar against invoking by contract the COGSA fire exception or (where seaworthiness is in issue) the error in navigation exception. The statutory time limit and $500 package limitation are merely contractual limits on liability. And neither the (q) clause nor the Act of God exception relieves the carrier of liability for negligence — the (q) clause provides that the carrier, bearing the burden of proof, may avoid liability of it shows "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," § 1304(2)(q); the Act of God exception may not be invoked unless the carrier first shows that the "damage . . . could not have been guarded against by reasonable care on [its] part." Mamiye Bros., 241 F. Supp. at 112.
The fire exception, however, exists only under COGSA and exempts the carrier for loss from fire "unless caused by the actual fault or privity of the carrier." § 1304(2)(b). The exception has been interpreted to mean that the carrier is liable for loss by fire "only if caused by the negligence of an executive officer, manager, or superintendent whose scope of authority includes supervision over the phase of the business out of which the loss occurred," and thereby to exonerate the carrier for the "negligence of longshoremen or other workers on the pier." R.L. Pritchard, 342 F. Supp. at 391. Because "the mere fact that goods are damaged by fire does not eliminate the possibility that the fire was caused by negligence," Id., and the rule is that "if the carrier shows that the damage was caused by fire, the shipper must prove that the carrier's negligence caused the fire or prevented its extinguishment," or face dismissal of the action, In re Ta Chi Navigation (Panama) Corp., S.A., 677 F.2d 225, 228 (2d Cir. 1982), the fire exception impermissibly expands the protection afforded a carrier and cannot be invoked where the Harter Act would normally apply. Similarly, the error in navigation exception, although it has a Harter Act equivalent, carries with it as a precondition a showing of seaworthiness under the Harter Act. Thus, where seaworthiness of the vessel is in issue, proceeding under the COGS A exception might excuse the carrier for negligently failing to maintain a seaworthy vessel.
My research reveals no case that directly addresses the question of whether the quarantine exception can be invoked by contract where the Harter Act would normally apply. Comparing the quarantine exception to those COGS A exceptions that it has been deemed permissible to incorporate by contract, such as the Act of God exception, and to those COGSA exceptions that it has been deemed impermissible to incorporate by contract, such as the fire exception, I find that the quarantine exception more closely resembles the latter and cannot be invoked pursuant to the strictures of § 190. The quarantine exception is functionally indistinguishable from the fire exception. It would shift the burden to the shipper/plaintiff to show that the defendant was negligent. This is a direct violation of the command of § 190 that a carrier may not be "relieved from liability for loss or damage arising from negligence, fault, or failure in proper loading, stowage, custody, care, or proper delivery", and a near-exact analogue to the fire exception, which may not be invoked through contract. As one court in this circuit has recently observed:
The Harter Act has no list of enumerated exceptions similar to COGSA § 1304(2)(a-p). Although courts have upheld certain COGSA § 1304(2) liability disclaimers under the Harter Act, see e.g., Mamiye Bros. v. Barber Steamship Lines, Inc., 241 F. Supp. 99 (S.D.N.Y. 1965), aff'd, 360 F.2d 774 (2d Cir.), cert. denied, 385 U.S. 835 (1966) (upholding disclaimer for "Act of God"), central to the holdings have been that the event disclaimed, by its very definition, includes as an essential element that the natural event and its consequences could not have been prevented by the exercise of reasonable care.Anvil Knitwear, Inc. v. Crowley American Transport, Inc., No. 00-3243, 2001 WL 856607, at *4 (S.D.N.Y. July 27, 2001) (internal quotation marks omitted). As analyzed above, a quarantine of the cargo may result from the carrier's negligence; still, the carrier may invoke the COGSA quarantine exception, leaving it to the shipper to prove the carrier's negligence as a concurrent cause of the quarantine-induced loss It follows that the quarantine exception falls outside of the scope of those COGSA exceptions that may be extended by contract in cases governed by the Harter Act. E. Can plaintiff properly claim consequential damages; i.e., were plaintiffs damage foreseeable?
