Doosan Corp (Doosan) contracted with Glory Express Inc (Glory), a NVOCC, to ship a 'Doosan Brand Vertical Twin Spindle CNC Lathe' from Busan, Korea, to Los Angeles, California, USA, on the Hyundai Liberty. Glory issued three bills of lading. Each bill of lading identified Doosan as the shipper and the Hyundai Liberty as the exporting carrier. The Glory bills of lading container a forum-selection clause requiring that all suits relating to the carriage of goods be brought in New York.

Glory contracted with Hyundai Merchant Marine Co (Hyundai) to ship the lathe on its vessel, the Hyundai Liberty, via Streamline Shippers Association (Streamline). Hyundai issued a bill of lading identifying Streamline as the shipper. That bill of lading's jurisdiction clause required claims to be brought before the Seoul Civil District Court in South Korea.

The lathe was damaged on the sea voyage, resulting in more than USD 200,000 in damage. Kukje Hwajae Insurance Co Ltd (Kukje), as Doosan's insurer, paid the claim and initiated an indemnity action claiming for damage to cargo, breach of contract, negligence, breach of duty to care for property in bailment, and unseaworthiness. Kukje brought an action in personam against Glory and in rem against the Hyundai Liberty.

The District Court for the Central District of California dismissed the in rem action against the Hyundai Liberty and granted summary judgment on the in personam claim in favour of Glory.

Kukje and Glory appealed.

Held: Decisions affirmed.

The District Court erred by failing to enforce the forum-selection clause in the Hyundai bill of lading at the outset of the litigation. Nonetheless, the decision is affirmed.

The District Court properly dismissed Kukje's in rem action, albeit for a different reason. It is clear that Kukje's in rem action for cargo damage, characterised as a tort, is within the scope of the forum-selection clause. The text of the clause provides: 'Any and all action concerning custody or carriage under this Bill of Lading whether based on breach of contract, tort or otherwise shall be brought before the Seoul Civil District Court in Korea.' (But see Polo Ralph Lauren LP v Tropical Shipping Constr Co 215 F 3d 1217, 1220-21 (11th Cir 2000) (CMI1536) holding that, when COGSA applies, it provides the exclusive remedy for cargo damage claims, which are 'hybrid' contract-and-tort claims.) It also is clear that enforcement of the clause does not contravene COGSA, and can be enforced against Kukje, because the commercial role of a NVOCC, as well as the facts of this case, lead to the conclusion that Glory was acting as Doosan's agent when it accepted the Hyundai bill of lading. As a result, Doosan - and thus Kukje, as Doosan's subrogee - are bound by the forum-selection clause in the Hyundai bill of lading.

It is then necessary to consider whether the liability limitations contained in the Glory bills of lading meet the COGSA fair opportunity requirement. Section 4.5 of COGSA (art 4.5 of Hague Rules) 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 $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.

A carrier may limit its liability under COGSA, but only if the shipper is given a 'fair opportunity' to opt for a higher liability by paying a correspondingly greater charge. The carrier has the initial burden of producing prima facie evidence showing that it provided notice to the shipper that it could pay a higher rate and opt for higher liability. The carrier satisfies this burden by legibly reciting COGSA s 4.5 in the bill of lading. The burden then shifts to the shipper to prove it was denied such an opportunity.

Kukje does not contest the applicability of COGSA to the Glory bills of lading, but argues that Glory cannot rely on the COGSA limitations on liability because the Glory bills of lading do not comply with the 'fair opportunity' requirement.

The Glory bills of lading contain the following provision:

In case of any loss or damage to or in connection with goods exceeding in actual value the equivalent of $500 lawful money of the United States per package, or in case of goods not shipped in package, per shipping unit, the value of the goods shall be deemed to be $500 per package or per shipping unit. The Carrier’s liability, if any, shall be determined on the basis of a value of $500 per package or per shipping unit or pro rata in case of partial loss or damage, unless the nature of the goods and a valuation higher than $500 per package or shipping unit shall have been declared in writing by the Shipper upon delivery to the Carrier and inserted in this bill of lading and extra charge paid. In such case, if the actual value of the goods per package or per shipping unit shall exceed such declared value shall nevertheless be deemed to be declared value and the Carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value. The words 'shipping unit' shall mean each physical unit or piece of cargo not shipped in a package, including articles or things of any description whatsoever, except goods shipped in bulk, and irrespective of weight or measurement unit employed in calculating freight charges.

(Emphasis added by the Court.)

That provision meets the requirements of COGSA. It explicitly limits Glory's liability and informs the shipper (in this case, Doosan) that it can opt for higher liability by declaring the value of the goods and paying an extra charge. Kukje argues that the reference to 'shipping unit' invalidates the clause because it does not echo the statutory phrase 'customary freight unit' and therefore operates to reduce Glory’s liability below the level permitted by COGSA. When faced with a carrier’s attempt to reduce liability through enterprising definitions of 'package', other courts have redefined 'package' or 'customary freight unit' according to the dictates of COGSA. Other courts have not held the limitation of liability provision void altogether. Glory has established a prima facie case of compliance with the 'fair opportunity' requirement. Because Kukje has argued only that Glory failed to establish its prima facie case, and does not attempt to show that Doosan was denied the opportunity to declare a higher value, this Court affirms the District Court's holding that the Glory bills of lading comply with the 'fair opportunity' requirement of COGSA.