Amicus Curiae Brief — Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp.
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(>) aC FEB 19 2010
Nos.X08-4553 & 54
; t CLeAK
IN THE
Supreme Court of the United States
KAWASAKI KISEN KAISHA, LTD., et al.,
Petitioners,
-and-
UNION PaciFic RaiLroap Co.,
Petitioner,
v.
REGAL-BELOIT CORPORATION, et al.,
Respondents.
On Writs or CERTIORARI TO THE
Unrrepb States Court or APPEALS
FOR THE Nintu Circuit
BRIEF OF AMICI CURIAE TRANSPORTATION AND
LOGISTICS COUNCIL AND AMERICAN INSTITUTE
OF MARINE UNDERWRITERS, IN SUPPORT
OF THE RESPONDENTS
ope Davipb ‘IT. MALOoFr
Of Counsel: Counsel of Record rau
GEORGE Cart PEZOLD Tuomas M. EaGan _& uM
PEZOLD SMITH HIKSCHMANN — RANDIE P. PaTERNO NW
& SELvaccio, LLC Ma.oor Browne & EAGAN LLC oY
120 Main Street 411 Theodore Fremd Ave, Suite 190
Huntington, NY 11743 Rye, NY 10580
(631) 427-0100 (914) 921-1200
Counsel for Amici Curiae
228201 g
COUNSEL PRESS
(800) 274-3321) © (800) 359-6859
i
TABLE OF CONTENTS
TABLE OF AUTHORITIES .................
STATEMENT OF INTEREST OF AMICI
i ice uhgda-en kb pb4h00s sve cus en
I
For Decades the Carmack Amendment
Has Been a Vital and Effective Regulatory
Framework. Allowing Railroads to
End Run Its Venue Provisions for
Multimodal Losses Would Create a
Regulatory Vacuum, Serious
Disuniformity in Outcomes, Drastically
Increased Litigation Costs and Serious
Disincentives to Invest in Adequate
EY Sel cc edevedevnceueedekes
Il The Railroad Industry Itself Has
Repeatedly Insisted That Multimodal
Claims Are Subject to the Carmack
Amendment. They Are Thus Now
Equitably Estopped From “Bait and
Switching” American Manufacturers by
Arguing Precisely the Opposite ........
il
Contents
Page
III In Any Event, This Court Decided Long
Ago in Union Pacific v. Burke That
Carmack Applies to Inland Transport
Under a Multimodal Through Bill of
Lading Even Though a Separate Bill of
Lading Was Not Issued ................ 27
IV If the Existence of an Inland Bill of
Lading is the Critical Factor in
Determining the Applicable Law, This
Case is Not Ripe for Finally Resolving the
Issue of the Carmack Amendment’s
Applicability. The Railroads Concede that
if the Rail Carrier Issued an Inland Bill
of Lading the Carmack Amendment
Applies. No Discovery Has Been Taken
on that Issue. Thus, to Resolve This
Issue, This Court Must Remand the
Dine tinncesen wadercnGeens Feu ehédehe 29
V_ If the Transportation Industry Really
Wants Uniformity, for a De Minimus Cost
It Can Extend a Single Clause Already
Routinely Present in Multimodal Bills of
Lading to Cover the United States Trade
and Offer Shippers a Carmack Option .. 34
CONCLUSION ........... eT errr 39
i
TABLE OF AUTHORITIES
Page
Cases
Aacon Auto Transport, Inc. v. State Farm
Mutual Automobile Ins. Co., 537 F. 2d 648
EE, fre ines ak venue been kassaess 36
Altadis USA, Inc. v. Sea Star Line LLC,
458 F.3d 1288 (11" Cir. 2006) .............. 17, 31
American Road Service Co. v. Consolidated Rail
Corp., 348 F.3d 565 (6" Cir. 2003) ........... 31
Burke v. Union Pacific R.R. Co., 226 N.Y. 534
(N.Y. 1919), aff'd, 255 U.S. 317 (1921) ...... 28, 38
Burlington Northern and Santa Fe R.R. v.
Hyundai Merchant Marine Co., No. CV 96-
9123-MMM, 1999 WL 1122998 (C.D. Cal. 1999)
Lae CRRA E MAA eeCER AMER EATRE See eek heeee 26
Capitol Converting Equipment, Inc. v. LEP
Transport, Inc., 965 F.2d 391 (7 Cir. 1992) .. 31
Chaveriat v. Williams Pipe Line Company,
RE Hs Gee POET GM BUD vc cccccccccecccss 26-27
Galveston, H. & S.A. Ry. Co. v. Woodbury, 254
EE ciseidavcikvenduasaens eases 20, 21
Hampton v. Federal Express Corp., 917 F.2d
ST ED bp dos nesdbeesaeendasane 33
iv
Authorities
Page
Hart v. Pennsylvania R.R. Co., 112 U.S. 331
RES ee er er Te eee 33
Hartford Fire Ins. Co. v. Orient Overseas
Containers Lines, 230 F. 3d 549 (2d Cir. 2000)
Log ae ee whee eae cae 04 Ved Ee Se eee ees 4068s 37
Hughes v. United Van Lines, Inc. 829 F.2d 1407
PE cicledeuiséscceeesssouse ens 33
Industrial Maritime Carriers (Bahamas), Inc.
v. Siemens Westinghouse Power Corp., No. 02-
30856, 2003 WL 21196176 (5th Cir. 2003)
Spar hd bs i eer rere SP er ers ere 18
King Ocean Cent. Am., S.A. v. Precision Cutting
Serv., 717 So. 2d 507 (Fla. 1998) ............ 32
Mannesman Demag Corp. v. M/V Concert
Express, 225 F. 3d 587 (5" Cir. 2000) ........ 37
M/S Bremen (and Unterweser GmbH) v. Zapata
Off-Shore Co., 407 U.S. 1 (1972) ............ 9
New York, N.H. & H. R.R. Co. v. Nothnagle,
Se ED 6 Wav stwecesteveevsece 338, 34
Nippon Yusen Kaisha v. Burlington Northern
and Santa Fe R.R., 367 F. Supp. 2d 1292
ccc ss esi vas Sesea cee ayee ens 26
Vv
Authorities
Page
Norfolk Southern Ry. Co. v. Kirby, 543 U.S. 14
ED 6-606 Cerdedddssekveews ae 29, 30, 32
NYK Line v. Burlington Northern and Santa
Fe Ry. Co., 222 F. Supp. 2d 1176 (C.D. Cal 2002)
s cvedeveeseesceeuuceddecsseueeneeeene 26
Quasar Company v. Atchicson, Topeka and
Santa Fe Ry. Co., 632 F. Supp. 1106 (N.D. III.
BE ‘Seceadccaveseyesesudssunseaeeeeeee 21
Regal-Beloit Corp. v. Kawasaki Kisen Kaisha
Ltd., 557 F. 3d 985 (9th Cir. 2009) ........... 30
Reider v. Thompson, 339 U.S. 1138 (1950) ..... 28, 29
Scope Imports, Inc. v. Interstate Commerce
Commission, 688 F. 2d 992 (5 Cir. 1982) .... 30
Shao v. Link Cargo (Taiwan) Ltd., Inc., 986 F.2d
VPS ED cv oconccececeyevévebeeirs 31
Sompo Japan Ins. Co. of America v. Union Pac.
R.R. Co., No. 09 Civ. 1604, 2007 WL 2230091
(S.D.N.Y. 2007), aff’d 341 Fed. Appx. 707 (2d
Cir. 2009), petition for cert. filed, (U.S. Jan. 4,
PONE EUTD sect ccusccctsebeeudsdanarees 30-31
Sompo Japan Ins. Co. of America v. Union
Pacific R.R. Co., 456 F.3d 54 (2d Cir. 2006)
sestvewevenedsncebcneeenekeeeee eee passim
vi
Authorities
Page
State of New Hampshire v. State of Maine,
EE cc. ccccceevesccoeducee 26, 27
Swift Textiles, Inc. v. Watkins Motor Lines, Inc.,
- Je | fe 2 | 32
Union Pacific R.R. Co. v. Burke, 255 U.S. 317
ccc ecaeeseudeunetess 7, 27, 28, 29
Vimar Seguros y Reaseguros, S.A. v. M/V Sky
Reefer, 515 U.S. 528 (1995) ............000- 13, 15
Statutes and Regulations
De ee ands dn beh eneseseese 10
oe e sek anseeneas 20-21
en odes nesses veuees 6, 8
es eine ee edneeet se 6, 8, 13
ICC Rules and Regulations, 49 C.F.R. $§ 1039,
ee cece sue beeseseeees 21
U.S. Carriage of Goods By Sea Act (““COGSA’”),
ch. 229, 49 Stat. 1207 (1936), Pub. L. No. 109-
304, 120 Stat. 1485, reprinted in note following
ccc cenebeksénesdens 6, 11
vil
Authorities
Other Authorities
Alphaliner - Top 100 Operated Fleets as per 1
February 2010, at http://www.axs-alphaliner.
com/top100/index.php .....................
