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

No. 02-1028

OFFICE OF THE €LERK

IN THE

Supreme Court of the United States

NORFOLK SOUTHERN RAILWAY COMPANY,

Petitioner.

Vv.

JAMES N. KIRBY PTY LTD d/b/a KIRBY ENGINEERING,

MMI GENERAL INSURANCE, LTD.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF OF AMICUS CURIAE TRANSPORTATION

LOSS PREVENTION AND SECURITY ASSOCIATION

IN SUPPORT OF PETITIONER

NORFOLK SOUTHERN RAILWAY COMPANY

JAMES ATTRIDGE *

SCOPELITIS, GARVIN, LIGHT

& HANSON

601 Montgomery Street, Suite 325

San Francisco, CA 94111

* Counsel of Record (415) 986-2479

for Amicus Curiae

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether a cargo owner that contracts with a freight

forwarder for transportation of goods to a destination in the

United States is bound by the contracts that the freight

forwarder makes with the carriers that actually transport the

owner’s goods.

2. Whether the phrase “person (including any independent

contractor) whose services have been used in order to

perform the contract” in a freight forwarder’s multimodal bill

of lading covers truckers that actually transport the goods to

their inland destination, regardless of whether the trucker is in

privity with the freight forwarder.

(i)

il

STATEMENT REQUIRED BY RULE 29.6

Pursuant to Rule 29.6 the Transportation Loss Preven-

tion and Security Association states that it is a non-

profit corporation incorporated in New Jersey. Its shares are

not traded.

iil

STATEMENT OF CONSENT

The parties have consented to the filing of this brief.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .............c.ccccccsecescseseseeeseeees i

STATEMENT REQUIRED BY RULE 29.6................ ii

STATEMENT OF CONSENT ............cccccccscssseseseseseeceees iii

iii ci iiiccciicititiins vi

RELEVANT FEDERAL STATUTES ...........cccccccceeeeees |

STATEMENT OF INTEREST OF AMICUS

EERE ae AREY S. eee e AI

SUMMARY OF ARGUMENT..............ccccccsesesessseseseeees 3

EL AE REE SD 3

I. PUBLIC POLICY ENCOURAGES THE PRO-

LIFERATION OF SMALL, PRIVATELY

OWNED TRUCKING COMPANIES ................ 3 -

Il. PUBLIC POLICY HAS ALWAYS FAV-

ORED A RISK ALLOCATION REGIME

WHICH MAKES CARRIERS STRICTLY

LIABLE FOR COMMONPLACE LOSSES,

BUT SHIFTS THE BURDEN FOR EXTRA-

ORDINARY LOSSES TO _ SHIPPER’S

ED cccencecenssasonssenennsssnssssengpensnmmmemnmenensss 4

Ill. PUBLIC POLICY ENCOURAGES THE

PRESENCE OF TRANSPORTATION IN-

CIEE venceserccssssssseesenssrmmnsnmmemnemeuens 7

IV. THESE PUBLIC POLICY GOALS WILL

BE SEVERELY UNDERMINED IF THE

LOWER COURT'S RULING IS AFFIRMED... 7

COCR EIOS cnecsnsssncensenscsnsansssessensenanemenasmniannnesmasetin 9

(v)

vi

TABLE OF AUTHORITIES

CASES

United States Supreme Court Cases

Hart v. Pennsylvania Railway Co., 112 U.S. 331

SIT eisitapeeesintinninienenadiataabanaenaniicitadiataieiitindinantaaiiaiiieiuane

Kansas City Southern Railway v. Carl, 227 U.S.

Ue cinntiscnderinnssieiiesieitaaibiiidinitaeriuatatiiaialiegiimantinaas

Missouri, K&T.R. Co. v. Harriman Brothers, 227

Be Har CPTI soresitistenitnttninintenigmempasnsaineintndanaindens

Great Northern Railway v. O'Connor, 232 U.S.

