Deltech Corp (Deltech), Stolt-Nielsen USA Inc, and Stolt Tank Containers BV (together, Stolt) challenged the District Court's determination that they were wholly responsible for the damage caused by the explosion of a chemical cargo of DVB-80 and the ensuing fire in June 2012 on the M/V MSC Flaminia. The Court found Deltech liable for 55% of the damage, and Stolt for 45%. The Court exonerated the other parties to the shipping transaction: see In re M/V MSC Flaminia 339 F Supp 3d 185, 229-30 (SD NY 2018) (CMI220).

Held:

1. The District Court's ruling that Deltech and Stolt were liable for the explosion's resulting damage under a failure-to-warn theory pursuant to § 4(3) of the US Carriage of Goods by Sea Act (COGSA), 46 USC § 30701 (n), is affirmed.
2. The Court's ruling that Deltech and Stolt were strictly liable for the damages under § 4(6) of COGSA is reversed.
3. The Court's ruling that the carrier and related shipowner interests (MSC Mediterranean Shipping Co SA (MSC), Container Schiffahrts-GMBH & Co KG MSC 'Flaminia' (Conti), and NSB Niederelbe Schiffahrtsgesellschaft MBH & Co KG (NSB)) and the New Orleans Terminal were not negligent in relation to the shipment is affirmed.
4. The Court's ruling that Stolt has not stated a claim against its subcontractor, the documentation provider BDP International Inc (BDP) is affirmed: Stolt failed to show that BDP's breach in processing the shipment's waybill was a contributing cause of the damages.
5. Finally, the Court's ruling that MSC, Conti, and NSB are entitled to indemnification for their losses by Stolt and Deltech is affirmed.

The District Court held that Stolt and Deltech were strictly liable for the loss arising from the explosion aboard the Flaminia. The Court took great care with its factual rulings in this difficult case; this legal determination, however, was in error.

COGSA provides that a shipper of 'inflammable, explosive, or dangerous' goods 'shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment' when the carrier does not have knowledge of the 'nature and character' of the goods: COGSA § 4(6); see In re M/V DG Harmony 533 F 3d 83, 92-94 (2d Cir 2008) (applying COGSA's strict liability provision); Senator Linie Gmbh & Co KG v Sunway Line Inc 291 F 3d 145, 168-70 (2d Cir 2002) (same) (CMI1833). Strict liability will not attach to the shipper, however, when the carrier knows that a particular type of cargo in its charge is dangerous. See DG Harmony 93 (holding that 'notice of any aspect of the cargo's dangerousness' is sufficient to defeat the carrier's ability to recover in strict liability (emphasis added)). There is no dispute here that MSC, as the charterer of the vessel, is a 'carrier' under COGSA. The question is whether Stolt and Deltech are strictly liable.

The District Court reasoned that 'generalized knowledge regarding a type of cargo' and its dangerousness is insufficient to warn of its 'particular contents and chemical sensitivities' (emphasis added). Because MSC could not have known that the DVB-80 stored in the tanks it loaded onto the Flaminia had been exposed to the specific dangerous conditions in question, the Court ruled that Deltech and Stolt both were strictly liable to MSC for the loss.

As this Court held in Contship Containerlines Ltd v PPG Industries Inc 442 F 3d 74, 77 (2d Cir 2006) (emphasis added), however, a carrier's entitlement to recovery in strict liability requires overcoming a very high hurdle:

[A] carrier cannot invoke strict liability if it knows that a cargo poses a danger and requires gingerly handling or stowage, and nevertheless exposes the cargo to the general condition that triggers the known danger, regardless of whether the carrier is aware of the precise characteristics of the cargo.

Thus, recovery on a strict liability theory is unavailable to a party with 'notice of the general dangerousness' of the cargo it agreed to transport: DG Harmony 93. The strict liability analysis is 'binary': Contship Containerlines 77. The notice threshold is relatively modest: the carrier's knowledge can be 'incomplete' or reflect an 'underestimation of the danger' and yet still preclude recovery in strict liability: DG Harmony 94.

