## Facts

- Steel Coils, Inc. contracted to ship steel coils from Eastern Europe to the United States aboard the M/V *Lake Marion*.
- Western Bulk Carriers K/S Oslo time-chartered the vessel from Lake Marion, Inc., the vessel owner.
- Bay Ocean Management, Inc. managed the vessel and employed the master and crew.
- Steel Coils alleged that coils loaded in apparent good condition were later discharged with rust damage caused by seawater during the ocean transit.
- Evidence at trial included bills of lading and cargo survey materials reflecting the coils’ apparent good order at loading, followed by destination testing and inspections indicating seawater as the source of corrosion.
- The voyage involved loading at Latvian ports and carriage to U.S. ports, with discharge occurring at multiple locations (including New Orleans and Houston).
- Steel Coils sued under the Carriage of Goods by Sea Act (COGSA), seeking cargo-damage recovery from the vessel (in rem) and from vessel interests and charter interests (in personam).
- The defendants contested causation and argued COGSA defenses, including “peril of the sea” and “latent defect,” and argued that they exercised due diligence to make the vessel seaworthy (including with respect to hatch covers and hold conditions).
- After a bench trial, the district court entered judgment for Steel Coils and imposed liability on the vessel interests and Western Bulk under COGSA; it also found Bay Ocean liable on a negligence theory not subject to COGSA’s $500-per-package limitation.
- The defendants appealed to the United States Court of Appeals for the Fifth Circuit, challenging the district court’s application of COGSA burdens and defenses; certiorari was later denied by the U.S. Supreme Court (540 U.S. 949 (2003)).

## Issues

1. Did Steel Coils establish a prima facie COGSA cargo-damage case by showing the coils were delivered to the carrier in apparent good order and discharged in damaged condition?
2. Did the vessel interests and charterer carry their burden to avoid liability by proving a COGSA exception (including “peril of the sea” or “latent defect”) and by proving due diligence to make the vessel seaworthy?
3. Could Bay Ocean, as vessel manager/agent, rely on COGSA’s $500-per-package limitation to cap liability for negligence causing cargo damage?

## Decision

- The Fifth Circuit held that Steel Coils proved a prima facie case under COGSA through evidence of apparent good condition at loading and rust damage at discharge consistent with seawater exposure during transit.
- The court held that the defendants did not meet their burden to establish a COGSA defense or otherwise avoid liability, including failing to show a qualifying “peril of the sea” and failing to prove a “latent defect” not discoverable by due diligence.
- The court agreed with the district court that the defendants failed to show due diligence to make the vessel seaworthy for this cargo, including as to hatch/hold integrity and related maintenance/inspection practices tied to water ingress.
- The court held that Bay Ocean could be held separately liable in negligence and could not invoke COGSA’s $500-per-package limitation as a defense in that posture.
- The Fifth Circuit affirmed the district court’s judgment in all material respects; the Supreme Court later denied certiorari (540 U.S. 949 (2003)).

## Legal Principles

- COGSA burden shifting: a cargo claimant generally establishes a prima facie case by proving delivery to the carrier in apparent good order and outturn in damaged condition; the burden then shifts to the carrier to prove an excepted cause and related requirements.
- Due diligence/seaworthiness: the carrier must exercise due diligence at the start of the voyage to make the ship seaworthy and fit to carry the cargo; failure to do so prevents reliance on statutory defenses tied to seaworthiness and cargo care.
- “Peril of the sea” requires more than ordinary, foreseeable sea and weather conditions; the carrier must show an extraordinary event of the sea and a causal connection to the damage.
- “Latent defect” within COGSA refers to a defect not discoverable by due diligence; deterioration or conditions that reasonable inspection and maintenance would reveal do not qualify.
- Evidence of cargo condition: bills of lading and survey evidence can support findings on “good order” at loading and help establish whether damage occurred during carriage rather than pre-shipment.
- Package limitation: COGSA’s $500-per-package limitation does not automatically protect a carrier’s agent/manager when liability is imposed on a separate negligence theory rather than as the contractual carrier under the bill of lading.

## Conclusion

In *Steel Coils, Inc. v. M/V Lake Marion*, the Fifth Circuit affirmed a COGSA judgment for a cargo owner whose steel coils were found to have been loaded in apparent good condition and discharged with seawater-caused rust damage, rejected the defendants’ attempts to avoid liability through asserted COGSA defenses and claims of due diligence, and held that the vessel’s manager could not cap its separate negligence liability through COGSA’s $500-per-package limitation; certiorari was denied at 540 U.S. 949 (2003).


Steel Coils, Inc. v. M/V Lake Marion, 331 F.3d 422 (2003), 540 U.S. 949 (2003)