Bad hair day

Bad hair day       A provision in the Carriage of Goods by Sea (COGSA) does not shield an importer and its agent from a liability provision in a bill of lading, an appellate court has found. (APL Co. Pte. Ltd. v. U.G. Co. Inc., Nos. 07-16739, 08-15078, Ninth Circuit, Sept. 21)
      In June 2003, U.G., a California company, sent purchase orders for 717,120 cans of hair spray and 59,760 cartons of hair mousse to Kamdar. Acting as purchasing agent, Kamdar purchased the goods from UK Aerosols, and authorized it to ship the goods on behalf of U.G. and Kamdar.
      UK Aerosols had APL ship the hair products from Istanbul, Turkey, to Long Beach, Calif. APL issued a bill of lading listing APL as carrier, UK Aerosols as shipper, Kamdar as 'notify party,' and U.G. as 'also notify party.'
      Clause 9 of the bill of lading provided that the 'merchant' must indemnify APL for any losses caused by the manner in which a container was packed by a party other than APL or the unsuitability of the goods for carriage.
      As defined in the bill of lading, 'merchant' included the shipper, consignee, receiver, holder of the bill of lading, owner of the cargo or person entitled to the possession of the cargo or having a present or future interest in the goods for carriage.
      Clause 19 required express written consent from APL for the carriage of hazardous goods. Regardless of whether the 'merchant' was aware of the hazardous nature of the goods, it must indemnify APL for losses arising as a consequence of the carriage of such goods.
      When the goods arrived in Long Beach, APL discovered that one of the containers in the shipment was leaking, dangerous and hazardous. APL spent about $700,000 in assessing, cleaning up, removing and ultimately disposing of the shipment.
      APL sued UK Aerosols, Kamdar, U.G., and Imp-Ex Solutions (a party later dismissed from the action), asserting negligence claims and contract claims. APL alleged the defendants had breached their indemnification obligations under the bill of lading.
      UK Aerosols failed to answer the complaint, and the district court entered default judgment against it.
      U.G. and Kamdar moved for summary judgment, arguing that certain provisions of the bill of lading were void because they violated provisions of COGSA.
      The district court held Clause 9 of the bill of lading would violate COGSA only to the extent that it imposed liability without fault on a party that was a 'shipper,' and because neither party had alleged that U.G. and Kamdar were 'shippers,' Clause 9 was not necessarily void. The district court also held that APL might not be able to prevail under Clause 19 if it was on notice of the hazardous nature of the goods, but that the issue of whether it had notice was a factual issue in dispute. Consequently, the district court denied summary judgment to U.G. and Kamdar on the contract claims. It did, however, enter summary judgment for U.G. and Kamdar on the negligence claims.
      Subsequently, U.G. and Kamdar filed a second motion for summary judgment. This time they argued that they were 'shippers' and certain provisions of the bill of lading were void as applied to them. APL, also filed for summary judgment, and argued that U.G. and Kamdar were contractually liable under the bill of lading for the negligence of UK Aerosols.
      The district court denied U.G. and Kamdar's motion and granted APL's, holding that U.G. and Kamdar were not 'shippers,' and thus not entitled to the protection of COGSA's rule against liability without fault. Since U.G. and Kamdar were contractually liable under clauses 9 and 19 of the bill of lading, the district court entered judgment against them for $733,963.10.
      Following the entry of judgment, APL filed a motion arguing under Singapore law the prevailing party is entitled to attorneys' fees. The district court denied the motion, holding COGSA controlled and no attorneys' fees would be awarded.
      U.G. and Kamdar filed an appeal of the summary judgment in favor of APL, and APL filed an appeal from the district court's denial of attorneys' fees.
      Section 1304(3) of COGSA provides the 'shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, fault or neglect of the shipper, his agents, or his servants,' while clause 9 of the bill of lading required a 'merchant' to indemnify APL for losses incurred as a result of 'the manner in which the container has been filled, packed, stuffed or loaded; or ' unsuitability of the goods for carriage in (the) container.'
      The court said the term 'merchant' would include U.G. and Kamdar as parties having a future right to receive the goods and the owner of the goods, respectively. But U.G. and Kamdar argued they were also 'shippers' entitled to the protection under COGSA and not obligated to indemnify APL because the leak was the result of UK Aerosol's negligent packing.
      While 'shipper' is not defined in COGSA the Ninth Circuit said for purposes of section 1304(3), a 'shipper' is a party separate and distinct from other parties to a bill of lading, including, in this case, the owners of the goods and those who have a future interest in the goods.
      After reviewing the statute and case law, the court said based on other provisions of COGSA's 'statutory scheme,' that because U.G. and Kamdar were not listed as the 'shipper' on the bill of lading the law did not shield them from liability under the bill of lading.
      U.G. and Kamdar argued they were not obligated to indemnify APL under Clauses 9 and 19 of the bill of lading. The court said Clause 9 would violate section 1304(3) of COGSA if it imposed strict liability on the shipper. But it said for liability under Clause 9 to set in, a person or entity other than the carrier (most likely the shipper) must act negligently or pack the container in a manner that would cause damage.
      It also added the bill of lading did not impermissibly lessen APL's liability, noting Clause 9 is not triggered if APL packed the containers that caused the damage.
      So the court found U.G. and Kamdar are contractually bound to indemnify APL under Clause 9. Having made this finding, the Ninth Circuit said it was unnecessary for it to consider the alternative liability issue raised under Clause 19.
      On the question of attorney's fees, the Ninth Circuit said, 'COGSA is silent.' It said APL was entitled to rely on the contractual choice-of-law provision in the bill of lading and reversed the district court's determination that Singapore law does not apply for the determination
of attorney fees, remanding the fee issue to the lower court.