This appeal arose from a judgment in favour of the underwriters, International Marine Underwriters, and the consignee, Holland America Bulb Farms Inc. The case concerned a cargo of iris flower bulbs shipped from Rotterdam to Seattle in a sealed refrigerator container on the Incotrans Pacific, a vessel owned by Hapag-Lloyd (America) Inc (Hapag-Lloyd). The underwriters brought an action for negligence and breach of contract against Hapag-Lloyd under the US Carriage of Goods by Sea Act (COGSA), 46 USC §§ 1300-1315. The District Court found that the underwriters made out a proper prima facie case under COGSA by showing that the cargo was delivered to Hapag-Lloyd in good order. Hapag-Lloyd appealed on two points: 1) the underwriters along with the consignee had not been able to establish a proper prima facie case under COGSA; and 2) the District Court’s causation analysis was erroneous.

Held: The judgment of the District Court is affirmed. The underwriters' motion for sanctions for frivolous appeal is denied.

Hapag-Lloyd argued that the underwriters, along with the consignee, had not been able to establish a proper prima facie case under COGSA, and that the District Court had erred in reaching its findings. Under COGSA, a shipper establishes a prima facie case against the carrier by showing that the cargo was delivered in good condition to the carrier, but was discharged in a damaged condition by the carrier: Re Damodar Bulk Carriers Ltd 903 F 2d 675 (9th Cir 1990) (CMI742). The burden of proof then shifts to the vessel owner to establish that the loss came under a statutory exception to COGSA: Taisho Mar & Fire Ins v MV Sea-Land Endurance 815 F 2d 1270 (9th Cir 1987); J Gerber & Co v SS Sabine Howaldt 437 F 2d 580 (2d Cir 1971).

The underwriters established that the cargo was delivered to the carrier in good condition by showing: 1) the clean bill of lading that was issued; 2) the phytosanitary certificate, supported by the oral testimony of the Holland America representative, Benno Dobbe; and 3) the Midbrook Flower Bulbs Holland container checklist. The District Court correctly found that the underwriters established a proper prima facie case under COGSA.

Hapag-Lloyd also challenged the District Court’s causation analysis. The Court of Appeals found that neither the underwriters nor the District Court was obligated under COGSA to advance a theory of causation. However, the District Court specifically found that: 1) the insulation on the container was saturated; 2) as a result, the insulation failed; and 3) the moisture inside the container was created by this insulation failure.

Hapag-Lloyd argued that: 1) there was no evidence that the insulation was ever wet, and no witness ever looked at the insulation; 2) the insulation could not have failed because the Ryan and Partlow charts indicated that the container remained within the required limits throughout the voyage, and the refrigeration equipment did not malfunction; 3) every surveyor who had examined the container testified that the bulbs on the floor inhibited air circulation and caused the build-up of moisture; nevertheless, the District Court had ignored the effect of the bulbs in the circulation gratings and the drains, for a theory of insulation-failure unsupported by objective findings; and 4) the Court’s theory of causation violated the laws of physics.

Hapag-Lloyd’s arguments had no merit. The District Court had sufficient basis for its theory, and was not erroneous in its analysis.