United States District Court, N.D. Illinois, Eastern Division
August 9, 2004.
NIPPON EXPRESS U.S.A. (ILLINOIS), INC., Plaintiff,
MITSUI SUMITOMO INSURANCE CO., LTD.; HANJIN SHIPPING CO., LTD.; NORFOLK SOUTHERN RAILWAY CO.; OMNI RAIL INTERNATIONAL, INC.; and JAM TRUCKING, INC., Defendants.
The opinion of the court was delivered by: MATHEW KENNELLY, District Judge
MEMORANDUM OPINION AND ORDER
In September 2002, Sony Computer Entertainment, Inc. contracted
with Nippon Express U.S.A. (Illinois), Inc., a non-vessel-owning
common carrier, to transport a quantity of Sony PlayStation games
from Tokyo, Japan to Bolingbrook, Illinois. The PlayStation games
were contained in 8,424 cartons which in turn were placed into
nine forty-foot long containers for shipping. Nippon contracted
with defendant Hanjin Shipping Co., a vessel-owning common
carrier, to transport the goods to a container yard in Chicago,
Illinois. Hanjin transported the containers by seagoing vessel to
Tacoma, Washington, and from there, they were carried by the
Burlington Northern Santa Fe Railroad to Chicago, where they were
placed in a yard owned by defendant Norfolk and Southern Railway
Company. One of the containers was later discovered to be missing
from the yard, the gate to which allegedly was controlled by
defendant Omni Rail Intermodal, Inc. The container was later
found, but the PlayStation games it had contained were not recovered.
Sony had contracted with defendant Mitsui Sumitomo Insurance
Co. to insure the goods during shipment. Mitsui paid Sony's claim
and demanded that Nippon pay $478,348, said to be the value of
the lost PlayStation games. Nippon then commenced this action,
seeking a declaration of non-liability or in the alternative
indemnity or contribution, naming as defendants the other
entities involved in the shipment as well as Mitsui. Hanjin and
Nippon have both moved for partial summary judgment, arguing that
their liability is limited to $500 based on the terms of the
bills of lading that each issued. Both motions require
consideration of the terms and effect of the Carriage of Goods at
Sea Act (COGSA), 46 U.S.C. App. § 1301 et seq. For the reasons
stated below, the Court denies both motions.
Nippon's bill of lading stated that "[e]xcept as otherwise
provided herein, . . . this Bill of Lading shall have effect
subject to the provisions of . . . [COGSA], which is incorporated
herein and made a part hereof. . . ." Nippon Summ. Judg. Mot.,
Ex. B, ¶ 3.1. It stated that Nippon would be liable for loss of
or damage to the goods occurring between the time it received
them and the time it delivered them at the place of delivery,
namely Bolingbrook. Id., ¶ 7.1. The bill of lading also stated,
however, that "[c]ompensation shall not . . . exceed US $500.00
per container, package or unit unless with the consent of
[Nippon], [Sony] has declared a higher value for the goods
. . .," id., ¶ 8.2(a), which Sony did not do. The bill of
lading defined "container, package or unit" as follows: "[w]here
a container, pallet or similar article of transport is used to
consolidate goods, the number of packages or units enumerated in
this Bill of Lading as packed in such article of transport shall
be deemed the number of packages or units for the purpose of this
package or unit. Except as aforesaid such article of transport shall be considered
the package or unit." Id., ¶ 8.2(b).
The first page of Nippon's bill of lading contained spaces to
fill in, among other things, the "No. of Pkgs. or Containers."
The bill of lading was completed in such a way that the
information did not line up directly within the space provided,
but the following information is contained at least partly in
that particular space:
(40' H/C × 9 CONTAINERS)
`FREIGHT COLLECT AS ARRANGED'
SAY: NINE (9) CONTAINERS ONLY.
See id., p. 1.
Hanjin issued Nippon a waybill covering Hanjin's portion of the
shipment. The waybill stated that it was subject to the terms of
Hanjin's standard bill of lading, a copy of which could be
obtained from Hanjin's office. See Hanjin Summ. Judg. Mot., Ex.
