Nigerian Star Line Ltd (NSL) contracted with BMA Industries Ltd (BMA) to carry a container from New York to Port Harcourt, Nigeria. The container arrived intact in Port Harcourt, where NSL transported it to a warehouse maintained by one of NSL's agents, Lagos & Niger Shipping Agencies Ltd (LANSAL). Mediterranean Agencies, another of NSL's agents, issued six bills of lading on behalf of NSL. The front side of the six bills of lading bore the following stamped legend:

Cargo to be released only against submission of original duly endorsed bills of lading. No bank letters of guarantee &/or any other means are acceptable.

The arrangement was that the consignee, Comfortex, had to pay USD 185,000 to BMA by sight drafts for the bills of lading to be endorsed and released to it. Comfortex would have to present the bills to NSL to receive the cargo in exchange. LANSAL released the goods to Comfortex upon its presentation of a warehouse delivery order instead.

BMA sued NSL in the Southern District of New York for cargo misdelivery for the full value of the cargo, USD 187,703.35. NSL argued that the Carriage of Goods by Sea Act, 46 USC § 1300 ff (COGSA) limited NSL's liability to USD 500 per package. The parties also disputed the reasons for the misdelivery. BMA claimed that it came about through the payment of a bribe to a LANSAL employee. NSL contended it happened because a BMA officer gave LANSAL confusing directions regarding delivery. In any event, BMA alleged that it had never been paid for the goods.

The District Judge held that NSL breached the contract of carriage by misdelivering the goods, but COGSA governed at the time of the loss and limited NSL's liability to USD 500 for each of the six bills of lading. He also rejected BMA's argument that it was entitled to recover its full claim because misdelivery was an unreasonable 'deviation', barring NSL from relying on COGSA's limitations.

The District Court entered summary judgment for NSL, and BMA appealed. NSL cross-appealed from the District Judge's award to BMA for USD 3,000 in damages.

Held: The judgment of the District Court is affirmed.

The Court of Appeals reaffirmed the rule that misdelivery of cargo was not a deviation that barred resort to the protections of COGSA. The concept of deviation grew out of the pre-COGSA law of marine insurance. A carrier's inexcusable deviation from its voyage contract would often void insurance on the cargo. To protect shippers from cargo loss, the courts developed a rule that a deviation would prevent a carrier from invoking limitations on liability written into the contract of carriage: see Thyssen Inc v SS Fortune Star 777 F 2d 57, 63-65 (2d Cir 1985).

Originally, the doctrine of deviation covered only cases of geographic departure from the voyage contract: see, eg, The Willdomino v Citro Chemical Co 272 US 718, 47 S Ct 261, 71 L Ed 491 (1927). Other decisions extended the concept of deviation to unauthorised on-deck stowage (or 'quasi-deviation') prior to the enactment of COGSA: see St Johns NF Shipping Corp v SA Companhia Geral Commercial 263 US 119, 44 S Ct 30, 68 L Ed 201 (1923), and after the enactment of COGSA: for on-deck stowage ousting COGSA's USD 500 per package limitation, see Encyclopaedia Brittanica v SS Hong Kong Producer 422 F 2d 7, 18 (2d Cir 1969) (CMI1649); Jones v The Flying Clipper 116 F Supp 386 (SDNY 1953). Nevertheless, the principle of quasi-deviation was arguably inconsistent with COGSA, which was applicable to the present situation, and is 'not one to be extended': see Iligan Integrated Steel Mills Inc v SS John Weyerhaeuser 507 F 2d 68, 72 (2d Cir 1974). As Iligan implied, the enactment of COGSA strengthened the rationale of cases that limit the doctrine: see also Hellyer v Nippon Yesen Kaisya 130 F Supp 209, 211 (SDNY 1955)). The Court of Appeals found no reason to depart from these authorities.

COGSA applied at the time of the loss. The bills of lading provided that COGSA would apply until the goods were 'delivered or despatched by the Carrier from the sea terminal at the port of discharge'. NSL did not have storage facilities in the wharf area of Port Harcourt and could not have stored containers there, due to the area's congestion and lack of security. In light of practical realities, there was ample reason to characterise LANSAL's warehouse as NSL's 'sea terminal', even though the warehouse was several miles inland. Accordingly, COGSA applied when LANSAL improperly released the cargo at its warehouse.

The doctrine of deviation did not extend to cover corrupt or criminal misdelivery situations. Before the enactment of COGSA, the courts uniformly refused to characterise misdelivery as a deviation: see Bank of California NA v International Mercantile Marine Co 64 F 2d 97, 99 (2d Cir 1933) (surrender of goods to person not holding bill of lading does not displace contractual limitation of liability); The Jean Jadot 9 F Supp 162, 162-64 (SDNY 1934). The courts have taken the same position after the enactment of COGSA. In Hellyer 130 F Supp 209, Judge Weinfeld concluded, relying in part on the pre-COGSA case law, that non-delivery was not drastic enough a deviation to oust COGSA's one-year limitation period: compare Italia de Navigazione SpA v MV Hermes I 724 F 2d 21 (2d Cir 1983)).

The Court of Appeals' conclusion was not affected by the alleged criminal receipt of a bribe related to the misdelivery. Assuming that NSL bribed LANSAL's employee, the commission of the crime would not make misdelivery a deviation. The Court of Appeals had repeatedly declined to extend the doctrine of deviation on the basis of culpability or crime. In Hermes I 724 F 2d 22, the Court of Appeals held that 'systematic thefts' by a carrier's officers and crew did not rise to the level of a deviation. The Court of Appeals in Iligan 507 F 2d 72 rejected the notion that a carrier's 'wanton and willful misconduct in tendering an unseaworthy ship' was a deviation: see Bank of California 64 F 2d 99, citing the rule that a carrier is entitled to the benefit of bill of lading clauses despite theft by carrier's employees. In Iligan 507 F 2d 72, Judge Friendly wrote that probing a carrier's culpability would create too much uncertainty if a possible deviation were to hang in the balance.

The Court of Appeals applied Iligan to the present case. The Court of Appeals declined to extend the doctrine of deviation, which had been criticised by commentators and this Court as one of 'doubtful justice under modern conditions, of questionable status under COGSA, and of highly penal effect': Hermes I 724 F 2d 23. To disregard precedent and fashion a rule that criminal misdelivery is a quasi-deviation, would be inviting shippers to 'demand a further inquiry into the degree of the carrier's culpability, with enormous potential liability ... riding on the decision of the fact finder', in nearly every case of improper delivery: Iligan 507 F 2d 72).