‘Gingerly handling or stowage’ of cargo
How much notice should be given to a shipowner when asked to carry hazardous cargo? That issue is discussed in a recent summary order that is part of the litigation growing out of the March 8, 2005 explosion on the Rickmers Genoa. (See: Chem One Ltd. v. M/V Rickmers Genoa. 2nd Circuit. No. 10-4934-cv(L). Nov. 9.)
That explosion occurred about four hours after the Rickmers Genoa collided with another ship, the Sun Cross, in the Yellow Sea.
The cargo on the Rickmers Genoa included 600 tons of a chemical known as Super-Sul Mg-89 (“SS-89”) that the company ESM (Tianjin), or “ESMT,” was shipping to affiliate ESM Group, or “ESMG.”
Seawater flooded the below-deck cargo hold where the SS-89 was stowed, yielding hydrogen gas that exploded, causing significant damage to the ship and killing a crewman.
An award of summary judgment was made in favor of ESMT on claims against it for strict liability under §4(6) of the Carriage of Goods by Sea Act (COGSA), negligent failure to warn under COGSA §4(3), and negligent misrepresentation under federal maritime common law.
The “Rickmers parties” that owned and chartered the ship appealed and the “Chem One parties” that held various interests in cargoes lost and damaged in the explosion, appealed from the award of summary judgment on their parallel COGSA claims, and on a federal maritime negligent-failure-to-warn claim against ESMG.
As there was overlap in the challenges to the district court ruling on the COGSA claims by the Rickmers and Chem One parties, the court considered and ultimately rejected them together.
COGSA §4(6) says a shipper of “(g)oods of an inflammable, explosive, or dangerous nature to the shipment… shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment,” if “the carrier, master or agent of the carrier, has not consented with knowledge of their nature and character.”
Quoting from its 2006 decision in Contship Containerlines, Ltd. v. PPG Indus., Inc., (442 F.3d 74, 77) the 2nd Circuit said this precludes a carrier from invoking strict liability “if it knows that a cargo poses a danger and requires gingerly handling or stowage, and nevertheless exposes the cargo to the general condition that triggers the known danger, regardless of whether the carrier is aware of the precise characteristics of the cargo.”
The district court had found, and the parties did not dispute, that ESMT gave Rickmers a U.S. Harmonized Tariff Schedule code identifying its cargo as a magnesium-based substance, and the master of the Rickmers Genoa knew that magnesium emitted hydrogen when exposed to water.
Chem One and Rickmers argued the district court nevertheless erred in holding that the information conveyed by the HTS code was sufficient to place Rickmers on notice of the dangerous properties of ESMT’s cargo.
Chem One argued Rickmers did not know the danger because ESMT never declared the cargo was “dangerous” within the meaning of the International Maritime Dangerous Goods (IMDG) code, and never provided Rickmers with a Material Safety Data Sheet (MSDS) identifying the SS-89 as dangerous.
Rickmers contended it could invoke strict liability because ESMT affirmatively certified that the SS-89 was not a cargo to which the IMDG code applied.
But the 2nd Circuit said those arguments failed “because strict liability under COGSA § 4(6) turns on what the carrier knows about the dangerous nature of its cargo, not whether or how the shipper conveys that information.”
The court said “undisputed facts establish that Rickmers was on notice that the SS-89 cargo contained magnesium and that flammable hydrogen would be released if it came in contact with water.”
Rickmers argued this knowledge could not defeat its strict liability claim because it did not intentionally expose the SS-89 to the water, and that this occurred as a result of the collision.
But the 2nd Circuit said this argument was “without merit” as it knew hydrogen would be produced “if the magnesium were exposed to any of the water in the vast ocean surrounding the ship.
Rickmers also argued “but for ESMT’s failure to warn of SS-89’s dangerous characteristic” that it would have refused to carry the SS-89 cargo or would have stowed it on deck.
To prevail on that COGSA § 4(3) claim, a carrier must prove: 1.) the defendant had a duty to warn because the cargo presented dangers of which the stevedore and ship’s master could not reasonably have been expected to be aware; 2.) the defendant breached that duty by failing to provide an adequate warning; and 3.) the breach in duty caused the resulting harm.
And citing its 2008 decision In re M/V DG Harmony (533 F.3d 83, 94) the court said “establishing causation requires the carrier to show that the warning, if given, would have had an impact on the stowage decision.”
It said Rickmers failed to cite evidence “sufficient to raise a genuine factual dispute as to the effect a different warning would have had on its stowage decision.”
Rickmers argued ESMT was liable under federal maritime common law for misrepresenting the hazardous nature of the SS-89 by certifying in a November 2004 letter of indemnity that an earlier shipment of SS-89 was not a dangerous good listed in the IMDG code. The court said Rickmers failed to timely assert this claim in district court.
Chem One claimed ESMG, the purchaser of the SS-89 shipped by ESMT, had a duty to warn Rickmers of the dangers posed by the SS-89 as a matter of federal maritime common law because of its extensive knowledge of the cargo’s dangerous properties.
Pointing to a 1993 2nd Circuit decision Aslanidis v. U.S. Lines, Inc. (7 F.3d 1067, 1077) Chem One said this left “open the possibility that a buyer may have a duty if it is in a unique position to protect against harm or to warn of known risks.”
But the 2nd Circuit said “to the contrary, Aslanidis defeats Chem One’s claim” because ESMT arranged for packing and shipment — ESMG was merely the intended recipient and “had no duty at law to warn Rickmers of the cargo’s latent dangers.”