Menu

Cases

Burlington v. Interdom

United States Court of Appeals,

Fifth Circuit.

The BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, Plaintiff-Appellee,

v.

INTERDOM PARTNERS, LTD., et al, Defendants,

Interdom Partners, Ltd., Interdom Inc., Defendants-Appellants.

Decided Dec. 10, 2004.

PER CURIAM: [FN**]

FN** Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIRCUIT RULE 47.5.4.

Appellant Interdom Partners Ltd. (“Interdom”) appeals from the district court’s grant of summary judgment, in which the district court determined that Interdom must indemnify Appellee The Burlington Northern and Santa Fe Railway Company (“BNSF”) for damages from a train derailment. Because fact questions concerning the cause of the derailment prevent summary judgment, we reverse and remand.

Background Facts and Procedural History

Interdom serves as a sort of shipping intermediary. In this role, Interdom arranges for the transportation (including by rail) of commodities for clients, who include various carriers and direct shippers. As part of that process, Interdom entered into a series of agreements with BNSF. This case involves the provision in those agreements where Interdom agreed to indemnify BNSF for damage “proximately caused by or resulting from” failure to comply with BNSF’s requirements or from failure to load and brace the cargo properly, unless caused by BNSF’s sole negligence.

On January 17, 2001, a BNSF train carrying a load of steel coils, among other items, derailed near Loder, Oklahoma. Interdom had arranged for the transportation of this load. The parties appear to agree that, because of an improper description from another company, Interdom was not aware that the containers it was transporting contained steel coils. The parties also agree that, under their contracts, steel coils required different handling from other kinds of cargo and that special bracing procedures for steel coils were not used in this case. In fact, the insufficiency of the framework that supported the coils has been cited, particularly by BNSF, as one possible cause of the derailment.

Following the derailment and repair, BNSF sued Interdom in the Northern District of Texas. In the suit, BNSF claimed that the indemnification provisions in the agreements required Interdom to pay for all the damage from the derailment. BNSF’s complaint also included claims for breach of contract, negligence, and negligent misrepresentation. Interdom filed third-party claims against Columbus Line, Inc., the company that provided the incorrect description, which in turn filed third-party claims against four other companies. On November 6, 2003, BNSF moved for summary judgment on its indemnity claims against Interdom.

The district court granted BNSF’s motion for summary judgment, finding that Interdom’s liability was established because the parties’ experts “do not rule out the improper loading of the coils and the mislabeling of the shipment as proximate causes of the derailment.” The district court also concluded that BNSF had established the amount of its damages. After reaching these conclusions, the court entered a final judgment on these claims in the amount of $3,230,100.30 plus post-judgment interest and costs. Interdom filed a notice of appeal, and the district court stayed the remaining proceedings.

Standard of Review

We review the district court’s grant of summary judgment de novo. Moore v. Willis Indep. Sch. Dist., 233 F.3d 871, 874 (5th Cir.2000). Summary judgment is appropriate when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). When faced with a summary judgment motion,

[T]he court must review all of the evidence in the record, but make no credibility determinations or weigh any evidence. In reviewing all the evidence, the court must disregard all evidence favorable to the moving party that the jury is not required to believe, and should give credence to the evidence favoring the nonmoving party as well as to the evidence supporting the moving party that is uncontradicted and unimpeached.

Moore, 233 F.3d at 874 (citations omitted).

Discussion

Each party cites different provisions of their agreements when arguing whether summary judgment was appropriate. Interdom emphasizes the existence of a dispute about the proximate cause requirement, whereas BNSF contends that Interdom has not presented any evidence supporting the sole negligence exception to the indemnity agreement.

