USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

____________________
No. 93-1543
HENLEY DRILLING COMPANY,
Plaintiff, Appellee,
v.
WILLIAM H. McGEE
AND
CNA CASUALTY OF PUERTO RICO,
Defendants, Appellants.
____________________
No. 93-1548
HENLEY DRILLING COMPANY,
Plaintiff, Appellee,
v.
MARINE TRANSPORTATION SERVICES, ETC.
AND
LUIS A. AYALA COLON SUCRS., INC.,
Defendants, Appellants.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Raymond L. Acosta, U.S. District Judge]

___________________
____________________
Before
Torruella, Circuit Judge,
_____________
Aldrich, Senior Circuit Judge,
____________________
and Cyr, Circuit Judge.
_____________
____________________

Keith A. Graffam, with whom Dario Rivera Carrasquillo, John

________________
_________________________ ____
E. Mudd and Cordero, Miranda & Pinto were on brief for plaintiff.
_______
________________________
Jose
F. Sarraga
for defendant
Marine Transportation
__________________
Services.
Eugene F. Hestres, with whom Bird, Bird & Hestres was on
_________________
_____________________
brief for defendant Luis A. Ayala Colon Sucrs., Inc.
____________________
September 27, 1994
____________________

CYR, Circuit Judge.

CYR, Circuit Judge.
_____________

The central question in this

case

whether the $500 per-package limit on ocean carriage liability

imposed

by the Carriage

of Goods by Sea

1304(5), is applicable to
court to

consider

Act (COGSA), 46 U.S.C.

an oil drilling rig

for the

first time

requires the

the COGSA-related

"fair

opportunity" doctrine.

I
I
BACKGROUND
BACKGROUND
__________

Puerto Rico Electric Power Authority (PREPA) contracted

with

Henley

drilling

Drilling

operations

Services-Sea
agreed to

Company
in

Barge Group,

(Henley)

Puerto

Rico.

Inc. (Sea

to

conduct

Marine

Transportation

Barge), an

ocean carrier,

transport Henley's drilling equipment

Puerto Rico, and

return.

petroleum

PREPA obtained

from Houston to

marine cargo insurance

on the Henley drilling rig through William H. McGee & Co. (McGee)
and CNA Casualty of

Puerto Rico (CNA).

southbound voyage,

Sea Barge retained a

Luis A. Ayala Col n

rig aboard

in Houston,

an uneventful

stevedoring contractor,

Sucrs., Inc. (Ayacol), to stow

the barge for the

barge arrived

Following

the drilling

return trip to Houston.

however, Henley's huge

When the

drilling rig,

valued at $629,000, was nowhere to be found.

Henley sued Sea Barge, Ayacol, McGee, CNA and PREPA

in

the United States District Court for the District of Puerto Rico.

Under
CNA

the terms of their settlement

were subrogated to the

agreement, PREPA, McGee and

rights of Henley,

leaving Sea Barge

and Ayacol as the only defendants.

Ayacol moved for partial
liability,
limit

if any,

imposed

not exceed

by COGSA.1

the $500

per-package/CFU

Contemporaneously,

Ayacol and

judgment on the further ground

stowing of the drilling rig aboard the barge for

to

Houston

retained

was improperly

by PREPA,

Sea Barge and

summary judgment, contending that their

could

Barge moved for summary

In March 1992,

supervised

thereby entitling

by

that the

the return trip

the marine

Ayacol

Sea

and Sea

surveyor

Barge to

exoneration from liability.

A magistrate judge recommended partial summary judgment

in

favor of Sea

Barge and Ayacol,

based on a

finding that the

drilling rig constituted a "package" within the meaning

4(5),

of COGSA

for which the maximum liability of the carrier is $500.2

The magistrate judge did

for exoneration.

not rule on the summary

McGee, CNA

and PREPA objected

judgment claim
to the

magis-

trate-judge's report and recommendation, which the district judge

subsequently
unsuccessfully

adopted over their objection.

moved for reconsideration

McGee, CNA and PREPA

by the district judge.

CNA

and McGee [collectively:

Barge

cross-appealed,

"McGee"] appealed.

challenging

the

district

Ayacol and Sea

court

order

adopting the magistrate-judge's report and recommendation insofar

as it failed to

grant Ayacol and Sea Barge exoneration

from all

liability and included no attorney fee award against McGee.

____________________
1The COGSA-imposed liability limit
or "customary freight unit" ("CFU").
__

applies to each package

2See note 1 supra.

___
_____
4

II
II
DISCUSSION
DISCUSSION
__________
A.
A.

The McGee Appeal (No. 93-1543)

The McGee Appeal (No. 93-1543)
_______________________________
1.
1.

Summary Judgment Standard

Summary Judgment Standard
_________________________
We

review

grant

of

summary

judgment

de
__

novo.
____

Commercial Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1050
_________________________
_________________
(1st

Cir. 1993).

record,
party,

viewed

Summary judgment
in the

light

is

appropriate where

most favorable

to

the

the nonmoving

reveals no genuine issue as to any material fact, and the

moving party is entitled to judgment

as a matter of law.

