Amicus Curiae Brief — Norfolk Southern R. Co. v. James N. Kirby, Pty Ltd.

No. 02-1028

In the Supreme Court of the Gnited States

NORFOLK SOUTHERN RAILWAY COMPANY, PETITIONER

JAMES N. KIRBY, PTY LTD., DBA KIRBY ENGINEERING,

AND ALLIANZ AUSTRALIA LIMITED

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

ROSALIND A. KNAPP

Acting General Counsel

PAUL M. GEIER

DALE C. ANDREWS

PETER S. SMITH

Attorneys

ROBERT B. OSTROM

Chief Counsel

EDMUND T. SOMMER, JR.

Assistant Chief Cou nsel

Maritime Administration

Department of Transportation

Washington, D.C. 20590

CAROLJ. NEUSTADT

Acting General Counsel

PHILLIP CHRISTOPHER HUGHEY

Attorney

Federal Maritime Commission

Washington, D.C. 20573

ELLEN D. HANSON

General Counsel

ALICE C. SAYLOR

Surface Transportation Board

Washington, D.C. 20423

THEODORE B. OLSON

Solicitor General

Counsel of Record

PETER D. KEISLER

Assistant Attorney General

THOMAS G. HUNGAR

Deputy Solicitor General

AUSTIN C. SCHLICK

Assista nt to the Solicitor

General

ROBERT GREENSPAN

ANNE MURPHY

Attorneys

Departme nt of Justice

Washington, D.C. 20530-0001

~

(202) 514-221 ‘

a BEST AVAILABLE COPY &

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QUESTION PRESENTED

Whether a foreign cargo owner who shipped goods to an

inland destination in the United States using a shipping

intermediary is bound by liability limitations in the inter-

mediary’s bill of lading, or those in the bill of lading that a

subcontracting ocean carrier issued to the intermediary,

when suing a railroad that subcontracted with the ocean

carrier to deliver the goods to their destination.

< (I)

Statement

TABLE OF CONTENTS

I. The petition presents important questions of

maritime law on which the major maritime circuits

SG cecsecnenscsesssseensretaisseeemeen

A.

B. The conflicts have practical importance .................

C. The conflicts are presented in this case ..................

D

. Carriers and shippers do not have viable means

of contracting aro and the court of appeals’

ET

Il. The decision below is incorrect ..............ccccccccceceseeeseeenees

A. The result below is incorrect in light of Kirby's

acceptance of a liability limitation under the

ICC/Kirby bill of lading ..................

CREE ERE E EEE EEE EERE EEE EEE EE EEE EERE EERE E EEE EE EEE EEE EEE EEE EEE EE EE EES

SERRE EERE EERE EEE EERE EEE EERE EEE EEE EERE EEE EEE EEE EEE TEE EE EEE EEE ESET EE RED

B. The liability limitation in the Hamburg Sud/ICC

bill may provide alternative grounds for re-

TABLE OF AUTHORITIES

Cases:

Adams Express Co. v. Croninger, 226 U.S. 491

GD cennecsescnennsesensepessszszsnssnnmasmanmecensensssnneanenaesennanssnesnsonssesnsnae

Akiyama Corp. of Am. v. M.V. Hanjin Marseilles,

SERRE EERE EEE EER EER EERE EERE EEE EE EEE EERE EEE EERE EERE EE EEE EEE EE EERE EEE EEE EEE EEE EET

162 F.3d 571 (9th Cir. 1998) 0.0...

American Dredging Co. v. Miller, 510 U.S. 443 (1994) ...

Berhard Ulmann Co. v. Porto Rican Express Co.,

3 F.M.B. 771 (1952)

Berlanga v. Terrier Transp., Inc., 269 F. Supp. 2d 821

(N.D. Tex. 2003)

Capitol Converting Equip., Inc. v. LEP Transp., Inc.,

965 F.2d 391 (7th Cir. 1992) ......

(IIL)

16

18

11

i2

IV

Cases—Continued: Page

Caterpillar Overseas, S.A. V. Marine Transp., Inc.,

900 F 2d 714 (4th Cir. 1990) 8, 18

Chicago, Milwaukee, St. Paul & Pac. R.R. v. Acme

Fast Freight, Inc., 336 U.S. 465 (1949) 20

Common Carners by Water—Status of Express Cos.,

Truck Lines, and Other Non-Vessel Carriers, 6 F.M.B.

245 (1961) 19

Feinberg v. Railway Express Agency, 163 F 2d 998

(2d Cir. 1947) 19

Great N. Ry. Co. v. O'Connor, 232 U.S. 508 (1914) ......... 18

Insurance Co. of N. Am. v. S/S Am. Argosy, 732 F.2d

299 (2d Cir. 1984) s

Kukje Hwajae Ins. Co. v. The M/V Hyundai

Liberty, 294 F.3d 1171 (9th Cir. 2002), petition for

cert. pending sub nom, Green Fire & Marine Ins. Co.

v. M/V Hyundai Liberty, No. 02-813 (filed Nov. 22,

2002) 7

Mikinberg v. Baltic S.S. Co., 988 F.2d 327 (1993) ............ 8

Naveria Neptune S.A. v. All /nt'l Freight Forwarders,

Inc., 709 F.2d 663 (11th Cir. 1983) 6

NLRB v. International Longshoremens Ass'n,

447 U.S. 490 (1980) 9, 10

Neptune Orient Lines, Ltd. v. Burlington N. & Santa

Fe Ry., 213 F.3d 1118 (9th Cir. 2000) ll

Nippon Fire & Marine Ins. Co. v. Skyway Freight

Sys., Inc., 235 F.3d 53 (2d Cir. 2000) 19

O'Melveny & Meyers v. FDIC, 512 U.S. 79 (1994) .......... 12

Pennsylvania v. ICC, 561 F.2d 278 (D.C. Cir.

1977) 14

Reider v. Thompson, 339 U.S. 113 (1950) 12

Robert C. Herd & Co. v. Krawill Mach. Corp.,

359 U.S. 297 (1958) 13, 17

SPM Corp. v. M/V Ming Moon:

22 F.3d 523 (3d Cir. 1994) 7-8

965 F.2d 1297 (3d Cir. 1992) 8

Cases—Continued:

Southern Pac. Co. v. Jensen, 244 U.S. 205 (1917) ............

