GAF Corp manufactured 75 drums of a plant regulator and arranged with Dart Containerline Co Ltd and Dart Containerline Inc (the defendants) for 'house to house' shipment in a container with ocean transport to Bremen, West Germany. Global Terminal & Container Services (Global Terminal), acting on behalf of the defendants, tendered an empty 40-foot container to GAF Corp for loading. The loaded container was returned to Global Terminal. A clean bill of lading was issued which indicated that the carrying vessel was the MV Dart Europe with the discharge port being Bremen, West Germany. The container was discharged at Hamburg, West Germany, and the defendants were to transport the container to Bremen by land. However, while the container was being moved at the sea terminal in Hamburg, the bottom right rail separated from the container. This caused the drums to drop onto the pier and onto other containers stowed below.

GAF (Osterreich) GmbH (the plaintiff), the purchaser of the drums, brought an action against the defendants seeking damages. The defendants sought partial summary judgment limiting their potential liability for cargo damage and loss to a maximum of USD 500 per package. The defendants relied on the United States Carriage of Goods by Sea Act (COGSA) which states in 46 USC § 1304(5):

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 $500 per package lawful money of the United States, 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 plaintiff sought to strike out the defendants' affirmative defences based on limited liability, and accordingly filed a cross motion for partial summary judgment. The sole issue was whether the package liability limitation in 46 USC § 1304(5) was applicable. The defendants relied upon the incorporation of COGSA in the bill of lading. The plaintiff argued that the loss occurred when the defendants furnished the defective container, and thus prior to the time that COGSA was operative. The bill of lading contained a clause paramount which provided in part that COGSA would govern 'at sea terminals before loading on and after discharge from the vessel’.

Held: The defendants' motion for partial summary judgment is granted. The plaintiff's cross motion is denied.

COGSA limits the liability of the ocean carriers for cargo loss or damage to USD 500 per package, unless a higher valuation is declared or a higher limitation figure is agreed upon (46 USC § 1304(5)). COGSA applies to contracts of carriage by sea 'to or from ports of the United States in foreign trade' (46 USC § 1312). COGSA only applies from the time the goods are loaded to the time they are discharged from the ship (46 USC § 1301(e)). Parties may extend the applicability of COGSA to periods prior to loading or subsequent to discharge (46 USC § 1307).

By the clause paramount in the bill of lading, COGSA's coverage was explicitly extended by the parties. It is undisputed that the drums were damaged at the sea terminal in Hamburg and thus within the time period when COGSA was applicable. No loss or damage occurred when the container was delivered to the plaintiff nor at any time prior to the incident at Hamburg.

If the plaintiff's position was accepted, it would circumvent an essential purpose of COGSA, which was to strike a balance between the interests that sought to exonerate the carrier from all claims based upon its negligence, and the interests who wish to hold carriers responsible for the consequences of any sort of negligence.