PUI TIEN el aeshtssintttenndannnesmenaniiasinamianctnitiantecussaien

Southeastern Express Co. v. Pastime Amusement

ig en SII icciicestinrenitantintrientindaiaiincnade

Federal District Court Cases

Cooperative Shippers, Inc. v. Atchison, Topeka &

Santa Fe Railway Company, 840 F.2d 447 (7th

ak See nrencsntreetnnememntnsiemnteiineennmnenens

Interstate Commerce Commission Cases

In Re: Bills of Lading, 52 1.C.C. 671 (1919).........

Released Rates Order No. MC 894, 353 LC.C.

EE CET Ul hcccsnenencensneircetentinininpeiitmanianasabniianmpiidniatn

Ex Parte No. MC-96 Entry Control of Brokers

a I Oe nciccntonetinnenseenseusinennmmenion

STATUTES

United States Code

46 U.S.C. app. §1300-1315 ...cccccccccsseesssseesesveeen

a

2 Se eae

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| | | 1,

EI

Page

vii

; TABLE OF AUTHORITIES

United States Code of Federal Regulations

es ST cactitinciiennntieinmeneamimeion

Public Laws

| Motor Carrier Act of 1980, Pub.Law. 96-296 94

Stat. 793;- Trucking Industry Regulatory

Reform Act of 1994 Pub. Law. 103-311, 108

Bs RI nicciaiasrseiticiiaesiesiniaaiaseiatiiaineinianiiieniiasiis

Interstate Commerce Commission Termination

Act of 1995, Pub.Law.. 104-88, 109 Stat. 903

PUBLICATIONS

1994 U.S. Code and Administrative News; 104

Cn

Thoms, William E.: “Rollin’ On...To A Free

Market. Motor Carrier Regulation 1935-

1980.” 13 Transportation Law Journal 43

ei ocsenesesseeensaecenempemmmeeeaeninnmgennnees

| U.S. Department of Transportation Cargo Lia-

bility Study, August 1998 00.00... cceeceeeeeeees

|

ee

Page

7

3, 4, 6

a

IN THE

Supreme Court of the Anited States

No. 02-1028

NORFOLK SOUTHERN RAILWAY COMPANY,

Petitioner,

V.

JAMES N. KirnBy PTY LTD d/b/a KIRBY ENGINEERING,

MMI GENERAL INSURANCE, LTD.,

- Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF OF AMICUS CURIAE ' TRANSPORTATION

LOSS PREVENTION AND SECURITY ASSOCIATION

IN SUPPORT OF PETITIONER

NORFOLK SOUTHERN RAILWAY COMPANY

-_—-— —————

RELEVANT FEDERAL STATUTES

The Carmack Amendment to the Interstate Commerce Act,

49 U.S.C. 14706.

STATEMENT OF INTEREST OF AMICUS CURIAE

The Transportation Loss Prevention and Security Asso-

ciation “TLPSA” is a non-profit corporation incorporated in

the State of New Jersey. It is comprised of over sixty-five

member organizations which are involved in the trans-

' No other person or organization made a monetary contribution to the

preparation of this brief

2

portation of freight by truck within the United States.

Members include trucking companies, large and small, some

with revenues upwards of $2.5 billion. Its mission as stated

in its bylaws is to:

(1) provide continuing professional education to cargo

claims professionals and their insurers, cargo security

professionals, and law enforcement; (2) facilitate practi-

cal and effective communications between carrier and

insurance personnel and law enforcement; (3) engage

in legal and legislative advocacy on behalf of the

membership.

A majority of its members transport freight to and from

domestic locales as a component of continuous through

movements in international transportation. As such, they

frequently transport freight subject to ocean bills of lading

which include Himalaya clauses as well as clauses Para-

mount. Consequently they are similarly situated to Norfolk

Southern Railway Company (“Norfolk Southern”). In fact, it

_ is merely an accident of circumstance that a railroad rather

than a trucker was retained to carry the freight in this

controversy. Had the freight been bound for a town not

served by a rail line, it would have been trucked. In addition,

Norfolk Southern was only dispatched to deliver the freight to

its rail ramp in Huntsville, Alabama. The ultimate destination

was Athens, Alabama, thirty miles west, to which the freight

would have eventually been short hauled by a trucker.

