Leather's Best International Inc (LBI), the plaintiff/consignee, brought an action against Companhia de Navegacao Lloyd Brasileiro (Lloyd), the carrier, for the loss of five pallets of crust leather shipped from Brazil to the United States on the Lloyd Sergipe. The leather, originally comprising 10 pallets with a gross weight of 8,413 kgs, had been packed, sealed, and delivered to the carrier's terminal in Rio Grande, Brazil. On arrival at LBI's warehouse in Johnstown, New York, five pallets were discovered missing, with the remaining cargo found in a state of disarray. LBI alleged that the loss resulted from Lloyd's negligence and unreasonable deviations from the contract of carriage. These deviations comprised two distinct acts: first, Lloyd's issuance of bills of lading falsely representing that the cargo was loaded 'clean on board' on March 10, when the vessel had not even arrived at the port until March 21; and second, the unauthorised stowage of the container on the vessel's weather deck, despite the absence of any agreement or authorisation permitting above-deck stowage. Lloyd, as third-party plaintiff, sought indemnification from the shipper/consignor, Leather's Best Brasil, Comercio E Representacoes Ltda (LBB), alleging that the loss was attributable to LBB's own acts or those of its agents.

Held: Judgment for the plaintiff. Lloyd is liable to LBI for the full value of the five missing pallets of leather; the package limitation under the Carriage of Goods by Sea Act (COGSA) 46 USC App § 1304(5) is inapplicable; the third-party claim against LBB is dismissed.

LBI successfully established its prima facie case under COGSA by demonstrating good delivery to the carrier and short outturn at destination. The Court found that Lloyd's issuance of backdated 'on board' bills of lading constituted an erroneous and false representation, and that stowing the cargo on the vessel's weather deck without authorisation amounted to an unreasonable deviation from the contract of carriage. Applying the reasoning of Berisford Metals Corp v S/S Salvador, the Court emphasised that the issuance of a false bill of lading, whether characterised as a deviation, breach of warranty, or estoppel, seriously undermines reliance on bills of lading as an essential instrument of trade. As a consequence of these deviations, Lloyd was precluded from invoking COGSA's package limitation on liability under 46 USC App § 1304(5) and was held liable in full as insurer of the cargo. LBI's claims for punitive damages and attorneys' fees were denied, and Lloyd's third-party claim against LBB was dismissed, as LBB had proved good delivery of the full shipment to the carrier.