Today the
Supreme Court granted certiorari in one case of interest to the
business community:
Intermodal Shipping—The Carmack
Amendment—Carriage of Goods by Sea Act
No single federal statute governs so-called “intermodal”
shipments—the international shipment of goods that are
transported by ocean vessels and then unloaded onto rail or
motor carriers for inland transportation. The ocean leg is
governed by the Carriage of Goods by Sea Act (“COGSA”), while
the inland leg is governed by the Carmack Amendment to the
Interstate Commerce Act. There are important differences between
the two statutes. For example, the Carmack Amendment imposes
something akin to strict liability on carriers (see 49
U.S.C. §§ 11706(a), 14706(a)), but liability under COGSA is
based upon negligence (see 46 U.S.C. § 30701 Note
§ 4.). COGSA also affords greater contractual freedom than the
Carmack Amendment, which limits what parties may agree to
contractually by, among other things, imposing venue
restrictions that parties may avoid only if they comply with
certain procedures.
Under modern shipping practices, parties contracting for
intermodal shipments typically use a single “through bill of
lading,” which controls both land and sea transportation. Today
the Supreme Court granted certiorari in two consolidated cases,
Kawasaki Kisen Kaisha v. Regal-Beloit Corporation, No.
08-1553, and Union Pacific Railroad Company v. Regal-Beloit
Corporation, No. 08-1554, to determine whether the inland
portion of an intermodal shipment is subject to the Carmack
Amendment even when no separate domestic bill of lading is
issued.
Given the significant differences between COGSA and the
Carmack Amendment with respect to both liability and venue, the
Court’s resolution of this issue—as to which the lower courts
are divided—will be important to all businesses involved in
intermodal shipping, whether as carriers, customers, or
insurers.
Several American companies contracted with Kawasaki Kisen
Kaisha, Ltd. and its U.S. agent, K-Line America, Inc.
(collectively “K-Line”), to ship goods from China to various
destinations in the Midwest. K-Line issued each company a
“through bill of lading” covering both the ocean and land
portion of their respective shipments. The through bills of
lading contained a provision pursuant to which COGSA would apply
to the inland leg. They also contained a forum selection clause
requiring that any actions against K-Line be brought in Japan.
The forum selection clause would be valid under COGSA, but not
under the Carmack Amendment. K-Line used its own ocean liner to
carry the companies’ goods to a port in California, and
subcontracted with Union Pacific Railroad Co. to transport the
goods to their final inland destinations. The cargo was
allegedly damaged when Union Pacific’s train derailed in
Oklahoma.
The shippers sued K-Line and Union Pacific in California
state court. After being removed to federal court, the case was
dismissed by the trial judge on the grounds that the parties had
validly opted out of the venue restrictions of the Carmack
Amendment and that the case should have therefore been brought
in Japan pursuant to the forum selection clause contained in the
bills of lading. The Ninth Circuit disagreed. First, the court
of appeals held that the Carmack Amendment, rather than COGSA,
applied to the rail leg notwithstanding the parties’ contractual
agreement to the contrary unless the parties had satisfied the
applicable opt-out procedures. Second, because the Surface
Transportation Board has exempted from regulation transportation
that “is provided by a rail carrier as part of a continuous
intermodal movement,” the Ninth Circuit held that the applicable
procedures were those set forth in 49 U.S.C. § 10502(e), not
§ 10709. Because the district court had failed to analyze
whether those procedures were followed, the Ninth Circuit
remanded.
Absent extensions, amicus briefs in support of the
petitioners will be due on December 11, 2009, and amicus briefs
in support of the respondents will be due on January 11, 2010.
Any questions about this case should be directed to Andrew Tauber (+1
202 263 3324) in Mayer Brown’s Washington, D.C. office.
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