Saray Dokum ve Madeni Aksam Sanayi Turizm AS (Saray) brought a claim against MTS Logistics Inc (MTS) under the United States Carriage of Goods by Sea Act (COGSA) for failure to deliver 1,534,000 kgs of S-PVC Resin Formosa Formolon 622 which Saray had purchased from Oxyde Chemicals Inc (Oxyde). Saray sought damages of USD 1,321,836. Both parties brought a motion for summary judgment.

Saray, a Turkish company, purchased the cargo from Oxyde, a Texas trading corporation. Oxyde then contracted with MTS, a New York NVOCC, to ship the cargo from Texas to Türkiye. In February 2017, MTS issued two house bills of lading to Oxyde to govern the shipment from Houston, Texas, to Istanbul, Türkiye. MTS then contracted with common carrier Mediterranean Shipping Co SA (MSC). MSC issued two sea waybills to MTS which governed the shipment. An MSC vessel departed from Houston, carrying the cargo. However, before the vessel arrived in Türkiye, US Customs ordered MSC to return the cargo to the loading port. The MSC vessel returned to Houston with the cargo, incurring additional freight, detention, and demurrage charges. In June 2017, MSC invoiced MTS USD 1.4 million to cover these charges. MTS negotiated with MSC to reduce the amount to USD 760,000, which MTS then paid MSC and thereafter secured possession of the cargo.

MTS then informed Oxyde that it intended to foreclose on a lien that it claimed to have over the cargo by selling it, prompting both Oxyde and Saray to file suit against MTS in the Southern District of Texas. That Court held that it would not enjoin MTS from selling the goods unless Saray posted a USD 820,000 bond by a certain date. When Saray did not post the bond, the Court ordered that MTS could sell the cargo. MTS did so, reimbursed itself for the sums previously paid to MSC, and paid Oxyde certain expenses that MTS owed Oxyde.

In its motion for summary judgment, MTS argues that: (1) Saray was a stranger to the MTS house bill and thus lacks standing to bring its suit; (2) COGSA does not apply because the cargo was not 'damaged' or 'lost'; (3) MTS acted properly when it sold the cargo to pay the redelivery charges; and (4) if COGSA does apply, it limits Saray's ability to recover to USD 500 per container. In its cross-motion for summary judgment, Saray asserts that it has established a prima facie case under COGSA and that MTS has raised no valid defences.

Held: Motions for summary judgment denied. Matter to go to trial.

Time bar

MTS argued that Saray's amended complaint does not relate back to the original complaint and is therefore time-barred under COGSA's one-year statute of limitations. COGSA requires that an individual or entity sue within one year of the delivery of the goods or the date when the goods should have been delivered, so long as there is notice of loss or damage: see 46 USC § 30701 note, § 3(6). Although Saray filed its original complaint in the Southern District of Texas within the one-year limitation period provided for under the statute, it did not raise its COGSA claim until its amended complaint, filed after that period. While Saray may have adopted a new legal theory in the amended complaint by exclusively relying on COGSA, both the original complaint and amended complaint plainly concern the same set of facts: the intended shipment of the cargo from Texas to Türkiye, and MTS's failure to deliver the cargo. Saray's COGSA claim is not barred by the statute's one-year limitations period.

Title to sue

The MTS house bill has a so-called 'merchant clause' that defines a 'merchant' as 'the shipper, consignee, receiver, holder of this Bill of Lading, owner of the cargo or person entitled to the possession of the cargo and the servants and agents of any of these'. This clause further provides that any merchant 'shall be jointly and severally liable to the Carrier for the payment of all Charges, and for the performance of the obligations of any of them under this Bill of Lading'. Although Saray does not point to any cases in which a merchant sued on a bill of lading, a review of the case law reveals that at least two other Circuits have concluded that an entity that falls under a merchant clause can sue on a bill of lading. First, in All Pacific Trading Inc v Vessel M/V Hanjin Yosu, 7 F 3d 1427, 1432 (9th Cir 1993), the Ninth Circuit assessed a similar merchant clause to the one at issue here, which sought to bind the 'shipper, consignor, consignee, owner and receiver of the Goods and the Holder of this Bill of Lading'. The Court concluded that the merchant clause 'unambiguously provides that the cargo owner has obligations under the bills of lading', and therefore 'the owners of the goods are parties to the bills of lading as Merchants and therefore have an in personam claim against' the carrier. The Eleventh Circuit in Polo Ralph Lauren LP v Tropical Shipping & Construction Co, F 3d 1215, 1219 (CMI1536) also addressed 'what recourse, if any, an owner of goods lost at sea has against the carrier when the owner of the goods is not a named party to the bill of lading', and reached a similar conclusion as the Ninth Circuit.

The Court finds these cases persuasive. MTS, as the NVOCC, elected to include a broad merchant clause, and in doing so intended to bind the 'owner' and 'person entitled to possession' of the cargo. Nonetheless, although the Court concludes that a 'merchant' can sue under the MTS house bill, Saray has not provided evidence that would allow the Court to conclude that it was in fact a 'merchant' as a matter of law. There remain disputed issues of fact. Accordingly, because the Court cannot determine whether Saray was the holder of the bill of lading, owner of the goods, or person entitled to possession, the Court cannot conclude whether Saray was a 'merchant' for purposes of the MTS house bill. The Court is therefore unable to grant Saray's cross-motion or MTS's motion.