Velez______

Gomez v. SMA Life Assur. Co., 8 F.3d 873, 874-75 (1st Cir. 1993).
_____
___________________

2.
2.

The COGSA Liability Limitation

The COGSA Liability Limitation
______________________________
Section 1304(5) of COGSA,

entitled "Rights and immuni-

ties of carrier and ship," provides in relevant part:

Neither 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 . . . or in case of goods
not shipped in
packages, per
customary
freight unit . . . unless the nature and
______ ___ ______ ___
value of such goods have been declared by the
_____ __ ____ _____ ____ ____ ________ __ ___
shipper before shipment and inserted in the
_______ ______ ________ ___ ________ __ ___
bill of lading . . . .
____ __ ______
By agreement between the carrier, master, or agent of the carrier, and the shipper
another maximum amount than that mentioned in
this paragraph may be fixed . . . [but] in no
event shall the carrier be liable for more
than the amount of damage actually sustained.
46 U.S.C. App.

1304(5) (emphasis added).

5

The
afford

the

courts
shipper a

"package/CFU"
notice.

generally
"fair

liability

have required

opportunity"

limitation

the

carrier

to avoid

through

the

adequate

to

COGSA

advance

See, e.g., Carman Tool & Abrasives, Inc. v. Evergreen

___ ____ _______________________________
_________

Lines, 871 F.2d 897, 899

_____
not adopted

the COGSA

n.3 (9th Cir. 1989).

As this court has

"fair opportunity" doctrine,

see Granite
___ _______

State Ins. Co. v. M/V Caraibe, 825 F. Supp. 1113, 1118-24 (D.P.R.
______________
___________
1993)

(noting

absence

of

opportunity" doctrine),

First

Circuit

we first examine

precedent
the case law

on

"fair

in other

jurisdictions.
All courts which have
carrier

to

provide

the

addressed the matter require the

shipper

some

notice

of

the

COGSA

"package/CFU" liability limitation, differing only as to the type

of notice.
notice

See id.
___ ___

required); see
___

(examining circuit
generally
_________

split as

Michael F.

to level

of

Sturley, The Fair

_________

Opportunity Requirement Under COGSA Section 4(5): A Case Study

_________________________________________________________________

in the Misinterpretation of the Carriage of Goods by Sea Act

_________________________________________________________________

(Part I),
________

19 J.

Mar. L.

"Sturley,
_______

Part I");

Michael

Requirement (Part II),

_____________________
inafter,
have

& Com. 1,

13-17 (1988)

F. Sturley,

19 J. Mar.

"Sturley, Part II").

_______

(hereinafter,

The Fair Opportunity

_____________________

L. & Com.

157 (1988)

The Ninth Circuit

(here-

is thought to

the more demanding notice requirement, see 2A Ellen Flynn &

___

Gina A. Raduazzo, Benedict on Admiralty

______________________
16-29 (Michael
Benedict)
________

F. Sturley,

(describing

cases), mandating

contrib. ed. 1993)

"strict" Ninth

that the

166, at pp. 16-28

Circuit

carrier provide the

to

(hereinafter, 2A

standard, citing

shipper legible

written notice of the COGSA "package/CFU" liability limitation in

the bill
COGSA
609,

of lading, employing language

4(5).

substantially similar to

See, e.g., Nemeth v. General S.S. Corp., 694 F.2d

___ ____ ______
___________________

611 (9th Cir. 1982).

Other courts,

including the Second,

Fourth, Fifth and Eleventh Circuits, simply require that the bill
of

lading include

a "clause

paramount" incorporating

COGSA by

reference.

See, e.g., Insurance Co. of N. Am. v. M/V Ocean Lynx,

___ ____ _______________________
______________

901 F.2d 934,

(1991);

939 (11th Cir. 1990), cert. denied,

_____ ______

General Elec. Co. v.

_________________

(2d Cir. 1987),

M/V Nedlloyd, 817

____________

cert. denied, 484

_____ ______

Milacron, Ltd. v.
______________

498 U.S. 1025

F.2d 1022, 1029

U.S. 1011 (1988);

M/V American Legend, 804 F.2d

____________________

Cincinnati
__________

837, 837

(4th

Cir. 1986) (en banc) (per curiam), rev'g 784 F.2d 1161 (4th
_____

Cir.

1986); Brown & Root, Inc.

___________________
(5th

Cir. 1981).

bears

The courts are in

648 F.2d 415,

424

agreement that the carrier

the burden of proving that it has afforded the shipper the

requisite "fair
817

v. M/V Peisander,
_____________

opportunity" notice.

