## Facts

- Louis-Dreyfus & Co. shipped wheat from Duluth, Minnesota to Montreal, Canada under bills of lading issued by Paterson Steamships, Ltd.
- The bills of lading provided for carriage “Duluth to Montreal, with transshipment at Port Colbourne, Ontario,” and excepted “dangers of navigation, fire and collision.”
- At Port Colbourne, Paterson unloaded the wheat, stored it in an elevator, and reshipped 35,000 bushels on the *Advance*, a vessel owned by a third party and arranged through Paterson’s agent.
- The *Advance* grounded near the entrance to the Cornwall Canal in the St. Lawrence River, stove in her bottom, and sank, extensively damaging the wheat by water.
- Louis-Dreyfus sued Paterson in personam for cargo damage; the district court held Paterson liable, and Paterson appealed.

## Issues

1. Whether issuing bills of lading from Duluth to Montreal “with transshipment at Port Colbourne” made Paterson a through carrier liable for loss on the transshipped leg.
2. Whether Paterson could avoid liability under the Harter Act and/or the Canadian Water-Carriage of Goods Act based on navigational fault immunity.
3. Whether Paterson carried its burden to show due diligence to make the *Advance* seaworthy and properly manned, equipped, and supplied as a condition to statutory immunity.
4. Whether the bill-of-lading exception for “dangers of navigation” independently excused the loss.

## Decision

- The Second Circuit affirmed judgment for Louis-Dreyfus.
- Paterson was a through carrier from Duluth to Montreal and remained responsible for the transshipped leg performed by the *Advance*.
- Paterson failed to prove due diligence as to the *Advance*’s seaworthiness and therefore could not claim statutory immunity for navigational errors or ship management.
- Because Paterson did not establish the statutory precondition of due diligence, it could not rely on the contractual “dangers of navigation” exception to escape liability.

## Legal Principles

- A carrier that issues a bill of lading covering carriage to the final destination “with transshipment” is ordinarily a through carrier unless the contract clearly terminates responsibility at the transshipment point.
- Agents and substituted vessels used to perform the contract do not, without clear limiting language, cut off the issuing carrier’s through-carrier liability.
- Under the Harter Act and comparable statutes granting immunity for navigational or management faults, the carrier bears the burden to affirmatively prove due diligence to provide a seaworthy, properly manned, equipped, and supplied vessel.
- Contractual peril exceptions (including “dangers of navigation”) are construed consistently with statutory limits; absent proof of due diligence as to seaworthiness, the carrier remains liable for cargo loss.

## Conclusion

Paterson remained liable as a through carrier for wheat damaged when a transshipped vessel sank, because it did not meet the required proof of due diligence to make the vessel seaworthy and thus could not invoke statutory or contractual navigational-peril defenses.


Louis-Dreyfus & Co. v. Paterson Steamships, Ltd., 43 F.2d 824 (2d Cir. 1930)