Stolt Tank Containers, Inc. v. Evergreen Marine

Corp., 962 F.2d 276 (2d Cir. 1992) ..............c.cscscscessesserseesees

Swift Textiles v. Watkins Motor Lines, 799 F.2d 697

(11th Cir. 1986), cert. denied, 339 U.S. 113 (1950) ...........

Taisho Marine & Fire Ins. Co. v. The Vessel Gladiolus,

762 F.2d 1264 (9th Cir. 1985) ..

Vimar Seguros Reaseguros, S.A. v. M/V Sky

Reefer, 515 U.S. 528 (1995) .............c0c000

Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63

(1966) ... 7 —

Wemhoener Pressen v. Ceres Marine Terminals, Inc.,

5 F.3d 732 (4th Cir. 1993)

Treaty, statutes, regulations and rule:

International Convention for the Unificiation of Certain

Rules of Law Relating to Bills of Lading, Aug. 25,

1924, 51 Stat. 233, TS No. 931

Carriage of Goods by Sea Act, ch. 229, 49 Stat.

1207 (46 U.S.C. App. 1300 et Sq.) ...........ceccscesecnesererneeneeseees

46 U.S.C. App. 1300

46 U.S.C. App. 1301(e)

46 U.S.C. App. 1302-1304 ...

46 U.S.C. App. 1304(5) 0...

46 U.S.C. App. 1397 ........................

Shipping Act of 1984, 46 U.S.C. App. 1701 et seg. ...........

46 U.S.C. App. 1702(6) ........ -

Ge GE Ge crn

46 U.S.C. App. 1702(17)(A) .............. scenianasiieanmiansananniaatiani

16 U.S.C. App. 1702(17)(B) .............

Rs Coe TD | eee

28 U.S.C. 1292(b)

28 U.S.C. 1332(a)(2) seeeeneenamen

49 U.S.C. 10502(e)

49 U.S.C. 10709 .

49 U.S.C. 10700(D) ..............-.02.0-0000000s

13

14

12

13

Vi

Statutes, regulations and rule—Continued: Page

Ts IED cnrnerencensesnrtncenentnnnistnemninansiniienninnataiataennsanens 12

eee 11

a Te I iiinirrctetaietemmenneesennibiesdiniiaias 11

Rs TE sinscincseaicsinesithasinetnesiceeatnaiieeiartienabiataieaaiaiinte 11

Ey ED ccrnnnseicetnniimneen 11

SM 1]

RF 20

Gas BE ctetitercneinnsninctiiinicenneisieinbnitinnen 11

i Minh, SI TET srernrtecpreneennetnnbienemnenmninnnnnaneiidaidesisdinbiniieneaians 12

Miscellaneous:

Grant Gilmore & Charles L. Black, Jr., The Law of

Repair GS OE, TICE) ccscscrsscsrssssensmmmesnermemenees 2

Michael F. Sturley, Carriage of Goods by Sea, 31

5. Taae. Go & Came. BEB GERED ccscscssnsesszsssarsnsmsssnemsssssssssesesens 3

Michael F.. Sturley, The Fair Opportunity Require-

ment Under COGSA Section 4(5): A Case Study in

the Misinterpretation of the Carriage of Goods by

Sea Act, 19 J. Mar. L. & Com. 1 (1988) ...........-ccccceceseeeeeees 9

2 Thomas J. Schoenbaum, Admiralty & Maritime

Be GRD OE, BIBI. ccscenscenssersnsnsereesnsmemnssscsessrsstessemenen 1, 2,7, 10

Marva Jo Wyatt, Contract Terms In Intermodal

Transport: COGSA Comes Ashore, 16 Tul. Mar.

Sadie SE aI cricericntctetadsiceenseatinnaadedaneniitidainnsaitiniaeiiaitinpaamenitiniees 3

In the Supreme Court of the Anited States

No. 02-1028

NORFOLK SOUTHERN RAILWAY COMPANY, PETITIONER

v.

JAMES N. KIRBY, PTY LTD., DBA KIRBY ENGINEERING,

AND ALLIANZ AUSTRALIA LIMITED

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is filed in response to the Court’s order inviting

the Solicitor General to express the views of the United

States. Petitioner seeks review of a decision of the United

States Court of Appeals for the Eleventh Circuit that allows

a cargo owner to recover damages from a railroad without

being limited by either the cap on carrier liability in the bill

of lading to which the cargo owner agreed, or the similar cap

incorporated into the railroad’s contract for transport. This

case presents legal questions that divide the courts of

appeals. Furthermore, practical realities prevent satisfac-

tory contractual solutions to that legal uncertainty. This

Court’s review therefore is warranted.

‘ STATEMENT

1. A bill of lading is a contractual document recording

that a carrier has received certain goods from a shipper and

“govern(ing] the relationship of the parties before delivery

of the goods.” 2 Thomas J. Schoenbaum, Admiralty &

Maritime Law 60 (3d ed. 2001). Since the 19th Century, it

has been “prevalent practice for [maritime] common carriers

(1)

)

—

to insert clauses in bills of lading exempting themselves from

liability for damage or loss, limiting the period in which

plaintiffs had to present their notice of claim or bring suit,

and capping any damages awards per package.” Vimar

Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528,

534-525 (1995). Historically, however, such clauses were not

uniformly enforceable in all nations. See Grant Gilmore &

Charles L. Black, Jr., The Law of Admiralty 142-143 (2d ed.

1975); 2 Thomas J. Schoenbaum, supra, at 75. The result was

a “distressing lack of uniformity in shipping practice and

law,” which prompted efforts to establish “uniform interna-

tional regulation of the rights and duties of carriers of ocean

eargo.” Ibid.

Those efforts led to the Hague Rules of 1921, which were

adopted with minor modifications by international conven-

tion in 1924. See International Convention for the Unifica-

tion of Certain Rules Relating to Bills of Lading, Aug. 25,

1924, 51 Stat. 233, T.S. No. 931. In 1936, Congress imple-

mented the Hague Rules by enacting the Carriage of Goods

by Sea Act (COGSA), ch. 229, 49 Stat. 1207 (46 U.S.C. App.