See,
___

e.g., General Elec.,

____ _____________

F.2d at 1029; Tessler Bros. (B.C.) Ltd. v. Italpacific Line,

_________________________
________________

494 F.2d 438, 443 (9th Cir. 1974).

Our review leads us to conclude that the bill of lading

in

this case

satisfy

afforded "fair

whatever

other courts.
paramount"3

essential

opportunity" notice
requirements are

Constructive notice was

legibly printed on the

sufficient to

imposed

afforded by the

reverse side of

by these

"clause

the bill of

____________________
3The bill of lading included a typical "clause paramount":
1.
CLAUSE PARAMOUNT: This bill of lading shall have
effect subject to the provisions of the Carriage of
Goods by Sea Act, approved April 16, 1936.
7

lading:

"This bill

provisions of

of lading shall

the Carriage of

have effect subject to

Goods by

Sea Act .

. . ."

the

See
___

Cincinnati Milacron, 804 F.2d at 837 ("clause paramount" provides

___________________
constructive notice).4

more particular notice

was contained

in the bill of lading "valuation clause":

20. VALUATION.
Carrier shall not be liable
in any event for any loss, damage, misdelivery or delay with respect to the goods in an
amount exceeding $500.00 lawful money of the
United States per package, or in the case of
goods not shipped in packages, per customary
freight unit, unless the nature of the goods
and a valuation thereof higher than $500.00
is declared in writing by Shipper on delivery
of the goods to Carrier and inserted in the
Bill of Lading and extra freight is paid
thereon as required by the applicable tariff
to obtain the benefit of such higher valuation.

See Carman Tool, 871 F.2d at 899 n.4 (finding that bill of lading
___ ___________
provision substantially similar to

____________________

that sub judice recited terms

___ ______

See also 46 U.S.C. App.

1312 ("any bill of lading . . .
___ ____
containing an express statement that it shall be subject to the
provisions of [COGSA] shall be subjected hereto as fully as if
subject hereto by the express provisions of [COGSA] . . . Provid_______
ed further, that every bill of lading . . . shall contain a
___________
statement that it shall have effect subject to the provisions of
[COGSA]") (emphasis original); cf. Komatsu Ltd. v. States S.S.
___ ____________
___________
Co., 674 F.2d 806, 810 n.6 (9th Cir. 1982) (rejecting statutory
___
challenge to "fair opportunity" doctrine based on
1312, because
this section "leaves a carrier free to quote the language of
section 4(5) in full").

4McGee does not challenge the legibility of the COGSA

notice.
Cf. Nemeth, 694 F.2d at 611-12 (illegible recitation of
___ ______
COGSA
4(5) does not provide "fair opportunity" notice).
8

of COGSA

4(5) and thus afforded actual

5-6 (quoting 46 U.S.C. App.

McGee contends
entitlement

to summary

opportunity" requirement
that Sea
the

Barge failed to

notice); cf. supra pp.

___ _____

1304(5)).5

that Sea Barge did

judgment
because

not demonstrate its

on compliance
there was

competent

offer PREPA ad valorem

__ _______

true value of the cargo.

with the

"fair

evidence

rates based on

Specifically, McGee reiterates its

claim

below that Sea Barge failed to show that published tariffs

were available for a drilling rig on this voyage.6

McGee relies

primarily on the Fifth Circuit's language in Brown & Root:

____________
[T]he circumstances of the case before us do
not overcome the prima facie evidence of the
opportunity for a choice of rates and valuations . . . First, COGSA was expressly incorporated in the bill of lading to thereby
bring into play
4(5).
Next, and more sig____ ____
nificantly, the published tariff which has
__________
___ _________ ______
____________________

5In light of our conclusion that the bill of lading met

whatever "fair opportunity" notice requirements are imposed by
other circuits, we refrain from embracing the "fair opportunity"
doctrine itself, in any form.
We take this course because the
parties have assumed, from the outset, that a COGSA-related "fair
opportunity" doctrine would apply.
Thus, we leave for another
day, and a proper adversarial setting, what we perceive to be a
problematic question. See Michael F. Sturley, The Fair Opportu___
__________________
nity Requirement Under COGSA Section 4(5): A Case Study in the
_________________________________________________________________
Misinterpretation of the Carriage of Goods by Sea Act (Part I),
________________________________________________________________
19 J. Mar. L. & Com. 1 (1988); and Michael F. Sturley, The Fair
___
________
Opportunity Requirement (Part II), 19 J. Mar. L. & Com. 157, 176
__________________________________
(1988) ("All of the available evidence suggests that the [COGSA]
package limitation should not be subject to a fair opportunity
requirement.").

6McGee relies on a deposition by William Lauderdale, the Sea

Barge agent responsible for negotiating freight charges with
PREPA, which states that the rate for transporting the drill rig
was "outside" the tariff Sea Barge filed with the Federal Maritime Commission, because this was "a single shipper on a single
voyage, on a contract voyage."
The record does not contain a
copy of the Sea Barge tariff. Cf. infra note 7.
___ _____
9

the effect of law very carefully gave

____
a choice of valuations by a choice
_ ______ __ __________ __ _ ______
cisely definable freight rates.
______ _________ _______ _____
648 F.2d

at 424 (emphasis

Wuerttembergische
_________________
(5th

omitted); see
___

v. M/V Stuttgart Express,

______________________

Cir. 1983) (per

The controlling

added, citations

Shipper
_______
of pre__ ____

711 F.2d

curiam) (similar, applying

question before

also
____

621, 622

Brown & Root).