Defendant cites Cheek Neal Coffee Co., 36 F.2d 256 (discussed in detail supra as the case relied upon in Hearty) as authority for the proposition that a quarantine exception included as a contractual term in bills of lading is enforceable under the Harter Act. Defendant argues, therefore, that the COGSA quarantine exception does not expand the relief available to the carrier in a manner not permitted under the Harter Act, especially in light of the fact that there is a quarantine exception included in the bills of lading in this case. (Def.'s Mem. in Supp. at 7-10). It is true that in Cheek Neal, a case governed by the Harter Act, the court enforced a quarantine exception contained in the bills of lading and interpreted the exception as it would be interpreted under COGSA — upon a showing by the carrier that the loss resulted from a quarantine detention of the ship, the burden shifted to the shipper to show negligence on the part of the carrier. 36 F.2d at 257. Two aspects, however, distinguish Cheek Neal from the present case. First, Cheek Neal was decided prior to the Supreme Court's decision in The Vallescura, 293 U.S. 296 (1934), where the Court refused to enforce a bill of lading exception for "decay," reasoning that a carrier bears the burden in the first instance of showing that the loss comes within "exceptions for which the law permits him to stipulate." Id. at 304. Second, in Cheek Neal, the entire ship was quarantined because of a suspected case of bubonic plague on board; the need for quarantine itself was not alleged, as in the case at bar, to have resulted from the carrier's alleged failure to properly care for the cargo. 36 F.2d at 256. Assuming without deciding that the exception for export and import impediments is a permitted excepted cause under the Harter Act, the circumstances in the present case are sufficient to place it in a posture where the burden is on defendant to show that it was not negligent in caring for the cargo in order to avail itself of the exception from liability for quarantine. Although the general rule with regard to the invocation of a bill of lading exception under the Harter Act is that Syhen the carrier succeeds in establishing that the injury is from an excepted cause, the burden is then on the shipper to show that that cause would not have produced the injury but for the carrier's negligence in failing to guard against it," this burden shifting rule does not apply until the carrier brings itself within an excepted cause. 293 U.S. at 304-5. In The Vallescura, the Court noted that "[w]here the state of the proof is such as to show that the damage is due either to an excepted peril [in this case, quarantine occasioned by forces outside of defendant's control] or to the carrier's negligent care of the cargo [in this case, defendant's allegedly negligent failure to complete the cold treatment protocol] it is for him to bring himself within the exception or to show that he has not been negligent." 293 U.S. at 306. Thus, allowing defendant to invoke the COGS A quarantine exception in this case would, by effecting a burden shift, violate § 190 of the Harter Act. See Levatino Co., Inc. v. Amereican President Lines, Ltd., 223 F. Supp. 697, 701 (S.D.N.Y. 1964) (holding Act of God exception "not available" to carrier under Barter-Act where the immediate cause of the loss was a severe snow storm, but the loss would not have occurred had carrier taken steps to protect the cargo from freezing), aff'd., 337 F.2d 729 (2d Cir. 1964). But see The Monte Inc. v. 167 F.2d 334 (3rd Cir. 1948) (upholding a bill of lading exception stating that carrier was not liable for "leakage, breakage or spigoting" as permissible under COGS A and the Harter Act). Additionally, to the extent that defendant argues that even if it is barred from raising a quarantine defense under COGSA, it may raise a quarantine defense under the Harter Act on the basis of the quarantine clause in the bills of lading, I note that there is a disputed issue of material fact as to whether defendant's negligence would preclude it from invoking the quarantine clause in the bills of lading.
Plaintiff states that it calculates its damages based "on the market price realized by the Canadian sales and the market price that could have been obtained in the United States." (Objections to MSC's Rule 56.1 Statement of Material Facts at ¶ 44.) Defendant moves for summary judgment dismissing plaintiffs claims on the ground that plaintiff seeks consequential damages, but has not provided evidence sufficient to the claim; plaintiff cross-moves for a declaration that "damages sustained by plaintiff were foreseeable by the parties at the time each contract of carriage was entered into." (Pl.'s Mem. in Opp. at 35.)
Both parties agree that the rule set forth in Hadley v. Baxendale, 9 Exch. 341 (1854), applies, see Pl.'s Mem. in Opp. at 32, and that, therefore, the following principles govern:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.Hadley v. Baxendale, 9 Exch. 341 (1854). And this rule has been applied in determining whether consequential damages are warranted in delay cases arising under COGS A. R.G.N. Capital Corp. v. Yamato Transport USA, Inc., 949 F. Supp. 232, 234-35 (S.D.N.Y. 1997) (granting one defendant's motion for summary judgment where there was "no evidence that [defendant] was aware of the necessity of [plaintiff s] shipments reaching the Ukraine by a specific date, or that [defendant] agreed to ensure that this would happen," and denying another defendant's motion for summary judgment where there was a "dispute . . . as to whether [plaintiff] specifically advised [defendant] that delivery of the containers at the Ukrainian port on or before a specified date was essential, whether [defendant] gave [plaintiff] specific assurances on that point, and whether [plaintiff] reasonably relied upon those assurances.").