B, "Conditions of Carriage," ¶ 1. The waybill went on to state
that it was subject to the "Hague Rules" unless the country of
shipment had enacted no such rules and there was "corresponding
legislation" in the country of destination, in which case that
legislation would apply. Id.
Hanjin's bill of lading provided that "the applicable
Hague/Visby/COGSA legislation shall govern throughout the time
when the Goods are in the actual or constructive custody of the
Carrier." Hanjin Summ. Judg. Mot., Ex. C, ¶ 2. It stated that
"[d]amage shall, in all events, be limited in accordance with the
applicable Hague/Visby/COGSA legislation," and that "[u]nless
the nature and value of the Goods have been declared in writing
by the Merchant before shipment and inserted in this bill of lading . . ., [w]here U.S. COGSA
applies, the Carrier shall in no event be or become liable for
any loss of damage to . . . the Goods in an amount exceeding U.S.
dollars 500 per package. . . ." Id., ¶ 16. The Hanjin bill of
lading defined "package" as "the single largest unit of Goods
(e.g., container, pallet, box, bale) delivered by Merchant to
Carrier for carriage pursuant to the terms of this Bill of
Lading." Id., ¶ 1(g). The Hanjin waybill listed "8,424 CTNS" in
the column identifying the "No. of Pkgs. or Containers," though
on a different section of the waybill it stated "NINE (9)
CONTAINERS ONLY" in a section listing the "Total No. of Packages
or Containers (in works)." Hanjin Summ. Judg. Mot., Ex. B.
COGSA, like both bills of lading in this case, imposes a $500
per-package limitation on the liability of a carrier. See id. §
1304(5). But under COGSA, if, as in this case, a bill of lading
discloses on its face the number of units or packages inside the
container, and those units or packages reasonably may be
considered COGSA packages, then the packages inside the container
are considered to be the packages for purposes of the $500
per-package limitation. See, e.g., Monica Textile Corp. v. S.S.
Tana, 952 F.2d 636, 639 (2d Cir. 1991); Hayes-Leger Assocs.,
Inc. v. M/V Oriental Knight, 765 F.2d 1076, 1080 (11th Cir.
1985); Int'l Adjusters, Inc. v. Korean Wonis-Son,
682 F.Supp. 383, 386 (N.D. Ill. 1988). This "clear rule" applies even if the
carrier's bill of lading purports to define the package as the
container itself, unless the bill of lading contains "explicit
and unequivocal" terms making it clear the parties agreed to that
definition. Monica Textile, 952 F.2d at 642. But that exception
to the rule "is more apparent than real." Id. When a bill of
lading refers to both containers and other units susceptible of
being considered as packages, it is "inherently ambiguous," and
the ambiguity found in what Monica Textile characterizes as
"unbargained-for boilerplate" is resolved against the carrier
(that is, against considering the container as the COGSA package).
Id. at 642, 643. In Monica Textile, the Second Circuit held
that a definition of "package" that is effectively
indistinguishable from the one found in Nippon's bill of lading
was insufficient to make the container the package for purposes
of COGSA. Id. at 642-43. In short, if COGSA applied by its own
terms in this case, the relevant number of packages for purposes
of the $500 per-package limitation in Nippon's bill of lading
would be 8,424 packages, rather than one package as Nippon
But COGSA does not apply by its own terms in this case. The
statute governs the period between the loading of the goods onto
the ocean vessel and the discharge of the goods from the vessel.
46 U.S.C. App. § 1301(e). In this case, the loss occurred after
the goods were discharged from Hanjin's ship. The Court must
determine whether this renders the Monica Textile analysis
When a bill of lading contains an express statement that it is
subject to COGSA, it is subject to COGSA's terms "as if subject
hereto by the express provisions" of COGSA. Id. § 1312. Mitsui
argues that this means that the COGSA-supplied definition of
"package," as discussed above, applies in this case. The Eleventh
Circuit has so held. In Groupe Chegaray/V. de Chalus v. P & O
Containers, 251 F.3d 1359, 1364 (11th Cir. 2001), the court held
that when a bill of lading incorporates COGSA as "paramount
throughout" the time the goods are in the shipper's custody (as
is the case here), COGSA's definition of "package" applies. By
contrast, Nippon and Hanjin argue that when COGSA is incorporated
by reference into a contract, it is merely another contract term
that is subject to modification or alteration by other contract
terms. That, is appears, is the view of the Fourth and Second
Circuits. See Commonwealth Petrochemicals, Inc. v. S/S Puerto
Rico, 607 F.2d 322, 325-27 (4th Cir. 1979); Pannell v. United States Lines Co., 263 F.2d 497, 498 (2d Cir. 1959) (discussed
in Commonwealth Petrochemicals).