____________

us therefore becomes:

whether

actual and constructive notice, without more, affords the shipper

"fair opportunity," as a matter of law.

Careful examination of the authorities has disclosed no

appellate
actual

or

case which requires a

constructive notice

opportunity" doctrine.

valid tariff
as

an

in addition to

element of

the "fair

The Fifth Circuit, whose cases constitute

the principal authority relied on by McGee, has reserved judgment

on this matter:
The facts

of [Brown & Root, 648 F.2d at 424,

____________
and Wuerttembergische, 711 F.2d at 622] re_________________
veal that we have not held . . . that the
___
mere incorporation of COGSA into a bill of
lading constitutes prima facie evidence of
fair opportunity. Because that circumstance
_______ ____ ____________

is not before us in this case, we express no

__ ___ ______ __ __ ____ _____ __ _______ __
opinion on the issue.
_______ __ ___ _____

Couthino, Caro & Co. v. M/V Sava, 849 F.2d 166, 170 n.6 (5th Cir.
____________________
________
1988) (emphasis added).

Other courts

of appeals either directly

hold that a tariff is not required if notice of the COGSA liabil____

ity limitation has been given, see, e.g., Ocean Lynx, 901 F.2d at
___ ____ __________
939 ("Brown & Root
____________

thus adopted a system of

of an opportunity to

constructive notice

declare excess valuation.

paramount in the bill of lading

Federal Maritime Commission

Either

a clause

or a valid tariff filed with the

__

. .

. is sufficient

to afford

the

10

shipper

an opportunity

omitted, emphasis

to

declare

added),7 or

excess value.")

clearly imply
_____

e.g., Aetna Ins. Co. v. M/V Lash Italia, 858

____ _______________
_______________
Cir. 1988) ("In
limitation

such a

(citations

rule, see,
___

F.2d 190, 193 (4th

this case [language reciting the COGSA liability

in the] bill

of lading establishes

prima facie evi_____ _____

dence of

fair opportunity by clearly outlining the limitation of

liability and
limitation
at 901

explaining the shipper's opportunity

by declaring a higher value."); Carman Tool, 871 F.2d

___________

("so long as

adequate notice

the bill of

of the

tariff,

(9th Cir.);
without

lading, on its

liability

declare a higher value, the

bility")

to avoid the

cf.
___

limit and

face, provides

an opportunity

to

carrier has discharged its responsiKomatsu, 674

_______

actual notice

of

the

F.2d at

811 (published

relevant provisions

of

COGSA, does not satisfy "fair opportunity" requirement).

We thus

eschew McGee's implicit invitation

the "fair opportunity" doctrine.

As the Ninth

to augment

Circuit observed

in a similar context:
We decline to expand the fair opportunity
requirement as suggested by [shipper]. The
requirement is not found in the language of
COGSA; it is a judicial encrustation, designed to avoid what courts felt were harsh
or unfair results. The requirement has been
criticized for introducing uncertainty into
____________________
7Though the published tariff

in Ocean Lynx "provide[d] that

__________
an ad valorem rate shall be applied to shipments of certain com__ _______
modities [but did] not provide for the method through which a
shipper of goods other than the listed commodities can avoid
COGSA section 4(5)'s limitation on liability," 901 F.2d at 940,
the court found that incorporation of COGSA into the bill of
lading satisfied the "fair opportunity" requirement, id.
The
___
argument rejected by the Eleventh Circuit is very similar to that
advanced by McGee. See supra note 6.
___ _____
11

commercial transactions that should be

erned by certain and uniform rules.

gov-

Carman Tool, 871 F.2d at 900 (citations omitted); see also Vimar
____________
___ ____ _____

Seguros y Reaseguros, S.A. v. M/V Sky Reefer, ___ F.3d ___, ___
___________________________
_______________
(1st Cir.
1994)]

1994) [No. 93-2179,

slip op. at

4 (1st Cir.

July 7,

("COGSA was . . . intended to reduce uncertainty concern-

ing the responsibilities

bilities and
(citations

and liabilities of carriers,

rights of shippers, and

omitted);

see
___

generally
_________

liabilities of insurers.")
Sturley,
_______

(criticizing "fair opportunity" doctrine as

cient and

inconsistent with

domestic law).8

The bill of

responsi-

Parts

I,

II

economically ineffi-

COGSA's roots in

international and

lading indisputably provided

both

____________________

8Further, nothing in the facts of this case counsels extension of the "fair opportunity" doctrine. McGee has not shown
that the absence of relevant published tariffs prevented PREPA
from avoiding the COGSA liability limitation.
We will not
presume that PREPA, McGee's insured, would have declared addi_______
tional value under a published tariff, especially since PREPA's
contract with Henley obligated it to provide marine cargo insur_________ __
ance for the full replacement value of the drilling rig. Compare
____ ___________ _____
_______
Travelers Indemn. Co. v. Vessel Sam Houston, 26 F.3d 895, 900