The relevant parts of the agreement read:

The shipper will be liable to BNSF or any third party for property damage, personal injury or death proximately caused by or resulting from (1) failure to comply with any requirement set forth in this BNSF Intermodal Rules and Policies Guide, including, but not limited to, equipment specifications and standards, (2) a defect in a vehicle supplied by shipper, or (3) failure of the shipper to load and brace the lading properly and in accordance with the requirements set forth in this BNSF Intermodal Rules and Policies Guide, unless caused by the proven sole negligence of BNSF.

IT IS EXPRESSLY INTENDED THAT THE SHIPPER IS TO INDEMNIFY BNSF PURSUANT TO THE FOREGOING; SUCH INDEMNITY SHALL INCLUDE (1) INDEMNITY FOR THE NEGLIGENCE OR ALLEGED NEGLIGENCE OF BNSF, WHETHER ACTIVE OR PASSIVE, WHERE SUCH BNSF NEGLIGENCE IS A CAUSE (BUT NOT THE SOLE CAUSE) OF THE LOSS OR DAMAGE; (2) INDEMNITY FOR STRICT LIABILITY RESULTING FROM VIOLATION OR ALLEGED VIOLATION OF ANY FEDERAL, STATE OR LOCAL LAW OR REGULATION BY BNSF, INCLUDING, BUT NOT LIMITED TO, THE FEDERAL EMPLOYERS LIABILITY ACT, AND THE OCCUPATIONAL HEALTH AND SAFETY ACT.

The Shipper will defend and indemnify BNSF from and against the loss and damage described above and for the cost of defending claims filed against BNSF for such damage, including, but not limited to, reasonable attorney’s fees necessary to defend against claims or suit. Upon tender of the defense for any claim or action against BNSF, shipper shall, at its expense, defend BNSF in such claim or action.

Acceptance by BNSF of a shipment not in compliance with this BNSF Intermodal Rules and Policies Guide will not serve to release the shipper from its obligations, including the obligation to defend and indemnify BNSF

….

Emphasizing the requirement that the damage be “proximately caused by or resulting from” any of the listed things, Interdom argues that the experts disagree about what caused the derailment and that they therefore disagree about whether Interdom’s actions proximately caused the accident. In contrast, BNSF contends that none of the experts suggest that BNSF’s negligence was the sole cause of the derailment and that it was therefore entitled to summary judgment. In making this argument, BNSF invokes the sole negligence exception and skips over the “proximately caused by or resulting from” language. The issue thus becomes whether cause is a prerequisite for indemnity under the agreement.

We conclude that it is–the proximate cause requirement must be met before the indemnity clause applies. This reading is clear from the language introducing the provision: “The shipper will be liable to BNSF or any third party for property damage, personal injury or death proximately caused by or resulting from…. ” (Emphasis added). The sole negligence provision is an exception, as evidenced by its “unless” language. Without showing that one of the listed items caused the damage, BNSF is not entitled to idemnity.

Thus, to analyze whether summary judgment was proper, we must first address whether BNSF’s evidence established that this initial requirement was met. This requirement can be met in two ways–damage can be either proximately caused or “resulting from” the action. Under Texas law, proximate cause has two parts: foreseeability and cause in fact. Southwest Key Program, Inc. v. Gil-Perez, 81 S.W.3d 269, 274 (Tex.2002). The parties, particularly Interdom, emphasize the cause-in-fact element. For cause in fact, a party must show that an action was “a substantial factor in bringing about [the] injury and without which no harm would have been incurred.” Id. “Resulting from,” too, requires causation.

Interdom bases its challenge on this point and argues that BNSF failed to conclusively show that Interdom’s actions caused the derailment. [FN1] Thus, according to Interdom, a fact question remains. In making this argument, Interdom emphasizes that, in reviewing summary judgment, all factual inferences from the evidence are to be drawn in favor of it as the nonmovant. See Moore, 233 F.3d at 874.

FN1. According to the district court, the plaintiff’s experts “do not rule out the improper loading of the coils and the mislabeling of the shipment as proximate causes of the derailment.” Interdom contends that this kind of analysis places an improper burden on it when it was BNSF’s burden to establish proximate cause.

