Orient Overseas Container Line Ltd. v. Crystal Cove Seafood Corp.

ORIENT OVERSEAS CONTAINER LINE LTD., Plaintiff,

v.CRYSTAL COVE SEAFOOD CORP., Defendant.

10 Civ. 3166 (PGG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Date: February 10, 2012

ECF CASE

MEMORANDUMOPINION & ORDER

PAUL G. GARDEPHE, U.S.D.J.

Plaintiff Orient Overseas Container Line Ltd. ("Orient") is a commercial carrier that contracted with Defendant Crystal Cove Seafood Corp. ("Crystal") to transport a shipment of frozen tilapia from China to Smyrna, Tennessee. In this action, Orient seeks $49,364.20 in demurrage, transportation, and surveying expenses which it incurred as a result of Crystal's alleged wrongful refusal to accept delivery. Orient's alleged damages represent $77,350 in container demurrage and reefer monitoring charges less $30,610 Orient received from its salvage sale of the cargo.

Crystal counterclaims under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 30701 et seq. Crystal seeks damages of $60,860, representing the market value of the tilapia, which Crystal claims was ruined because of a refrigeration unit malfunction. Orient concedes that some portion of the cargo was damaged, but nonetheless contests liability and the appropriate amount of damages. Crystal seeks sanctions for spoliation of evidence, and both parties seek attorneys' fees.

In an order dated September 26, 2011, the Court denied Crystal's motion for summary judgment.¹ The case proceeded to a bench trial on January 4, 2012. This opinion sets forth the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).

FINDINGS OF FACT

1. Crystal and Orient contracted for the shipment of 3,400 cartons of frozen tilapia from Shekou, China to Smyrna, Tennessee. Orient Overseas, 2011 WL 4444527, at *1.² The bill of lading provided that the cargo was to be kept at -18.0 Celsius (-0.4 degrees Farenheit). (Id. at *1)

2. The cargo was in good order and condition when delivered to Orient in China, and was loaded into container OOLU 617235 on July 6, 2009. (Id.; Px. 1) The cargo was floor-loaded, as opposed to stacked on pallets. (Tr. 141)

3. The container was discharged in Long Beach, California on July 26, 2009, and was placed on rail transport in Long Beach on July 28, 2009, arriving in Memphis on July 31, 2009. The container was discharged at the railyard in Memphis and was transported by truck to an intermodal storage facility on the afternoon of August 3, 2009. (Px. 22; Tr. 345-47).

4. At about midnight on July 29, 2009,³ the refrigeration unit in Orient's container failed. (Px 24) The temperature data recorder log for the container shows that the temperature inside the container began rising dramatically during the morning of July 30, 2009. (Id.) Before the temperature data recorder log stopped functioning on August 4, 2009, the temperature inside the container reached as high as 10 degrees Celsius (50 degrees Farenheit). (Id.; Orient Overseas, 2011 WL 4444527, at *2)

5. By the time the cargo arrived at its destination in Smyrna, Tennessee on August 4, 2009, the refrigeration unit of the container had not been functioning for more than five days. (Px 24; Tr. 91)

Preparation of the Container

6. Eric Anderson, Orient's Senior Operations Specialist, is responsible for overseeing the Company's pre-trip inspection of vessels and containers. While Anderson does not perform pre-trip inspections or maintenance work himself, he is familiar with the Company's policies concerning pre-trip inspection of containers, and is notified of any container problem that develops in North America. (Tr. 157, 189-90)

7. Anderson and his supervisor, Marty Sherman, were notified on or about August 3, 2009 that the container at issue had malfunctioned due to a problem with its relay board. (Tr. 166, 207-08; Px 4; Dx C)

8. Orient's internal procedures require that all containers pass a pre-trip inspection before the container is loaded and before it is released to the shipper. (Tr. 159)

9. On June 26, 2009, before the container at issue was loaded, a pre-trip inspection of the container was conducted; the container and its refrigeration unit were found to be in goodworking order. (Tr. 172-73) Anderson testified that relay boards are checked as part of the pre-trip inspection. (Tr. 166) If there had been a problem with the relay board at the time of the pre-trip inspection, the container would have failed its inspection. (Tr. 174)

10. Anderson further testified that he is not aware of any preventive maintenance that could have been performed on the relay board that could have prevented the malfunction. He likewise testified that no inspection could have permitted Orient to predict a future problem with the relay board. (Tr. 167)

11. The relay board and wiring do not have parts that show wear or that require regular maintenance, and Orient did not "expect[] a problem with the relay board and wiring," given that the container had only been in service for about one year. (Anderson Decl. ¶¶ 13, 18; Tr. 200) Containers of this sort have a useful life of approximately 12 to 15 years. (Anderson Decl. ¶¶ 5, 16)