_____________________
___________________
(9th Cir. 1994) (because shipper obtained insurance through an
independent underwriter, "there is every reason to believe that
[the shipper] made a deliberate choice to forego the additional
cost that would have been incurred in raising [the COGSA] liability limit"). Indeed, Sea Barge proffered uncontroverted evidence
that though it offered insurance, PREPA declined, opting instead
to purchase insurance through McGee.
Professor Sturley has suggested that in the typical case,
the ad valorem rates for excess value offered by a carrier are
__ _______
higher than premiums for equivalent cargo-insurance coverage from
a third-party underwriter.
See Sturley, Part II, at 194.
A
___ _______
rational shipper confronted with such a choice is not likely to
pay ad valorem rates when third-party insurance coverage is less
__ _______
expensive.
Moreover, a judicially-imposed tariff requirement
would increase transaction costs to the carrier, with no corresponding benefit to either party.
12

actual

and constructive

limitation.9
the

As there

district court

notice

of the

COGSA

was no material fact in

properly

granted summary

4(5)

liability

genuine dispute,
judgment for

Sea

Barge/Ayacol on the ground that the COGSA "package/CFU" liability

limitation applies.
3.
3.

COGSA Package/Customary Freight Unit

COGSA Package/Customary Freight Unit
____________________________________
COGSA

or in case

4(5) limits liability to "$500 per package

of goods

not shipped

in packages,

. .

per customary

freight unit."

46 U.S.C.

concluded that the drill

Strictly
parties
a

speaking, of

App.

rig was shipped as a

course,

it was

not

The district

court

single "package."
a "package."

The

agree that "the actual cargo that was lost overboard was

truck mounted Cabot 900 Drilling rig, which was self propelled

and had eighteen (18) wheels .

crated in any
______ __ ___
J.

1304(5).

way."
___

facts).

boxed or
_____ __

McGee's Mot. Opposing Def.'s Mot. for Summ.

at 5-6 (emphasis added);

Statement

. . [and which] was not

___

compare Sea Barge's

_______

of Uncont. Mat. Facts

Resp. to Pl.'s

at 4 (expressly admitting these

Moreover, we have held that a printing press shipped "in

____________________

9McGee also argues that because David Kiester, the PREPA

agent who negotiated the bill of lading with Sea Barge, allegedly
was inexperienced in maritime matters, knowledge of the effect of
COGSA
4(5) may not be imputed to PREPA. The only case McGee
cites for this proposition, see Pan American World Airways, 559
__________________________
F.2d at 1177 (holding that "clause paramount" alone cannot be
_____
used to impute knowledge of effect of COGSA to shipper), is
inapposite. Moreover, we conclude that Kiester's inexperience is
immaterial to our analysis. Cf. Carman Tool, 871 F.2d at 901 n.9
___ ___________
("So long as the bill of lading has all the necessary information
[i.e., gives actual notice of COGSA
4(5)], the shipper, or any
___ ________ __ ___
other interested party, has the means of learning everything it
_____ __________ _____
may wish to know about the terms of the transaction.") (emphasis
added).
13

open

view, unboxed, [which] was not wrapped

not a

package as defined by COGSA."

or crated . . . was

Hanover Ins. Co. v. Shulman

________________
_______

Transp. Enters., Inc., 581 F.2d 268, 275 (1st Cir. 1978); accord
______________________
______
Tamini
______

v. Salen Dry Cargo AB, 866

__________________

(free-standing portable
exposed
age");
1953)

drilling rig, "for the

and not enclosed in a

(uncrated locomotive
167,

packaging

at

packages'") (citations
since

that

generally
omitted,

the shipper

201 F.2d 281,

not COGSA

16-35 ("cargo

whatsoever is

most part" fully

container, was not a COGSA "pack-

Petition of Isbrandtsen Co.,

___________________________

supra,
_____

then,

F.2d 741, 743 (5th Cir. 1989)

286 (2d Cir.

"package"); 2A
is shipped

Benedict,
________

without

any

treated as

'not shipped

citing numerous

cases).

chose to

describe

in

How,

the shipment

as a

single package can it now claim it constituted multiple units?

Thus,
whether labeled
freight unit"
generally
shipment at
Rotterdam,
_________

the

drilling

a "package"
(CFU).

rig

or, more correctly,

Within the

the unit on which the

issue."

constituted

but

one

unit,

one "customary

meaning of COGSA, the

CFU "is

freight charge is based for the

Binladen BSB Landscaping v.

_________________________

M.V. Nedlloyd
_____________

759 F.2d 1006, 1016 (2d Cir.), cert. denied, 474 U.S.
_____ ______

902 (1985); Granite

State, 825 F.