Application of COGSA

MTS argues that: (1) Saray cannot bring a COGSA claim because it disclaimed ownership for the goods; (2) COGSA is inapplicable to these claims because the goods were not damaged or lost; and (3) COGSA does not apply because the sale of the cargo was justified. The Court rejects each of these arguments.

Saray's initial decision to decline to admit ownership is not equivalent to actively disclaiming ownership. The Court therefore rejects MTS's suggestion that Saray is estopped from claiming ownership now.

MTS's second argument, that COGSA is inapplicable because the goods were not damaged or lost, also lacks merit. Although most cases frame the plaintiff's burden in making a prima facie showing as requiring '(1) delivery of the goods to the carrier in good condition and (2) outturn by the carrier in damaged condition': Westway Coffee Corp v MV Netuno, 675 F 2d 30, 32 (2d Cir 1982)), COGSA clearly applies to the non-delivery of goods: see eg OOO v Empire United Lines Co, 557 F App'x 40, 44 (2d Cir 2014); NY Marine & Gen Ins Co v S/S Ming Prosperity, 920 F Supp 416, 422 (SDNY 1996).

Finally, MTS argues that the sale of the cargo was justified for two reasons. First, it contends that Saray's suit is barred because the sale was 'judicially sanctioned'. But while the Southern District of Texas permitted the sale, it appears that the Court explicitly reserved Saray's right to sue. Second, MTS reasons that the sale was justified because shipping charges fell on MTS and Oxyde, and because MSC was required to comply with the orders from US Customs. But even if MTS was required to mitigate its costs and MSC was required to comply with the redelivery notices, this does not necessarily mean that MTS was permitted to sell the cargo to pay for its additional costs. Taken to its logical extreme, such a rule would permit shippers to sell cargo when faced with any additional charges. Such a rule finds no support in the text of COGSA.

Package limitation

COGSA provides that '[n]either 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 ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading': 46 USC § 30701 note, § 4(5). MTS contends that any damages are limited to USD 500 per container. Accordingly, because the MTS house bill states that the cargo contained 65 sealed containers, MTS contends that any recovery is limited to a total of USD 32,500. In response, Saray makes two main arguments: first, it contends that if COGSA's USD 500 limitation does apply, the proper 'package' inquiry is the number of 'bags' listed on the MTS house bill, not the number of 'containers'. Second, it contends that COGSA's USD 500 per package limitation does not apply because: (a) MTS failed to offer the shipper a fair opportunity to declare a higher value; and (b) MTS's failure to deliver the goods constituted an unreasonable geographic deviation.

It is well-established that if a bill of lading lists two units, both of which are 'susceptible of being COGSA packages', the bill of lading is 'inherently ambiguous': Monica Textile Corp v SS Tana, 952 F 2d 636, 642-43 (2d Cir 1991). As a contract of adhesion, an ambiguous bill of lading must be construed against the carrier, and therefore if a 'bill of lading discloses not only the number of containers but the number of cartons within them, the cartons' ie, the smaller unit, 'not the containers, will be treated as COGSA packages': Binladen BSB Landscaping v MV Nedlloyd Rotterdam, Her Engines, Boilers, Etc, Nedlloyd Lijnen BV (Nedlloyd Lines), 759 F 2d 1006, 1013 (2d Cir 1985) (CMI1621). Because the MTS house bill lists two units - bags and containers - that are susceptible to being considered 'packages', the Court concludes that the bags are the relevant packages for COGSA purposes. There is no clear agreement in the MTS house bill to treat the containers as the relevant packages.

However, even though the 'bags' are the relevant 'packages' here, the Court is, at this stage, unable to rule whether COGSA's USD 500 package limitation does in fact apply. The MTS house bill provided that liability was limited to USD 500 per package, 'unless the nature of the cargo and valuation higher than $500 per package or per shipping unit shall have been declared by the Merchant before shipment and inserted in this Bill of Lading, and extra freight paid if required'. The MTS house bill provided a space 'Declared Value by Shipper', which is stamped 'NVD', commonly understood to mean 'no value declared'. Accordingly, while Saray contends that it did not have the opportunity to declare a higher value, the MTS house bill clearly provided the shipper the opportunity to do so. The Court therefore agrees with MTS that Saray cannot claim that it was deprived of a fair opportunity to declare a higher value such that the USD 500 package limitation would not apply.

Saray next contends that the USD 500 limitation does not apply because the failure to deliver the cargo to Türkiye constituted an unreasonable deviation. COGSA provides that 'any reasonable deviation shall not be deemed to be an infringement or breach of this chapter or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom': 46 USC § 30701 note, § 4(4). The record is not sufficiently developed at this point for the Court to rule if any deviation was unreasonable. For instance, the parties dispute the exact route the shipment took. Without even knowing what happened, the Court is unable to determine what exact deviations occurred and whether they generated unanticipated and additional risks. And although complying with a government order is not typically an unreasonable deviation, that does not mean that certain stops taken on the way back to Texas or MTS's failure to continue the voyage on to Türkiye after the cargo was released were reasonable. These factual disputes preclude the Court from ruling if any deviation was justified.

[For subsequent proceedings in this matter, see CMI2261.]