Limitation on Liability Under COGSA
Limitation on Liability Under COGSA
By: Kevin Phillips
In OOO "GARANT-S” v. EMPIRE UNITED LINES CO., INC., MICHAEL KHITRINOV AKA MICHAEL HITRINOV, No. 13-1685-cv (2nd Cir. 2014), the Second Circuit affirmed the district court’s summaryjudgment. Empire United Lines, with Khitrinov as its sole shareholder, served as a carrier for Garant-S in the field of shipping cars.The main dispute arose concerning the loss of two packages, containing a car apiece, after they arrived at port to be loaded on the ship. The claim was brought under the Carriage of Goods by the Sea Act (COGSA),to place limitations on Empire’s liability for the loss. By default, COGSA limits the carriers liability to $500 per package (here $1000 for 2 cars), which was less than the value of the cars. The shipper could declare a different value on the bill of lading, but here a bill of lading never issued. The court found that COGSA applies per se as soon as cargo is loaded on a vessel, which will be traveling between a port in the States and a foreign port. The court also noted that the scope of COGSA coverage could be expanded by reviewing past bills of lading. After reviewing previous bills of lading between the parties, and Empire United Lines’ house bill of lading, the court expanded coverage to when the package arrived at the port to be loaded. Therefore the coverage of liability was expanded in this instance even though the bill of lading, which normally controls under COGSA, was never issued because it would customarily be issued later inthe shipping process.Garant-S argued that COGSA did not apply as there had been an “unreasonable deviation” on Empire United Lines’ part. The court assumes arguendo that Empire United Lines played a part in the alleged theft of the two cars, and found no unreasonable deviation. The court was unwilling to recognize any unreasonable deviations that were not recognized before COGSA because the objective of COGSA is to provide simplicity to the shipping process, and finding that COGSA does not apply opens the door to the complexity of having to find when it does apply. The court finds that unreasonable deviation can only occur 1) ”when a vessel geographically departed from its scheduled and anticipated route,” 2) when there has been “unauthorized on-deck stowage,” and 3) when “the issuance of billsof lading incorrectly stat[ed] that goods have been received on board.” The court went on to find cases, which found no unreasonable deviation but finding theft and brides to be analogous.Finally, the court held that Garant-S was provided a “fair opportunity” because although the bill of lading, which never issued, did not contain a space for declaring a higher value, it did inform the shipper that he could do. In the past, Garant-S had declared higher values for the hundreds of cars it had shipped with Empire. Therefore, this shows that Garant-S knew it could have declared a higher value but chose not to do so. The court does not address how Garant-S was supposed to do this before the physical bill of lading had issued, but does find “that [Garant-S’] interactions with Empire were [not] materially different such that the previous method it used for declaring excess value was not available in this particular instance.”
For these reasons the court held that the corporate veil could not be pierced and that COGSA’s default limitations on liability did apply.
