Monica Textile Corp (Monica) engaged the carriers to transport a single 20-foot shipping container from Africa to Savannah, Georgia. The bill of lading disclosed that the container, which Monica had stuffed and sealed, held 76 bales of cotton cloth. The goods were damaged in transit. Monica brought suit in the District Court to recover for the loss. 

The carriers moved for partial summary judgment limiting their liability to USD 500 pursuant to US COGSA's liability limitation provision, 46 USC App § 1304(5). The District Court initially denied the motion, holding that 'where the bill of lading prepared by the carrier’s agent discloses a specific number of identifiable units as the contents of the container, those units (the bales of cloth) constitute the package' for purposes of COGSA’s limitation on liability: Monica Textile Corp v SS Tana 731 F Supp 124 (SD NY 1990). Shortly thereafter, the Second Circuit Court of Appeals decided Seguros Illimani SA v MV Popi P 929 F 2d 89 (2d Cir 1991), which held that for COGSA purposes, the number of packages specified in the 'No of Pkgs' column of the bill of lading is generally controlling. 

In the present case, though the 'Description of Goods' column of the bill of lading stated that the contents of the container consisted of 76 bales of cotton cloth, the 'No of Pkgs' column of the bill of lading had the number '1' typed in it, and the line labeled 'Total Number of Packages or Units in Words (Total Column 19 [No of Pkgs column])', had the word 'ONE' typed in it. In light of these facts, the District Court permitted the carriers to renew their summary judgment motion to limit their liability to USD 500, and the District Court reversed itself, holding that the intervening Court of Appeals decision in Seguros compelled a finding that the single container, rather than the 76 bales stowed therein, was the relevant COGSA package, see Monica Textile Corp v SS Tana 765 F Supp 1194 (SD NY 1991). Because the carriers conceded liability, the District Court entered judgment for Monica in the amount of USD 500.

Monica appealed the second judgment of the District Court, maintaining that the 76 individual bales of cloth, not the solitary shipping container, were the appropriate COGSA packages. 

Held: The second judgment of the District Court is reversed.

The District Court reversed itself in its second judgment on the basis of Seguros, which it read as establishing a bright-line rule for determining the number of COGSA packages from the bill of lading. The number of packages is the number appearing in the 'No of Pkgs' column of the bill, unless other evidence of the parties' intent plainly contradicts the applicability of that number, or unless the item referred to by that number is incapable of qualifying as a COGSA package.

The District Court’s characterisation of the Seguros rule is accurate. However, Seguros involved 600 separate steel-strapped bundles, each containing 15 tin ingots. The issue, therefore, was whether there were 600 'packages' or 9,000 (600 x 15) 'packages'. Most significantly, the Seguros decision did not purport to apply to containers, and the District Court's application of the Seguros rule to the container context is erroneous. 

Long before COGSA was enacted, industrialised nations recognised the need to reconcile the desire of carriers to limit their potential liability, with their vastly superior bargaining power over shippers: see HR Rep No 2218 74th Cong 2d Sess 6–9 (1936); Mitsui & Co v America Export Lines Inc 636 F 2d 807 (2d Cir 1981); 'Containerization, the Per Package Limitation, and the Concept of "Fair Opportunity"' (1986) 11 Mar Law 123. The nations at the Brussels Convention of 1924 balanced these competing concerns with a per-package limitation on liability: International Convention for the Unification of Certain Rules Relating to Bills of Lading, 25 August 1924, 51 Stat 233 120 LNTS 155 (1931-32), reprinted in Knauth, The American Law of Ocean Bills of Lading (4th ed 1953) 37-72, and 'Defining "Package" in the Carriage of Goods by Sea Act' (1982) 60 Tex Law Rev 961. The principles established by the Brussels Convention became the template for COGSA: Robert C Herd & Co v Krawill Mach Corp 359 US 297 S Ct 766 (1959) (CMI1735).