1300 et seq.). See generally Vimar Seguros, 515 U.S. at 536-

537; Grant Gilmore & Charles L. Black, Jr., supra, at 143-

144.

COGSA governs “(e]very bill of lading * * * for the

carriage of goods by sea to or from ports of the United

States, in foreign trade[.]” 46 U.S.C. App. 1300. it guaran-

tees shippers rights against common carriers and establishes

the carriers’ minimum liability to shippers for cargo damage

or loss. See 46 U.S.C. App. 1302-1304. Of particular rele-

vance here, COGSA establishes a default rule that limits

carrier liability “for any loss or damage to or in connection

with the transportation of goods” to no more than $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.” 46 U.S.C. App. 1304(5). COGSA per-

mits the carrier and shipper to agree to a higher liability cap,

but not a lower one. 46 U.S.C. App. 1304(5). In practice,

3

bills of lading usually incorporate COGSA’s $500-per-pack-

age liability limitation. Shippers pay a reduced transport

rate that reflects the carriers’ reduced risk and obtain pri-

vate insurance for the excess value of their goods. See

Michael F. Sturley, Carriage of Goods by Sea, 31 J. Mar. L.

& Com. 241, 244 (2000); Ass’n of Am. R.R. Br. 10-11.

COGSA regulates the carriage of goods “from the time

when the goods are loaded on to the time when they are dis-

charged from the ship.” 46 U.S.C. App. 1301(e). But

COGSA permits the carrier and shipper to agree to terms

concerning the carrier's liability for loss or damage before or

after that time. See 46 U.S.C. App. 1307. Under that

authority, carriers and shippers routinely extend the

applicability of COGSA’s provisions by contract. A so-called

“Clause Paramount” in a bill of lading extends COGSA’s

liability rules beyond the time during which the goods are on

the ship. A “Himalaya Clause” extends the benefit of

COGSA’s liability limitation (or other liability limitations

enjoyed by the carrier) to parties other than the carrier

itself. See Pet. App. 5a. The vast majority of modern mari-

time bills of lading include a Himalaya Clause. See Marva Jo

Wyatt, Contract Terms in Intermodal Transport: COGSA

Comes Ashore, 16 Tul. Mar. L.J. 177, 180 (1991) (“The Hima-

laya Clause, or some similar provision extending the car-

rier’s rights and immunities to third parties, is now standard

fare in bills of lading.”).

2. a. Respondent James N. Kirby Pty Limited (Kirby)

contracted with International Cargo Control Pty Ltd. (ICC)

for “through” (i.e., end-to-end) transportation of machinery,

valued at more than $2 million, from Sydney, Australia, to

Huntsville, Alabama. Pet. App. 2a, 3a, 27a; Br. in Opp. 4.

ICC issued Kirby a bill of lading that designates Sydney as

the place where ICC received the goods and the port of

loading; Savannah, Georgia, as the port of discharge from the

ship; and Huntsville (a city more than 300 miles inland from

Savannah) as the place of delivery. Pet. App. 66a.

4

The ICC/Kirby bill limits ICC’s liability under COGSA to

$500 per package and otherwise caps ICC’s liability for loss

or damage to the goods. See Pet. App. 67a, Cl. 8.1 through

8.9 (reprinted at Pet. App. 57a-58a); see also Pet. App. 5a;

Pet. 7; Br. in Opp. 4. The bill also contains a Himalaya

Clause that extends the benefits of the bill’s limitations on

carrier liability to entities other than ICC itself. Pet. App.

3a; see id. at 67a, Cl. 10.1. To obtain additional protection

against loss or damage to its machinery; Kirby insured the

cargo with the predecessor of respondent Allianz Australia

Limited. See id. at 4a n.4; Br. in Opp. 5 n.4.

b. An ocean shipping company known as Hamburg Sud

subcontracted with ICC to transport Kirby’s machinery

from Sydney to Huntsville. Pet. App. 3a-4a. Hamburg Sud

issued ICC a bill of lading for the cargo. See id. at 68a; see

also id. at 6la-64a (excerpts from Hamburg Sud bill). The

bill committed Hamburg Sud to “provide transportation

to/from sea terminal and [specified] inland points, which may

well involve transport by rail,” id. at 6la, Cl. 4. The bill

incorporates COGSA’s $500-per-package limitation, id. at

63a-64a, Cl. 17, and contains a Clause Paramount, id. at 62a,

Cl. 4.d.

The Hamburg Sud/ICC bill also includes a Himalaya

Clause extending Hamburg Sud’s contractual protections to

other parties. That clause allowed Hamburg Sud to “sub-

contract on any terms the whole or any part of the carriage”

of Kirby’s cargo, Pet. App. 62a, Cl. 5.a, and states that “all

exemptions, limitations of, and exonerations from liability”

provided under the Hamburg Sud/ICC bill “shall be avail-

able to” Hamburg Sud’s agents and subcontracting parties,

including “all participating (including inland) carriers.” Id.

at 63a, Cl. 5.b.

ce. Hamburg Sud’s ship carried Kirby’s machinery from

Sydney to Savannah, where Hamburg Sud (or a subsidiary

of Hamburg Sud) hired petitioner to carry the cargo by rail

to Huntsville. Pet. App. 4a & n.3. Petitioner carried the car-

go under a contract that incorporated the terms of the bill of

5

lading that Hamburg Sud had issued to ICC. /7/d. at 4a.

Petitioner’s train derailed between Savannah and Hunts-

ville, damaging Kirby’s machinery. Kirby recovered from its

insurer/co-respondent for the loss. /d. at 4a n.4.

3. Respondents sued petitioner in the United States

District Court for the District of Georgia, alleging breach of

contract and tortious negligence and recklessness, among

other claims. Pet. App. 4a; see C.A. E.R. Tab 24, paras. 14-

24, 31-35 (Second Amended Complaint). Petitioner raised as

a defense the $500-per-package limitation contained in the

Hamburg Sud/ICC bill, which, petitioner argued, protected

it as a subcontractor of Hamburg Sud. See Pet. App. 29a,

3la-32a.

The district court determined that respondents’ claims

against petitioner are subject to the liability limitation in the

Hamburg Sud/ICC bill of lading, because that was the

contract under which petitioner “contracted and performed.”

