This case arose from an explosion on the MV Eva Maria. The vessel and cargo sank on 25 January 1980. Various cargo interests then brought an action seeking recovery from the shipowner, Pisces Ltd (Pisces), the time charterer, Transportation Maritima Mexicana SA (TMM), the manager and the operator of the vessel, Laeisz Maritime Trading Co Ltd (Laeisz) and the shipowner's insurer, United Kingdom Mutual Steam Ship Owners Assurance Association Ltd.

The consolidated claims were tried, and it was found that the defendants had shown by a preponderance of the evidence that the loss was not caused by any actions or omissions of the defendants. In fact, was found that one of the cargoes, a load of detonator caps, exploded due to spontaneous heating and combustion of the organic packing material surrounding it. The District Court found that the defendants had satisfied the burden under COGSA, 46 USC § 1304(2)(q), the 'catch all' exemption. The Court also rejected the plaintiffs' other contention, that the defendants should be held strictly liable for the loss as carriers transporting dangerous goods. The plaintiffs appealed.

Held: The District Court’s decision is affirmed.

The plaintiffs' argument was that COGSA coverage given to Pisces was wrong since the District Court did not go into the question of whether the bill of lading was signed by TMM with the authority of Pisces. They thus argued that Pisces should be liable under the Limitation of Liability Act and under general maritime law. The plaintiffs argued that the District Court had skipped this first step to determine whether COGSA was contractually extended to Pisces. Pisces contended that it had a contract with TMM so as to place Pisces within the definition of a COGSA 'carrier'.

The District Court, after going through a 'ping-pong volley-like exchange of burdens', decided that Pisces was exonerated of liability because it had met its burden of persuasion and production. The Court of Appeals stated that § 1304(2)(q) imposes the burden of persuasion on the defendant to show that it was not at fault in contributing to the loss or damage. Once the defendant had made this showing, the burden shifts to the plaintiffs to 'produce evidence to discredit the carrier’s theory of causation or to present proof of an alternative and more probable explanation for the loss that would involve the carrier’s causative or contributory negligence'. The plaintiffs had failed to do this. The plaintiffs' argument that the standard of liability could not be applied to Pisces was faulty. The standard under COGSA was more onerous than that in the Limitation of Liability Act and general maritime law. Pisces had affirmatively proved that no fault or negligence on its part caused or contributed to the loss.

In a limitation proceeding, the court must first determine whether any liability exists: see The Rambler 290 F 791 (2d Cir 1923). Liability is determined by the same legal principles that apply in an ordinary action for damages, except that certain statutory exemptions from liability apply. A claimant seeking recovery for loss of cargo must prove a ‘definite tort or contract, and the [shipowner’s] connection with it’: see Southern Pacific Co v United States 72 F 2d 212 (2d Cir 1934). The Court of Appeals stated that the defendants affirmatively established their freedom from fault and were thus free from liability, unless they were to be held strictly liable for the loss.

The plaintiffs contended that the defendants, as carriers of ultra-hazardous materials, were strictly liable for the loss of cargo. They argued that § 519 of The Restatement (Second) of Torts (1977), which has been imposed to hold land carriers strictly liable for the miscarriage of hazardous goods, extends to carriers of goods by sea as well. The plaintiffs argued that this was the correct standard of liability under general maritime law, not COGSA. The Court of Appeals dismissed this argument, affirming the District Court's judgment that imposition of a rule of strict liability for the carriage of ultra-hazardous materials would destroy the recognised need for uniformity in admiralty law. It further stated that such an approach would intrude upon the 'established statutory scheme concerning carriage of goods by sea' adopted by Congress. Accordingly, it found that the District Court’s ruling that the defendants affirmatively proved freedom from any fault in connection with the loss and that the plaintiffs failed to rebut this proof, was sufficient to exonerate each of the defendants from liability under general maritime law.

The Court of Appeals also commented upon the District Court's process of finding fault. The District Court acknowledged that since there was no way of proving what had actually happened, the District Court had to be persuaded by the conflicting theories as to the causation of the explosion and eventual sinking. The District Court found the defendants' theory to be the most persuasive and likely explanation for the loss of the ship and its cargo: that spontaneous heating led to the explosion of the rice hull material in which the detonator caps were packed. The District Court was correct in weighing the evidence and credibility of witnesses before it, in order to determine which theory had a stronger factual basis.