WILLIAM J. AUGELLO, TRANSPORTATION LOGISTICS
AND THE Law 31 (1* ed., Transportation
Consumer Protection Council, Inc. 2001)
Mary Helen Carlson, U.S. Participation in the
International Unification of Private Law:
The Making of the UNCITRAL Draft
Carriage of Goods by Sea Convention, 31
TUL. MAR. L.J. 615 (Summer 2007) ........
Comments on Behalf of the Association of
American Railroads, docket no. MARAD-
2001-11135-12 (Maritime Admin., Dep’t of
Transp., filed Sept. 13, 2002) ...............
Convention on Contracts for the International
Carriage of Goods Wholly or Partly by Sea
(the Rotterdam Rules), G.A. Res. 63/122,
Annex, U.N. Doe. A/RES/63/122 (Dec. 11,
ST cciusiccdenwenaeed aneaweeuene chase
Convention for the Unification of Certain Rules
for International Carriage by Air (1999) ....
Page
vill
Authorities
Page
Convention on the Contract for the International
Carriage of Goods by Road (CMR), May 19,
SL GE TED nko kc ccteccocscccees 35
Drawing up of a New Convention on the
Carriage of Goods by Sea and Extending This
Convention to Door-to-Door Transport
Operations (Comments on Behalf of the 1RU)
in UNCITRAL, Compilation of Replies to a
Questionnaire, U.N. Doe. A/CN.9/WG.ITI/
ED binds decescocescceseess 23
R. Force AND M. DAVIES, JURISDICTION AND
FORUM SELECTIONS IN INTERNATIONAL MARITIME
Law 11 (Kluwer Law Int’! 2005) ............ 16
Chester D. Hooper, Forum Selection and
Arbitration in the Draft Convention on
Contracts for the International Carriage of
Goods Wholly or Partly by Sea, or The
Definition of Fora Conveniens Set Forth in
the Rotterdam Rules, 44 TEX. INT’L L.J. 417
a 4ensnscndensousustieurceddensouete 16
Interstate Commerce Commission, 46 Fed. Reg.
eee aeeseeeneee 20
ix
Authorities
Kawasaki Kisen Kaisha, Ltd. Combined
Transport: Bill of Lading Terms Export -
Front, “K” Line America, Inc., available at
http://www.kline.com/KAMBL _ Terms
BL_Terms_Export_Front_Clauses.asp......
Master Intermodal Transportation Agreement
(MITA), Union Pacific Exempt Circular MITA
2-A, available at http://www.uprr.com/
customers/intermodal/mita.shtml ...........
Paul Keane, US Law -COGSA Limitations and
Intermodal Transport, 192 Garp News 22
nck iheeuiveeeusnuenenhune sudkue acess
Oligopoly Watch, Jndustry brief: US railroads
(Nov. 1, 2003), at www.oligopolywatch.com/
i a6 Checeisdaywaleel kensennes
JUDGE RICHARD PosNER, ECONOMIC ANALYSIS OF
THE Law (3rd ed., Little Browne 1986) ......
Proposals by the International Road Transport
Union (IRU), U.N. Doe. A/CN.9/WG.III/
I Bs IED gg ccc cécsssvvtecesese
Rail Carriers Cargo Liability Study, Ex Parte No.
403 (1.C.C. Oct. 9, 1981), reprinted in WILLIAM
AUGELLO AND GEORGE PEZOLD, FREIGHT CLAIMS
IN PLAIN ENGLISH, Vol. 11, App. 90, p. B-150-
ee ee os eeu eeu caeeceessee
Page
x
Authorities
Research and Innovative Technology
Administration: Bureau of Transportation
Statistics, Table 1-52: Freight Activity in
the United States: 1993, 1997, and 2002,
available at www.bts.gov/publications/
national transportation _‘statistics/html]/
4 8 err rrrrrrrrr re Tr rrr
SBA, Office of Advocacy, Frequently Asked
Questions, available at http://www.sba.gov/
EEE occ cadecacsccesuntnvees
Michael F. Sturley, Maritime Cases About Train
Wrecks: Applying Maritime Law to the
Inland Damage of Ocean Cargo, 40 J. Mar.
i ED Sc vekseesetsenvesenesee
SuRFACE TRANSP. Boarp, CLass 1 RAILROAD
ANNUAL Report, available at http://
www.stb.dot.gov/stb/industry/econ_
SEE Ab Sd ce.cedbedreteneenseveteses
Transit Loss Prevention & Security
Association Motor Carrier Survey (2005),
In TRANSIT, Spring 2006 ...................
W. TerLey, Marine Carco Cuiaims (4" ed. 2008) ...
U.S. Census Bureau, Profile of U.S. Exporting
Companies (Apr. 9, 2009), available at http://
www.census.gov/foreign-trade/Press-Release/
IEMA ik, SiN SRP ENR chee
Page
xi
Authorities
Page
U.S. Dep’t or Lasor, Orrice or Disability
EMPLOYMENT PoLicy, SMALL BUSINESS IN
AMERICA, available at http://www.dol.gov/
odep/pubs/ek00/small.htm ................. 3
U.S. Dep’t Or Transp., Carco LiaBILiry StuDy
(1998), available at http://ntl.bts.gov/lib/
22000/22900/22922/cargolivab.pdf ......... 10, 12
]
STATEMENT OF INTEREST OF AMICI CURIAE'
The Transportation & Logistics Council, Inc. is a
not-for profit organization of some 350 companies that
are principally manufacturers, shippers and receivers
of freight nationwide. See www.tleouncil.org. The
Council’s members are transportation and logistics
professionals who are responsible for the shipping,
receiving and distribution needs of their companies.
Among the various functions these transportation
professionals are responsible for are administration of
claims for loss, damage and delay, freight charge
auditing and payment, cargo insurance, carrier
selection, and the negotiation of transportation
agreements with motor, rail, air and ocean carriers.
The American Institute of Marine Underwriters
(AIMU), a non-profit association, represents 36 United
States marine insurance companies which underwrite
approximately 90 percent of the marine risks insured in
this country. AIMU thus serves as an advocate,
source of information and center for education.
See www.AIMU.org. In 2008, AIMU’s members
underwrote marine insurance policies with collective
premiums of more than $2.6 billion. The insured value
of the goods and vessels insured under their policies
total hundreds of billions of dollars. More than a third
-_—
' Both Petitioners and the Respondents have filed blanket
consents to the filing of amici briefs. No counsel for a party
authored this brief in whole or in part, and no such counsel or
party made a monetary contribution intended to fund the
preparation or submission of this brief. No person other than
amici curiae, their members, or their counsel made a monetary
contribution to its preparation or submission.
2
of those insured values represent cargo shipped in
United States foreign trade, including through
multimodal shipments such as the one involved in this
case. AIMU, on behalf of its members, works in
cooperation with the United States Government and
international bodies to improve the legal environment
for international trade (such as in connection with the
recently-signed Convention on Contracts for the
International Carriage of Goods Wholly or Partiy by Sea-
“The Rotterdam Rules”).
INTRODUCTION
Shippers come in all shapes and sizes
A shipper could be a small start-up company
designing ultra-efficient batteries for electric cars. A
shipper could be an artist, right out of school, who is
selling her first sculpture. A shipper could be an
executive, retiring to the south of France, transporting
his most precious personal heirlooms. A shipper could
be a giant like Wal-Mart, though in most cases, shippers
are not massive enterprises. Statistically, 97.38% of all
American exporters are small businesses (defined as
having fewer than 500 employees).’
At some point, for every shipper, and for every
importer, there will be a shipment that goes astray. If
the value is small, and there is no compensation, it will
be a bad day. If the value is large, and there is no
compensation, it could mean bankruptcy.
“ SBA, Office of Advocacy, Frequently Asked Questions,
available at http://www.sba.gov/advo/stats/sbfaq.pdf.