As part of this evidence, Interdom cites the affidavit of its expert Gregg Perkin, who concluded that “too many facts remain for anyone to precisely determine the proximate cause(s) of this derailment. The possibility remains that BNSF directly contributed to the events leading up to this derailment.” While not ruling out improper loading of steel coils as a cause, Perkin provided other possible causes of the derailment: structural deficiencies with the railcar, defects along the railway, slipping by another car, and the train’s speed. With all of these unknown factors, Interdom contends that a fact question exists regarding proximate cause.

We agree with BNSF, however, that Perkin’s affidavit is insufficient by itself to defeat summary judgment because it merely indicates, without elaboration or support, that several causes might be possible. [FN2] It does not provide its own view of causation; because it is so vague, it also does not impeach BNSF’s expert opinion. Nevertheless, Interdom has provided further evidence beyond Perkin’s affidavit. Interdom also provided the reports of two other experts, Colin Fulk and Roger Iversen. [FN3] Both reports were based on examination of the site and cars, and both reports provide specifics of other possible causes. In particular, Fulk contends that defects in the rail car, combined with train speed and track conditions, caused the derailment. The second expert report, by Iversen, concluded that the train derailed because of BNSF’s excessive rough handling. These experts’ opinions contradict the opinion of BNSF’s expert, who contended that derailment was caused by the steel coils exceeding the maximum weight for the container. In other words, these reports show the existence of a fact question concerning causation and, more importantly, concerning whether any of the actions listed in the agreement caused the derailment. This dispute among the experts cannot be resolved at summary judgment. Because of this dispute, summary judgment on BNSF’s indemnity claim was improper.

FN2. We also note that Perkin never physically examined the rail car or the site.

FN3. These experts were retained by other parties.

Conclusion

Because a fact question concerning proximate cause remains, the district court’s grant of summary judgment was incorrect. We reverse and remand for further proceedings in the district court.

REVERSED AND REMANDED.

Norfolk Southern v. Kirby

Supreme Court of the United States

NORFOLK SOUTHERN RAILWAY COMPANY, Petitioner,

v.

James N. KIRBY, Pty Ltd., dba Kirby Engineering, and Allianz Australia

Insurance Limited.

Argued Oct. 6, 2004.

Justice O’CONNOR delivered the opinion of the Court.

This is a maritime case about a train wreck. A shipment of machinery from Australia was destined for Huntsville, Alabama. The intercontinental journey was uneventful, and the machinery reached the United States unharmed. But the train carrying the machinery on its final, inland leg derailed, causing extensive damage. The machinery’s owner sued the railroad. The railroad seeks shelter in two liability limitations contained in contracts that upstream carriers negotiated for the machinery’s delivery.

I

This controversy arises from two bills of lading (essentially, contracts) for the transportation of goods from Australia to Alabama. A bill of lading records that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for carriage. See 2 T. Schoenbaum, Admiralty and Maritime Law 58-60 (3d ed.2001) (hereinafter Schoenbaum); Carriage of Goods by Sea Act (COGSA), 49 Stat. 1208, 46 U.S.C.App. § 1303. Respondent James N. Kirby, Pty Ltd. (Kirby), an Australian manufacturing company, sold 10 containers of machinery to the General Motors plant located outside Huntsville, Alabama. Kirby hired International Cargo Control (ICC), an Australian freight forwarding company, to arrange for delivery by “through” (i.e., end-to-end) transportation. (A freight forwarding company arranges for, coordinates, and facilitates cargo transport, but does not itself transport cargo.) To formalize their contract for carriage, ICC issued a bill of lading to Kirby (ICC bill). The bill designates Sydney, Australia, as the port of loading, Savannah, Georgia, as the port of discharge, and Huntsville as the ultimate destination for delivery.

