Senator Linie GMBH & Co. KG v. Sunway Line, Inc.

291 F.3d 145, 2002 WL 1011296
Court of Appeals for the Second Circuit·Decided May 17, 2002·No. Docket No. 01-7374·Published·Cited by 15 cases

Opinion

SOTOMAYOR, Circuit Judge.

This appeal poses the question of whether, under § 4(6) of the U.S. Carriage of Goods by Sea Act (“COGSA”), 46 U.S.CApp. § 1304(6), a shipper may be held strictly hable for damages and ex[148]*148penses resulting directly or indirectly from shipments of inherently dangerous goods when neither the shipper nor the carrier had actual or constructive preshipment knowledge of the goods’ dangerous nature. Plaintiff-appellant Senator Linie GMBH & Co. KG (“Senator”), which incurred damages arising from the spontaneous combustion of a chemical cargo aboard its ship, the MTV Tokyo Senator, argues that defendants-appellees shippers (collectively, “the Shippers” or “defendants-appellees”) are liable under § 1304(6) even if, prior to the shipment, they did not know and could not have known that the chemical cargo was inherently dangerous.

The Shippers respond by arguing that § 1304(6) sets forth a negligence- or knowledge-based rale and that liability under that provision may be imposed only if Senator can show that the Shippers had actual or constructive preshipment knowledge of the inherent danger of the chemical cargo. The Shippers further contend that § 1304(6) codified a well-settled federal maritime common-law rule that shippers could not be held to give an absolute warranty for the fitness of cargo, and that in 1936, when COGSA was enacted, this rule was chiefly represented by a decision of this Court, The Wm. J. Quillan, 180 F. 681 (2d Cir.1910). We disagree.

An examination of the plain meaning of the statute reveals that § 1304(6) sets forth a risk-allocating rule that renders a shipper strictly liable for damages in the event that neither the shipper nor the carrier knew or should have known that shipped goods were inherently dangerous. Contrary to the Shippers’ position, we are unpersuaded that COGSA, which “represents the codification of the United States’ obligations under the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading [the ‘Hague Rules’],” J.C.B. Sales Ltd. v. Wallenius Lines, 124 F.3d 132, 134 (2d Cir.1997), incorporated the shipper liability rule set forth in Quillan. As discussed below, while the history of COGSA and the Hague Rules is largely silent as to the kind of liability that the drafters intended when they adopted § 1304(6), that history is not inconsistent with a rule of strict liability for shippers of inherently dangerous goods.

Even if COGSA legislators had set out to codify general maritime law, they would have found no firmly established rule of shipper liability in the dangerous-goods context. Pre COGSA case law reflected disagreement over the nature and scope of such liability. In light of this unsettled law, and because § 1304(6) speaks directly to the issue of shipper knowledge and liability, we conclude — as did the House of Lords in Effort Shipping Co. v. Linden Mgt. SA, [1998] A.C. 605 (H.L.1998), with respect to the British counterpart of § 1304(6) — that enactment of § 1304(6) established a rale of strict liability for a shipper of inherently dangerous goods when neither the shipper nor the carrier had actual or constructive preshipment knowledge of the danger. This construction of § 1304(6) is consonant with COG-SA’s goals of fostering international uniformity in sea-carriage rules and allocating risk between shippers and carriers in a manner that is consistent and predictable.

Application of § 1304(6) to the unusual facts of this case presents an issue of first impression in this Circuit. Because this case involves the rare circumstance in which neither party had actual or constructive preshipment knowledge of the cargo’s inherently dangerous nature, we hold that the Shippers are strictly liable for the damages incurred by Senator. We therefore vacate that part of the district court’s judgment granting the Shippers’ motions for judgment, and remand for proceedings consistent with this opinion.

[149]*149BACKGROUND

The stipulated facts in the parties’ Joint Pretrial Order together with the district court’s factual findings form the basis of the following summary.

On April 28, 1994, a fire broke out in the forward hold of the M/V Tokyo Senator (the “Tokyo Senator”) as she made for the coast of Norfolk, Virginia. The vessel was bound from Pusan, Republic of Korea, where she had taken on a cargo of 300 drums of thiourea dioxide (“TDO”) originally exported from the People’s Republic of China. At about 10:30 pm on April 28, the captain observed smoke coming from hold number 2, in which the TDO container was stowed. The contents of the TDO container were emitting heat, smoke, and chemical residue. After the fire had been brought under control, a fire expert, discovering that a number of TDO drums were charred, concluded that the fire had broken out within the TDO container. In a separate but related action in the Southern District of New York, Judge Lynch noted that “at least one of the thiourea dioxide drums spontaneously ignited. Other containers then caught fire.... ” Zen Continental Co., Inc. v. Intercargo Ins. Co., 151 F.Supp.2d 250, 255 (S.D.N.Y. 2001).

TDO is a white, odorless powder used as a reducing agent and in the bleaching of protein fibers such as paper, paper pulp, and textiles. At the time of the shipment in question, TDO was considered a stable compound under normal conditions.1 According to trial testimony which the dis[150]*150trict court in the instant case found credible, the fire resulted from an exothermic (or heat-releasing) reaction within the container holding the TDO drums. M/V Tokyo Senator, 2001 WL 238293, at *1. Although there are several possible causes of an exothermic reaction in TDO — including exposure to excessive heat or to moisture2 —the district court found that the plaintiffs3 below had failed to establish the actual cause of the exothermic reaction or that any particular party was responsible. Id4 The fire resulted in damage to the vessel and other cargo. At trial, Senator proved damages in the amount of $439,785.88. Id. at *3. The district court found that defendants-appellees Zen, Sino-chem, Sunway, and Eastern Sunway were all shippers in relation to Senator. Id. at *1, *4.5 Defendants-appellees do not dispute this finding.

At the time of the shipment in this case, TDO was not named as a hazardous or dangerous cargo in the International Maritime Dangerous Goods Code (“IMDGC”) or in the Department of Transportation Hazardous Materials Table. Id. at *2. It was not until 1998 that TDO was specifically listed as a hazardous or dangerous material in the IMDGC, and not until 1999 that TDO was listed as a dangerous cargo in the Code of Federal Regulations. The district court found, moreover, that at the time of the incident aboard the Tokyo Senator, “the vast majority of the available literature did not describe an exothermic reaction as a likely result of the decomposition of TDO.” M/V Tokyo Senator, 2001 WL 238293, at *1.

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Senator Linie GMBH & Co. KG v. Sunway Line, Inc., 291 F.3d 145, 2002 WL 1011296 (2d Cir. 2002).

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Senator Linie Gmbh & Co. Kg v. Sunway Line, Inc.
291 F.3d 145 (Second Circuit, 2002)