3
This Court’s decision in the pending matter will thus
have a significant impact on the rights and obligations
of nearly every shipper and importer in America.
The one thing that everyone agrees upon is that
shippers, particularly America’s 17 million small
businesses, accounting for 51 percent of our nation’s
sales,® cannot adequately defend their interests in
negotiations with carriers absent a regulatory
framework. That is why virtually every major country
in the world has enacted some legal framework for
negotiations concerning ocean, trucking, or rail
shipments. That is why the Carmack Amendment was
enacted in 1906, and that is why the Carriage of Goods
by Sea Act was enacted in 1936. Even today, the United
States government concedes that:
...acertain inequality of bargaining power
between the shipper and the carrier is
assumed to exist.‘
The government made that statement in the context of
the international ocean liner industry, wherein, as
discussed infra, 20 companies control 80% of the market
share.
° U.S. Dep’t oF Lapor, OFrFice oF DISABILITY EMPLOYMENT
Po.icy, SMALL BUSINESS IN AMERICA, available at http://
www.dol.gov/odep/pubs/ek00/small.htm.
* Mary Helen Carlson, U.S. Participation in the
International Unification of Private Law: The Making of the
UNCITRAL Draft Carriage of Goods by Sea Convention, 31
TUL. MAR. L.J. 615, 625 (Summer 2007).
4
The railroad industry is such that four mega-
railroads® account for 95% of the industry’s traffic.
WILLIAM J. AUGELLO, TRANSPORTATION LoGisTICS AND THE
Law 31 (1* ed., Transportation Consumer Protection
Council, Ine. 2001). For America’s 17 million small
businesses to fairly and effectively negotiate with them,
absent some regulatory framework, is simply impossible.
Indeed, these four mega-railroads, which operate under
anti-trust immunity, under subchapter IV of Title 49,
control over 107,500 miles of railroad track in this
country. As to be expected, their dominance has been
enormously profitable for them, with multi-billion dollar
profits for the first 9 months of 2009.* See Oligopoly
Watch, Industry brief: US railroads (Nov. 1, 2003), at
www.oligopolywatch.com/2003/11/01.html. It is a matter
of public knowledge that the net result of having such
few railroads control the vast majority of the industry’s
business is that a virtual monopoly exists in each region
of the country, providing shippers with a single option
for transporting their goods by rail in a given region.’
®° These four railroads are the Petitioner Union Pacific, as
well as Burlington Northern Santa Fe (“BNSF”), CSX
Corporation and Norfolk Southern. WILLIAM J. AUGELLO,
TRANSPORTATION LoGistTics AND THE Law 31 n.50 (1" ed.,
Transportation Consumer Protection Council, Inc. 2001).
6 Surrace Transp. Boarp, CLass 1 RAILROAD ANNUAL REPoRT,
available at http://www.stb.dot.gov/stb/industry/econ_
reports. html.
7 Union Pacific and BNSF dominate the West, and CSX
and Norfolk Southern dominate the East. See Oligopoly Watch,
Industry brief: US railroads (Nov. 1, 2003), at www.oligopoly
watch.com/2003/11/01.html.
5
Any argument that an individual shipper or a smal]
business has either the means or the economic clout to
rewrite a Chinese jurisdiction clause in a preprinted
form bill of lading or to insist that Union Pacific offer it
a full liability option to carry its goods is just as
preposterous as arguing that a consumer renting a car
can effectively rewrite a car rental contract. In the real
world it simply does not happen unless a consumer
friendly framework exists in the form of the Carmack
Amendment’s protective structure, which does not
insure a particular outcome in terms of the venue and
liability options being offered, but does require a fair
process and at least some choices.
Put simply, this case is about giving effect to
Congress’ intent that the U.S. Railroads operate within
a regulatory framework which requires them to offer
reasonable jurisdictional and liability contract options
— not outcomes - to rail shippers of goods as a condition
of possessing such extraordinary regional monopolies.
The alternative would be to create a regulatory vacuum,
allowing Railroads to end run the Carmack Amendment’s
liability and venue provisions, thereby creating serious
disuniformity in outcomes, drastically increased litigation
costs for American businesses, and serious disincentives
for carriers to adequately invest in caring for cargo.*
* An example of the type of clauses which railroads
unilaterally insert in their tariffs can be found in Union Pacific’s
own MITA which provides, inter alia, that it is not liable
for damage unless the container is opened and “visibly
checked” at the U.S. port of entry (a virtual impossibility)
(310-C (¢) (9)); that it is not liable unless “clear and convincing”
evidence is presented (which completely reverses Carmack’s
(Cont'd)
6
SUMMARY OF ARGUMENT
1. As a matter of public policy, keeping cargo cases
in the United States promotes certainty in settling such
claims. Only a tiny fraction of cargo claims are sent to
lawyers to handle or result in litigation. For many
decades, the vast majority of such claims have been
promptly and amicably resolved by U.S.-based cargo
claims adjusters due to the familiar liability and time-
bar schemes imposed by Carmack and COGSA. The
Carmack Amendment (“Carmack”) has covered liability
of railroads since 1906 (and of motor carriers since 1935).
The statute is presently codified at 49 U.S.C. §11706
(rail) and §14706 (trucking). The U.S. Carriage of Goods
By Sea Act (“COGSA”) covering ocean carriers was
enacted in 1936. 46 U.S.C. § 30701 (Notes).
Each of these longstanding statutes has a unique
liability scheme which is very familiar to the claims
people in the cargo industry (and their counterparts on
the carrier side). COGSA always provides at least one
year to file a lawsuit; Carmack always provides at least
two years. This certainty provides a window of time in
which to pursue amicable settlement without resort to
lawyers and the courts. Reversal of the decision below,
however, endangers this well-settled scheme and creates
a “no man’s land” of unregulated cargo movements
(Cont'd)
presumptions) (310-C (c) (9)); that only its customer or assignee
(i.e. the multimodal bill of lading issuer) can make claim
(attempting to prevent any claims by the actual cargo owner)
(310-C (E)). Master Intermodal Transportation Agreement
(MITA), Union Pacific Exempt Circular MITA 2-A, available
at http://www.uprr.com/customers/intermodal/mita.shtml.
7
which will almost certainly result in rail carriers
asserting (i) foreign jurisdiction clauses as well as (ii)
one, two or three month time bars in bills of lading. Thus,
rather than the amicable and fair out-of-court
settlements promoted by the current framework,
reversal of the case below would result in the following:
where every meaningful party is American-based, the
loss occurs in the United States, and all of the evidence
is located in the United States, multimodal cargo claims
will nonetheless have to be sent to and resolved by
foreign lawyers in a myriad of foreign courts, wherein
access to witnesses and evidence will be cost-prohibitive,
if accessible at all, and justice will rarely be achieved.
See infra Point I.
2. Solemn representations of the state of the law
were previously propounded by the Association of
American Railroads (which includes Union Pacific among
its largest members) and by an individual railroad—to
a United Nations Committee and in numerous
litigations—that the Carmack Amendment did indeed
regulate the U.S. leg of all multimodal movements,
resulting in these movements being excluded from a
proposed new landmark international cargo treaty
known as “The Rotterdam Rules.” See infra Point IT.
3. Industry long ago accepted that, as a matter of
law, Carmack applies to the U.S. ground transportation
leg of an multimodal shipment regardless of whether a
separate inland bill of lading is issued. In fact, this Court
has already ruled in Union Pacific R.R. Co. v. Burke,
255 U.S. 317 (1921) that Carmack does apply in such
circumstances. See infra Point III.
8
4. In any event, if not affirmed, under the proper
test this matter must be remanded to the District Court
to determine the jurisdictional and liability terms of the
railroad’s domestic waybill. See infra Point IV.
5. True uniformity can be accomplished, at virtually
no cost, while preserving international and true
substantive uniformity, if the transportation industry
modifies a single clause already present in most
multimodal bills of lading to incorporate and offer a
Carmack Amendment option to shippers. See infra
Point V.