Defendant presents two arguments in support of its contention that plaintiff seeks damages that are not allowed. Defendant argues first that "MSC's position . . . is that the cold treatment protocol was not a part of obligations arising under the contracts of carriage. As a result, the consequential damages sought by plaintiff, which are only related to the failure of the cold treatment protocol and are not related to any physical damage to the citrus in suit, could not have been foreseeable to MSC because, at the time the contracts of carriage were entered into by the parties, cold treatment was not part of the obligations arising under the contracts." (Def.'s Reply at 15.) See also Def.'s Mem. in Supp. at 21. ("Since there is no evidence that MSC was aware at the time of contracting of the special needs of the subject shipments (i.e., special handling for the cold treatment protocol, particularly at discharge), Sunpride's claim for consequential damages stemming from such a failure should be dismissed as outside the contemplation of the parties at the time of contracting. . . ."). Pursuant to the standard for evaluating the propriety of consequential damages set out above, defendant makes a sound argument. However, having already ruled previously in this Opinion that the extent of defendant's knowledge of and obligation to conduct the cold treatment protocol is a disputed issue of material fact, I likewise conclude here that summary judgment with regard to the availability of consequential damages on this ground is not appropriate for the same reason. See generally R.G.N. Capital Corp., 949 F. Supp. at 235.
Defendant's second argument is that, "[e]ven assuming . . . that MSC contracted to undertake a cold treatment obligation for these voyages, the damages claimed by Sunpride — the difference between the price realized in Canada and the price expected in the United States — was not foreseeable. The foreseeable consequence of failing cold treatment would be to subject the citrus to another cold treatment protocol." (Def.'s Reply at 15.) I therefore consider whether, assuming defendant had an obligation to complete the cold treatment protocol, consequential damages are barred as a matter of law.
Defendant concedes in its moving papers that the need to subject citrus to a second cold treatment protocol is a foreseeable consequence of raised temperatures and that the damages incurred after the failure of cold treatment when citrus is subjected citrus to a second cold treatment procedure (the costs of conducting the second cold treatment protocol) are also foreseeable. (Def.'s Reply at 15.) As discussed above, plaintiff determined that subjecting the citrus in this case to a second cold treatment would have resulted in spoilation, thereby severely reducing its value, and decided instead to mitigate its damages by selling the citrus in Canada. Having conceded that it is foreseeable that raised temperatures will lead to citrus shipments failing quarantine, defendant's argument, under the standard set forth in Hadley v. Baxendale, must be that the while the damages incurred by subjecting that citrus to a second cold treatment are foreseeable — "the amount of injury which would ordinarily follow," the damages incurred by selling that citrus on a different market to mitigate damages (instead of subjecting it to a second cold treatment protocol) are not. Id.
I do not find defendant's position persuasive. As discussed above, a party may take such measures to mitigate damages as it deems reasonable and appropriate; the burden lies on the party challenging the mitigation efforts undertaken to show that they were unreasonable. In re Kellett Aircraft Corp., 186 F.2d 197, 198-199 (3d Cir. 1950) ("When a choice has been required between two reasonable courses, the person whose wrong forced the choice can not complain that one rather than the other was chosen. The rule of mitigation of damages may not be invoked by a contract breaker as a basis for hypercritical examination of the conduct of the injured party. . . ."). Here, plaintiff submitted testimony attesting to the fact that subjecting the citrus to a second cold treatment would have resulted in damages in excess of those incurred through sale in Canada, either as a result of spoliation (Clementines) or market change (navels). (Sotomayor Dep. at 37-38, 51-52, 128-29.) Defendant submitted testimony from an individual involved in the citrus trade, but not directly involved in the events in this case, that "[n]avels and Clementines can undergo a second cold treatment depending on their inherent susceptibility to chilling injury, fruit condition and existing shelf life." (Brecht Decl. at 2.) The evidence submitted by defendant does not directly address whether the citrus in this case could have withstood a second cold treatment protocol; in fact, it suggests that in certain instances "depending on their inherent susceptibility to chilling injury, fruit condition and existing shelf life," a second cold treatment might be harmful. Defendant further submits testimony from this same individual that "[b]ased on the USD A Federal-State Market News Service statistics, US East Coast pricing for oranges either increased or stayed the same from May to August 2000." (Brecht Decl. at 3.) This testimony, however, does not directly address either market pricing for navels aged after completion of a second cold treatment protocol or whether defendant's anticipation that the market would go down was reasonable.