In negotiating the ICC bill, Kirby had the opportunity to declare the full value of the machinery and to have ICC assume liability for that value. Cf. New York, N.H. & H.R. Co. v. Nothnagle, 346 U.S. 128, 135, 73 S.Ct. 986, 97 L.Ed. 1500 (1953) (a carrier must provide a shipper with a fair opportunity to declare value). Instead, and as is common in the industry, see Sturley, Carriage of Goods by Sea, 31 J. Mar. L. & Com. 241, 244 (2000), Kirby accepted a contractual liability limitation for ICC below the machinery’s true value, resulting, presumably, in lower shipping rates. The ICC bill sets various liability limitations for the journey from Sydney to Huntsville. For the sea leg, the ICC bill invokes the default liability rule set forth in the Carriage of Goods by Sea Act. The COGSA “package limitation” provides:

“Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States … unless the nature and value of such goods have been declared by the shipper before shipment and inserted into the bill of lading.” 46 U.S.C.App. § 1304(5).

For the land leg, in turn, the bill limits the carrier’s liability to a higher amount. [FN1] So that other downstream parties expected to take part in the contract’s execution could benefit from the liability limitations, the bill also contains a so-called “Himalaya Clause.” [FN2] It provides:

FN1. The bill provides that “the Freight Forwarder shall in no event be or become liable for any loss of or damage to the goods in an amount exceeding the equivalent of 666.67 SDR per package or unit or 2 SDR per kilogramme of gross weight of the goods lost or damaged, whichever is the higher, unless the nature and value of the goods shall have been declared by the Consignor.” App. to Pet. for Cert. 57a, cl. 8.3. An SDR, or Special Drawing Right, is a unit of account created by the International Monetary Fund and calculated daily on the basis of a basket of currencies. Liability computed per package for the 10 containers, for example, was approximately $17,373 when the bill of lading issued in June 1997, $17,231 when the goods were damaged on October 9, 1997, and $9,763 when the case was argued. See International Monetary Fund Exchange Rate Archives, http:// www.imf.org/external/np/fin/rates/param_rms_mth.cfm (as visited Nov. 5, 2004, and available in Clerk of Court’s case file). Respondents claim that liability computed by weight is higher. The machinery’s weight is not in the record. In any case, because we conclude that Norfolk is also protected by the $500 per package limit in the second bill of lading at issue here, see Part III-B, infra, and thus cannot be liable for more than $5,000 for the 10 containers, each holding one machine, the precise liability under the ICC bill of lading does not matter.

FN2. Clauses extending liability limitations take their name from an English case involving a steamship called Himalaya. See Adler v. Dickson, [1955] 1 Q.B. 158 (C.A.).

“These conditions [for limitations on liability] apply whenever claims relating to the performance of the contract evidenced by this [bill of lading] are made against any servant, agent or other person (including any independent contractor) whose services have been used in order to perform the contract.” App. to Pet. for Cert. 59a, cl. 10.1.

Meanwhile, Kirby separately insured the cargo for its true value with its co-respondent in this case, Allianz Australia Insurance Ltd. (formerly MMI General Insurance, Ltd.).

Having been hired by Kirby, and because it does not itself actually transport cargo, ICC then hired Hamburg Südamerikanische Dampfschiflahrts-Gesellschafft Eggert & Amsinck (Hamburg Süd), a German ocean shipping company, to transport the containers. To formalize their contract for carriage, Hamburg Süd issued its own bill of lading to ICC (Hamburg Süd bill). That bill designates Sydney as the port of loading, Savannah as the port of discharge, and Huntsville as the ultimate destination for delivery. It adopts COGSA’s default rule in limiting the liability of Hamburg Süd, the bill’s designated carrier, to $500 per package. See 46 U.S.C.App. § 1304(5). It also contains a clause extending that liability limitation beyond the “tackles”–that is, to potential damage on land as well as on sea. Finally, it too contains a Himalaya Clause extending the benefit of its liability limitation to “all agents … (including inland) carriers … and all independent contractors whatsoever.” App. 63, cl. 5(b).

