NYLS Journal of International and Comparative Law Volume 9 Number 2 VOLUME 9, NUMBERS 2 & 3, 1988 Article 11 1988 ADMIRALTY LAW: CARRIAGE OF GOODS BY THE SEA ACTQUASI- DEVIATION-SEDCO, INC. V. MV STRATHEWE Irwin Nack Follow this and additional works at: https://digitalcommons.nyls.edu/ journal_of_international_and_comparative_law Part of the Law Commons Recommended Citation Nack, Irwin (1988) "ADMIRALTY LAW: CARRIAGE OF GOODS BY THE SEA ACTQUASI- DEVIATION-SEDCO, INC. V. MV STRATHEWE," NYLS Journal of International and Comparative Law: Vol. 9 : No. 2 , Article 11. Available at: https://digitalcommons.nyls.edu/journal_of_international_and_comparative_law/vol9/iss2/ 11 This Notes and Comments is brought to you for free and open access by DigitalCommons@NYLS. It has been accepted for inclusion in NYLS Journal of International and Comparative Law by an authorized editor of DigitalCommons@NYLS. COMMENT ADMIRALTY-LAW: CARRIAGE OF GOODS BY THE SEA ACT - QUASI-DEVIATION - SEDCO, INC. v. MIV STRATHEWE The concept of "deviation," as that term is used in the area of admiralty law, refers to a voluntary and unjustifiable departure by a carrier from its contracted voyage.' The law is well-settled, in both the United States and England, that such action by a shipowner renders him liable for any damages or losses to his cargo resulting from that deviation. Although at one time application of this doctrine was lim- ited to an actual geographical departure by a carrier from an agreed upon route, in recent years its use has been expanded to include vari- ous actions by a carrier which tend to expose his cargo to a greater risk of damage or loss.2 The confusion associated with this expansive appli- cation of the deviation doctrine and its relationship to the liability lim- itation provisions of the Carriage of Goods by Sea Act of 19361 (COGSA) are reflected in the recent decision of the United States Court of Appeals for the Second Circuit in Sedco, Inc. v. M/V 4 Strathewe. In June of 1982, Sedco, Inc. (Sedco) contracted with the British shipping line Peninsular and Oriental Steam Navigation Ltd. ("P & 0") to ship eighteen packages of oil drilling equipment from Dubai, Saudi Arabia to Houston, Texas.5 The equipment was loaded on board the P & 0 vessel MIV Strathewe, which departed from Dubai in the early part of June." Soon after her departure, the Strathewe was requi- sitioned by the British Government for service in the Falkland Islands 1. The United States Supreme Court has defined deviation as a "voluntary departure without necessity from the regular and usual course of a voyage .... " Hostetter v. Park, 137 U.S. 30, 40 (1890); see also G. GILMORE & C. BLACK, LAW OF ADMIRALTY § 3-40, at 177 (2d ed. 1975). 2. See G. GILMORE & C. BLACK, supra note 1, § 3-41, at 182. 3. 46 U.S.C. §§ 1300-1315 (1982). 4. 800 F.2d 27 (2d Cir. 1986). 5. Id. at 29. 6. Id. N.Y.L. SCH. J. INT'L & COMP. L. [Vol. 9 War, in accordance with that country's war powers.7 In response to or- ders to discharge her present cargo at a convenient port, the ship pro- ceeded to Malta,8 which in addition to being on her course to Britain, was also on the course of another P & 0 vessel, the M/V Strathesk, en route to Houston, Texas.9 Sedco's cargo was offloaded by P & 0 at Malta on June 12th.10 In mid-July, Sedco's custom's broker in Houston twice inquired of P & 0 as to the estimated date of arrival of the cargo, and in both instances he was told the cargo would arrive aboard the M1 V Strathewe on August 24th.1 1 On August 4th, after a third inquiry as to the estimated arrival date, P & 0 informed Sedco's agent that the cargo had been discharged at Malta and reloaded on the M/V Strathesk which had departed on August 3rd.1 2 The Strathesk arrived in Houston on August 30th with only sixteen of Sedco's eighteen pack- ages.'" Although the Strathesk's shipping manifest stated that eighteen packages had been reloaded, only sixteen actually were. The other two packages were left on a pier in Malta and were not located until 1984, at which time they could only be sold by Sedco as salvage. 4 Sedco brought suit against P & 0 in the United States District Court for the Southern District of New York 5 for the value of the lost cargo."" The claim asserted that the Strathewe's departure from its in- tended voyage and P & O's subsequent misrepresentations and post- discharge negligence in the handling of Sedco's cargo constituted an unreasonable deviation, thereby voiding COGSA's $500 per package li- ability limitation. 