Perhaps the Supreme Court wasn’t clear in its intentions when it saw “no reason to read COGSA and Carmack to outlaw this efficient mode of international shipping [i.e., through bills of lading] by requiring [intermodal] journeys to have multiple bills of lading.” Those were the Big Nine’s words just one year ago in their Kawasaki Kisen Kaisha, Ltd., et al. v. Regal-Beloit Corp. opinion, which many heralded as a firm jurisprudential recognition of modern shipping practices. Regal-Beloit appeared to clear up any misconception lawyers, industry players and lower courts might have had about COGSA governing cargo liability – start to finish – in intermodal moves governed by through ocean bills of lading. Many of us thought the High Court’s decision dispelled any notion that its 2004 ruling in Norfolk S. Ry. Co. v. Kirby was somehow limited to an explication of how federal law trumps state law.
Regal Beloit specifically eviscerated certain post-Kirby, federal court decisions such as Sompo Japan Ins. Co. v. Norfolk S. Ry. Co. The courts in those cases interpreted Kirby narrowly, and applied the Carmack Amendment to the Interstate Commerce Act to claims in which cargo was damaged during interstate surface legs of post-ocean transports subject to through ocean bills of lading. The theory was that Carmack, a federal statute with its own stated applicability, couldn’t be superseded by another federal statute such as COGSA absent clear Congressional intent.
Regal Beloit blessed Kirby in no uncertain terms. Regal Beloit reaffirmed and referenced Kirby’s logic in several key places throughout the opinion. But it didn’t simply restate Kirby. Instead, as the July-August Legal Lookout column noted:
[T]he ink from Justice Kennedy’s pen in Regal Beloit is the cold blue of statutory analysis, in vivid contrast to the passionate red ink that depicted Justice O’Connor’s public policy concerns in Kirby. In Kirby, the Court asked, “What’s best for the transportation industry and the American public?” In Regal Beloit, the Court asked “under what circumstances does Carmack even kick in?”
One might think Regal Beloit’s statutory analysis would compliment or augment Kirby, leaving no doubt as to what the Supreme Court had in mind. What better way to solidify a primarily policy-driven decision than following it up with a statutory explanation of its foundation? But as last summer’s Legal Lookout article forewarned, that’s not how it’s worked out. At least one court recently read Regal Beloit’s dissection of legislative statements and intent to mean that Regal Beloit applies only to inbound ocean traffic followed by interstate surface transportation during which a mishap occurs. In American Home Assurance Co. v. Panalpina, the U.S. District Court for the Southern District of New York applied Carmack to a loss suffered when a Burlington Northern Santa Fe train carrying freight from Illinois to the Port of Long Beach for ocean transport to Australia derailed. Ocean carrier Maersk SeaLand had issued a through ocean bill of lading covering the rail transport. The BNSF wanted to limit its liability to COGSA’s $500/package. Limitation of liability under Carmack wasn’t available because the railroad hadn’t issued its own shipping documentation, a prerequisite of limitation of liability under that statute. From the railroad’s perspective, its own bill of lading wouldn’t be necessary given the protection Maersk SeaLand’s documentation afforded it.
The circumstances were identical to Regal Beloit and Kirby except for the freight’s stateside point of origination and outbound direction. But Regal Beloit found Carmack inapplicable on the ground the railroad wasn’t a “receiving carrier” as defined by the statute. The Panalpina railroad was indeed a receiving carrier. Strictly adhering to Regal Beloit’s statutory analysis, and ignoring Kirby’s policy-driven conclusions, one might conclude Panalpina makes sense.
The Supreme Court’s divergent approaches to Kirby and Regal Beloit probably opened the door to renewed confusion and inconsistent rulings of the variety Panalpina presents. The latter decision acknowledges the BNSF’s argument that Maersk SeaLand’s through ocean bill of lading, to which the shipper was a party, contained a Himalaya Clause extending COGSA’s coverage to connecting carriers such as the railroad. However, it ignores Kirby’s precepts about the efficacy of such bill of lading terms, and how free contracting allows all parties to protect themselves. All of the parties’ rights and expectations were agreed to in a single contract here. The Panalpina court disregarded that point in favor of statutes whose applicability had been determined by another Supreme Court ruling in a slightly different context.
So are we back to square one? Is judicial discord over this point at a level precluding a uniform policy? Or did the current Supreme Court take a step back from Kirby by not pronouncing a broader doctrine when it had the opportunity last year in Regal Beloit? Is global intermodal contracting effectively allowed only for inbound traffic? Probably none of the above. As all transportation law practitioners come to learn, this field’s factual scenarios have myriad variations that can alter judicial thinking, especially given the broad spectrum of opinions and attitudes harbored by those wearing black robes, and the numerous similar-but-slightly-conflicting legal principles that play into the equation. More likely, as with the rest of transportation law and legislation, we are witnessing an ongoing evolution that will sort itself out over time – perhaps in largest part with ratification of an international treaty.
Meanwhile, surface carriers of outbound intermodal cargo might want to issue their own shipping documentation to ensure their liability is limited.
Ref: American Home Assurance Co. v. Panalpina, Inc., et al., 2011 WL 666388 (SDNY 2011); Kawasaki Kisen Kaisha, Ltd., et al. v. Regal-Beloit Corp., 130 S.Ct. 2433 (2010); Norfolk S. Ry. Co. v. Kirby, 125 S.Ct. 385 (2004); Sompo Japan Ins. Co. v. Norfolk S. Ry. Co., 456 F.3d 54 (2nd. Cir. 2006).
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