Pet. App. 37a. The Hamburg Sud/ICC bill, the court further

concluded, unambiguously extends its $500-per-package

limitation to an inland carrier providing transport to Hunts-

ville. Jbid. Accordingly, the district court determined that

petitioner’s liability is limited to $500 for each of ten “pack-

ages” of machinery, or $5000. Jd. at 38a.

The district court certified its decision for immediate

appeal under 28 U.S.C. 1292(b). See Pet. App. 21a-26a.

' 4. The United States Court of Appeals for the Eleventh

Circuit reversed. Pet. App. la-20a. The court of appeals

first expressed the view that the inland-carrier liability limi-

tation in the Hamburg Sud/ICC bill is binding on Kirby only

if ICC was “acting as Kirby’s agent when it entered the

shipping contract with Hamburg Sud.” Jd. at 6a. Thus, the

court stated, whether ICC was acting as Kirby’s agent when

it received Hamburg Sud’s bill is “the pivotal question.” /d.

at 7a.

Turning to that question, the court determined that ICC

did not act as Kirby’s agent when it contracted with Ham-

burg Sud, and, therefore, ICC could not have limited Kirby’s

6

recovery from petitioner by accepting Hamburg Sud’s bill of

lading. Pet. App. 7a-lla. The court reasoned that if ICC had

acted as Kirby’s agent, then Hamburg Sud’s bill of lading

would list Kirby as the shipper, whereas the bill actually lists

ICC as the shipper. /d. at 7a-8a, 9a. Similarly, the court

said, Kirby would not have contracted with ICC for through

transport, if ICC was Kirby’s agent. /d. at 8a. The court

noted that the ICC/Kirby bill of lading is based on standard

terms that are intended for use by shipping intermediaries

when they operate as carriers with respect to shippers. /d.

at 8a-9a. Finally, the court stated that “absent special

particular arrangements” establishing an agency relation-

ship, an intermediary that arranges for the carriage of cargo

“is considered as an independent contractor” that cannot

contractually bind the shipper. /d. at 9a (quoting Naviera

Neptune S.A. v. All Int’l Freight Forwarders, Inc., 709 F.2d

663, 665 (11th Cir. 1983)). The court of appeals therefore

concluded that Kirby is not bound by the provisions of the

ICC/Hamburg Sud bill of lading, and petitioner cannot

invoke the liability limitations in that bill against Kirby. /d.

at 10a-11a.

The court of appeals next determined that petitioner is

not protected by the liability limitation in the ICC/Kirby bill

of lading because the Himalaya Clause in that bill “does not

specifically identify [petitioner] as a member of a well-

defined class of its beneficiaries.” Pet. App. lla; see id. at

lla-13a. The court stated that when a Himalaya Clause does

not specifically describe a party, the Eleventh Circuit denies

that party protection unless there is “privity between the

carrier and the party seeking shelter in the Himalaya

clause.” Jd. at 14a; see id. at 14an.11.

Judge Siler dissented. In his view, ICC was acting as an

agent of Kirby in contracting with Hamburg Sud. Pet. App.

19a. Judge Siler further stated that because it was clear that

inland carriers would be used to transport K..by’s machin-

ery, the absence of a specific reference to inland carriers in

the Himalaya Clause of the ICC/Kirby bill does not prevent

7

petitioner from invoking the protection of that clause. /d.

at 19a-20a. Judge Siler also concluded that because the

Hamburg Sud/ICC bill covers transportation from Sydney

all the way to Huntsville, it likewise is binding on Kirby and

protects petitioner. /d. at 20a.

DISCUSSION

The shipment of goods in this case is representative of a

large number of international, multimodal transactions for

which uniform rules of law are essential.’ The courts of

appeals presently disagree about the background rules of

federal law that should be applied to contractual arrange-

ments like those at issue in this case. Although the case

presents significant complexities, this Court’s review of the

Eleventh Circuit’s judgment is warranted to clarify and

unify the law.

I. THE PETITION PRESENTS IMPORTANT QUES-

TIONS OF MARITIME LAW ON WHICH THE

MAJOR MARITIME CIRCUITS ARE DIVIDED

A. Genuine Circuit Conflicts Exist

The petition identifies two relevant areas of disagreement

among the major maritime circuits. The first conflict, which

is the subject of Question 1 in the petition, involves the

nature of the relationship that is presumed to exist between

a cargo owner and a shipping intermediary (such as ICC)

that does not physically transport cargo, when the governing

contract and the surrounding circumstances do not clearly

establish the nature of that relationship. See Pet. 14-19. The

Second, Third, and Ninth Circuits presume an agency

relationship in that situation. See Kukje Hwajae Ins. Co. v.

The M/V Hyundai Liberty, 294 F.3d 1171, 1175-1177 (9th Cir.

2002), petition for cert. pending sub nom. Green Fire &

| Multimodal transport, also known as intermodal transport, involves

transport by both water and land (or air) under a single bill of lading. See

2 Thomas J. Schoenbaum, supra, at 29 n.1.

8

Marine Ins. Co. v. M/V Hyundai Liberty, No. 02-813 (filed

Nov. 22, 2002); SPM Corp. v. M/V Ming Moon, 22 F.3d 523,

526-527 (3d Cir. 1994); Insurance Co. of N. Am. v. S/S Am.

Argosy, 732 F.2d 299, 300-301 (2d Cir. 1984).’ In this case,

the Eleventh Circuit has adopted a conflicting rule, stating

that “special particular arrangements” are necessary to

demonstrate that the intermediary is acting as an agent of

the shipper, rather than as an independent contractor. Pet.

App. 9a, 10a.

The second pertinent conflict, which is the subject of

Question 2 in the petition, involves the circumstances under

which a Himalaya Clause that extends liability limitations to

parties other than the carrier is enforceable by third-party

beneficiaries. See Pet. 23-26. The Eleventh Circuit denies

H.malaya Clause protection to putative third-party benefi-

ciaries that are not in privity of contract with the shipper or

carrier, unless they are designated as beneficiaries by a

specific description “such as ‘stevedore,’ ‘terminal operator,’

etc.” Pet. App. 14a n.11. A general description of the third

party—“such as ‘agent,’ ‘servant,’ or ‘independent contrac-

tor’”—is not sufficient in the absence of privity. [bid. The

Fourth Circuit has suggested a similar specificity require-

ment when a Himalaya Clause is invoked by a non-maritime

entity that provided transport under the bill of lading. See

Caterpillar Overseas, S.A. v. Marine Transp. Inc., 900 F.2d

714, 726 (4th Cir. 1990).

