Educational Innovation Systems International Inc (Edusystems) shipped 59 boxes of vocational and agricultural equipment in a container to Asuncion, Paraguay, on 9 May 1985. Through a freight forwarder in Miami, Meadows Wye & Co (Meadows), Edusystems entered into a contract with Mar Shipping Line Inc (Mar), a non-vessel-operating common carrier (NVOCC), to transport the cargo from Miami to Paraguay. Mar, acting as Edusystems' agent, entered into a carriage contract with A Bottacchi SA de Navegacion (Bottacchi) to ship the cargo from Miami to Buenos Aires, Argentina. Bottacchi loaded the cargo onto the Ocean Lynx, a vessel chartered by Bottacchi and owned by Nabadi Maritime SA (Nabadi). On 7 June 1985, the Ocean Lynx encountered rough weather, and the container and cargo were lost at sea.

Both Mar and Bottacchi supplied bills of lading. The Mar bill of lading consisted of one piece of paper. The front identified the parties and contained a block where the shipping cost was calculated. The back contained 27 clauses in extremely fine print. Clause 1 stated that the carriage contract is subject to 46 USC ss 1300 ff (COGSA), and cl 16 recited the provisions of s 1304(5) of COGSA, limiting Mar’s liability for loss to USD 500 per package. The Bottacchi bill of lading stated that it binds the cargo owner and that it supersedes all other agreements covering the shipment. The back of the bill of lading was also in fine print and contained provisions identical to the Mar bill of lading.

In 1986, Edusystems' insurer, Insurance Co of North America (the plaintiff), filed a complaint against the Ocean Lynx, Mar, Bottacchi, and Nabadi, claiming USD 244,820 in damages for the lost cargo. Mar and Bottacchi asserted that their liability was limited to USD 500 per package under COGSA. Mar also filed a cross-claim against Bottacchi for Mar’s damages, interest, and costs in the action. On 9 January 1987, Mar served the plaintiff with an offer of judgment of USD 29,500 plus interest and costs. On the same day, Bottacchi served Mar with an offer of judgment of USD 34,500. The plaintiff and Mar rejected these offers. The District Court found that under s 1304(5) of COGSA, Mar's and Bottacchi's liability was limited to USD 500 per package lost. The Court rejected the plaintiff's argument that the Mar bill of lading was illegible and therefore did not invoke s 1304(5) of COGSA. The Court found that the print on the back of the Mar bill of lading appeared blurry but stated that '[w]ith the aid of a magnifying glass ... most of the words and numerals can be read by a party examining the words and conditions stated therein'.

The Court also rejected the plaintiff's argument that s 1304(5) of COGSA did not apply because Mar and Bottacchi did not present Edusystems with an opportunity to declare the cargo's value. The Court stated that the incorporation of COGSA in the bills of lading provided a fair opportunity to declare the excess value as a matter of law. The Court also found that Mar's tariff was valid and presented the plaintiff with an opportunity to declare the cargo's value. Accordingly, the District Court entered judgment for the plaintiff against Mar for USD 29,500 on the plaintiff’s complaint and judgment for Mar against Bottacchi for USD 29,500 on Mar’s cross-claim.

Bottacchi appealed. The appeal raised several questions. First, whether the District Court erred in holding that Mar and Bottacchi had limited liability under s 1304(5) of COGSA. Second, whether the District Court erred in holding that Mar could recover attorneys' fees from Bottacchi for the cost of defending against the plaintiff's claim. Finally, whether the District Court erred in ruling that Mar could recover pre-judgment interests from Bottacchi for the period after Bottacchi's offer of judgment.

Held: The appeal is dismissed. The judgment of the District Court is affirmed.

Section 1304(5) of COGSA provides as follows:

Neither the carrier nor the ship shall, in any event, become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

Congress enacted this COGSA package limit in 1936 to restrain the superior bargaining power wielded by carriers over shippers by setting a reasonable limitation on liability that the carriers could not reduce by contract. Courts have developed two preconditions to invoking s 1304(5) of COGSA. First, the carrier must give the shipper adequate notice of the USD 500 limitation by including a 'clause paramount' in the bill of lading that expressly adopts the provisions of COGSA. Second, the carrier must give the shipper a fair opportunity to avoid s 1304(5) by declaring excess value. The clause paramount establishes three things. First, it makes COGSA contractually applicable at times when it would not apply by its own force. Second, COGSA's provisions are deemed to be incorporated into the bill of lading. Third, nothing in the bill of lading can increase the carrier's liability under COGSA, which overrules any clause in the bill of lading that conflicts with COGSA. Either a clause paramount in the bill of lading or a valid tariff filed with the Federal Maritime Commission that includes an opportunity to declare excess value according to s 1304(5) is sufficient to afford the shipper an opportunity to declare excess value. The District Court found that the back of the Mar bill of lading, which contained a clause paramount and a clause reciting s 1304(5), could not be read without the aid of a magnifying glass. It has been held that 'microscopic' print on a bill of lading is insufficient to give the shipper a fair opportunity to avoid s 1304(5). This holding is persuasive. Print that cannot be read with the naked eye can hardly impart notice. In the present case, however, Meadows, Edusystems' agent, maintained multiple copies of Mar's master bill of lading in its files, and yet Meadows' representative, Albert Fabrikant, testified that in preparing hundreds of bills of lading for Edusystems he never read the provisions on the reverse side. Meadows certainly had an opportunity to read these copies of Mar's bill of lading. Accordingly, the plaintiff’s argument that Edusystems was not afforded an opportunity to avoid s 1304(5) lacks merit.

The plaintiff also fails to address the District Court's holding that Edusystems did not desire to avoid s 1304(5) by opting for a higher freight charge. The District Court found that Edusystems had chosen to rely on its insurance policy with the plaintiff to cover any losses. Edusystems had made hundreds of shipments with Mar without ever enquiring into declaring excess value. Under these circumstances, it is reasonable to conclude that Edusystems did not wish to insure against losses twice, and chose to rely on its policy with the plaintiff.

Rule 12 of Bottacchi’s tariff provides that an ad valorem rate shall be applied to the shipments of certain commodities. It does not provide for the method through which a shipper of goods other than the listed commodities can avoid s 1304(5). However, Bottacchi’s bill of lading does contain a clause paramount invoking the provisions of COGSA, and cl 16 recites s 1304(5). It has been held that such a clause is sufficient to give the shipper constructive notice of a fair opportunity to declare excess value. Once COGSA is incorporated, the provisions of s 1304(5) spell out how a shipper can declare excess value, and the burden is on the shipper to declare excess value. Accordingly, the plaintiff's argument based on Bottacchi's tariff lacks merit.

Bottacchi also argues that Mar’s attorneys' fees are part of Mar's overall damages in this case, and are therefore limited by s 1304(5). Mar argues that attorneys' fees are excluded from the calculation of general damages under COGSA, and thus do not fall under the USD 500 package limitation. The District Court found that the language in cl 16 of Bottacchi’s bill of lading, which recites s 1304(5), is distinguishable from 'red letter' clauses limiting liability for 'any claim'. The District Court’s interpretation of s 1304(5) of COGSA is correct. The statute does not purport to include all types of claims in the USD 500 package limitation. Accordingly, Mar's attorneys' fees claims are not limited by s 1304(5) of COGSA.