The recent Whitcombe case (1993 A.M.C. 2097) in the U.S. Court of Appeals for the 9th Circuit is the latest attempt to resolve some of the complex liability and damage issues associated with lawsuits commenced by cargo interests solely against stevedores and marine terminal operators for cargo losses.
Terminal operators are usually described as entities that store goods before and after ocean transportation. The status of terminal operators is often equated to that of shoreside warehousemen.
If cargo is damaged aboard ship, the stevedore may be sued for negligence under admiralty law principles. If the loss occurs on land, state law may apply. Suits against terminal operators for cargo damaged while in storage is usually governed by state law.
Stevedores historically have occupied a special relationship with shipowners because their cargo handling services fulfill one of the ocean carrier’s responsibilities. The unique status of stevedores provides a novel theory in admiralty law for extending certain ocean carrier protections to them through bill of lading Himalaya clauses.
The primary protections are the $500 package limitation and the one-year suit time limit found in the Carriage of Goods by Sea Act (Cogsa).
Himalaya clause protection also can be provided to terminal operators acting as agents for vessel owners under contracts of carriage. However, terminal operators will not be afforded protection after cargo delivery or if the protection is contrary to public policy under state law.
Stevedoring and terminal operations are often performed by the same company. This can result in a choice of law dilemma for courts attempting to assess liability for shoreside cargo losses. The problem is clearly illustrated by the Whitcombe case.
Plaintiff Whitcombe engaged a freight forwarder to book ocean passage for four automobiles from California to Australia. The cars were loaded into a container, taken to the loading area at a port in California and turned over to a stevedoring company that provided terminal and stevedoring services for the vessel owner. A dock receipt was not issued for the container.
While the cargo was in the terminal stacking area, it fell from a container stack and the cars were damaged. The vessel owner refused to accept the damaged container and a bill of lading was not issued.
Whitcombe sued the stevedoring company for the damages in federal court under diversity jurisdiction. The trial court held that California state bailment law limited the plaintiff’s damages to the declared value of the cars ($7,000) rather than their resale value ($84,000). On appeal, Whitcombe claimed that federal admiralty law (with no liability limit), rather than state law, controlled.
The appeals court held that state law applied because the damage occurred on land while the terminal was storing the container. Although the container was stored in anticipation of an eventual shipment by sea, the activity was more analogous to the warehouse of goods under state law than it was to a traditional maritime activity.
The 9th Circuit then adopted a rule established by the 2nd Circuit that a claim against a terminal operator for damages to cargo is controlled by state law. In adopting this rule, the court emphasized the distinction between the traditional activities of stevedores and terminal operators.
The Whitcombe case indicates that courts will now look to the nature of the conduct that produces the loss, rather than the title of the culpable party. The conduct must bear a significant nexus to traditional maritime activities to warrant the application of admiralty law to losses occurring at ocean terminals.