ARGUMENT
I
For Decades the Carmack Amendment Has Been a
Vital and Effective Regulatory Framework. Allowing
Railroads to End Run Its Venue Provisions for
Multimodal Losses Would Create a Regulatory
Vacuum, Serious Disuniformity in Outcomes,
Drastically Increased Litigation Costs and Serious
Disincentives to Invest in Adequate Care for Cargo
Requiring a separate inland bill of lading for the
Carmack Amendment’ to apply to claims against inland
rail carriers” violates the vital public policy of promoting
—--
® Now codified at 49 U.S.C. § 11706 (for rail carriers) and
49 U.S.C. § 14706 (for motor carriers).
” Amici curaie do not address the liability of Petitioner
Kawasaki Kisen Kaisha Ltd. (“K-Line”). Rather, they rely upon
the points asserted in Respondents’ brief on this issue and
respectfully refer the Court to that brief.
9
certainty in settlements of cargo claims outside of Court.
Indeed, requiring an Oklahoma train derailment to be
litigated in a foreign jurisdiction such as Japan, where
no witnesses exist (and no depositions are permitted) is
in itself so “seriously inconvenient” that it violates the
fundamental fairness principles laid down in M/S
Bremen (and Unterweser GmbH) v. Zapata Off-Shore
Co., 407 U.S. 1, 16 (1972). The Bremen test mandates
that enforcement of such a clause against a Plaintiff can
not be “so gravely difficult and inconvenient that he will
for all practical purposes be deprived of his day in court.”
Id. at 18. Requiring American manufacturers, importers
and shippers to sue inland railroads for minor claims in
far flung jurisdictions clearly violates the principle set
forth in Bremen. Indeed, as correctly pointed out by
Petitioners, with over 100 separate ocean carriers
utilizing the Port of Long Beach alone, each one having
its own jurisdiction clause, and given that a single train
derailment can easily involve dozens of containers, if the
decision below is reversed, it would become the norm
for cargo losses in separate containers from one accident
to wind up being litigated in a score of different
countries, with each American witness involved in turn
spending months shuttling from country to country, the
most inefficient possible result.
Over $8 trillion of goods are shipped in the U.S. each
year. See Research and Innovative Technology
Administration: Bureau of Transportation Statistics,
Table 1-52: Freight Activity in the United States:
1993, 1997, and 2002, available at www.bts.gov/
publications/national transportation_statistics/html/
table_01 52.html. Over $1 trillion are multimodal
shipments. /d. Only about .63% of shipments result in a
10
loss or shortage claim. Transit Loss Prevention &
Security Association Motor Carrier Survey (2005), IN
TRANSIT, Spring 2006. For most of these shipments, there
is no insurance. U.S. Dep’t Or TRANsP., CARGO LIABILITY
Stupy 4 4.1.4, p. 22 (1998), available at http://ntl.bts.gov/
lib/22000/22900/22922/cargolivab. pdf.
The vast majority of cargo claims are resolved
promptly, without litigation. One study found that 97%
of cargo claims are resolved within 120 days of filing of
the claim. Transit Loss Prevention & Security
Association Motor Carrier Survey (2005), In TRANSIT,
Spring 2006. By one estimate less than one quarter of
one percent (.25%) of all cargo claims result in litigation.
Rail Carriers Cargo Liability Study, Ex Parte No. 403
(1.C.C. Oct. 9, 1981), reprinted in WILLIAM AUGELLO AND
GEORGE PEZOLD, FREIGHT CLAIMS IN PLAIN ENGLISH (3°?
ed. 1995) Vol II, App. 90, p. B-150-151 (also noting that
“there is no current problem involving needless [rail]
litigation” and “the prevailing reason that claimants
commence court action is the inability to secure needed
information from the [rail] carrier”). Experienced claims
adjusters know that a large portion of these claims are
under $1,000 and it is nearly certain that the vast
majority are under $10,000."
Why is there such a remarkable rate of resolution
of these small claims without resort to the courts? Most
claims are resolved between the claims departments of
cargo underwriters and claims advisors working for
' Claims under $10,000 are generally subject to the
Carmack Amendment but are not subject to jurisdiction in
federal court pursuant to 28 U.S.C. § 1337(a).
1]
carriers (or their insurers) without either side ever
hiring attorneys. These claims personnel are very
familiar with the fundamental outlines of the three
mandatory liability schemes adopted by Congress:
Carmack:
(for inland losses)
COGSA:"
(ocean losses)
Montreal
Convention:
(air losses)
Minimum 9 month to
claim/2 years from claim
declination to sue; specific
venue in U.S.; limitation of
liability if agreed to
byshipper; only common
law defenses available to
carriers.
1 year to sue; $500 per
package limit (unless
deviation); various
defenses (including due
diligence); venue not
specified, foreign
jurisdiction clauses can be
upheld.
2 years to sue; 17 SDR
(presently about US
$26.00) per kilo limit of
liability; limited defenses;
specific venue choices
'? Previously codified at 46 U.S.C. app. § 1300-15; now located
in 46 U.S.C. § 30701 (Notes).
'S Convention for the Unification of Certain Rules for
International Carriage by Air (1999).
12
(including for United
States imports, suit in the
United States).
Thus, when a claim lands on their desk, these claims
professionals immediately know the ground rules for
resolution. They also know that for ocean claims they
have at least one year and for inland claims two years
before they need to contact a lawyer. That is, they knew
up until now. Reversal of the decision below will cast a
pall of uncertainty over this currently reliable and
effective framework by making the resolution of claims
wholly dependent on arbitrary time to sue terms
(perhaps even one or two months) and obscure and
inconvenient forums unilaterally designated by ocean
carriers in pre-printed multimodal bill of lading forms.
In addition, whether a separate inland bill of lading is
issued is, as a practical matter, likewise entirely out of
the control of most (especially small) shippers.
As the U.S. Department of Transportation itself
found in rejecting calls for a change of Carmack’s 2 year
time to sue:
Consideration of efficiency and international
harmony, as well as the ease of keeping the
familiar time limitation, are arguments in favor
of continuing the existing time limits. There
are no strong arguments for changing the
time limits.
U.S. Dep’t Or Transp., Carco LIABILITY Stupy 4 5.1.6
(1998), available at http://ntl.bts.gov/lib/22000/22900/
22922/cargolivab.pdf (emphasis added).
13
Reversal of the holding of the Court below would
immediately mean that Carmack’s minimum 2 years to
sue does not necessarily apply to interstate multimodal
shipments originating from outside the U.S. and would
destroy that uniformity and certainty. This, despite the
fact that Congressional intent could not have been
clearer in the Carmack Amendment that a carrier
cannot lessen the two year time to sue:
A carrier may not provide by rule, contract,
or otherwise, a period of less than’9 months
for filing a claim against it under this section
and a period of less than 2 years for bringing
a civil action against it under this section.
49 U.S.C. § 14706(e)(1).
As a result of this Court’s legal sea change in Vimar
Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S.
528 (1995), most multimodal bills of lading today covering
shipments to and from the United States contain foreign
jurisdiction clauses. This is not surprising given that
there are no large U.S. ocean carriers remaining, and
the vast majority of ships that service our ports today
are foreign-owned.’ And yet, even in the fifteen years
'* In 2010, the twenty largest ocean carriers by container
volume were identified as follows.* Within particular routes,
the choices of carriers are of course considerably narrower.
Rank | Operator ' MarketShare |
l APM-Maersk (Denmark)| 14.9%
2 Mediterranean Shg Co |
(Switzerland) H 11.1%
j
(Cont'd)
14
(Cont'd)
3 CMA CGM Group
(France) 7.7%
4 Evergreen Line
(Taiwan) 4.0%
5 APL (Singapore) 3.9%
6 Hapag-Lloyd
(Germany) 3.5%
7 COSCO Container L.
(China) 3.3%
CSCL (China) 3.2%
Hanjin Shipping
(Korea) 3.1%
10 NYK (Japan) 3.0%
11 CSAV Group (Chile) 2.6%
12 OOCL (Hong Kong) 2.5%
13 MOL (Japan) 2.5%
14 K Line (Japan) 2.4%
15 Hamburg Sad Group
(Germany) 2.3%
16 Zim (Israel) 2.3%
17 Yang Ming Line (Taiwan) | 2.2%
18 Hyundai M.M. (Korea) 2.1%
19 UASC (Middle East) 1.5%
20 PIL (Pacific Int. Line)
(Singapore) 1.4%
* Alphaliner - Top 100 Operated Fleets as per 1 February 2010,
at http://www.axs-alphaliner.com/top100/index.php.
15
subsequent to the Sky Reefer decision, among the scores
of reported federal cargo cases filed annually under
multimodal bills of lading against railroads and truckers,
no one in the various amicus briefs filed herein has cited
to a single case against an inland U.S. trucker or
railroad that was actually pursued in a foreign forum.