Constituents of TLPSA include small trucking companies,

which, unlike Petitioner Norfolk Southern do not have the

financial wherewithal to absorb a $1.5 million judgment.

Claims of such magnitude would force numerous truckers out

of business. It is the considered opinion of TLPSA not only

that the Eleventh Circuit decision is in error, but that if it

remains intact it will have a chilling effect upon the

willingness of trucking companies to accept import and

export freight, in contravention of established public policy.

3

SUMMARY OF ARGUMENT

Any decision affecting the effectiveness of limitations of

liability in an ocean carrier’s bill of lading insofar as it affects

the liability of railroads will necessarily have a similar impact

upon the liability exposure of the trucking industry; an

industry which constitutes a more significant component of

the national economic infrastructure than do railroads.

The ultimate outcome of the 11th Circuit’s decisions will

be to discourage truckers both large and small from accepting

imported freight. Any such outcome is counter to and

destructive of well settled public policy ensconced in the

Interstate Commerce Act, 49 U.S.C. 101, et seg. Specifically,

if the decision below is affirmed it will: (1) chill entre-

preneurship by impeding the viability of small trucking

companies; (2) subject this vital component of the infra-

structure to catastrophic liability exposure; and (3) discourage

the use of transportation intermediaries, essential to the

deregulated transportation environment.

ARGUMENT

I. PUBLIC POLICY ENCOURAGES THE PRO-

LIFERATION OF SMALL, PRIVATELY

OWNED TRUCKING COMPANIES

In 1935 Congress adopted the Motor Carrier Act which

placed the motor carrier industry under the heavy hand of the

erstwhile Interstate Commerce Commission (“ICC” or “the

Commission”). Market entry was restricted, rates were

subject to regulatory review and competitor protest, and

routes were confined to those expressed within the carrier’s

operating authority issued by the Commission.

Prodded by the government as well as the general public,

the Commission began to unshackle the transportation

industry in the 1970’s. In 1980 Congress adopted a new

Motor Carrier Act mandating further deregulation.

4

During the period between 1980 and 1995, Congress

enacted a series of laws which completely overhauled the

regulatory scheme. These enactments were designed to

achieve various goals including: (1) to deregulate the trucking

industry and subject it to market-driven forces; (2) to further

integrate the national transportation network by eliminating

state government regulation of motor carriers; and (3) to

encourage entrepreneurship by making it easy for individual

truckers to own their own independent companies. This last

goal represented a deliberate policy decision not only to spur

entrepreneurship for its own sake, but also to encourage the

proliferation of minority-owned businesses, which could avail

themselves of federally-mandated set-aside programs.”

Passage of the Motor Carrier Act of 1980 resulted in a

boom of small operators entering the field. Between 1980

and 1995, the number of federally-licensed motor carriers

swelled from 14,000 to over 55,000. (1994 U.S. Code and

Administrative News, p. 804; 104 Congr., Ist Sess. 1995.)

Il. PUBLIC POLICY HAS ALWAYS FAVORED A

RISK ALLOCATION REGIME WHICH MAKES

CARRIERS STRICTLY LIABLE FOR COM-

MONPLACE LOSSES, BUT SHIFTS THE

BURDEN FOR EXTRAORDINARY LOSSES TO

SHIPPERS’ INSURERS.

At common law, a carrier was strictly liable for the full

actual value of cargo damaged in its care. This principal was

codified by the Carmack Amendment to the Interstate

Commerce Act, 49 U.S.C. §14706 (previously 49 U.S.C.

11707 and 49 U.S.C. 20(a).) However, a longstanding

exception to the full value rule has been found in what is

? See Thoms, William E.: “Rollin’ On... To A Free Market. Motor

Carrier Regulation 1935-1980.” 13 Transportation Law Journal 43, 72,

76, 84 (1983).