Here, MSC did not have specific knowledge of the conditions to which the DVB-80 tanks were exposed at the New Orleans Terminal. It did, however, have prior experience shipping DVB-80, and MSC was aware, at least at the corporate level, that DVB-80 generally was heat sensitive. In particular, the record showed that MSC had shipped DVB-80 cargo many times before June 2012 and had received transport documents that warned of the chemical's heat sensitivity. It was thus incorrect to conclude broadly that MSC was not on notice as to 'any aspect of the cargo's dangerousness'. MSC's experience with DVB-80 and its management's general knowledge of the chemical's heat sensitivity surpasses the low threshold that precludes a recovery in strict liability.

The District Court determined that Stolt and Deltech were liable to Conti and NSB for damage caused by the explosion under a negligent failure-to-warn theory in the COGSA regime. This finding is correct. Under COGSA's general rule of shipper liability, a 'shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, fault, or neglect of the shipper, his agents, or his servants': 46 USC § 30701 (n) § 4(3). This Court has recognised that a shipper's failure to adequately inform a carrier of the foreseeable dangers posed by cargo can constitute such fault or neglect, and may give rise to a negligent failure-to-warn claim: Contship Containerlines 78. To prevail on this type of claim, a 'plaintiff must show that the shipper had a duty to warn because the cargo presented dangers about which the carrier could not reasonably be expected to know': DG Harmony 94; Contship Containerlines 78.

That showing, in turn, depends on whether it 'would have been reasonable to expect the carrier to know of the specific type and degree of danger posed by the cargo at issue': DG Harmony 95 (emphasis in original). Generally, the shipper is in the best position to know of the relevant dangers and to provide an effective warning; absent prior or independent knowledge of the nature of the cargo or the particular shipment, the carrier is entitled to rely on the warnings given by the shipper without conducting further inquiries. See DG Harmony 95 (explaining that when the dangerousness of cargo is not readily apparent, 'a carrier may rely on the shipper's attestations as to the cargo's characteristics' because carriers and their agents 'often must make quick and complex stowage decisions about diverse containerized cargoes' and therefore should not be expected to have 'encyclopedic knowledge beyond' those attestations).

Consistent with the principles enunciated in DG Harmony, the District Court correctly concluded that Stolt and Deltech bore a duty to warn of the particular heat sensitivities of the DVB-80 in the tanks loaded onto the Flaminia. In the circumstances, it would have been unreasonable to expect MSC, Conti, and NSB either together or individually to know of the specific type and degree of danger posed by this cargo of DVB-80. The risk-producing circumstances - the early filling of the tanks and the long period outside in the heat at the New Orleans Terminal, in particular - were neither apparent on visual inspection nor described in the tanks' accompanying documentation.

Further, Stolt and Deltech each had material information about the DVB-80 tanks that neither communicated to MSC. None of Stolt and Deltech's arguments to the contrary is persuasive. Stolt and Deltech bore a duty to warn other participants in the transportation chain of the particular characteristics of the tanks of DVB-80 that were left outside at the New Orleans Terminal and later stowed aboard the Flaminia.

The District Court concluded that MSC was not negligent in its stowage and handling of the DVB-80. MSC's rights and obligations as the carrier are governed by COGSA. COGSA provides that '[t]he carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried': 46 USC § 30701 (n) § 3(2). Under the COGSA regime, a carrier is not liable for failing to store or stow cargo as suited for special conditions of which it was not aware. The Court correctly determined that MSC did not breach its duty of care in its stowage or general handling of the DVB-80 tanks because MSC's handling of the cargo was proper assuming 'normal voyage conditions' and because Stolt and MSC never provided any special instruction or warning regarding the heightened dangerousness of this cargo. There was no error in the Court's finding that MSC treated the tanks exactly as specified by the IMDG Code.

Menashi Cir J, concurring in part and dissenting in part:

First, the District Court erred in holding that MSC was not negligent. Second, the Court erred when it concluded that Stolt's breach of contract claim against BDP is not actionable because BDP did not cause any harm to Stolt. Third, MSC is not entitled to full indemnification from Deltech and Stolt.

Even if Deltech and Stolt had duties to provide additional warnings and failed to discharge those duties, MSC received information concerning the stowage of DVB-80 but failed to heed those warnings. Had MSC complied with the stowage instructions, the DVB-80 might not have autopolymerised and exploded. I would reverse the District Court's decision that MSC was not negligent.