Nor has anyone cited a prior case where an inland
carrier moved to dismiss based upon a foreign forum
selection clause. The explanation is simple: American
manufacturers, shippers and inland carriers have long
operated on the premise that the Carmack Amendment
(including its forum selection provisions) controls
interstate inland movements, even under multimodal
bills of lading. In fact, that very position has been taken
in prior litigation by a rail carrier. See cases cited under
Point II, infra.
Should this Court now permit these multimodal bills
of lading/contracts of adhesion to apply foreign
jurisdiction clauses to U.S.-based railroads and truckers,
the practical result will be to bar justice for thousands
of cargo claimants, as has in fact indisputably been the
result of the Sky Reefer decision. One study on the
subject concluded that when such forum selection
clauses exist, only 11.8% of U.S.-based maritime cases,
which were originally pursued here, are ever pursued
in a foreign forum:
Overall, the responses to our survey show
overwhelmingly that it is unrealistic to
assume that the plaintiff’s claim will be
pursued in the foreign forum if it is dismissed
or stayed from the US court. In only four of
the 34 cases about which we received
16
responses (or 11.8%) were any steps taken to
bring the case before the chosen foreign
forum. In one of those four cases, the case was
settled ‘soon after’ proceedings had been
instituted in the foreign forum; in another, the
claim was held by the foreign forum to be time-
barred. Thus, only two of the 34 cases (or
5.9%) proceeded to resolution in the forum
designated in the forum selection clause. The
large majority of cases (24 out of the 34, or
70.6%) settled or were discontinued after
dismissal in the United States, and when there
was a settlement, it was almost always
settlement at a discount. In half of the cases
(17 of the 34 cases, or 50%), we know that no
steps were taken to bring the case before the
chosen foreign forum; that may also be true
in other cases about which we received no
response to questions 6 or 7.
R. Force anp M. Davies, JURISDICTION AND ForuM
SELECTIONS IN INTERNATIONAL MARITIME LAw 11 (Kluwer
Law Int’l 2005).
This result, that presumably valid cargo claims are
simply disappearing, is in fact admitted by amicus
curiae counsel for the P&I Clubs."® By extension, such
an extreme rate of deferral in the prosecution of
‘*° Chester D. Hooper, Forum Selection and Arbitration in
the Draft Convention on Contracts for the International
Carriage of Goods Wholly or Partly by Sea, or The Definition of
Fora Conveniens Set Forth in the Rotterdam Rules, 44 TEX.
INT'L L.J. 417, 423-25 (2009).
17
meritorious claims permits foreign carriers to be less
careful and to take fewer precautions in caring for U.S.
cargoes. Those who damage cargo now routinely get a
free ride.
Thus, if the lower Court’s decision is reversed,
earriers like China Ocean Shipping Company
(“COSCO”), for example, that are already legally
permitted to force small U.S. importers of goods to sue
in China to collect on a $10,000 claim—in itself a
gargantuan hurdle rarely jumped—would be in a
position to contractually require that such a lawsuit,
whether brought against them directly or their U.S.
inland carriers, be filed, and service completed, in China
within a matter of months. Should a time limit of even
one year to sue and serve (as was upheld in Altadis USA,
Inc. v. Sea Star Line LLC, 458 F.3d 1288, 1290 (11" Cir.
2006)) appear in the bill of lading, since service in China
easily takes 6-8 months,”* the process would have to start
long before most cargo insurers have had time to review
and investigate the underlying claim and prepare it for
subrogation. The net result of reversing the lower
Court’s ruling would thus be to routinely exonerate
foreign carriers like COSCO, and their sub-contractors,
from ever having to pay for their negligence. The result?
Again, fewer precautions taken and even more negligent
conduct with respect to cargoes delivered in the United
States.
In contrast, the whole purpose of the 2 year
minimum time to sue in Carmack is to give the parties
'© Information provided by APS International Ltd. based
in Minneapolis, Minnesota, a leading provider of service of
process abroad.
18
(and their insurers) sufficient time to investigate and
resolve difficult claims without resort to lawyers. If the
lower court decision is reversed, parties will have no
choice even for small, routine claims but to immediately
get on a plane, retain foreign counsel, rush into a foreign
court, and hire a foreign process server, thereby
effectively adding a one-direction foreign litigation “tax”
on American manufacturers.
Ultimately, there are several reasons why allowing
the railroad industry to end run the Carmack
Amendment could be disastrous for shippers.
First, the structure of the shipping industry is such
that alternative freight costs charged by carriers if a
value is declared are often prohibitively high.'” As seen
above, just 20 liner service companies control 80% of
the world container trade; in contrast, in 2006 the U.S.
alone had, as noted above, 17 million small businesses
and roughly 248,000 export shippers.'* For specific
routes, the number of carriers are very modest indeed,
and with economic retrenchment on the horizon, the
numbers will almost certainly get smaller.
Second, it is well known that under the present limits
of liability selected shippers (particularly those with
See, e.g., Industrial Maritime Carriers (Bahamas), Inc.
v. Siemens Westinghouse Power Corp., No. 02-30856, 2003 WL
21196176, at *1-3 (5th Cir. 2003) (upholding an ad valorem rate
of 6% cargo value as reasonable and not a denial of fair
opportunity).
'® U.S. Census Bureau, Profile of U.S. Exporting Companies
(Apr. 9, 2009), avazlable at http://www.census.gov/foreign-trade/
Press-Release/edb/2007.
19
larger resources) purchase their own cargo insurance.
This is prudent behavior and to insure one’s belongings
has long been recognized as a social good. However, a
classic agent-principal or third-party payment dilemma
then comes into play, wherein shippers are in actuality
negotiating on the part of the third-parties. By the time
the principals, the cargo underwriters, see the claims —
usually years later —- such shipper employees may no
longer be in a position to be held accountable for their
actions. While such a course of conduct should (in theory,
and assuming perfect competition) ultimately reach an
equilibrium when cargo underwriters adjust their
premiums upward to account for the increased
exposures, in the meantime, significant societal losses
have already been incurred.
Finally, by deregulating railroads and allowing
de minimus low liability limits (with no choice of
Carmack terms) public policy itself is frustrated. Such
low liability limits have the unfortunate consequence of
stripping incentive for carriers to perform diligently.’
‘8 This situation is known as “underdeterrence.” As
explained by Judge Richard Posner in his classic text ECONOMIC
Ana ysis Or Tue Law (3rd ed., Little Browne 1986) at pp. 186-
187:
To permit the defendant to set up my insurance
policy as a bar to the action would result in
underdeterrence. The economic cost of the accident,
however defrayed, is $10,000, and if the judgment
against him is zero, his incentive to spend up to
$10,000 (discounted by the probability of
occurrence) to prevent a similar accident in the
future will be reduced.
** kt
(Cont'd)
20
Having cargo insurers pay for foreign or railroad carrier
negligence accomplishes nothing more than to shift the
burden of bearing the costs of a carrier’s lack of care,
caused by underdeterrence, to the manufacturers or
buyers of goods. Though cargo insurers would initially
foot the bill for such shortcomings, U.S. consumers will
ultimately suffer the harm in the form of increased costs
resulting from volume contracts which have no liability
floor. As the world’s largest nation of importers, this,
over time, will seriously impact American business.
It is important to keep in mind as set forth in the
Second Circuit’s detailed analysis in Sompo Japan
Insurance Company of America v. Union Pacific
Railroad Company, 456 F.3d 54, 68 (2d Cir. 2006), that
this Court’s decision in “Woodbury [254 U.S. 357 (1920)]
and the Act of February 28, 1920 (ratifying the
Woodbury interpretation) clearly establishes that the
ICC’s jurisdiction includes transportation from a
foreign country to the United States.” The plain
language in the present Carmack Amendment confirms
that the statute covers the inland portion of the
transportation at issue (as discussed in detail in Point I
of Respondents’ Brief).
The ICC itself, in its Exempt Order 390, 46 Fed. Reg.
14348, 14348-14351 (Feb. 27, 1981), explained that 49
(Cont'd)
If compensation is the only purpose of the
negligence system, it is a poor system, being both
costly and incomplete. Its economic function,
however, is not compensation but the deterrence of
inefficient accidents.