The Second Circuit has stated more vroadly that benefi-

ciaries of a Himalaya Clause must be in “contractual privity

with the shipper or carrier.” Mikinberg v. Baltic S.S. Co.,

988 F.2d 327, 333 (1993). The Third Circuit likewise has

suggested that contractual privity may be required for a

Himalaya Clause to apply. SPM Corp. v. M/V Ming Moon,

965 F.2d 1297, 1305 n.9 (1992).

2 The Court has invited the Solicitor General to file a brief in the

Green Fire case, No. 02-813, expressing the views of the United States.

9

The Ninth Circuit “reject{s] [the] argument that privity of

contract is required in order to benefit from a Himalaya

Clause, and instead enforces such clauses when the party

seeking protection has provided services that are “the

carrier’s responsibilities under the carriage contract.” Aki-

yama Corp. of Am. v. M.V. Hanjin Marseilles, 162 F.3d 571,

574 (1998) (quoting Taisho Marine & Fire Ins. Co. v. The

Vessel Gladiolus, 762 F.2d 1364, 1367 (9th Cir. 1985)).

B. The Conflicts Have Practical Importance

Those circuit conflicts create serious practical problems

for shippers and carriers. “Carriers and cargo interests need

to know who bears the risk of potential loss so that they can

decide who must insure against it. Insurers need the same

information to calculate their premiums.” Michael F. Sturley,

The Fair Opportunity Requirement Under COGSA Section

4(5): A Case Study in the Misinterpretation of the Carriage

of Goods by Sea Act, 19 J. Mar. L. & Com. 1, 21 (1988). When

courts of appeals disagree, certainty is particularly difficult

to achieve in international shipping. As petitioner (Pet. 3

n.1) and amicus Association of American Railroads (Br. 15-

16) note, shipowners and other potential defendants (such as

the major railroad that is the petitioner in this case) often

could be sued in any of several judicial circuits with respect

to the same transaction.

Furthermore, multimodal transport and the so-called

“container revolution” have made third-party enforcement of

Himalaya Clauses critically important in international ocean

shipping. As the Court explained in NLRB v. International

Longshoremen’s Association, 447 U.S. 490 (1980), container

transport involves “large, reusable metal receptacles [i.e.,

containers], ranging in length from 20 to 40 feet * * *

which can be moved on and off an ocean vessel unopened.”

Id. at 494. Cargo destined for the same location can be

packed into a container and only the container—not the

individual items of cargo within the container—is physically

handled en route to its ultimate destination. The stan-

10

dardized dimensions of containers make it possible to handle

and stow cargo more efficiently, so that ships carry more

cargo and are loaded and unloaded in far less time than

before. See id. at 494-496. The Maritime Administration of

the Department of Transportation advises that in Fiscal

Year 2002, approximately 28% (by weight) of international

waterborne cargo in the United States was containerized.

One consequence of the container revolution is that the

water’s edge ceases to be “the critical point for the division

of functions, costs, and risks.” 2 Thomas J. Schoenbaum,

supra, at 30 (3d ed. 2001). Containerized cargo moves easily

and without re-packaging among ships, trains, trucks, and

even airplanes. See id. at 29-30. In multimodal container

shipments, “(t]he critical point is now the place where the

container is loaded or ‘stuffed.’” /d. at 30.

The container revolution also has lent further importance

to the role of intermediaries who, in addition to making

arrangements for shippers, combine the goods of various

shippers into larger loads bound for the same location.

Intermediaries enable cargo owners to share in the efficien-

cies of containerization even if their shipments to particular

destinations are infrequent, or too small to fill a container.

See International Longshoremen’s Ass’n, 447 U.S. at 495-

496 & n.8; 2 Thomas J. Schoenbaum, supra, at 30. Congress

recognized the important role of shipping intermediaries in

the Shipping Act of 1984, 46 U.S.C. App. 1701 et seq., which

requires licensing of certain intermediaries and establishes

regulatory oversight of their activities by the Federal

Maritime Commissien. See 46 U.S.C. App. 1702(17) & 1718. °

Due in part to those developments, a single “through bill

of lading” commonly covers transport of a shipper’s goods all

the way to an inland destination. As in this case, the through

bill often is issued by a shipping intermediary, which con-

tracts for transport with a vessel-owning carrier. Accord-

ingly, questions concerning the intermediary’s authority to

act for the cargo owner, and the liability of parties that sub-

contract with a carrier that is not in contractual privity with

1]

the shipper, are far more likely to arise today than when

port-to-port carriage of a particular shipper’s goods on a

particular vessel was the ordinary focus of a bill of lading.”

C. The Conflicts Are Presented In This Case

Despite the general importance of the questions presented

in the petition, there are threshold issues—which the parties

have not addressed—concerning the applicability of federal

maritime law in this case and, therefore, the appropriateness

of addressing those questions here.

1. The record facts do not preclude the possibility that

petitioner’s liability could have been determined under

statutory rules governing railroad transport. The Carmack

Amendment to the Interstate Commerce Act (49 U.S.C.

11706), provides that railroads generally are liable for loss or

injury to property, 49 U.S.C. 11706(a), and may limit their

liability only under specified circumstances, 49 U.S.C.

11706(e)(1) and (3)."

It is unsettled whether the Carmack Amendment applies

to land transport under international, multimodal through

bills of lading, such as the bills in this case. Compare

Neptune Orient Lines, Ltd. v. Burlington N. & Santa Fe

Ry., 213 F.3d 1118, 1119 (9th Cir. 2000) (Carmack

Amendment reaches “the inland leg of an overseas shipment

conducted under a single ‘through’ bill of lading * * * to the

extent that the shipment runs beyond the dominion of

(COGSA]”), and Berlanga v. Terrier Transp., Inc., 269 F.