Supp. at 1126.10

To

deter-

______________
____________________

10Some early cases looked to shipping-industry custom in

determining the CFU. See, e.g., Waterman S.S. Corp. v. United
___
____ ____________________
______
States Smelting, Ref. & Mining Co., 155 F.2d 687, 693-94 (5th
____________________________________
Cir.), cert. denied, 329 U.S. 761 (1946).
But the clear modern
_____ ______
trend is to "recognize the customary freight unit as the unit
specifically employed by the parties in arriving at the rate
charged for shipment," Granite State, 825 F. Supp. at 1126; see,
_____________
___
e.g., FMC Corp. v. S.S. Marjorie Lykes, 851 F.2d 78, 80 (2d Cir.
____ _________
___________________
1988); see also Jerome C. Scowcroft, Recent Developments Concern___ ____
____________________________
ing the Package Limitation, 20 J. Mar. L. & Com. 403, 412 (1989)
___________________________
(discussing modern cases); 2A Benedict, supra,
168, at pp. 16________ _____
14

mine the

unit upon

parties' intent, as
tariff,

and perhaps

which freight was

charged we

expressed in the Bill

elsewhere."11

look "to

the

of Lading, applicable

Croft & Scully Co.

___________________

v. M/V
___

Skulptor Vuchetich, 664 F.2d 1277, 1282 (5th Cir. 1982); see FMC
___________________
___ ___
Corp. v.
_____

S.S. Marjorie Lykes, 851 F.2d 78, 80 (2d Cir. 1988) (in
___________________

determining the CFU, "district

court should examine the bill

of

lading, which expresses the contractual relationship in which the

intent of

the parties

is the overarching

standard") (citations

omitted).
In
Barge

support of

argued that

drilling rig on
the bill of

its

motion for

it charged

the northbound

a lump

summary judgment,

sum for

voyage.12

Sea

Sea

transporting the
Barge relied

on

lading, PREPA's acceptance of the bid/purchase order

(purchase order), and a facsimile from Sea Barge to PREPA quoting

the charge

for the

northbound voyage

purchase order and the

("quoted

charge").

quoted charge clearly establish

The

that the

freight charge was based on a lump sum:

____________________
46 to 16-47 (same).

11Since the bill of lading is the contract of carriage

between shipper and carrier, Grant Gilmore & Charles L. Black,
Jr., The Law of Admiralty 93 (2d ed. 1975), familiar principles
_____________________
of contract interpretation govern its construction, see Croft &
___ _______
Scully Co. v. M/V Skulptor Vuchetich, 664 F.2d 1277, 1282 (5th
___________
_______________________
Cir. 1982).
12It is undisputed that the

freight charges for the

south______
were calculated on a short-ton

bound voyage, totalling $164,583,

_____
basis, as evidenced by the bill of lading. It is not clear from
the record exactly why the parties opted for a lump-sum contract
rate on the northbound voyage, but the Lauderdale deposition
suggests that Sea Barge's expenses would be lower for the trip to
Houston because the barge to be used on the return leg was
already positioned in Puerto Rico.
15

[PURCHASE ORDER]
[PURCHASE ORDER]
Charges will be as follows:
a)
Ocean Transportation
--Drill rig & acc.: $86,400 lumpsum
b)
Port charges & handling fees
--San Juan arrimo: $5.00/2,000 lbs
--Houston Wharfage: 1.50/2,000 lbs
--Houston truck loading: $7.50/2,000 lbs

[QUOTED CHARGE]
[QUOTED CHARGE]

David, I have finalize [sic] shipping charges for this

move and wish to give you our charges to move this rig
to Houston, Texas.
. . .
Charges ocean transportation:
Drill rig and accessories loose.
$86,400.00
lumpsum
. . .
Port charges and handling fees:
San Juan Arrimo
$5.00 per 2000 lbs
Houston Wharfage
$1.50 per 2000 lbs
Houston truck loading
$7.50 per 2000 lbs
The relevant portion of
same, though
dence

the bill of lading is

it does not use

substantially the

the term "lump sum."13

This evi-

was sufficient to establish that Sea Barge was entitled to

summary judgment on

its claim that the northbound freight charge

____________________
13
_________________________________________________
TARIFF ITEM NUMBER
CHARGES
TOTAL
TARIFF ITEM NUMBER
CHARGES
TOTAL

_________________________________________________
CONTRACT
86,400.00
_________________________________________________
_________________________________________________
TOTAL THRU FREIGHT
_________________________________________________
WHARFAGE 1.50 st
1,322.25
_________________________________________________
TERMINAL USAGE(1)PR 5.00 st
4,407.50
_________________________________________________
TERMINAL USAGE(2)US 7.50 st
6,611.25
_________________________________________________
. . .
TOTAL CHARGES
-------98,741.00
-------________________________________________________
(Italicized characters are typed in the original; all
characters are pre-printed in the bill of lading.)

other

16

was based on a lump sum.

See FMC Corp., 851 F.2d at 81 (bill of

___ __________

lading established that CFU was calculated on lump-sum basis).

