In May 1995, Tall Pony Productions Inc (Tall Pony) leased a mobile stage from In Any Event Inc (Any Event). Any Event had leased the stage from its owner, Stageline Mobile Stage Inc (Stageline), a Canadian manufacturer of mobile stages. Tall Pony subleased the stage in connection with an HBO Sinbad Special television production scheduled to take place in St Maarten. Tall Pony contracted with Tropical Shipping & Construction Co Ltd (Tropical), an ocean carrier, to transport the stage and other equipment from the Port of Palm Beach to St Maarten. Tropical and Tall Pony entered into a shipping contract, evidenced by a bill of lading, for shipment of the cargo on Tropical's vessel, the Tropic Tide. A separate clause in the bill of lading limited Tropical’s liability to USD 500 for each trailer or container prepared by the shipper (Tall Pony), except where Tall Pony declared a higher value for the equipment and paid the corresponding higher ad valorem tariff. Tropical contended that Tall Pony did not declare value for the shipment on the bill of lading and as such did not pay a higher tariff rate for its cargo, which the District Court noted would have been approximately USD 64,000.

Fireman’s Fund Insurance Co (Fireman's Fund) insured both Tall Pony and Any Event and to that end, issued Tall Pony with a blanket policy. The policy insured against all risks of direct physical loss or damage to the property covered, and did not contain an exclusion for property damage incurred during the loading and transport of the stage. Fireman’s Fund issued a certificate of insurance on behalf of Tall Pony and in favour of Stageline for the stage. As the lessee of the stage, Any Event was required to indemnify Stageline for damage to the stage. Tall Pony, the sub-lessee and actual user of the stage, was in turn legally obliged to indemnify Any Event for any amounts paid to Stageline arising from damage to the stage.

Shortly before the scheduled shipment date, an underwriter from Fireman’s Fund informed Tall Pony that its policy did not cover the loading and ocean transport of the stage, and that Fireman’s Fund did not wish to underwrite risks associated with shipping by water. Tall Pony contacted Tropical to enquire about obtaining marine cargo insurance for the shipment. Tropical referred Tall Pony to Seven Seas Insurance Co (Seven Seas), who provided 'open-cargo' or 'open-sea' insurance for the ocean transport of the stage, listing Tall Pony as named assured.

Tropical employed Birdsall Inc (Birdsall), a stevedore, to load the stage onto the vessel through the use of a crane with spreaders. The crane was manufactured by Bromma Inc (Bromma). During loading, the crane failed and dropped the stage onto the dock, causing its total destruction.

In 1996, Tall Pony, Fireman's Fund, and Any Event commenced an action in the District Court against Tropical, Birdsall, Bromma, and Stageline, and against the Tropic Tide in rem. In August 1997 the District Court held that the mobile stage constituted a single package for the purposes of s 4(5) of the Carriage of Goods by Sea Act (COGSA), and therefore the defendants' liability was limited to USD 500. The District Court found that Tall Pony was on constructive notice of the contents of the bill of lading which contained a clause paramount that expressly adopted the provisions of COGSA; and that Tall Pony failed to declare a higher value and, therefore, pay a higher tariff rate for its cargo in order to opt out of the COGSA limitation. The District Court held that the bill of lading legibly and clearly described the stage as 'one unit' or 'package' for the purposes of COGSA. The District Court further held that Birdsall's liability was limited to USD 500 pursuant to the Himalaya clause contained in the bill of lading. In February 1999, the District Court held a bench trial on the issue of liability and found that Birdsall was negligent, and that its negligence was the proximate cause of the damage to the stage. The District Court further held that Tropical was vicariously liable to Tall Pony and Fireman’s Fund. However, because of the District Court’s prior ruling, Birdsall's and Tropical's liability was limited to USD 500.

Fireman's Fund and Tall Pony appealed on the ground that the District Court erred in holding that Tropical and Birdsall had limited liability under s 4(5) (art 4.5 of the Hague Rules).

Held: Appeal dismissed. The decision of the District Court that the USD 500 limitation on liability applied to the claims against Tropical and Birdsall is affirmed.