Acting through a subsidiary, Hamburg Süd hired Petitioner Norfolk Southern Railroad (Norfolk) to transport the machinery from the Savannah port to Huntsville. Delivery failed. The Norfolk train carrying the machinery derailed en route, causing an alleged $1.5 million in damages. Kirby’s insurance company reimbursed Kirby for the loss. Kirby and its insurer then sued Norfolk in the United States District Court for the Northern District of Georgia, asserting diversity jurisdiction and alleging tort and contract claims. In its answer, Norfolk argued, among other things, that Kirby’s potential recovery could not exceed the amounts set forth in the liability limitations contained in the bills of lading for the machinery’s carriage.

The District Court granted Norfolk’s motion for partial summary judgment, holding that Norfolk’s liability was limited to $500 per container. Upon a joint motion from Norfolk and Kirby, the District Court certified its decision for interlocutory review pursuant to 28 U.S.C. § 1292(b).

A divided panel of the Eleventh Circuit reversed. It held that Norfolk could not claim protection under the Himalaya Clause in the first contract, the ICC bill. It construed the language of the clause to exclude parties, like Norfolk, that had not been in privity with ICC when ICC issued the bill. 300 F.3d 1300, 1308-1309 (2002). The majority also suggested that “a special degree of linguistic specificity is required to extend the benefits of a Himalaya clause to an inland carrier.” Id., at 1310. As for the Hamburg Süd bill, the court held that Kirby could be bound by the bill’s liability limitation “only if ICC was acting as Kirby’s agent when it received Hamburg Süd’s bill.” Id., at 1305. And, applying basic agency law principles, the Court of Appeals concluded that ICC had not been acting as Kirby’s agent when it received the bill. Ibid. Based on its opinion that Norfolk was not entitled to benefit from the liability limitation in either bill of lading, the Eleventh Circuit reversed the District Court’s grant of summary judgment for the railroad. We granted certiorari to decide whether Norfolk could take shelter in the liability limitations of either bill, 540 U.S. 1099, 124 S.Ct. 981, 157 L.Ed.2d 811 (2004), and now reverse.

II

The courts below appear to have decided this case on an assumption, shared by the parties, that federal rather than state law governs the interpretation of the two bills of lading. Respondents now object. They emphasize that, at bottom, this is a diversity case involving tort and contract claims arising out of a rail accident somewhere between Savannah and Huntsville. We think, however, borrowing from Justice Harlan, that “the situation presented here has a more genuinely salty flavor than that.” Kossick v. United Fruit Co., 365 U.S. 731, 742, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961). When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation. Id., at 735, 81 S.Ct. 886.

Our authority to make decisional law for the interpretation of maritime contracts stems from the Constitution’s grant of admiralty jurisdiction to federal courts. See Art. III, § 2, cl. 1 (providing that the federal judicial power shall extend to “all Cases of admiralty and maritime Jurisdiction”). See 28 U.S.C. § 1333(1) (granting federal district courts original jurisdiction over “[a]ny civil case of admiralty or maritime jurisdiction”); R. Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler’s The Federal Courts and the Federal System 733-738 (5th ed.2003). This suit was properly brought in diversity, but it could also be sustained under the admiralty jurisdiction by virtue of the maritime contracts involved. See Pope & Talbot, Inc. v. Hawn, 346 U.S. 406, 411, 74 S.Ct. 202, 98 L.Ed. 143 (1953) (“[S]ubstantial rights … are not to be determined differently whether [a] case is labelled ‘law side’ or ‘admiralty side’ on a district court’s docket”). Indeed, for federal common law to apply in these circumstances, this suit must also be sustainable under the admiralty jurisdiction. See Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 28, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). Because the grant of admiralty jurisdiction and the power to make admiralty law are mutually dependent, the two are often intertwined in our cases.

