Fortis Corporate Insurance SA (the plaintiff) insured a cargo of 176 steel coils belonging to Metallia LLC (Metallia). The coils were carried from Szczecin, Poland, to Toledo, Ohio, on the Inviken. During the journey, seawater entered the cargo hold containing the steel coils, and caused significant rust damage to 99 of them. The plaintiff, as underwriter, paid Metallia USD 375,000 for the damage to the steel coils. The plaintiff then brought a lawsuit as Metallia’s subrogee, alleging negligence and breach of bailment against the Inviken's owner, Viken Lakers, along with the ship's manager, Viken Ship Management AS (the defendant).

Viken Lakers and the defendant moved for summary judgment on the basis that the suit was filed beyond the one-year statute of limitations provided for in 46 USC ss 1300 ff (COGSA). COGSA generally applied 'to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade'. COGSA provides that 'carriers' are subject to certain statutory 'responsibilities and liabilities', and in turn, are provided with certain 'rights and immunities', such as the one-year statute of limitations. The plaintiff did not dispute that the suit was brought outside the one-year statutory period provided for in COGSA, but instead argued that COGSA did not apply to this dispute, because neither Viken Lakers nor the defendant was a carrier covered by the terms of COGSA. The District Court agreed with Viken Lakers that it was a carrier, and that the suit against it was barred by the one-year statute of limitations. However, it found that the defendant was not a COGSA carrier, and therefore could not invoke the one-year statute of limitations. COGSA provided that '[t]he term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper', and the District Court found that the defendant could not qualify as a carrier because it was not an owner or charterer that was a party to the contract of carriage.

The defendant raised two principal arguments on appeal. It argued that, contrary to the District Court's ruling, it was a COGSA carrier, and was therefore entitled to invoke COGSA's one-year statute of limitations as a defence, effectively barring the suit below.

Held: Appeal dismissed.

COGSA imposes particularised duties and obligations upon, and grants stated immunities to, the carrier. It is drafted to address the belief that carriers use their superior bargaining power against shippers when contracting for the carriage of goods, and can often dictate the terms of bills of lading to exempt themselves from any liability. To counteract this inequality, COGSA sets baseline liabilities for carriers. It allows parties to contract out of its terms, but only in the direction of increasing liability for carriers; parties cannot contractually limit a carrier’s liability.

COGSA defines 'carrier' as follows: 'The term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper.' The defendant argues that the District Court took an unduly formalistic approach to COGSA's provisions when it held that the defendant did not qualify as a carrier. The defendant asks this Court to endorse a practical or functional approach in determining which entities qualify as COGSA carriers. Under this approach, the critical question is whether the entity in question performs a function traditionally carried out by a carrier even if, due to the advances in the shipping industry in the 70-plus years since COGSA was enacted, it does not meet the traditional view of what qualifies as a carrier under COGSA. This view, the defendant argues, best accords with the language of COGSA, which defines 'carrier' in an open-ended fashion to include owners and charterers who enter contracts of carriage, but does not expressly exclude any actor in particular. Moreover, the defendant argues that this approach best effectuates COGSA's purposes in the modern shipping world where ship managers and owners operate 'hand-in-glove', with managers often carrying out the duties traditionally belonging to shipowners. While no circuit has endorsed this functional test, it has its supporters.

However, the Supreme Court found in Robert C Herd & Co v Krawill Machinery Corp 359 US 297, 79 S Ct 766, 3 L Ed 2d 820 (1959) (Herd: see CMI1735) that COGSA's plain terms applied only to carriers, and not agents thereof.

The defendant tries to distinguish this case on two grounds. First, it argues that the 'Supreme Court held in Herd that because the stevedoring services occurred prior to the inception of the tackle-to-tackle period covered by COGSA, COGSA had no application'. This is a clear misreading of Herd. The Supreme Court ruled on the broader basis that a carrier's agents simply are not covered by COGSA's terms, even when they carry out the carrier's obligations.

Second, the defendant attempts to distinguish Herd on the basis that the stevedoring company, in that case, did not argue that it was a COGSA carrier, as the defendant does here, but instead argued that COGSA should be extended to cover the agents of carriers. That is, the rejected argument in Herd was that a shipowner's agents should be treated as carriers when performing the functions of a carrier, whereas the defendant now argues that such agents simply are carriers. Rather, it argued that COGSA should apply to it 'as well as' the carrier or, alternatively, it could benefit from COGSA limitations of liability as an 'agent' of the carrier. In so far as these two arguments can even be described as distinct, any distinction is meaningless. The Supreme Court in Herd rejected the argument that agents of a carrier who perform the tasks of carriage are covered by COGSA. For this Court to conclude that those same agents performing the same tasks of carriage are, in fact, carriers would be a clear circumvention of Herd and render it meaningless.

The defendant complains that, unless it is covered as a COGSA carrier, it will be subjected to all of the liabilities of a carrier with none of the protections. This is not true. The defendant is subjected to neither the liabilities nor the protections of a COGSA carrier. For instance, COGSA utilises a complicated burden-shifting mechanism that effectively leaves carriers liable for any damage to cargo, unless they meet the affirmative burden of proving that they exercised due diligence to prevent the damage. The defendant was not subjected to that burden, or any other burden that COGSA imposes upon carriers, in the District Court. Instead, it was held liable for common-law negligence in managing the Inviken and, in that capacity, it was treated as a simple tortfeasor.

It is important to note that shipping parties are free to extend COGSA's coverage by adding provisions to bills of lading extending the COGSA regime to any and all agents or independent contractors who participate in the shipment of goods under a particular contract. These contractual provisions are known as Himalaya clauses. If the parties in this case wanted the defendant to be covered by COGSA's terms, they could have provided for that contractually, but they chose not to do so. This is especially telling when the parties were contracting against the backdrop of nearly uniform case-law refusing to extend COGSA's liabilities and immunities to ship managers, absent such a Himalaya clause. The value of maintaining uniformity between circuits is at a premium in cases involving the interpretation of maritime contracts, especially when the parties can easily alter the terms of their contracts to react to prevailing case-law.

Finally, the defendant argues that it is already established that it is a carrier, because this Court and the District Court treated the defendant and Viken Lakers as 'in essence, the same company', when evaluating the initial jurisdictional question. Viken Lakers was found to be a carrier, and the defendant argues that if it is in essence the same company as Viken Lakers, it must also be a carrier. This argument falters, because treating two entities as equivalent for jurisdictional purposes does not somehow mean they are the same in all other ways. There are many instances where courts treat companies as the same for jurisdictional purposes, such as joint venturers, but that fact alone does not mean the companies are the same in all respects. Here, finding that the defendant and Viken Lakers similarly availed themselves of the Ohio forum for jurisdictional purposes in no way precludes a finding that one is a COGSA carrier, while the other is not.