21
U.S.C. § 10502(e), the Staggers Amendment, applied to
trailer on flatear/containers on flatear (TOFC/COFC)
shipments. 49 C.F.R. §§ 1039, 1090, 1300 (1981). As COF'C
shipments refer to the rail carriage of ocean containers
and TOFC refer to the rail carriage of motor carrier
trailers, the Commission thus effectively mandated that
the Carmack Amendment governs the entire U.S.
domestic transportation industry for inland U.S.
carriage. See also Quasar Company v. Atchicson,
Topeka and Santa Fe Ry. Co., 632 F. Supp. 1106, 1109-
1110 (N.D. Ill. 1986).
Hence, even in the face of some ambiguous lower
court decisions suggesting the need for a separate
inland bill of lading,” in view of the Woodbury decision,
the plain language of Carmack, the ICC Exempt Order,
and the fact that rail waybills are issued for virtually all
rail carriages (as discussed infra Point IV), the
transportation industry has operated and acted for
decades on the premise that U.S. inland movements of
multimodal] shipments are covered by Carmack.
* See cases cited at Respondents’ Brief, p. 32.
22
II
The Railroad Industry Itself Has Repeatedly Insisted
That Multimodal Claims Are Subject to the Carmack
Amendment. They Are Thus Now Equitably Estopped
From “Bait and Switching” American Manufacturers
by Arguing Precisely the Opposite
During recent negotiations over The Rotterdam
Rules, a recently drafted international convention on
cargo claims*' which is expected to be widely enacted,
the American railroad industry used their considerable
influence to quash attempts to achieve uniformity in
handling cargo claims in the United States by insisting
that they were already strictly regulated by the
Carmack Amendment with respect to precisely the type
of inland multimodal cargo claims at issue in this
litigation.” Specifically, the very same Association of
21 In September 2009, the United States became a signatory
to the United Nations Convention on Contracts for the
International Carriage of Goods Wholly or Partly by Sea (the
Rotterdam Rules), G.A. Res. 63/122, Annex, U.N. Doc. A/RES/
63/122 (Dec. 11, 2008). If ratified by the President with the
advice and consent of the Senate, the Rotterdam Rules would
alter the liability regime for international transportation of
cargo involving the United States when the transportation is
partly by sea and partly by land, but would not cover inland
carriers. See id. at arts. 12,17, 18(d). Surprisingly, the discussion
of the Convention in the United States’ amicus brief fails to
mention that it will not cover railroads. See Brief for the United
States as Amicus Curiae Supporting Petitioners, p. 11.
* Of course, AAR knew that once ratified the treaty terms
would be applied in the United States federal courts as the law
of the land, and that Carmack would be applicable to inland
multimodal cargo claims.
23
American Railroads (AAR), as are amicus curiae here,
filed formal comments” with UNCITRAL* expressing
its strong opposition to any proposal that the new
regime (then known as “the Draft Instrument”) should
cover the liability of inland rail carriers:
The U.S. and Canadian railroad members
of the AAR have serious concerns over the
application of the Draft Instrument to rail
transportation. There is already an existing
and well established system in the U.S. and
Canada which governs the liability of rail
carriers for loss and damage to goods
transported and the rights and obligations
of both the rail carrier and the shipper. This
system was promulgated by legislation and
developed through litigation and regulatory
agency action interpreting and applying the
legislation.”
(emphasis added).
— ee ——— —_
* See e.g., Proposals by the International Road Transport
Union (IRU), at 1, U.N. Doc. A/CN.9/WG.III/WP90 (Mar. 27,
2007); Drawing up of a New Convention on the Carriage of Goods
by Sea and Extending This Convention to Door-to-Door
Transport Operations (Comments on Behalf of the IRU) in
UNCITRAL, Compilation of Replies to a Questionnaire, at 43,
U.N. Doc. A/CN.9/WG.I1I/WP28 (Jan. 31, 2003).
*“47UNCITRAL (“United Nations Commission On
International Trade Law”) was the UN commission which studied,
held hearings and ultimately drafted the Rotterdam Rules.
*° Comments on Behalf of the Association of American
Railroads (AAR) Relating to the Preliminary Draft Instrument
on the Carriage of Goods by Seain UNCITRAL. See supra note
21, U.N. Doe. A/CN.9/WG.ITI/W P28, at 32.
24
In the United States, of course, that “existing and
well established system” is the Carmack Amendment.
The AAR itself described the Carmack Amendment
without qualification as “the statute providing the
underpinning upon which the system of liability for loss
and damage to [multimodal] transported goods is based.”
Id. at 33 n.3.
The AAR added “that the U.S. and Canada already
have in place a uniform and well understood system of
handling rail freight loss and damage claims which
meet[s] the needs of the parties involved.” Jd. at 33
(footnote omitted). In contrast, “the Draft Instrument
would adversely modify the current system applicable
to U.S. and Canadian railroads.” /d. at 34.
The AAR was adamant that “[t]he Draft
Instrument’s scope should therefore not be extended
to apply to the land portion of any cargo transportation
to the extent it adversely affects the current liability
system applicable to U.S. and Canadian railroads.”*
In short, the railroads repeatedly, consistently and
effectively insisted that any maritime regime should not
apply to them, even though it was explicitly being
designed to cover on a door-to-door basis for the full
multimodal journey, because they preferred to continue
to be exclusively governed by the Carmack Amendment.
** Id. These sentiments were also expressed in the AAR’s
comments submitted at about the same time to the U.S.
Government. See Comments on Behalf of the Association of
American Railroads, docket no. MARAD-2001-11135-12
(Maritime Admin., Dep’t of Transp., filed Sept. 13, 2002).
25
Commenting on the Railroad’s successful Rotterdam
Rules lobbying effort, one commentator has now
summarized deftly:
What is the explanation for the
Rotterdam Rules’ failure to address such an
obvious and pressing problem? Why did
UNCITRAL not include railroads and motor
carriers in the new Convention? The simple
answer is that [the railroad] industry does not
want it. In both Europe and North America,
inland carriers (particularly the railroads)
were highly vocal about their desire to be
excluded from the new regime.
x * * *
The record thus demonstrates that the
railroads’ rhetoric about “uniformity” when
criticizing Sompo is simply empty rhetoric.
When faced with the very real prospect of a
legal regime that extended the ocean carrier’s
defenses and limitations inland to protect all
of the performing parties involved in
multimodal transactions—which is exactly
what they say good public policy mandates in
the Sompo context—they blocked the effort.
The record proves that their goal cannot be
uniformity. It instead appears that their true
goal is simply to reduce their liability for the
damages that they have caused. While this
may be a good business practice that benefits
their shareholders, uniformity and good
public policy have little to do with their
position.
26
Michael F. Sturley, Maritime Cases About Train
Wrecks: Applying Maritime Law to the Inland Damage
of Ocean Cargo, 40 J. Mar. L. & Com. 1, 36-39 (2009)
(emphasis added).
The Railroads have not just wrapped themselves in
the shield of Carmack to avoid international regulation;
the railroad-side has used it as a sword domestically to
reap financial benefits and to avoid judgments (at least
where a domestic waybill is also issued). See, e.g.,
Nippon Yusen Kaisha v. Burlington Northern and
Santa Fe R.R., 367 F. Supp. 2d 1292, 1296-98 (C.D. Cal.
2005) (railroad successfully argued Carmack applied to
inland U.S. loss on inbound multimodal shipment from
abroad); NYK Line v. Burlington Northern and Santa
Fe Ry. Co., 222 F. Supp. 2d 1176, 1178-79 (C.D. Cal. 2002)
(railroad successfully argued Carmack applied to inland
U.S. loss on outbound multimodal shipments);
Burlington Northern and Santa Fe R.R. v. Hyundai
Merchant Marine Co., No. CV 96-9123-MMM, 1999 WL
1122998, at *8 (C.D. Cal. 1999) (same).
In fact, the case at issue was actually removed from
state court by Union Pacific based, in part, on the
representation that it was governed by the Carmack
Amendment. JA67-68.
Here the Railroads have in effect taken a contrary
position in front of the United Nations and now seek to
repudiate that position to gain an advantage in later
proceedings. The doctrine of judicial estoppel prohibits
such gamesmanship. State of New Hampshire v. State
of Maine, 532 U.S. 742, 749-50 (2001). See also, Chaveriat
v. Williams Pipe Line Company, 11 F. 3d 1420, 1427
27
(7 Cir. 1993) (“though called judicial estoppel the
doctrine has been applied to proceedings in which a
party to an administrative proceeding obtains a
favorable outcome that he seeks to repudiate in a
subsequent judicial proceeding”). The Railroads got
what they wanted—a treaty which does not apply to
inland multimodal transport.