I find that defendant has not, on this record, shown that the mitigation undertaken by plaintiff was unreasonable; at most, there is a dispute of material fact in this regard. Defendant's motion for summary judgment and dismissal on the ground that the damages sought by plaintiff are unrecoverable as a matter of law is accordingly denied.
However, that conclusion does not compel summary judgment in plaintiffs favor that the damages were foreseeable and satisfied the standard for asserting a claim for consequential damages as a matter of law. In support of its cross-motion seeking a determination that the damages were foreseeable, and in rebuttal of defendant's application, plaintiff cites evidence in the record that defendant had actual knowledge that the cargo was subject to the cold treatment protocol and of the consequences of failing such. (Pl.'s Mem. in Opp. at 32-36.) Because, as discussed above, it cannot be determined in the posture of summary judgment whether defendant had an obligation to carry out the cold treatment protocol, I find it premature to enter a ruling at the present time that the damages were foreseeable as a matter of law. Accordingly, plaintiffs motion for summary judgment that the damages sought in this case were foreseeable is likewise denied.
Plaintiff also raises as an argument that "the law requires MSC to ascertain the special characteristics of the cargoes it agrees to carry and MSC is charged with the knowledge it could and should have obtained." (Pl.'s Mem. in Opp. at 35.) Having previously held that defendant, merely by accepting a shipment of citrus, was not automatically charged with knowledge of the cold treatment protocol, I also reject the comparable argument made by plaintiff here with regard to damages.
For purposes of clarity, I summarize the numerous holdings and conclusions reached in this Opinion:
• Plaintiff has established a prima facie case under COGS A and its motion for partial summary judgment on this ground is granted. Defendant's motion for summary judgment on the ground that plaintiff failed to establish its prima face case is denied.
• The duty of care set forth in 46 U.S.C. § 1303(2) did not independently give rise to a duty by defendant to adduce the need for and carry out the cold treatment protocol. The documents provided to defendant and/or its agents apart from the bills of lading did not formally become part of the contract. However, there is a disputed issue of material fact as to whether, in light of custom, trade practice, and/or prior experience, defendant was bound to carry out the cold treatment protocol. The parties' cross-motions for summaryjudgment with regard to this issue (whether defendant had a duty to carry out the cold treatment protocol) are denied.
• Defendant's motion for summary judgment pursuant to the act or omission of shipper exception, § 1303(2)(i), is denied.
• Defendant need not show that its negligence did not create the need for quarantine in order to invoke the quarantine exception. Defendant's motion for summary judgment with regard to container CRLU 9137295 is granted in so far as I hold as a matter of law that defendant may invoke the COGS A quarantine exception with regard to claims relating to that container.
• Plaintiffs motion for summary judgment that it has established a concurrent cause of loss with regard to claims relating to container CRLU 91377295 is denied. There is an issue of material fact with regard to this issue, on which plaintiff bears the burden of proof.
• The quarantine exception may not be raised, even where purportedly extended by contract, where the Harter Act would normally apply. Defendant's motion for summary judgment pursuant to the quarantine exception, § 1303(2)(h), as regards all portions of plaintiff's claim other than those involving container CRLU 9137295 is denied.
• The parties' cross-motions for summary judgment regarding the propriety of consequential damages are denied.
The case will proceed in a manner consistent with this Opinion. Counsel are directed to attend a status conference in Room 17C, 500 Pearl Street, on December 10, 2003 at 4:00 p.m. The agenda for the conference will include ascertaining whether all pre-trial discovery has been completed; whether a reference should be made to a Magistrate Judge to conduct settlement discussions; the anticipated length and duration of the trial; and setting the trial date.
It is SO ORDERED.