McGee argues that
charges by short ton
short ton as the CFU.
The portion of

listing wharfage and terminal

(st) on the bill of

lading established the

We think this argument cuts the other way.

the bill

of lading reproduced

note 13, sets out the charge per short ton only
____
terminal

usage

usage, whereas the freight

above, see
___

supra
_____

for wharfage and

charge is stated

in a lump

sum.

And this reading is buttressed by the quoted charge and the

purchase order, which clearly evince the intent of the parties to

calculate the freight charge on a lump-sum basis.
Sea

Barge having

carried

the initial

burden on

its

motion for summary judgment, the burden shifted to McGee to point

to competent evidence indicating a trialworthy issue.
48 v. United Bhd. of Carps. & Joiners, 920
__
________________________________
Cir. 1990).

In support of

F.2d 1047, 1050 (1st

its claim that freight

based on the short ton, McGee proffered the Sea

PREPA relating to
deposition

the northbound

testimony

similar in all

of William

charge
charges
points

is made for "Ocean

are listed
out, other

on a

charges were

Barge invoice to

voyage, and a

portion of

the

Lauderdale.

The invoice

is

relevant respects to

lading set out in the margin.

See Local
___ _____

the portion of the

See supra note 13.

___ _____

bill of

A flat $86,400

freight," while wharfage and terminal

short-ton basis.

portions of

the invoice

reflect that the drilling rig weighed

17

Although,

as McGee

and bill

of lading

1,726,000 pounds, there is

nothing to link weight with the freight charge, and McGee made no
_______
proffer supporting such a link.14

More importantly, the Lauderdale deposition tendered by

McGee

states

that Lauderdale

northbound voyage
costs

based on

of operating

container

the

costs; as

Lauderdale

calculated

charges for

Sea Barge's expenses,

___ _______ ________

vessel; agency,

well

the

as a

profit

including the

port, stevedoring
margin.

the

Nowhere

and

does

intimate that the drilling-rig weight was a factor in

calculating the freight charge or

in the parties' discussions of

the freight charge for the northbound

competent evidence that the freight

voyage.

Thus, we find

no

charge was based on anything

other than a lump sum, see S.S. Marjorie Lykes, 851 F.2d at 80-81
___ ___________________
(finding that bill
intended

of lading and tariff established that parties

to calculate

freight on

lump-sum basis),

that the drilling rig itself was the CFU in this case.

which means

Binladen,
________

759 F.2d at 1016; see Union Carbide Corp. v. M/V Michele, 764 F.
___ ___________________
____________

Supp. 783, 786 (S.D.N.Y. 1990) (CFU was transportable tank, since
freight charge was computed on lump-sum basis).
B.

The Cross Appeal (No. 93-1548)

B.

The Cross Appeal (No. 93-1548)

______________________________

____________________
14Even

evidence that Sea Barge used the weight of the drill

rig to calculate

its own costs may not have been dispositive.

___
See M/V Lash Italia, 858 F.2d at 193 ("[w]hile [carrier] may have
___ _______________
considered the vehicles' dimensions in setting its freight rates,
the mere consideration of a particular measure does not render it
a customary freight unit"); S.S. Marjorie Lykes, 851 F.2d at 80___________________
81 (even though preliminary negotiations indicated that carrier
was calculating freight based on price per ton, the fact that the
bill of lading and tariff unambiguously reflected a lump-sum rate
was controlling).
18

The Ayacol

and Sea

the district court finding

was

not controlled by

exonerated from
Barge

an

PREPA to such

attorney fee

award against

an extent

drilling rig

that Ayacol was

order denying Ayacol/Sea

McGee.15

We

deem these

cross-appellants' failure to object to

magistrate-judge's report and

recommendation within the

prescribed by 28 U.S.C.

Mart, Inc.
___________

challenges (1)

that the loading of the

liability, and (2) the

claims waived due to

period

Barge cross-appeal

636(b)(1)(C).

v. Ford Motor Co., 616

________________

1980)16 ("[A] party 'may'

F.2d

603,

the

ten-day

See Park Motor

___ __________
605 (1st

file objections within ten days

Cir.

or he

may not, as he chooses, but he 'shall' do so if he wishes further

[appellate]

consideration.").17

See also Fed.

___ ____

R. Civ. P. 72(b)

(same); D.P.R. Loc. R. 510.2(A) (failure to object to magistrate-

____________________

15Prior to briefing and oral argument, McGee moved to

dismiss the Ayacol/Sea Barge cross-appeal for failure to comply
with D.P.R. Loc. R. 510.2(A) (failure to object to magistratejudge's report within ten days waives right to appellate review).
On written submissions by the parties, we denied the motion
without prejudice, specifically preserving McGee's right to
address this issue in its appellate brief.
Ayacol/Sea Barge
failed to respond to the waiver argument presented in McGee's
brief, either at oral argument or in their principal brief on
appeal, and filed no reply brief. Thus, we rely on the Ayacol/SeaBarge submissions in opposition to McGee's motion to dismiss.

