Admiralty - Robert S. Glenn, Jr. and Colin A. Mcrae

• Publication year: 2003

Articles

Admiraltyby Robert S. Glenn, Jr.^* and

Colin A. McRae^**

The United States Court of Appeals for the Eleventh Circuit published four opinions dealing with Admiralty issues in 2002. While the total number of opinions is not as high as in recent years, the court addressed numerous issues that are relevant and important in today's Admiralty practice. The court dealt with coverage under the Longshore and Harbor Workers' Compensation Act ("LHWCA"),¹ cargo liability limitation by inland carriers through a Himalaya clause in an ocean bill of lading, protection and indemnity coverage for cargo damage claims, the doctrine of forum non conveniens, and the applicable law to be used by federal courts sitting in diversity. In addition to these four Eleventh Circuit cases, there were two Supreme Court cases involving preemption in the maritime arena that will be very important to Admiralty practitioners.

I. The Longshore and Harbor Workers' Compensation Act

The LHWCA is a federal compensation scheme promulgated for the purpose of providing compensation in lieu of tort damages for workplace injuries sustained by land-based workers commonly referred to as "longshoremen."² In order to obtain coverage under the LHWCA, a claimant must satisfy both the "status" test,³ by showing that she was engaged in maritime employment at the time she was injured,⁴ and the "situs" test,⁵ by showing that the injury occurred in a location customarily used for maritime activities.⁶ In Bianco v. Georgia Pacific Corp.,⁷ the Eleventh Circuit Court of Appeals confronted the question of whether an employee injured at a manufacturing plant that is indirectly connected to a marine terminal can recover under the LHWCA.⁸

Appellant-petitioner Linda Bianco was a Georgia Pacific Corporation ("GPC") employee injured on two separate occasions at the gypsum products plant in Brunswick, Georgia. Bianco's first injury occurred in May 1993 while she worked as a knife operator in the sheetrock production department, and her second injury occurred in July 1995 while operating a palletizer on the gypcrete production line.⁹ While neither of these production departments is situated in an area contiguous to the East River at the Port of Brunswick, they are both supplied with gypsum via a system of three separate conveyor belts from the nearby Lanier dock, which is situated on the East River.¹⁰ Bianco filed two LHWCA claims for the injuries she sustained in the production plant on the theory that the area where she was working was connected to the gypsum-loading terminal by virtue of the system of conveyor belts. Both claims were denied by the administrative law judge ("ALJ") for failure to satisfy the maritime situs test for LHWCA coverage, and the Benefits Review Board summarily affirmed. Bianco appealed this denial of benefits to the Eleventh Circuit.¹¹

In order to determine whether the sheetrock facility had the requisite situs¹² for LHWCA coverage, the Eleventh Circuit considered whether the GPC plant was an "'other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling, or building a vessel.'"¹³ Despite the fact that the facility is separated from navigable waters by city- and county-owned property, Bianco argued that the GPC sheetrock production department "adjoins" the navigable waterways of the United States.¹⁴ The court ultimately did not need to decide the question of whether the area "adjoins" the waterway because it was clear that the area of the facility where Bianco had been injured had never been used for any of the enumerated types of maritime activity.¹⁵

Bianco next argued that the LHWCA should be applicable throughout the entire facility based on the fact that maritime activity took place in certain parts ofthe GPC plant.¹⁶ Bianco argued that "to hold otherwise would result in workers walking in and out of coverage,"¹⁷ a concern Congress had expressed prior to the 1972 amendments modifying the LHWCA situs definition.¹⁸ The court in Bianco held that "the facts in this case [did] not implicate that limited concern"¹⁹ for workers engaged in maritime activity walking in and out of coverage at or near the water's edge because no maritime activity was going on in the "area" where Bianco was injured.²⁰ The broad interpretation of "adjoining area" urged by Bianco would ignore "language in the statute indicating that a functional nexus to maritime activity must nonetheless exist."²¹ The court of appeals therefore affirmed the denial of LHWCA bene-fits.²²