12. Each container has a data logger that gives a "history of the unit." (Tr. 162) The data logger stores a record of the container's temperatures and pre-trip inspection history. (Tr. 163; Px 3 at 1-32)

13. Where a refrigeration unit is not operating properly, the data logger will eventually stop, because there is no power to the unit. (Tr. 164) Here, the data logger stopped functioning on August 4, 2009. (Tr. 182)

Events Between August 1 and August 3, 2009

14. Orient learned on Saturday, August 1, 2009, that the refrigeration unit had malfunctioned but did not notify Crystal of the malfunction until Monday, August 3, 2009. (Orient Overseas, 2011 WL 4444527, at *1)15. Upon learning of the malfunction on August 3, 2009, Crystal immediately authorized Orient to break the seal on the container and requested that Orient transload the cargo into a working refrigeration container. (DeGrand Decl. ¶ 13)

16. Richard Ng is the claims manager at Orient. (Tr. 263-64) He was notified of the container malfunction on August 3, 2009. (Tr. 276) Ng. was also aware that Crystal had requested that the cargo be immediately transloaded into a working container. (Tr. 277)

17. E-mails between Ng and other Orient employees on August 3, 2009, demonstrate that they were aware of the urgent need to transload the cargo into a container with a working refrigeration unit. (Dx C) In an August 3, 2009 e-mail, for example, Marty Sherman tells an Orient associate, "Rather than wait until morning we need to get this load into [a] working unit ASAP." (Px 63; Dx C)

18. Ng decided, however, that there was not "enough time" to transload the cargo into a working container on August 3, and that the cargo should be kept in the non-working container until the following morning, when it was scheduled to be delivered to U.S. Cold Storage ("USCS"), a warehouse in Smyrna. (Tr. 277) Ng testified that he wanted the transloading to take place in a refrigerated facility, and was not able to locate such a facility in the Memphis area. (Tr. 277-78)

19. Ng testified that he contacted other Orient employees in Memphis and Houston for help in locating a cold storage facility where the cargo could be stored or transloaded, but no such facility could be located. (Px 63; Dx C; Tr. 289, 309, 354-55) Indeed, Ng testified that he was told that USCS was the only such facility in Tennessee. (Tr. 309-10, 359)

20. Ng's testimony concerning the existence of other cold storage facilities, and the time it would take to transload the cargo, was not credible. There are, in fact, numerous othercold storage facilities in Tennessee and in adjoining states. (DeGrand Supp. Decl. ¶¶ 3, 5, Ex A) As to the time it would take to transload the cargo, Orient's contemporaneous communications indicate that transloading could be completed in three hours. (Dx C) Ng - who has never been involved in transloading a container - testified that it would "take[] at least four or five hours to transload the whole container." (Tr. 277)

Arrival at USCS on August 4, 2009

21. Having decided not to transload the cargo into a working container on August 3, Orient proceeded to deliver the container to USCS - Crystal's designated agent for delivery - on August 4, 2009. (Orient, 2011 WL 4444527, at *1) The container arrived that morning between 9:30 and 10:00. (Tr. 89)

22. When the shipment arrived, the driver told the plant supervisor, Tim Greer, that the refrigeration unit for the container had not been operating for the past three to five days. (Tr. 91, 93) In his testimony, Greer noted that it is "sweltering . . . hot" in Tennessee in August. (Tr. 88)

23. Upon arrival at USCS, the ambient air inside the container was approximately 70 degrees Farenheit, and the cargo was giving off a "horrendous" smell. (Tr. 91-92, 97) Using a digital thermometer, Greer punctured five or six boxes of fish to test the temperature in the center of each box. The center of each box registered at approximately 30 degrees Farenheit. (Tr. 89-90) Greer communicated this information to Crystal. (Tr. 94)

24. Crystal instructed Greer to reject delivery of the shipment, and he did so. (Tr. 97) Greer's notes on the bill of lading read: "The container arrived with the unit not running. The seal was broken to inspect and temp product. I feel the odor from the product may contaminate the whse. Temp 29.8 to 30.3" (Tr. 107-08; Px 55)25. Greer testified that he would not have allowed the cargo to be stored in USCS's general warehouse storage area without testing it to make sure that it would not contaminate other food products in the warehouse. (Tr. 97, 99) Had testing confirmed that the cargo did not present a risk to other food products stored at USCS, USCS would have stored the cargo for a total fee of $4,390 for the period between August 2009 and March 2010. (Tr. 119-22)

26. The Court credits Greer's testimony as to the events of August 4, 2009 and the condition

...