Supp. 2d 821, 826-830 (N.D. Tex. 2003) (motor carrier con-

* We are advised by the Department of State that the ongoing inter-

national negotiations discussed by the parties (see generally Br. in Opp. 3-

4, 21-22, 29-30; Pet. Reply Br. 8), the results of which would have to be

implemented through domestic legislation, are not likely to resolve the

issues addressed in this brief.

* The particular shipments at issue here are exempt from certain

regulatory requirements, see 49 C.F.R. 1090.2, but such exempt freight is

generally subject to the liability rules of Section 11706, see 49 U.S.C.

10502(e). The Carmack Amendment also established liability rules for

motor carriers. See 49 U.S.C. 14706.

12

text) (same), with Capitol Converting Equip., Inc. v. LEP

Transp., Inc., 965 F.2d 391, 394 (7th Cir. 1992) (Carmack

Amendment inapplicable when domestic transport is cov-

ered by international through bill of lading), and Swift Tex-

tiles v. Watkins Motor Lines, Inc., 799 F.2d 697, 701 (11th

Cir. 1986) (motor carrier context) (same), cert. denied, 480

U.S. 935 (1987); see generally Reider v. Thompson, 339 U.S.

113 (1950).

That uncertainty, however, is not material to this Court’s

consideration of the instant petition. First, the Carmack

Amendment issue was not raised in the lower courts or in

respondents’ brief in opposition. Accordingly, it has been

waived. See S, Ct. Rule 15.2. Second, we are advised by

petitioner that the rail transport in this case was provided as

contract carriage under 49 U.S.C. 10709, which would make

the transport exempt from the Carmack Amendment's

liability rules. See 49 U.S.C. 10709(b) and (c). Third, data

maintained by the Surface Transportation Board reflect that

most (approximately 56% by revenue) multimodal, contain-

erized rail freight is transported under such contract-

carriage arrangements, to which the Carmack Amendment’s

liability regime does not apply. In sum, even if the Carmack

Amendment’s liability rules sometimes apply to rail trans-

port under international, multimodal through bills of lading,

they do not apply to a large amount of the cargo carried by

railroads under such bills, including, it appears, Kirby’s car-

go in this case.

2. There also is an unexplored issue whether the courts

below were correct in assuming that this case is governed by

federal substantive law. A federal rule of decision may be

justified “where there is a ‘significant conflict between some

federal policy or interest and the use of state law.’”

O'Melveny & Meyers v. FDIC, 512 U.S. 79, 87 (1994)

(quoting Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63, 68

(1966)); see American Dredging Co. v. Miller, 510 U.S. 443,

447 (1994) (state remedies must not “work[] material pre-

judice to the characteristic features of the general maritime

13 :

law or interfere{] with the proper harmony and uniformity of

that law in its international and interstate relations”) (quot-

ing Southern Pac. Co. v. Jensen, 244 U.S. 205, 216 (1917)). It

plausibly could be argued that sufficient justification for

applying general federal maritime law, rather than the state

or foreign law indicated by application of Georgia’s choice-

of-law rules, exists in this case in light of: the international,

interstate nature of the transport contemplated under the

bills of lading; the parties’ use of the same contract pro-

visions to cover both maritime and land transport; the

interrelationship between the bills of lading and COGSA;

and the relative importance within the contract of the ocean

transport from Sydney to Savannah, as compared with the

land transport from Savannah to Huntsville. Cf., e.g.,

Wemhoener Pressen v. Ceres Marine Terminals, Inc., 5 F.3d

734, 741 (4th Cir. 1993) (“[C]Jontractual extensions of COGSA

are to be construed * * * without reference to state law.”).

The Court need not resolve that issue, however. In seek-

ing certification of the district court’s liability determination

for interlocutory appeal under 28 U.S.C. 1292(b), the parties

jointly argued that the correct resolution of the liability-

limitation issue turns on questions of federal law that divide

the circuits. See Pet. App. 24a; see also Dist. Ct. Joint Mot.

to Certify Partial Summ. J. for Immediate Permissive

Review 4-7. In the court of appeals, respondents stated that

the liability issue “must be determined” by applying

principles of maritime law derived from Robert C. Herd &

Co. v. Krawill Machinery Corp., 359 U.S. 297 (1959). Resp.

C.A. Br. 15; see also id. at 46 (arguing that this case

implicates “competing lines of jurisprudence arising under

(COGSA).”). Respondents thus have accepted petitioner’s

contention that this case involves “questions of federal mari-

time law.” Pet. 2. Because this is a diversity action under 28

U.S.C. 1332(a)(2) and the question of what law applies is not

jurisdictional, this Court may rely on the parties’ joint posi-

tion and address the federal-law questions decided by the

Eleventh Circuit and presented in the petition.

14

D. Carriers And Shippers Do Not Have Viable Means

Of Contracting Around The Court Of Appeals’

Decision

The result of the Eleventh Circuit’s decision is that

respondents are able to recover from petitioner without

being limited by the COGSA-based cap on liability, even

though both bills of lading in this case covered the inland

transport during which the damage to Kirby’s machinery

occurred and contained a $500-per-package liability limita-

tion.

Respondents address the anomaly of that result by

suggesting (Br. in Opp. 21) that inland carriers can protect

themselves from similar liability by: (1) declining to partici-

pate in multimodal transactions; (2) negotiating liability

limits directly with cargo owners; or (3) seeking indemnity

provisions in their agreements with other carriers. Respon-

dents’ first proposal is unworkable on its face. The Depart-

ment of Transportation advises that multimodal container-

ized freight comprises approximately ten percent of all rail

freight. A major railroad (or trucking line) could not refuse

to participate in international multimodal transport and re-

main viable in the competitive transportation industry. Fur-

thermore, the public interest weighs strongly against rules

of law that discourage inland carriers from participating in

efficient, lower-cost arrangements for international trans-

port. See Pennsylvania v. ICC, 561 F.2d 278, 282 (D.C. Cir.

1977) (discussing benefits of “joint through rate tariffs” for

ocean and rail transport).

Nor is it feasible for subcontracting carriers to negotiate

directly with cargo owners. A single bill of lading often

covers multiple containers, each of which may hold goods

owned by multiple parties, who may reside in other nations.

