In October 2009, Greenpack of Puerto Rico Inc (the plaintiff) hired American President Lines (the defendant) to ship four crates of perishable food from Puerto Limón, Costa Rica, to San Juan, Puerto Rico. The defendant promised to convey the food within seven days but failed to do so. The food allegedly sat on the dock for several days before being loaded. The last container arrived in San Juan on 18 November 2009. The food was no longer fit to sell upon its& arrival in San Juan, and was duly decommissioned.

Although shipped separately, the four containers were governed by identical bills of lading. The paramount clause read as follows:

Prior to loading onto the Vessel and after discharge from the Vessel or if the stage of Carriage during which the loss or damage to Goods occurred cannot be proved, the Carrier's liability shall be governed under the Hague Rules, except that the limitation shall be US$500 per package or per shipping unit as stated in [the bill of lading's package limitation clause], and for this purpose the Hague Rules shall be extended to the periods before loading and sub-sequent [sic] to discharge and to the entire period of the Carrier's responsibility.

The paramount clause explicitly referenced US COGSA's relationship to the Hague Rules, stating that, for the tackle-to-tackle period,

the Carrier's responsibility shall be subject to the provisions of any legislation compulsorily applicable to this Bill of Lading ... which gives effect to the Hague Rules ... including adaptations thereof, such as [COGSA], the provisions of which shall apply on all shipments to or from the United States whether compulsorily applicable or not ...

The package limitation clause in the bills of lading read:

For shipments to and from the United States, neither the Carrier nor the Vessel shall in any event become liable for any loss of or damage to or in connection with the Carriage of Goods in an amount exceeding US$500 (which is the package or ship-ping [sic] unit limitation under ... COGSA) per package or in the case of Goods not shipped in packages per customary freight unit.

This clause further stated that '[it] applies in addition to and shall not be construed as derogating from any defense or exclusion, restriction or limitation of liability available to the Carrier under the terms of this Bill of Lading or otherwise'.

The bills of lading also contained a notice of loss and time bar provision establishing that:

[t]he Carrier shall in any event be discharged from all liability whatsoever in respect of the Goods, unless suit is brought in the proper forum and written notice thereof received by the Carrier within nine months after delivery of the Goods or the date when the Goods should have been delivered.

On 3 February 2011, the plaintiff filed suit in the San Juan Superior Court, alleging breach of contract. On 23 March 2011, the defendant removed the action to a federal court, the District Court for the District of Puerto Rico. The defendant moved for dismissal or judgment on the pleadings, arguing that all claims were time-barred under COGSA, because the shipment was governed by COGSA and its one-year time bar, which provided that:

the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.

In response, the plaintiff argued that the Harter Act, rather than COGSA, governed because the losses were likely to have occurred before loading and while the goods were in the defendant's custody. The plaintiff contended that COGSA governs only losses that occur while goods are onboard a ship. The plaintiff argued that claims governed by the Harter Act may be filed within a 'reasonable time' after the discharge of the goods, because the Harter Act contains 'no specific limitations period for suits by a consignee against a carrier'. The defendant contended that the bills of lading extended COGSA's coverage to the period before loading and after discharge, due to the paramount clause in the bills of lading. The plaintiff argued that the paramount clause incorporated 'only the liability provision' of COGSA, and that the COGSA time bar was not a COGSA liability provision. In turn, the defendant argued that a plain reading of the contract reveals the parties' intention to extend COGSA's provisions in full. The issue was therefore whether the bills of lading extended the time-bar provision of COGSA to the period when the damage allegedly occurred: ie prior to loading the cargo on board the ship.

The District Court for the District of Puerto Rico dismissed the plaintiff's complaint in its entirety, finding that the plaintiff's claims were subject to the one-year COGSA time bar and were time-barred. The plaintiff appealed.

Held: Decision affirmed.

For the purposes of its motion to dismiss, the defendant did not dispute that the loss may have occurred when the goods were in its possession prior to loading. The timing of the loss is germane to the question of which statute controls the parties' liability. COGSA is the United States' domestic enactment of the Hague Rules. COGSA applies when there is a contract for carriage of goods between a foreign port and a port of the United States, but only during the interval when the cargo is at sea. This is known as the 'tackle-to-tackle' period. Damage that occurred on the dock during the land portion of the shipment's journey, or outside of the tackle-to-tackle period (ie 'beyond the tackles'), would escape COGSA's statute of limitations. The Harter Act would govern instead.

Parties may agree to extend COGSA's coverage to the period either before loading of the goods, or after unloading of the goods, or both. The Court must look to the parties' intent as expressed in the bills of lading to determine the extent of any extension of COGSA beyond the original scope of the COGSA.

The Court rejected the plaintiff's contention that a plain reading of the paramount clause indicated that the parties meant to incorporate COGSA solely for the purpose of limiting the carrier's liability to USD 500, as per COGSA's limitation of liability provision. A natural reading of the paramount clause indicates that the parties intended a general extension of the provisions of COGSA to govern all issues relating to the carrier's liability arising during the period beyond the tackles, which would include COGSA's time-for-suit provision. The paramount clause had two relevant subsections, (i) and (iv). The first sets out the law that will govern the rights of the parties '[f]rom loading of the Goods onto the Vessel until [their] discharge', ie, tackle-to-tackle, while the second identifies the applicable law '[p]rior to loading onto ... and after discharge from the Vessel', ie, beyond the tackles. Subsection (iv) also indicates that, during that time,

or if the stage of Carriage during which the loss or damage to Goods occurred cannot be proved, the Carrier's liability shall be governed under the Hague Rules, except that the limitation shall be US$500 per package or per shipping unit as stated in [the bill of lading's package limitation clause]. …

The plaintiff focused on the phrase in subsection (iv) of the paramount clause that begins with 'except' and establishes a per package limitation of 'US$500' to the liability of the carrier. According to the plaintiff, this qualifying phrase was meant to narrow the preceding, more general language incorporating COGSA. The defendant argued, however, such language is not unusual in this context.

The Court did not accept that the qualifying phrase was meant to operate as a continuum of the first part of the sentence to confine COGSA's application solely to setting the package limitation rule. The Court reasoned that while the 'except' language in subsection (iv) of the paramount clause operates to qualify the general incorporation of COGSA to the period beyond the tackles, it does so only as an attempt to clarify and make certain the amount of liability per package that the defendant would be subject to in the event of suit.

The Court also rejected the plaintiff's suggestion that a contract must recite all 'elements' of a law that the parties would like to incorporate. A general reference to the statute in the contract (with any amendments, exceptions, or clarifications specified) will suffice, like the reference to COGSA in this case.

The Court rejected the other arguments made by the plaintiff, including that the language in the bills of lading was unclear, that the doctrine of laches applied under the Harter Act, and that no prejudice arose from the plaintiff's delay in presenting suit. As to the first argument, the language was found to be clear. As to the other arguments, the Court found them to be undeveloped and considered them waived.

Separately, the Court observed that COGSA's USD 500 limit will apply 'unless the nature and value of [the goods in carriage] have been declared by the shipper before shipment and inserted in the bill of lading'. Thus, the shipper retains the right to avoid the limitation by declaring a higher value, and a carrier who does not provide adequate notice of this possibility does so at its own peril. Parties may agree on a higher liability limit.