The parties do not dispute that COGSA, which governs 'all contracts for carriage of goods by sea to or from ports of the United States in foreign trade' (Polo Ralph Lauren LP v Tropical Shipping & Construction Co Ltd 215 F 3d 1217, 1220 (11th Cir 2000) (CMI1536)), applies to Fireman's Fund's and Tall Pony's claims against Tropical and Birdsall for the property damage to the stage.

However, Fireman's Fund and Tall Pony argue that, because the stage was an unpackaged piece of machinery, the USD 500 COGSA limitation should be multiplied by each 'customary freight unit', which they contend is cubic feet. Thus Fireman's Fund and Tall Pony contend that the maximum recovery they are entitled to is USD 500 multiplied by 5,304 cubic feet, or USD 2,652,000, which far exceeds the USD 474,023 they sought. In response, Tropical and Birdsall argued that the stage constituted one 'package' for the purposes of COGSA. Therefore they contended that any recovery should be limited to USD 500.

Section 4(5) of COGSA provides:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding USD 500 per package ... , or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

The bill of lading extended the applicability of COGSA 'from the time when the goods are received by the Carrier … at the port of loading until they are delivered or dispatched by the Carrier … at the port of discharge'.

To invoke the limitation on liability under s 4(5), the carrier must satisfy two preconditions. First, the carrier must give the shipper adequate notice of the USD 500 limitation by including a clause paramount in the bill of lading that expressly adopts the provisions of COGSA. Second, the carrier must give the shipper a fair opportunity to avoid COGSA s 4(5)'s limitation by declaring excess value.

Paragraph 2 of the bill of lading is entitled 'Clause Paramount', and provides that the bill of lading is subject to the provisions of COGSA, and that the carrier is entitled 'to any privilege and right and immunity provided [under COGSA]'. The clause paramount put Tall Pony on constructive notice that it could declare a higher value for its cargo on the bill of lading. The bill of lading also put Tall Pony on actual notice that it could opt out of the COGSA liability limitation by declaring a higher value for the shipment and paying an extra freight charge. The bill of lading's Himalaya clause extended the limitation on liability to Birdsall, which functioned as the stevedore during the loading of Tall Pony's shipment.

This Circuit has adopted the Second Circuit’s definition of 'package' under COGSA: 'The meaning of "package" ... can therefore be said to define a class of cargo, irrespective of size, shape or weight, to which some packaging preparation for transportation has been made which facilitates handling, but which does not necessarily conceal or completely enclose the goods': see Fishman & Tobin v Tropical Shipping & Constr Co Ltd (CMI1663).

Several principles guide the determination of whether the mobile stage constitutes a single 'package' under COGSA. The number of packages should be fully and accurately disclosed and easily discernable by the carrier. In the bill of lading, the parties listed the mobile stage trailer as one unit. This designation, along with the terms of the bill of lading incorporating the provisions of COGSA and expressly invoking the USD 500 per package limitation on liability under COGSA for loss or damage to the shipment, is important evidence of the intent of the parties to the shipping contract. Tall Pony argued that because the stage's design does not require packaging for it be transported by an ocean carrier, it cannot be classified as a 'package'. Tall Pony cannot be permitted to hide behind the sophisticated technology and design of the stage to avoid the unambiguous terms of the bill of lading and the description of the stage as one unit in the bill of lading, and thereby expose carriers like Tropical to unforeseen liability. The packaging of the stage is effectively incorporated into the design of the stage, which becomes one 'package' when folded up.

There is nothing in the bill of lading or in the statute that justifies the assumption that a cubic foot constitutes a customary freight unit. It would be highly artificial to attribute a USD 500 ceiling of liability to each cubic foot of the stage.

The amount listed in the bill of lading was the insurable value of the stage, and was not the declared value which would have required Tall Pony to pay a significantly higher ad valorem freight charge. The burden is on the shipper to ensure that the declared value is properly documented on the bill of lading. Under COGSA, the shipper must declare the value of its goods and pay higher freight if it wants to have greater liability placed on the carrier. If Tall Pony had declared the value, the ad valorem freight tariff would have been USD 64,000. Instead, Tall Pony opted to rely on its insurance policy with Seven Seas to insure its cargo. Tall Pony made a business decision in favour of insurance coverage and paid a premium of USD 9,807.40.