See generally Ass’n of Am. R.R. Br. 8-9, 13; ef. Stolt Tank

Containers, Inc. v. Evergreen Marine Corp., 962 F.2d 276,

279 (2d Cir. 1992) (requiring carriers to negotiate with all

parties who have an interest in cargo “would impose far

15

too heavy a burden” and “undermine COGSA's purpose” of

creating predictable liability rules) (internal quotation marks

omitted).

Indemnity agreements also are not a satisfactory mecha-

nism for providing certainty to subcontracting carriers. The

actual value of the goods—and hence the risk associated with

an indemnification arrangement—may be known only to the

cargo owner(s). Without knowledge of the actual value of

the goods, it may be impossible to establish satisfactory in-

demnification arrangements. Furthermore, the industry

practice of setting carriers’ liability at COGSA’s minimum

amount of $500 per package suggests that it is less costly for

shippers to insure themselves against losses than for car-

riers to bear the risk or insure against it. In this case, for

example, Kirby obtained insurance to supplement the pro-

tection afforded under ICC’s bill of lading. It would have

been grossly inefficient for petitioner to negotiate with Ham-

burg Sud for overlapping protection against the same loss.°

* Conceivably, the liability issue in this case could have been ad-

dressed by a “circular indemnification” arrangement. Under that ap-

proach, Kirby would have agreed to indemnify ICC for its losses (in excess

of the contractual liability cap) if Kirby recovered in a suit arising from the

transport; ICC similarly would have agreed to indemnify Hamburg Sud if

Kirby recovered; and Hamburg Sud would have agreed to indemnify

petitioner if Kirby recovered. That string of contractual arrangements

might have prevented Kirby from suing petitioner, because its potential

liability to ICC would offset its potential recovery from petitioner. Such

provisions generally have not been adopted by United States carriers,

however, and the full chain of indemnifications seemingly would have to be

negotiated by the parties (or expected as an industry-standard arrange-

ment) before petitioner could agree to provide transport at a particular

rate. Circular indemnification would be a cumbersome way of precluding

damages recovery that, as we explain below, should be unavailable in any

event.

16

Il. THE DECISION BELOW IS INCORRECT

A. The Result Below Is Incorrect In Light Of Kirby's

Acceptance Of A Liability Limitation Under The

ICC/Kirby Bill Of Lading

1. Kirby’s contract with ICC clearly extended the $500-

per-package liability limitation to the inlaad transport of

Kirby’s goods from Savannah to Huntsville. The ICC/Kirby

bill provides that ICC would “perform and/or * * *

procure” multimodal transport to Huntsville, Pet. App. 67a

(Cl. 2.1(a) and definition of “Freight Forwarder”), and that

the bill’s liability limitations “apply whenever claims relating

to the performance of the contract * * * are made against

any servant, agent or other person (including any inde-

pendent contractor) whose services have been used in order

to perform the contract,” id. at 67a, Cl. 10.1; see id. at 67a,

Cl. 10.2 (beneficiaries of Himalaya Clause are deemed par-

ties to the contract). The bill specified an inland place of

delivery, id. at 66a, and expressly states that Kirby’s goods

might be transported in separate “stage[s],” id. at 67a, Cl.

8.6.a.°

If ICC had contracted directly with petitioner for rail

transport, there would be little question in the Eleventh

Circuit that petitioner could enforce the $500-per-package

limitation in the ICC/Kirby bill against Kirby despite its lack

of contractual privity with Kirby. See Pet. App. 12a-l3a.

The result should not be different because ICC instead con-

tracted with Hamburg Sud, which contracted with peti-

6 Petitioner argued in the court of appeals that the relevant bill of

lading in this case is the Hamburg Sud/ICC bill, but it preserved the

argument, fully addressed by the court of appeals, that the Himalaya

Clause of the 1CC/Kirby bill applies. See Pet. C.A. Br. 32 (“Kirby cannot

allege to have a surviving claim whether in contract or tort, arising out of

a portion of the performance of the ICC Ltd. bill of lading{,] after explic-

itly agreeing by that contract's terms that its damages would be limited to

$500.00 per package.”). Furthermore, respondents argued in the district

court that the ICC/Kirby bill is the relevant contract. See Pet. App. 37a.

17

tioner. Both ICC’s contract with Hamburg Sud and Ham-

burg Sud’s ensuing subcontract with petitioner were

anticipated in the ICC/Kirby bill and foreseeable by Kirby.

2. The court of appeals reasoned (Pet. App. 1la-18a)

that, under this Court’s decision in Robert C. Herd & Co. v.

Krawill Machinery Corp., supra, the failure of the

ICC/Kirby Himalaya Clause to make specific mention of

inland carriers prevents petitioner from obtaining protection

under that clause. The Eleventh Circuit has misapplied

Herd.

In Herd, the applicable bill of lading incorporated

COGSA’s $500-per-package limitation, but only as to the

carrier itself. A stevedoring company hired by the ocean

carrier dropped a portion of the cargo into the water during

the loading process. The cargo owner sued the stevedoring

company in tort. The stevedoring company invoked the

$500-per-package liability limitation in COGSA, as well as

the parallel limitation in the bill of lading. See 359 U.S. at

298-299.

This Court determined that the stevedoring company was

not protected under COGSA or the bill of lading because

both addressed only the carrier’s liability. 359 U.S. at 301-

308. In pertinent part, the Court stated that there was

“nothing in [the bill of lading] to indicate that the contracting

parties intended to limit the liability of stevedores or other

agents of the carrier for damages caused by their negli-

gence.” /d. at 302. The Court refused to infer such an

extension of the liability limitation in the absence of clear

contract language, because such an inference would be

contrary to common-law liability rules. /d. at 303-305.

Under Herd, the carrier’s contractua! protections do not

automatically extend to subcontractors of the carrier.

Furthermore, Himalaya Clauses should not be construed to

protect third-party beneficiaries “unless the clarity of the

language used expresses such to be the understanding of the

contracting parties.” 359 U.S. at 305 (citation and internal

quotation marks omitted). Applying those rules to this case,

18

the dispositive fact is that clear language in the ICC/Kirby

bill extends the protection of the $500-per-package limitation

to petitioner as a subcontractor of ICC’s chosen ocean

earrier. Petitioner is expressly protected under Clause 10.1

as an “independent contractor * * * whose services have

been used in order to perform the contract.” Pet. App. 67a.