7 The district court held that P & O's failure to no- tify Sedco that its cargo had been offloaded at Malta, coupled with their erroneous representations that the cargo was still aboard the Strathewe when in fact it was still in Malta, and their inability to properly reload all eighteen packages amounted to an unreasonable 7. Id. 8. Id. The following message was received: "Your vessel Strathewe is required for service in connexion [sic] with the Falkland Islands Emergency. Request you instruct your master to proceed to Southampton at best speed discharging present cargo at a port convenient to you subject to minimum delay." Id. 9. Sedco, Inc. v. MN Strathewe, 630 F. Supp. 120, 121 (S.D.N.Y. 1986). 10. 800 F.2d at 29. 11. 630 F. Supp. at 121. 12. Sedco, Inc. v. M/V Strathewe, 800 F.2d 27, 29 (2d Cir. 1986). 13. Id. 14. Id. 15. Sedco, Inc. v. M/V Strathewe, 630 F. Supp. 120 (S.D.N.Y. 1986). 16. Id. at 122. Sedco had contracted to sell the lost drilling equipment for $350,000. The salvage value was $167,362.52; thus Sedco sought to recover $182,637.48. Id. 17. See 46 U.S.C. § 1304(5) (1982). 19881 SEDCO, INC. v. M/V STRATHEWE deviation, precluding P & O's reliance on the liability limitation. 8 On appeal, the Second Circuit, in an opinion which reflects the ambiguous application of the deviation doctrine, held that P & O's actions did not amount to an unreasonable deviation within the meaning of COGSA and thus P & O's liability was governed by the $500 per package limit imposed by COGSA. 9 Traditionally, carriers were held liable for all damages or losses to their cargo which were not the result of an act of God, the public en- emy, the fault of the shipper, or the inherent characteristics of the cargo. 20 This held true even absent negligence or fault on the part of the carrier."' The rationale behind this somewhat harsh rule was that the carrier was in sole possession and control of the cargo, thereby lending credence to fears that they might very well steal the goods which they were carrying.22 Moreover, such exclusive possession made it virtually impossible for a cargo owner to effectively prove the true cause of his loss.23 Thus, it was not necessary for shippers to assert a carrier's geographic deviation as a distinct basis of liability, since even non-deviating carriers were liable for cargo losses not attributable to one of the above-mentioned exceptions. 4 It was in response to this rule of "carriers as insurers" that shipowners began to insert various clauses and provisions into their bills of lading, which had the effect of con- tracting away their liability. 5 These clauses generally were held valid as "[p]rinciples of freedom of contract prevented courts from refusing 2' to enforce these stipulations." 18. 630 F. Supp. at 122. P & 0 also contended that pursuant to COGSA's "restraint of princes" defense, it was immune from liability. Under this defense, where a sovereign's assertion of control over a vessel is the proximate cause of the loss, the carrier will be relieved from liability. See Baker Castor Oil Co. v. Insurance Co. of America, 157 F.2d 3, 4-5 (2d Cir.), cert. denied, 329 U.S. 800 (1946). Both courts here rejected this defense since P & O's activities, and not the British government's restraint, were the proximate cause of Sedco's loss. 630 F. Supp. at 121; Sedco, Inc. v. M/V Strathewe, 800 F.2d 27, 32- 33 (2d Cir. 1986). 19. 800 F.2d at 33. 20. See G. GILMORE & C. BLACK, supra note 1, § 3-22, at 139-40; see also Propeller Niagara v. Cordes, 62 U.S. (21 How.) 7, 23 (1859); Clark v. Barnwell, 53 U.S. (12 How.) 272, 282 (1851). Even where a loss was attributable to one of these common law excep- tions, a showing of fault or negligence on the carrier's part would result in imposition of liability upon the carrier. Id. 21. Sorkin, Changing Concepts of Liability, 17 FORUM 710 (1981). 22. See Forward v. Pittard, 99 Eng. Rep. 953 (K.B. 1785). 23. Id. 24. Friedell, The Deviating Ship, 32 HASTINGS L.J. 1535, 1537 (1981); see supra note 20 and accompanying text. 25. Friedell, supra note 24, at 1549. 26. Id. at 1537. N.Y.L. ScH. J. INT'L & COMP. L. [Vol. 9 One of the more common provisions inserted into bills of lading by carriers to limit their liability was the valuation clause, which stipu- lated the value of the cargo. Often fixed at $100 per package, these clauses were usually enforced under the theory that cargo owners had the opportunity to pay a higher price and declare a higher valuation." It was the widespread use of the valuation clauses and other liability limitation provisions during the nineteenth century from which the no- tion of deviation as a distinct basis of liability arose."8 With the introduction of steam powered vessels during the Indus- trial Revolution and England's traditional maritime history, it seemed inevitable that British ships would dominate the trans-atlantic ship- ping market.29 Thus, it was no surprise that British bills of lading gen- erally contained the most extreme liability limitation provisions." In the United States, where the use of these provisions was prevalent only among rail carriers, their validity was generally determined by state contract law.