Complicated enough title for you? Well, complexity seems to be the name of the game when it comes to defining the implications of activities an ocean transportation intermediary undertakes for its customers. The U.S. District Court for the Northern District of Illinois recently took a look at the aftermath of an international transportation daisy chain that left a train derailed, ocean shipping containers destroyed, and liability disputed. At issue: should a consignee bear ultimate responsibility for losses allegedly caused by improper cargo packaging? Take out your pad and pen for this one.
Illinois-based Plano Molding (Plano) needed some steel injection molds. It sent specs to CMT International (CMT, apparently a broker), which sourced Chinese manufacturer Kunshan Yuanjin Plastic & Electronic Co. (Kunshan), and ordered the molds per Plano’s directions. CMT also engaged non-vessel operating common carrier World Commerce Services (World) to arrange transit. World, in turn, hired Chinese forwarder THI Group (THI) to arrange the bookings. THI contracted with steamship line Kawasaki Kisen Kaisha, Ltd. (K-Line) to make the ocean haul. World issued a bill of lading naming Kunshan as shipper and Plano as consignee. K-Line issued a bill naming THI as its shipper and World as consignee. Oh what a tangled web we weave!
Kunshan loaded the steel molds into wooden crates. THI loaded the crates into a K-Line shipping container. The ocean carrier delivered the freight safely to Los Angeles, where it was transloaded to the Union Pacific Railroad for onward carriage to Illinois. The train derailed damaging equipment owned by K-Line and the UP. The two carriers sued Plano, alleging that the containers were improperly loaded, such that the molds broker through the crates. Their theory: Plano was a “merchant” in the bills of lading. The encompassing and standardized term “merchant” in shipping documentation is designed to name everyone and his brother connected with freight as a party liable for freight charges, and render them concurrently responsible with the shipper for the latter’s contractual and regulatory responsibilities. These duties specifically include safe and proper cargo stowage.
But Plano wasn’t a party to any bill of lading, at least not by its own stated agreement and signature. It wasn’t even named in the K-Line bill. The plaintiff carriers argued that Plano had a “future interest” in the cargo, and thus was a third-party beneficiary of the ocean carrier’s contract. To reach that conclusion, the court would have to conclude that World was Plano’s “agent” for which Plano was responsible as K-Line’s named consignee. K-Line argued that conclusion was supported by the U.S. Supreme Court’s 2004 decision in Norfolk S. Ry. Co. v. Kirby, celebrated for launching a muddled and subsequently clarified line of cases that apply admiralty jurisdiction and maritime cargo law to claims deriving from through ocean bills of lading that involve land-based losses. If an NVOCC is a shipper’s agent for purposes of limiting that shipper’s rights against surface carriers (per Kirby), then why shouldn’t it be a shipper’s agent of a party in a bill of lading?
This court wouldn’t extend the Supreme Court’s logic that far. Kirby itself proclaimed that ocean transportation intermediaries are “certainly not automatically empowered to be the cargo owner’s agent in every sense. That would be unsustainable.” The Big Nine missed a chance to clear up a thorny issue in intermediary law by not drawing a line for us defining just where an NVOCC’s agency power ends. But that’s another article.
Citing other federal precedents, the court ruled that “[t]he applicability of an agency theory of liability must be considered on a case-by-case basis.” Here, the court found that NVOCC World was an independent contractor not subject to requisite control by Plano to bring it within the “agency” realm. Even though Plano had worked with World extensively in the past, CMT actually hired and paid World. And with respect to this loss, Plano apparently had nothing to do with the loading.
But what about the World bill of lading? Plano was actually the named consignee in that contract. The plaintiff carriers argued that this bill of lading’s Himalaya Clause extends the documents rights and obligations to World’s agents and independent contractors (again, à la Kirby, which cloaked succeeding carriers with the NVOCC’s contractual protections). This argument failed because, again, Plano didn’t negotiate or seek benefits under World’s bill of lading. As neither World nor THI was Plano’s agent, neither could bind Plano to contract terms. This determination is a bit more dubious under Kirby, but fits within the court’s logic.
Dismissing a negligence claim based on Plano having no duty of care to the carriers, the court granted Plano’s motion for summary judgment. Cases like this, to the extent they’re consistent (they frequently aren’t), answer specific questions we have about the nature and scope of intermediaries’ relationships with their shippers on an ad hoc basis. But the complex interrelationships between the numerous parties involved in ocean transportation leave no end to the uncertainty various scenarios leave us in when dispute arises.
Ref: Kawasaki Kisen Kaisha, Ltd., et al. v. Plano Molding Co., 2011 WL 3163578 (N.D. Ill. 2011).
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