5

alternatively known as the declared value, or released rates

doctrine. As this Court stated long ago:

There is no justice in allowing a shipper to be paid a

large value for an article which he has induced the

carrier to take at a low rate of freight on the assertion

and agreement that its value is a lesser sum than that

claimed after loss. It is just to hold the shipper to his

agreement, fairly made, as to value, even where the loss

or injury has occurred through the negligence of the

carrier.

Hart v. Pennsylvania Railway Co., 112 U.S. 331, 340 (1884).

The Carmack Amendment to the Interstate Commerce

Act, as modified by the Cummins Amendment of 1916,

specifically provided that carriers could offer a menu of

published discount rates provided that the shipper was willing

to accept a limited liquidated cap on the carrier’s liability.

The inherent equities of this arrangement have long been

lauded by this Court:

The underlying principle is that the carrier is entitled to

base rates upon value and that its compensation should

bear a reasonable relation to the risk and responsibility

assumed. The broad purpose of the federal act is to

compel the establishment of reasonable rates and to

provide for their uniform application.

Southeastern Express Co. v. Pastime Amusement Co., 299

U.S. 28, 29; 57 S.Ct. 73; 81 L.Ed. 20 (1936). Accord:

Missouri, K&T.R. Co. v. Harriman Brothers, 227 U.S.

657 (1913).

In 1919, the Interstate Commerce Commission prescribed

the Uniform Domestic Bill of Lading which featured a block

requiring shippers to declare the value of their freight when

the rate paid was based in part on the freight’s value. Jn

Re: Bills of Lading, 52 1.C.C. 671 (1919).

6

In 1977 the I.C.C. promulgated Released Rates Order No.

MC 894, 353 1.C.C. 661 (1977), which endorsed the practice

of carriers establishing by tariff rule that a shipper’s omission

to declare the value of its freight automatically resulted in the

freight being transported at the lowest rate along with the

concomitantly lower limitation of liability. The petitioner in

that proceeding was a major shipper, IBM, which was having

trouble distributing high-value mainframe computers because

Carriers were reluctant to haul such expensive merchandise.

That decision crystalized the overriding policy rationale

supporting the limited liability regime. In order to protect

motor carriers from catastrophic losses, and to allow shippers

the flexibility to manage their risk as they see fit, the I.C.C.

ordained a liability regime which shifted the burden for

extraordinary losses to private insurers whose premium pool

was far more widespread. Despite ample opportunities for

legislative reexamination °, limitations on carrier liability for

extraordinary losses remain the rule. This is consistent with

other modes of transportation in which limitations of liability

are ubiquitous.

The liability of ocean carriers is limited by statute to $500

per shipping unit. Carriage of Goods by Sea Act, 46 U.S.C.

§1304(5). Limitations of liability in the volume transporta-

tion contracts of railroads are routinely upheld. Cooperative

Shippers, Inc. v. Atchison, Topeka & Santa Fe Railway

Company, 840 F.2d 447 (7th Cir. 1988). The liability of

international air carriers is limited by treaty to the sum of

$9.07 per pound. 49 U.S.C. §40105.

* Motor Carrier Act of 1980, Pub.Law. 96-296 94 Stat. 793; Trucking

Industry Regulatory Reform Act of 1994 Pub. Law. 103-311, 108 Stat.

1683 (1994); Interstate Commerce Commission Termination Act of 1995,

Pub.Law. 104-88, 109 Stat. 903 (1995).

7

Il. PUBLIC POLICY ENCOURAGES THE PRES-

ENCE OF TRANSPORTATION INTERME-

DIARIES

In the new deregulated environment matching freight with

a carrier suitably situated to haul it is a much more haphazard

and frenetic enterprise. Among the sidebar consequences of

this sea change is the massive proliferation of transportation

intermediaries who run the gamut from brokers who mix and

match shippers with carriers, sometimes with the benefit of

little more than a personal computer and a telephone, to third

party logistics providers which operate as outsourced traffic

departments for large companies.