The Court does not find Commonwealth Petrochemicals
persuasive. COGSA says that where parties agree that they will be
governed by COGSA's terms before loading or after discharge,
their bill of lading is "subjected [to COGSA] as fully as if
subject [t]hereto by the express provisions" of the statute. 46
U.S.C. App. § 1312. The plain meaning of this statutory provision
is that COGSA applies the same way irrespective of whether it
applies by its own terms or by private agreement. This
construction of the statute "foster[s] predictability in this
nettlesome area of the law." See Monica Textile,
952 F.2d at 643. In the Court's view, it would not make a great deal of sense
to have COGSA apply one way when the goods are first turned over
to the carrier before loading on the ship, a different way under
the same bill of lading while the ship is at sea, and then back
to the first way once the ship arrives at its destination and the
goods are unloaded. The Court therefore agrees with the Eleventh
Circuit that COGSA's definition of "package" applies to Nippon's
bill of lading. Because the bill of lading specifically disclosed
that the container contained a larger number of items that
reasonably could be considered packages, the $500 per-package
limitation stated on Nippon's bill of lading applies to that
larger number of packages, not to the container as a whole.
The Court reaches the same conclusion regarding Hanjin's bill
of lading. The attempt to define the package as the container was
clearer in Hanjin's bill of lading than it was on Nippon's. But
Hanjin did not actually issue a bill of lading in this case;
rather it issued only a waybill that said it was subject to its
standard bill of lading, which though available elsewhere was
apparently not provided to Nippon and certainly not to Sony. The
waybill provided, without limitation, that it was subject to COGSA, and like Nippon's bill of lading it
identified both the number of cartons (8,424) and the number of
containers (9) under the heading "package." It therefore had the
type of ambiguity that, under Monica Textile, calls for
application of the general rule that the container is not the
COGSA package when the shipping document discloses on its face a
larger number of packages.*fn1 The fact that Hanjin had set
forth a different definition in a separate document that was not
even provided in connection with the shipment is insufficient to
give rise to an exception to the general rule; "`[a]llowing the
carrier . . . to insert an essentially unbargained-for definition
of `package' in the bill of lading would effectively eliminate
the protection COGSA was meant to afford shippers.'" Monica
Textile, 952 F.2d at 643 (quoting St. Paul Fire & Marine Ins.
Co. v. SeaLand Serv., Inc., 735 F.Supp. 129, 132 (S.D.N.Y.
1990)). See also Int'l Adjusters, 682 F.Supp. at 386
("international uniformity is best achieved by the approach . . .
that generally a container supplied by the carrier is not a COGSA
package if its contents and the number of packages or units is
disclosed'"; quoting Mitsui & Co. v. American Expert Lines,
Inc., 636 F.2d 807, 821 (2d Cir. 1981) (Friendly, J.)).
For the reasons stated above, the Court denies the motions of
Nippon Express U.S.A. (Illinois) Inc. and Hanjin Shipping Co.,
Ltd. for partial summary judgment [docket # 34-1, 40-1]. Hanjin's
motion for protective order and to strike certain points from
Nippon's memorandum [docket # 48-1 & 2] is terminated as moot.
The Court previously granted Hanjin's motion to supplement its
argument [docket # 39-1], so that motion is also terminated. The
case is set for a status hearing on August 16, 2004 at 9:30 a.m.
for the purpose of setting a trial date and discussing the possibility of settlement. Trial counsel are
directed to appear.