Judicial estoppel protects the judicial process by
prohibiting parties “from deliberately changing
positions according to the exigencies of the moment.”
State of New Hampshir: v. State of Maine, 532 U.S. at
750, citations omitted. The doctrine prevents the parties
from “playing fast and loose with the courts” and the
facts. Id.
Ill
In Any Event, This Court Decided Long Ago in Union
Pacific v. Burke That Carmack Applies to Inland
Transport Under a Multimodal Through Bill of
Lading Even Though a Separate Bill of
Lading Was Not Issued
Long before Sompo, this Court itself addressed the
issue of whether Carmack applies to the U.S. inland leg
under a through bill of lading. In Union Pacific R.R.
Co. v. Burke, 255 U.S. 317 (1921), a single bill of lading
was issued for a shipment via ocean and rail from Japan
to New York via San Francisco. The New York Court of
Appeals found that the inland loss was subject to the
Carmack Amendment:
Ocean transportation may be conducted
under through bills of lading, issued at a
28
foreign port, but the classifications and
schedules of rates and charges of the inland
carrier or carriers must be limited to inland
transportation and services, and cannot relate
to liability, service, or obligation of the ocean
carrier.
The liability of the defendant is not and, under
the Carmack Amendment, could not be
questioned.
Burke v. Union Pacific R.R. Co., 226 N.Y. 534, 540 (N.Y.
1919). The U.S. Supreme Court affirmed, holding that
the inland carriage was subject to common law liability
(i.e. Carmack) and that the bill of lading limitation was
ineffective because no full liability Carmack option was
offered. Union Pacific R.R. Co. v. Burke, 255 U.S. 317,
321 (1921).
Since Burke, however, there has been confusion as
to the applicability of the Carmack Amendment to inland
carriers where there is an import shipment moving
under a multimodal through bill of lading. Most of the
confusion can be traced to Reider v. Thompson, 339 U.S.
113 (1950). The Court rejected the rail carrier’s
argument that Carmack did not apply to the inland U.S.
rail carriage. The opinion in Reider reflected that
Carmack was intended to cover the domestic portion of
movements originating in foreign countries:
The purpose of the Carmack Amendment was
to relieve shippers of the burden of searching
out a particular negligent carrier from among
the often numerous carriers handling an
29
interstate shipment of goods. To hold
otherwise than we do would immunize from
the beneficial provisions of the Amendment
all shipments originating in a foreign country
when reshipped via the very transportation
chain with which the Amendment was most
concerned. /d. at 119.
Moreover, Reider does not say what would happen
if the inland carrier had not issued a separate bill of
lading. Nor does it mention the Court’s earlier ruling in
Union Pacific R.R. Co. v. Burke, which indicates that
there was no intention of overruling that decision.
IV
If the Existence of an Inland Bill of Lading is the
Critical Factor in Determining the Applicable Law,
This Case is Not Ripe for Finally Resolving the Issue
of the Carmack Amendment’s Applicability. The
Railroads Concede that if the Rail Carrier Issued an
Inland Bill of Lading the Carmack Amendment
Applies. No Discovery Has Been Taken on that Issue.
Thus, to Resolve This Issue, This Court
Must Remand the Case
In the event this Court determines that the
Carmack Amendment does not apply to this rail
shipment under the K-Line through bill of lading, its
holding in Norfolk Southern Ry. Co. v. Kirby, 543 U.S.
14, 15 (2004) compels that the case be remanded to
determine whether a domestic waybill was issued by the
rail carrier, and if so, the effect of its terms. Discovery
on that issue was apparently never conducted and so
30
the issue could not be fully presented to the District
Court. For that reason, in part, the Ninth Circuit
remanded this matter, calling it contractually a “factual
morass.” Regal-Beloit Corp. v. Kawasaki Kisen Kaisha
Ltd., 557 F. 3d 985, 1002 n.22 (9 Cir. 2009).
Kirby involved an international multimodal
shipment under a through bill of lading from Australia
to Huntsville, Alabama via vessel and rail. As is typical,
the shipper contracted with a forwarder who contracted
with an ocean carrier who contracted with the railroad.
The Court recognized that the intermediaries between
the shipper and the railroad acted as the cargo owner’s
agent in contracting for the actual transportation.*’
Kirby, 543 U.S. at 17.
It is well known in the industry that railroads
universally issue domestic “waybills” to the party they
immediately contract with in connection with multimodal
shipments — typically the ocean carrier. See, e.g., Scope
Imports, Inc. v. Interstate Commerce Commission, 688
F. 2d 992, 994 (5“ Cir. 1982) (describing the ICC’s
findings that the typical intermodal shipping documents
include the intermodal bill of lading and the railroad
“waybills” for the inland carriage to destination); Sompo
Japan Ins. Co. of America v. Union Pac. R.R. Co., 456
F.3d 54, 76 (2d Cir. 2006) (remanding case to determine,
inter alia, whether Carmack was offered via the rail
carrier’s domestic waybills); on remand Sompo Japan
** The Court pointed out that although the intermediaries
are “not the cargo owner’s agent in every sense,” they do have
authority to bind the cargo owner to a liability limitation. Kirby,
543 U.S. at 17.
31
Ins. Co. of America v. Union Pac. R.R. Co., No. 09 Civ.
1604, 2007 WL 2230091, at *5 (S.D.N.Y. 2007) (finding
that Union Pacific’s domestic rail waybills, while subject
to Carmack, did not offer full Carmack liability terms),
aff’d 341 Fed. Appx. 707 (2d Cir. 2009), petition for cert.
filed, (U.S. Jan. 4, 2010) (09-787).
A domestic waybill evidences a contract of carriage.
“Like bills of lading, waybills are contracts for the
carriage of goods.” Sompo Japan Ins. Co. of America
v. Union Pac. R.R., 456 F.3d 54, 56 n.4 (2d Cir. 2006). As
both Union Pacific and Amicus Curiae Association of
American Railroads concede,* under the terms of the
Carmack Amendment and established law, such
waybill would satisfy any perceived requirement of a
separate inland contract and thereby triggering
Carmack. Altadis USA, Inc. v. Sea Star Line, LLC, 458
F.3d 1288, 1291 (11 Cir. 2006); American Road Service
Co. v. Consolidated Rail Corp., 348 F.3d 565, 568 (6" Cir.
2003); Shao v. Link Cargo (Taiwan) Ltd., Inc., 986 F.2d
700, 703 (4"" Cir. 1993); Capitol Converting Equipment,
Inc. v. LEP Transport, Inc., 965 F.2d 391, 394 (7 Cir.
1992). In other words:
[I]nland carriers are subject to Carmack
Amendment liability when a separate,
domestic bill of lading is issued, even though
a through bill of lading was issued abroad
covering the same transport.
** See Brief for Petitioner Union Pacific, p. 34; Brief for the
Association of American Railroads as Amicus Curiae
Supporting Petitioners, p. 180.
32
King Ocean Cent. Am., S.A. v. Precision Cutting Serv.,
717 So. 2d 507, 512 (Fla. 1998) (citing Swift Textiles,
Inc. v. Watkins Motor Lines, Inc., 799 F.2d 697 (11* Cir.
1956)).
It is worth noting that all parties concede that inland
domestic rail contracts covering the shipments — known
as ERTA’s did exist here — specific contracts between
Union Pacific and each of the shippers, which
incorporate by reference Union Pacific’s MITA (“UP
Exempt Circular 20-B”), which in turn expressly states
that it provides terms and conditions for “Intermodal
Shipments.” See Brief of Petitioner Union Pacific
Railroad Co., p. 44. Based upon the foregoing principles,
and particularly since Carmack provides that the
absence of a bill of lading should not affect substantive
rights, this Court could find—even if this turned out to
be the rare case where a rail waybill is absent—that
Carmack applies.
Under Kirby, the ocean carrier (the through bill of
lading issuer) is deemed to be the cargo owner’s agent
in contracting with the rail carrier. Hence the domestic
waybill (the contract between the ocean carrier and the
railroad) needs to be examined to determine which, if
any, terms bind the cargo owner. At the very least, the
Court would need to examine the inland waybill to
determine if it states directly or indicates the party’s
intent to have it supersede the multimodal bill of lading
terms with respect to the relationship between the cargo
interests and the inland carrier on liability or
jurisdictional issues. These issues are fact intensive and
would thus be more properly addressed in the first
33
instance by the courts below. Absent an affirmance of
the Circuit Court’s decision, a remand on this domestic
waybill issue is required.