The I.C.C. recognized and accommodated this shift in the

marketplace by promulgating Ex Parte No. MC-96 Entry

Control of Brokers 126 MCC 476 (1977), which loosened

entry restrictions on brokers.

Over the course of the past decade countless intermediaries

have entered the marketplace. The Transportation Inter-

mediaries Association, for instance, was nonexistent until

1996, and now boasts over eight hundred active members. In

1980, Congress repealed the prohibition against motor

carriers holding dual authority as both carriers and brokers. It

is now not only common for freight to be brokered, it is

downright common for freight to be rebrokered from entity to

entity until a suitable empty truck can be found in the vicinity

of the freight heading in the same direction in which the

freight is bound.

IV. THESE PUBLIC POLICY GOALS WILL BE

SEVERELY UNDERMINED IF THE LOWER

COURT?’S RULING IS AFFIRMED

Small truckers, who comprise an ever larger segment of the

trucking market are required by law only to carry cargo

insurance of $10,000 per occurrence. 49 C.F.R. 387.303(c).

8

This is consistent with the economic reality that ninety

percent (90%) of all freight that moves is worth less than $10

a pound. U.S. Department of Transportation Cargo Liability

Study, August 1998, p.26.

These small truckers have been advised by this Court since

Kansas City Southern Railway v. Carl, 227 U.S. 639 (1912),

that they can avail themselves of whatever limitation of

liability has been agreed to by an earlier, upstream carrier.

They have also been advised by this Court since Great

Northern Railway v. O'Connor, 232 U.S. 508 (1914), that

whatever limitation of liability is negotiated by an inter-

mediary is binding on the shipper. The Eleventh Circuit has

deviated from these lines of precedent which form the legal

pillar upon which carriers have always relied.

Asking truckers to accept any type of cargo without

availing themselves of the limitations of liability in place for

the prior carrier would essentially ask them to purchase a pig

in a poke. The freight on board could be anything from

abacuses to zippers, and without the prior limitations on

liability truckers would have to carry over $1,500,000 in

insurance coverage to protect themselves against catastrophic

losses like that here. No small transportation company has

that kind of coverage, in no small measure because they are

mindful of, and rely upon, the ocean carriers’ $500 per

package limitation of liability. If this Court affirms the

decision below, local draymen, regional carriers, and other

small truckers integral in completing the last leg of most

import transportation would simply refuse to carry freight,

and inbound commerce would grind to a halt.

It is also neither plausible nor possible to expect shippers

and carriers to negotiate freight rates and insurance coverage

every time someone needs a truck, especially when the cargo

originates overseas and arrangements are made by a third

party. The nature of freight distribution depends heavily on

the flexibility provided by the vast range of carriers and types

9

of service. Just-in-time shipping and expedited distribution

services require the interchangeability of equipment and

companies to meet whatever the current need may be.

Expecting the parties to stop all shipping operations every

time a substitute carrier is used, or every time there is a

change in a distribution plan, runs counter to the trans-

portation policy and will have a devastating effect on the

supply chain.

The National Transportation Policy, first enacted in 1940

and now codified at 49 U.S.C. §13101(a)(2), seeks to en-

courage reasonable rates, efficiency, service to small towns,

profitability, and further seeks to promote inter-modalism.

The Eleventh Circuit’s view will only promote higher freight

rates and service shortages.

This- policy will be completely undermined if the lower

Court’s decision is affirmed. The pool of transportation

providers will be severely reduced, and the field will be

limited only to large carriers with high risk reserves or small

carriers cavalier enough to transport loads too valuable for

them to assure against loss.

CONCLUSION

Amicus Curiae respectfully request that the decision of the

11th circuit be reversed.

Respectfully submitted,

JAMES ATTRIDGE *

SCOPELITIS, GARVIN, LIGHT

& HANSON

601 Montgomery Street, Suite 325

San Francisco, CA 94111

* Counsel of Record (415) 986-2479

for Amicus Curiae