Unhappily, neither the statute nor its legislative history provided any clue as to the meaning of 'package' in the Act: Aluminios Pozuelo Ltd v SS Navigator 407 F 2d 152 (2d Cir 1968). It was in Standard Electrica SA v Hamburg Sudamerikanische Dampfschifffahrts Gesellschaft 375 F 2d 943 (2d Cir 1967) that COGSA's application to shipping innovations was applied to determine the relevant COGSA package. In that case, the issue was whether each 60–pound carton, or the pallets on which the cartons were bound together, was the package. Divining the parties' intent, the Court held the pallet to be the relevant COGSA package. Then came the development of, and thus the question of whether containers may be called a package. This was answered in Leather’s Best Inc v SS Mormaclynx 451 F 2d 800 (2d Cir 1971), distinguishing Standard Electrica and veering away from the pre-container cases, because of the finding that the purpose of § 4(5) of COGSA was to set a reasonable figure below which the carrier should not be permitted to limit his liability. 'Package' was thus more sensibly related to the unit in which the shipper packed the goods and described them, rather than to a large metal object, functionally a part of the ship, in which the carrier caused them to be 'contained'. Leather’s Best thus stood for the proposition 'that a container should be rarely treated as a package'. 

It was in Mitsui that this Court held that when a bill of lading discloses on its face what is inside the container, and those contents may reasonably be considered COGSA packages, the container itself is not the COGSA package. Mitsui thus settled the law in container cases for this Circuit and has been steadfastly followed. Although Mitsui was concerned with containers, a District Court later extended it to pallets: Allied Int’l Am Eagle Trading Corp v SS Yang Ming 519 F Supp 187 (SD NY 1981). This Court reversed that holding by stating that containers and pallets are quite different and that 'Standard Electrica ... is still the law with regard to pallets': Allied Int’l Am Eagle Trading Corp v SS Yang Ming 672 F 2d 1055 (2d Cir 1982). In so doing, this Court methodically documented why the decisions in Standard Electrica and Leather’s Best required distinct analyses for container and non-container cases, respectively, as follows:

The container cases involve factors not found in pallet cases. Because of their size and their function in the shipping industry, containers are ordinarily not considered 'packages' ... . In Mitsui ... as in other container cases, the courts must look askance at an agreement which purports to define a container as a 'package' because the results of such a limitation can be ludicrous.

Thus, any notion that container and non-container cases are interchangeable is rejected. The line of cases on pallets and containers are separate lines of authority. They have been uniformly so construed until the present case. 

On the District Court's application of the Seguros decision, the dispute in Seguros was whether each bundle of 15 tin ingots, or each individual ingot, constituted the relevant COGSA package. Therefore, the following test was adopted to settle such controversies:

The number appearing under the heading 'No of Pkgs' is our starting point for determining the number of packages for purposes of the COGSA per-package limitation, and unless the significance of that number is plainly contradicted by contrary evidence of the parties’ intent, or unless the number refers to items that cannot qualify as 'packages', it is also the ending point of our inquiry. 'Package' is a term of art in the ocean shipping business, and parties to bills of lading should expect to be held to the number that appears under a column whose heading so unmistakably refers to the number of packages.

As between bales, boxes, bundles, cartons, cases, crates, and other COGSA packages, the Seguros rule is as sensible as it is straightforward. But all 'packages' are not created equal, as the container cases make plain. Containers raise unique issues which have been addressed in a distinct line of case law. In light of the significant container jurisprudence, the Seguros rule is inapposite in the container context. In Seguros, the parties disputed whether the ingots or the bundles containing the ingots should be considered the relevant COGSA packages. No one even questioned the District Court’s holding in that case, that 'it is clear that the container is not the appropriate "package" in this case'. Viewed in context, Seguros simply does not purport to apply when a container is alleged to be the relevant COGSA package. It is inconceivable that Seguros would, in dictum, overrule, sub silentio, a long line of Second Circuit precedent. Notwithstanding the insertion in the number-of-packages column(s) of the bill of lading of a number reflecting the number of containers, where the bill of lading discloses on its face what is inside the container(s), and those contents may reasonably be considered COGSA packages, the latter, not the containers, are the COGSA packages. The District Court’s holding to the contrary in its second judgment was erroneous.