II. CARGO

The case of Kirby v. Norfolk Southern Railway Co.²³ presented the court with an opportunity to clarify Eleventh Circuit law on when a "Himalaya clause"²⁴ contained in an ocean bill of lading will extend an ocean-going carrier's defenses and limitations of liability to an inland carrier.²⁵ The case stemmed from the shipment of ten containers of machinery from Sydney, Australia to Huntsville, Alabama via the port of Savannah, Georgia. The shipment involved the issuance of two separate bills of lading as the Australian freight forwarder, International Cargo Control Pty. Ltd. ("ICC"), issued the first bill of lading (the "ICC Bill") to the shipper, James N. Kirby Pty. Ltd. ("Kirby").²⁶ ICC then arranged to have the shipping line, Hamburg Sud,²⁷ perform the ocean transport of the ten containers from Australia to the United States. A second bill of lading (the "Hamburg Sud Bill") was issued to ICC by Hamburg Sud, which subcontracted with the rail carrier, Norfolk Southern Railway Company ("Norfolk Southern"), to transport the machinery inland to Huntsville. After a derailment of the train between Savannah and Huntsville caused $1.5 million of damage, the shipper, Kirby, brought suit in the United States District Court for the Northern

District of Georgia to recover for damage done to the goods in the course of the inland carriage.²⁸

The inland carrier, Norfolk Southern, moved for partial summary judgment, arguing that it was entitled to the protections of the Carriage of Goods by Sea Act²⁹ ("CoGSA") and its $500 per package liability limitation,³⁰ pursuant to the Himalaya clauses contained in the two bills of lading. The District Court for the Northern District of Georgia agreed and limited Norfolk Southern's liability to $5,000, or $500 for each of Kirby's ten containers.³¹ On appeal the Eleventh Circuit considered both bills of lading and whether the Himalaya clauses contained therein operated to limit the liability of Norfolk Southern to the shipper, Kirby.³²

The court first concluded that the Himalaya clause contained in the Hamburg Sud Bill did not bind Kirby.³³ The court focused on the role played by the freight forwarder, ICC, vis-a-vis Kirby in receiving the Hamburg Sud Bill.³⁴ If ICC were acting as Kirby's agent in receiving the Hamburg Sud Bill, then the shipper, Kirby, would be bound by the contractual provisions contained therein.³⁵ The court looked to the language of the bill of lading, as well as the overall structure of the transaction, to conclude that ICC was acting as a principal and not as Kirby's agent.³⁶ The Hamburg Sud Bill listed ICC, not Kirby, as the party with whom Hamburg Sud had contracted.³⁷ Further, the fact that there were two bills of lading for this shipment transaction showed that the freight forwarder, ICC, was acting as a principal because "if ICC had been acting as Kirby's agent, there would have been only one bill of lading[,] issued by Hamburg Sud to Kirby and listing Kirby as the shipper."³⁸ Because the freight forwarder, ICC, was not acting as Kirby's agent in accepting the bill of lading, Kirby was not bound by the Himalaya clause contained in the Hamburg Sud Bill.³⁹

The court next scrutinized the ICC Bill to determine if its Himalaya clause would operate to limit Norfolk Southern's liability to the shipper, Kirby.⁴⁰ As a backdrop, the court reviewed the situation in the context of the Supreme Court case of Robert C. Herd & Co. v. Krawill Machinery Corp. ⁴¹ and its admonition that "contracts purporting to grant . . . limitation of [] liability must be strictly construed and limited to [their] intended beneficiaries."⁴² The court also noted that the Eleventh Circuit has developed a "clarity of language" test for determining whether a third party is effectively identified as a member of the group of beneficiaries to whom a Himalaya clause will extend.⁴³ The "clarity oflanguage" test allows the enforcement of a Himalaya clause only when it is drafted with "'language expressing a clear intent to extend the benefits to a well-defined class of readily identifiable persons.'"⁴⁴

The Himalaya clause in the ICC Bill extended ICC's limitations of liability to "'any servant, agent, or . . . independent contractor[s] whose services have been used in order to perform the contract.'"⁴⁵ Such language in a bill of lading has been previously interpreted by the court in Certain Underwriters at Lloyds' v. Barber Blue Sea Line⁴⁶ to include "all those persons engaged by the carrier to perform the functions and duties of the carrier."⁴⁷ However, as the freight forwarder, ICC, was listed as the carrier on the ICC Bill, the inland carrier, Norfolk Southern, could not be said to have been "engaged by the carrier" because Norfolk Southern was engaged by the ocean carrier, Hamburg Sud.⁴⁸ The court therefore deemed Norfolk Southern a "sub-sub-contractor."⁴⁹ The court succinctly concluded that "if Kirby and ICC had intended for the protections of the ICC Bill to extend to sub-sub- contractors, they could have said so."⁵⁰ In Kirby the court acknowledged that a different standard has been developed by the Ninth Circuit, which looks to "'the nature of the services performed [by the defendant who seeks to invoke the clause] compared to the carrier's responsibility under the carriage contract.'"⁵¹ In the Eleventh Circuit, however, the "Certain Underwriters limitation ofHimalaya clause protections to those parties [actually] 'engaged by the...