STEEL COILS INC v. LAKE MARION
331 F.3d 422 (2003)
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Rule of Law:
Under the Carriage of Goods by Sea Act (COGSA), a carrier's agent, such as a vessel manager, who is not a party to the contract of carriage cannot claim the Act's statutory liability limitations. Such an agent may be sued separately in tort for its own negligence in causing damage to cargo.
Facts:
- Steel Coils, Inc. imported steel coils from a mill in Russia, which were purchased by its parent company, Itochu International, Inc.
- Itochu entered into a voyage charter with Western Bulk Carriers for the M/V LAKE MARION to ship the steel. The vessel was owned by Lake Marion, Inc. and managed by Bay Ocean Management, Inc., which employed the master and crew.
- The steel coils were loaded onto the M/V LAKE MARION in Riga, Latvia, between February 26 and March 2, 1997.
- Prior to loading, the vessel's holds, which had previously carried rock salt, were washed out with Baltic Sea water instead of fresh water.
- Preload surveys noted deficiencies in the hatch cover gaskets, such as deformation and rust, but the hatches were not tested for watertightness.
- During the voyage to the United States, the vessel encountered a storm with winds reaching Beaufort Scale Force 11 to 12 for approximately two hours.
- Upon discharge in New Orleans and Houston, the steel coils were found to be extensively damaged by saltwater rust.
- An inspection in New Orleans revealed an old crack in Hold No. 1, which had been previously repaired with a doubling plate.
Procedural Posture:
- Steel Coils, Inc. filed suit in the U.S. District Court for the Eastern District of Louisiana against the M/V LAKE MARION (in rem), Lake Marion, Inc., Bay Ocean Management, Inc., and Western Bulk Carriers (in personam) under COGSA.
- Steel Coils also asserted a separate maritime negligence claim against Bay Ocean Management.
- The defendants filed cross-claims for indemnification against each other, and Western Bulk filed a third-party complaint against Itochu.
- After a bench trial, the district court found for Steel Coils, holding the defendants jointly and severally liable under COGSA and holding Bay Ocean separately liable in tort for the full amount of damages, without the COGSA limitation.
- The district court also ruled on the indemnity claims, ordering Lake Marion, Inc. to indemnify Western Bulk.
- The vessel interests (M/V LAKE MARION, Lake Marion Inc., and Bay Ocean Management) appealed the judgment to the United States Court of Appeals for the Fifth Circuit.
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Issue:
Does the Carriage of Goods by Sea Act (COGSA) provide the exclusive remedy for cargo damage, thereby precluding a separate negligence claim in tort against a vessel's managing agent who is not a party to the contract of carriage?
Opinions:
Majority - Higginbotham, J.
No. The Carriage of Goods by Sea Act (COGSA) does not preclude a separate tort action against a carrier's agent who is not a party to the contract of carriage, and such an agent is not entitled to COGSA's $500-per-package liability limitation. COGSA's protections apply only to a 'carrier,' defined as the owner or charterer who enters into a contract of carriage with the shipper. Bay Ocean Management, as the vessel manager, was not a party to the voyage charter between Western Bulk and Itochu; it was merely an agent for the owner, Lake Marion, Inc. Citing the Supreme Court's decision in Robert C. Herd & Co. v. Krawill Machinery Corp., the court reasoned that COGSA's text and history show no intent to limit the liability of a carrier's agents. Therefore, Bay Ocean could be held fully liable for its negligence in failing to maintain the vessel. The court also affirmed the district court's findings that the carrier defendants were liable under COGSA because Steel Coils established its prima facie case, the defendants failed to prove they exercised due diligence to ensure the vessel's seaworthiness (citing the defective hatches and improper hold cleaning), and their 'peril of the sea' and 'latent defect' defenses were not credible.
Analysis:
This decision reinforces the strict interpretation of 'carrier' under COGSA and solidifies the principle from Herd v. Krawill that COGSA's liability limitations do not automatically extend to a carrier's agents. By allowing a separate tort claim against a negligent vessel manager, the ruling provides shippers a potential path to recover damages exceeding COGSA's statutory cap. This creates a significant risk for vessel managers and other agents, who cannot assume they are protected by the carrier's COGSA defenses. The case highlights the critical importance for such agents to secure protection explicitly through a 'Himalaya Clause' in the bill of lading or contract of carriage.