16The Supreme Court has made clear that the failure to make
timely objection does not deprive the court of appeals of jurisdiction. Thomas v. Arn, 474 U.S. 140, 146 n.4 (1985).
______
___

17We reject the contention that the Ayacol/Sea Barge claim

sought to be raised on cross-appeal was preserved by an oblique
footnote reference in their joint memorandum opposing McGee's
________ _______
objection to the magistrate-judge's report. Their joint memoran_________
dum was not filed within the ten-day period prescribed by 28
U.S.C.
636(b)(1)(C). See Park Motor Mart., 616 F.2d at 605.
___ ________________
19

judge's report within

ten days waives

district court order).18

absolute right to

appeal

Ayacol/Sea Barge urge that timely objection is required

only

when a party challenges

a finding actually

magistrate-judge's report and recommendation.

set out in the

Thus, they

assert

no exception to the report per se but challenge the "fail[ure] to

___ __

make the additional findings requested [in the motion for summary
judgment]."

We reject

their contention, which

would allow

an

aggrieved party to assert on appeal an argument never surfaced in

the district court;
judge's

namely, in this

report failed to respond

dealing with

(arguments
surfaced for

to the portions

exoneration of liability

United States
_____________

v. Nu ez,
_____

19 F.3d

magistrate-

of the motion

and attorney

719, 722

not seasonably addressed

first time on

case, that the

fees.

n.8 (1st Cir.

to trial

court may

appeal) (citing cases).19

See
___

1994)

not be

Finally,

____________________

18The report and recommendation warned that "failure to

comply with [D.P.R. Loc. R. 510.2(A)] precludes further appellate
review." See United States v. Valencia-Copete, 792 F.2d 4, 6
___ _____________
_______________
(1st Cir. 1986) (directing inclusion of notice of waiver in
magistrate-judge's reports).
19Ayacol/Sea

Barge

point

to Orthopedic & Sports Injury

_____________________________
Clinic v. Wang Labs., Inc., 922 F.2d 220 (5th Cir. 1991), as
______
_________________
support for their theory. In Wang, plaintiffs did not object to
____
the magistrate-judge's report with respect to its failure to
treat plaintiffs' res ipsa loquitur defense against partial
___ ____ ________
summary judgment.
The Fifth Circuit rejected the defendant's
argument that Thomas v. Arn barred the claim, stating: "[plain______
___
tiff] is still able to request that the issue be considered on
__ _______
appeal, even if it did not question the magistrate's findings."

Wang, 922 F.2d at 225 (emphasis added), citing Thomas, 477 U.S.
____
______ ______
at 148-49. Although the court did not detail the reasons for its
decision, the referenced portion of Thomas states: "we need not
______
decide whether the Act mandates a waiver of appellate review
absent [timely objection to the magistrate-judge's report]. We
hold only that it does not forbid such a rule." Id.
No other
___
20

the

proposed bypass of the Article III judge would undermine the

established role of the magistrate judge in the federal system:

The purpose of the Federal Magistrates Act is
to relieve courts of unnecessary work. Since
magistrates are not Article III judges, it is
necessary to provide for a redetermination by
the court, if requested, of matters falling
__ _________
within subsection (b)(1)(B).
To require it
__ _______ __
if not requested would defeat the main pur__ ___ _________ _____ ______ ___ ____ ____
pose of the act.
____ __ ___ ___
Park Motor Mart, 616 F.2d
________________
added);
party

see also id. at

___ ____ ___
could

skip

directly to us.

the

at 605

(footnote omitted)

605 n.1 ("Nor can it

district court

and,

(emphasis

be thought that a
in

effect, appeal

We have no jurisdiction to review the determina-

tions of magistrates").20

We affirm
the district
court judgment
for Sea
We affirm
the district
court judgment
for Sea
_______________________________________________________

Barge/Ayacol, dismiss the Sea Barge/Ayacol cross-appeal, and

Barge/Ayacol, dismiss the Sea Barge/Ayacol cross-appeal, and
_________________________________________________________________
remand for further proceedings consistent with this opinion.
remand for further proceedings consistent with this opinion.
___________________________________________________________

All
All
___

parties are to bear their own costs.

parties are to bear their own costs.
___________________________________

____________________

court has cited Wang on this point. We think Wang is better seen
____
____
as support for the view that a court of appeals has discretion to
__________
adopt a rule allowing a party to raise a claim not preserved
before magistrate-judge.
Since this case presents no suitable
occasion for such a rule, see Park Motor Mart, 616 F.2d at 605,
___ ________________
we find Wang to be inapposite.
____

20Additionally, we note that these claims likely would not

succeed on the merits.
Ayacol cites no case holding that a
stevedore's duty of care may be delegated, in toto, to its marine
__ ____
surveyor. The district court case cited for this proposition,
see Royal Embassy of Saudi Arabia v. S.S. Ioannis Martinos, 1986
___ _____________________________
_____________________
A.M.C. 769 (E.D.N.C. 1984), merely found a right to contribution
____________
from the marine surveyor.
As concerns the request for attorney
fees, Sea Barge/Ayacol established no conduct on the part of
McGee which would warrant a fee award.
21