The court of appeals found significance in the fact that

petitioner is a railroad, rather than a provider of port

services. Pet. App. 15a-17a; accord Caterpillar Overseas,

900 F.2d at 726. When a shipper contracts in a single

through bill for transport by both sea and land, however,

there is no basis for applying a complicated rule of contract

enforcement that distinguishes between providers of port

services and other providers whose services are equally

foreseeable and essential to fulfillment of the contract.

Using such a rule to override the plain terms of a Himalaya

Clause is inconsistent with Herd and fosters harmful uncer

tainty in the industry.

B. The Liability Limitation In The Hamburg Sud/ICC Bill

May Provide Alternative Grounds For Resolving The

Case -

If the petition is granted and the case is not resolved on

the basis of the ICC/Kirby Himalaya Clause, then it would

be appropriate to consider petitioner’s ability to enforce the

liability limitation in the Hamburg Sud/ICC bill, which is

incorporated into petitioner’s carriage agreement.

1. This Court’s decision in Great Northern Railway Co.

v. O'Connor, 232 U.S. 508 (1914), suggests that, when a

carrier accepts goods for transport from an intermediary,

the liability limitations in the carrier’s terms of carriage are

enforceable against the cargo owner regardless of whether

the intermediary contracted with the carrier “as agent [of

the cargo owner] or Forwarder.” /d. at 514. Such a rule

would be consistent with the common law’s allowance of

“fair, open, just and reasonable agreement(s]” under which

shippers obtain lower rates in exchange for limiting carrier

19

liability, Adams Express Co. v. Croninger, 226 U.S. 491, 509

(1913), and harmonious with the rule that tariff limitations

on railroad liability are conclusive, see, e.g., Feinberg v.

Railway Express Agency, 163 F.2d 998, 999 (7th Cir. 1947)

(railroad’s receipt for mink coat “was binding on it as to the

charge it could make and on the [owner] as to the amount

she could collect in case of loss”), cert. denied, 332 U.S. 847

(1948). If contract limitations on carrier liability were not

enforceable against cargo owners, then the availability of

reduced transport rates as a quid pro quo for limited carrier

liability would be put at risk.

Furthermore, as the Second Circuit explained when dis-

cussing potential tort liability in a case involving air cargo,

carriers who accept goods from intermediaries generally are

“entitled * * * to assume” that the intermediary has

authority to accept the terms of carriage, and “[fjrom the

perspective of the [carrier, the cargo owner] is an unforesee-

able plaintiff.” Nippon Fire & Marine Ins. Co. v. Skyway

Freight Sys., Inc., 235 F.3d 53, 62 n.4 (2d Cir. 2000). It would

not be reasonable to expect petitioner to review ICC’s con-

tract with Kirby to assess its own potential liability to Kirby.

Rather, petitioner could justifiably rely on the protections it

negotiated with the party (Hamburg Sud or a subsidiary

thereof) that presented the goods for shipment by rail.

2. For the reasons given above, it would not be necessary

for the Court to reach the agency question framed in the

petition (see Pet. 14-23) in order to resolve the case on the

merits. If the Court does address that issue, however, its

analysis should consider the Shipping Act of 1984, 46 U.S.C.

App. 1701 et seg. Codifying the regulatory approach of the

former Federal Maritime Board (the predecessor to the

Federal Maritime Commission), see Common Carriers by

Water—Status of Express Cos., Truck Lines, and Other

Non-Vessel Carriers, 6 F.M.B. 245 (1961); Bernhard UIl-

mann Co. v. Porto Rican Express Co., 3 F.M.B. 771 (1952),

the Shipping Act provides that maritime businesses may be

common carriers, regulated as such, even if they do not own

20

or operate any ships. The Shipping Act creates the statu-

tory classification of “ocean transportation intermediary,”

which includes both “ocean freight forwarders” and “non-

vessel-operating common carriers” (NVOCCs). Ocean

freight forwarders arrange for shipments from the United

States via common carrier “on behalf of shippers.” 46 U.S.C.

App. 1702(17}(A). Implementing regulations of the Federal

Maritime Commission provide that if an ocean freight

forwarder is identified in the bill of lading as a shipper, its

agency relationship with the original shipper must be

indicated as well. 46 C.F.R. 515.42(a). The Shipping Act

further provides that NVOCCs operate and are regulated as

common carriers, but NVOCCs do not own the vessels used

for transport and they are defined as shippers in their

relationships with vessel-operating common carriers. See 46

U.S.C. App. 1702(6) and (17)(B).

ICC’s status as an NVOCC vel non therefore may bear on

the agency issue discussed in the petition. Cf. Chicago, Mil-

waukee, St. Paul & Pac. R.R. v. Acme Fast Freight, Inc.,

336 U.S. 465 (1949) (discussing role of freight forwarders

under Interstate Commerce Act). Yet the parties seem to

agree that the record facts do not conclusively establish

whether ICC was acting as an NVOCC. See Br. in Opp. 16;

Pet. Reply Br. 5-6 n.4; see also Pet. App. 10a n.9. That fac-

tual uncertainty is an additional reason why the agency issue

may prove to be an unsuitable ground for resolving the case.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

21

THEODORE B. OLSON

ROSALIND A. KNAPP Solicitor General

Acting General Counsel PETER D. KEISLER

PAUL M. GEIER _ Assistant Attorney General

DALE C. ANDREWS THOMAS G. HUNGAR

PETER S. SMITH Deputy Solicitor General

Attorneys AUSTIN C. SCHLICK

ROBERT B. OSTROM Assistant to the Solicitor

Chief Counsel General

EDMUND T. SOMMER, JR. ROBERT GREENSPAN

Assistant Chief Counsel ANNE MURPHY

Maritime Administration Attorneys

Department of Transportation

CAROLJ. NEUSTADT

Acting General Counsel

PHILLIP CHRISTOPHER HUGHEY

A

Federal Maritime Commission

ELLEN D. HANSON

General Counsel

ALICE C. SAYLOR

Surface Transportation Board

NOVEMBER 2003