The carrier also argued that the bill of lading manifests the parties' agreement that the container is the relevant COGSA package. In non-container cases, this Court has generally deferred to the parties’ intent, as manifested by their bill of lading, in determining what unit is the relevant COGSA package. Such deference to the parties' wishes permits commercial flexibility without offending the statute. COGSA, however, required that the container cases are viewed through a different prism. Thus, in container cases, clauses purporting to define the container as the COGSA package must be viewed critically. The reason for this skepticism was that such agreements ran against the grain of COGSA. The bill of lading in this case disclosed on its face that 76 bales of cloth were stowed in the container. Even though that disclosure triggers Mitsui’s presumption that the container is not the COGSA package, the carriers maintained that the bill of lading nevertheless disclosed an agreement with Monica that the single container was the relevant package. They emphasised the two clauses appearing on the reverse of the carriers' standard bill of lading forms. 

Clause 2 of the bill of lading provided:

The word 'package' shall include each container where the container is stuffed and sealed by the Merchant or on his behalf, although the Shipper may have furnished in the Particulars herein the contents of such sealed container. (See Clause 11).

Clause 11 stated:

Neither the Carrier nor the vessel 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 USD 500 per package.... Where container(s) is stuffed by Shipper or on his behalf, and the container is sealed, the Carrier’s liability will be limited to USD 500 with respect to the contents of each container, except when the Shipper declares value on the face hereof (Box 26) and pays additional charges on such declared value (Box 23). The freight charged on sealed containers when no higher valuation is declared by the Shipper is based on a value of USD 500 per container.

The carriers maintained that these clauses articulated an agreement between them and Monica to treat the container as the package. The carriers' argument was premised on obiter dicta from the previous container cases that suggested that parties to a bill of lading have the right to agree to treat a container as the relevant COGSA package: Smythgreyhound v MV Eurygenes 666 F 2d 746 (2d Cir 1981) (CMI1838). The otherwise clear rule that 'where the contents of the container are disclosed in the bill of lading then the container is not the COGSA package', seemingly, had an exception. The container may be treated as the 'package' if the bill of lading discloses that the parties have so agreed in terms that are explicit and unequivocal. This supposed exception to Mitsui, however, was more apparent than real. No appellate precedent had been found applying this exception to a bill of lading like the one before us now. The container cases recognise that when a bill of lading refers to both 'containers' and 'other units' susceptible of being COGSA packages, it is inherently ambiguous. In Smythgreyhound, it was observed 'that no shipper ever actually intends that its recovery will be limited to USD 500 per container, or that any carrier, in the absence of an express agreement, intends that the recovery should exceed USD 500 per container'. 

It is not without significance that the two boilerplate clauses upon which the carriers rely (cll 2 and 11) have consistently failed to persuade the Court in the past that the container is intended to be the package. Clause 11, for example, is essentially the same one that was ignored in Leather’s Best, even though in Leather’s Best the clause appeared on the front of the bill of lading in capital letters. Similarly, cl 2 is virtually indistinguishable from one rejected in Matsushita Elec Corp v SS Aegis Spirit 414 F Supp 894 (WD Wash 1976). 

Because the bill of lading, in the present case, was ambiguous on its face and cll 2 and 11 are not-bargained-for boilerplate clauses, it could not be said that Monica and the carriers unequivocally agreed to treat the container as the COGSA package. Thus, the exception to Mitsui is not applicable. The 76 bales, not the container, are the relevant units for determining the extent of the carriers' liability under the statute. This conclusion was consistent with the Court's longstanding recognition of what every shipper knows, that 'bills of lading are contracts of adhesion, ambiguities in which must be resolved against the carrier': Mitsui. Clauses 2 and 11, like other clauses printed on the back of a form of bill of lading, 'carry little weight toward establishing intent, being unilateral, self-serving declarations by the carrier which were not negotiated by the parties and could scarcely be discerned by the unaided eye in the maze of microscopic and virtually illegible provisions on the back of the bill of lading': Matsushita; St Paul Fire & Marine Ins Co v Sea Land Serv Inc 735 F Supp 129 (SD NY 1990).