Alternatively, should the Court determine that
Carmack does not apply to inland multimodal
transportation from abroad, the case must be remanded
to determine whether a full liability option was offered
to the shipper under federal common law. Long before
Carmack, the federal common law required that a full
liability option be provided to the shipper. See Hart v.
Pennsylvania R.R. Co., 112 U.S. 331, 338 (1884).
Thereafter, the common law analysis was incorporated
into Carmack cases. New York, N.H. & H. R.R. Co. v.
Nothnagle, 346 U.S. 128, 135 (1953) (which relied upon
a string of cases emanating from the “general common
law” decision in Hart).”
Under the released value doctrine, federal law
permits carriers to limit their liability only by express
agreement with the shipper, under what is known as
the “Hughes Test”. Thus, to effectively limit its liability,
a carrier must: (1) maintain an approved tariff; (2) obtain
a shipper’s agreement as to his choice of liability; (3)
give the shipper a reasonable opportunity to choose
between two or more levels of liability; and (4) issue a
bill of lading prior to shipment. Hughes v. United Van
Lines, Inc. 829 F.2d 1407, 1419-20 (7th Cir. 1987); The
—_-- a
** Thus, Carmack simply incorporates federal common law
principles of inland carriage, including the released value
doctrine. See e.g., Hampton v. Federal Express Corp., 917 F.2d
1119, 1121 (8* Cir. 1990) (federal common law applies the same
released value doctrine as Carmack)
34
Hughes Test has its genesis in New York, N.H. & H.
R.R. Co. v. Nothnagle, 346 U.S. 128, 135 (1953).
It is important to keep in mind that the released
value doctrine pertains to effective limitations of liability,
which is the central issue in numerous cases including
Sompo Japan Ins. Co. of America v. Union Pac. RR.
Co, 456 F.3d 54 (2d Cir. 2006). It is also applicable to the
case at bar. That is, there has been no determination
below as to whether a full liability option was offered to
the shipper under the Hughes test, and if so, whether
requiring suit in a foreign forum negates such an offer.
V
If the Transportation Industry Really Wants
Uniformity, for a De Minimus Cost It Can Extend a
Single Clause Already Routinely Present in
Multimodal Bills of Lading to Cover the United
States Trade and Offer Shippers a
Carmack Option
The argument is repeatedly made in the various
amicus briefs that enforcement of K-Line’s Japanese
jurisdiction clause against the inland U.S. railroad would
promote “uniformity.”
Actually, precisely the opposite is the case. The
United States has few if any major ocean carriers forcing
foreign shippers to litigate here. Moreover, as explained
in the seminal work W. TeTLey, MARINE Carco CLAIMS
1915-26 (4" ed. 2008), the very same jurisdiction clauses
that our Court’s recognize—for claims against ocean
35
carriers—are unenforceable in whole or in part in at
least the following jurisdictions:
* China (noting that as of 1997 only Dutch and
German forum selection clauses were
enforceable there)
¢ Canada
* The European Union (clauses enforced only
under restrictive conditions)
* Australia
* New Zealand
* South Africa
* France
No showing has been made that a single foreign
country currently permits lawsuits against its railroads
(or truckers) for their local activities to be routinely
venued in and their employees forced to testify in an
overseas country. Under Article 31 of the European
CMR Convention, for example, a United States forum
selection clause would be unenforceable against a
European trucker.*” Pursuant to the CMR, forum
selection clauses are only enforceable if the designated
forum is that of a participating nation (which in turn
would apply the CMR).* Nonetheless, the Railroads
3° See Convention on the Contract for the International
Carriage of Goods by Road (CMR), May 19, 1956, 399 U.N.T.S. 189.
3! Similarly, if the Carmack Amendment did apply here, it
is well established (and the Railroads do not contest) that a
(Cont'd)
36
want our citizens to have to travel across the globe to
seek justice.
Independent of this one-sided situation, a crucial
fact exists in this case which independently supports
the application of Carmack here. The standard K-Line
Bill of Lading (and also the one at issue) contains the
following clause, applicable everywhere except the
United States:
Clause 3(B)
Carrier’s responsibility, if any, for any loss or
damage to Goods proven to have taken place
during any period other than Water Carriage
shall be governed by any relevant provisions
contained in any applicable international
convention or national law which provisions
(a) eannot be departed from by private
contract to the detriment of Merchant, and
(b) would have applied if Merchant had made
a separate and direct contract with Carrier in
respect of the particular stage of Carriage
during which the loss or damage occurred.
Available at http://www.kline.com/KAMBL_Terms/
BL_Terms_Export_Front_Clauses.asp. In fact, TLC’s
counsel’s experience and published decisions reveal that
similar clauses exist in most ocean carrier bills of lading.
(Cont'd)
foreign forum selection clause would not be enforceable. Aacon
Auto Transport, Inc. v. State Farm Mutual Automobile Ins. Co.,
537 F. 2d 648, 654-55 (2d Cir. 1976).
37
See, e.g., Hartford Fire Ins. Co. v. Orient Overseas
Containers Lines, 230 F. 3d 549, 553 (2d Cir. 2000);
Mannesman Demag Corp. v. M/V Concert Express, 225
F. 3d 587, 590 (5" Cir. 2000).
As the bill of lading clearly contemplates a
multimodal shipment, the reference to “laws
compulsorily applicable under the e« reumstances” to the
participating carrier/trucker can only mean inland laws
such as the Carmack Amendment (or such as in Europe,
the CMR Convention) which apply independent of the
issuance of the bill of lading.
The clause thus establishes that K-Line expressly
intended different liability schemes to govern different
phases or modes of transportation, in virtually every
country except the United States. A few adjustments to
this simple clause to make it indisputedly applicable to
the parallel Carmack Amendment, would thereby put
U.S. shippers on equal footing with foreign shippers.
Instead, the Railroads are now effectively arguing for
this Court to put United States shippers in a deeply
weakened, completely unregulated, competitively
disadvantaged position.”
*® Professor Sturley, analyzing the decision in Sompo Japan.
Ins. Co. of Am. v. Union Pac. R.R., 456 F.3d 54 (2d Cir. 2006),
notes that more careful contract drafting would provide a
complete and virtually cost-free “solution” to this entire debate.
Michael F. Sturley, Maritime Cases About Train Wrecks:
Applying Maritime Law to the Inland Damage of Ocean Cargo,
40 J. Mar. L. & Com. 1, 36-39 (2009). Numerous other Sompo
critics are in accord. See Paul Keane, US Law -COGSA
Limitations and Intermodal Transport, 192 arp News 22, 24
(2008).
38
Finally, it is important to note that nothing in
Carmack, either in its present form or its history,
suggests that a carrier can make an offer of full liability
to anyone other than the actual shipper (the owner of
the goods). That is, an offer to another carrier — i.e. from
the railroad to an intermodal bill of lading issuer — is
simply not authorized by the language in Carmack. For
the Court to permit such an offer to be made would be
for the Court to legislate and to validate a procedure
which Congress never approved. The offer must be made
to the actual shipper. Burke v. Union Pac. R. R. Co.,
226 NY 534 (1919), aff’d Union Pac. R. R. Co. v. Burke,
255 U.S. 317, 321 (1921). It would be a simple matter for
the railroads to contract with their multimodal partners
to insert an offer of full Carmack liability right in the
multimodal bill of lading. In fact, as discussed above,
this is exactly what the multimodal] carriers have done
regarding inland shipments for countries other than the
United States. There would be no cost or burden to
require the full Carmack option to be specifically
included in such a bill of lading clause.
39
CONCLUSION
The decision of the court below should be affirmed.
In the alternative, the case should be remanded to
resolve the matter of the existence of and the precise
jurisdictional terms of the Railroad’s waybill.
Respectfully submitted,
Davip T. MALoor
Counsel of Record
Tuomas M. EaGAn
RANDIE P PATERNO
MALoor Browne & Eacan LLC
411 Theodore Fremd Ave, Suite 190
Rye, NY 10580
(914) 921-1200
Of Counsel:
GEORGE CARL PEZOLD
PEZOLD SMITH HIRSCHMANN
& Se.vaccio, LLC
120 Main Street
Huntington, NY 11743
(631) 427-0100
Counsel for Amici Curiae
c
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