Applying the two-step analysis from Kossick, we find that federal law governs this contract dispute. Our cases do not draw clean lines between maritime and non-maritime contracts. We have recognized that “[t]he boundaries of admiralty jurisdiction over contracts–as opposed to torts or crimes–being conceptual rather than spatial, have always been difficult to draw.” 365 U.S., at 735, 81 S.Ct. 886. To ascertain whether a contract is a maritime one, we cannot look to whether a ship or other vessel was involved in the dispute, as we would in a putative maritime tort case. Cf. Admiralty Extension Act, 46 U.S.C.App. § 740 (“The admiralty and maritime jurisdiction of the United States shall extend to and include all cases of damage or injury … caused by a vessel on navigable water, notwithstanding that such damage or injury be done or consummated on land”); R. Force & M. Norris, 1 The Law of Seamen § 1:15 (5th ed.2003). Nor can we simply look to the place of the contract’s formation or performance. Instead, the answer “depends upon … the nature and character of the contract,” and the true criterion is whether it has “reference to maritime service or maritime transactions.” North Pacific S.S. Co. v. Hall Brothers Marine Railway & Shipbuilding Co., 249 U.S. 119, 125, 39 S.Ct. 221, 63 L.Ed. 510 (1919) (citing Insurance Co. v. Dunham, 11 Wall. 1, 26, 20 L.Ed. 90 (1871)). See also Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 611, 111 S.Ct. 2071, 114 L.Ed.2d 649 (1991) (“[T]he trend in modern admiralty case law … is to focus the jurisdictional inquiry upon whether the nature of the transaction was maritime”).

The ICC and Hamburg Süd bills are maritime contracts because their primary objective is to accomplish the transportation of goods by sea from Australia to the eastern coast of the United States. See G. Gilmore & C. Black, Law of Admiralty 31 (2d ed.1975) (“Ideally, the [admiralty] jurisdiction [over contracts ought] to include those and only those things principally connected with maritime transportation” (emphasis deleted)). To be sure, the two bills call for some performance on land; the final leg of the machinery’s journey to Huntsville was by rail. But under a conceptual rather than spatial approach, this fact does not alter the essentially maritime nature of the contracts.

In Kossick, for example, we held that a shipowner’s promise to assume responsibility for any improper treatment his seaman might receive at a New York hospital was a maritime contract. The seaman had asked the shipowner to pay for treatment by a private physician, but the shipowner, preferring the cheaper public hospital, offered to cover the costs of any complications that might arise from treatment there. We characterized his promise as a “fringe benefit” to a shipowner’s duty in maritime law to provide ” ‘maintenance and cure.’ ” 365 U.S., at 736-737, 81 S.Ct. 886. Because the promise was in furtherance of a “peculiarly maritime concer[n],” id., at 738, 81 S.Ct. 886, it folded into federal maritime law. It did not matter that the site of the inadequate treatment–which gave rise to the contract dispute–was in a hospital on land. Likewise, Norfolk’s rail journey from Savannah to Huntsville was a “fringe” portion of the intercontinental journey promised in the ICC and Hamburg Süd bills.

We have reiterated that the ” ‘fundamental interest giving rise to maritime jurisdiction is “the protection of maritime commerce.” ‘ ” Exxon, supra, at 608, 111 S.Ct. 2071 (emphasis added) (quoting Sisson v. Ruby, 497 U.S. 358, 367, 110 S.Ct. 2892, 111 L.Ed.2d 292 (1990), in turn quoting Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982)). The conceptual approach vindicates that interest by focusing our inquiry on whether the principal objective of a contract is maritime commerce. While it may once have seemed natural to think that only contracts embodying commercial obligations between the “tackles” (i.e., from port to port) have maritime objectives, the shore is now an artificial place to draw a line. Maritime commerce has evolved along with the nature of transportation and is often inseparable from some land-based obligations. The international transportation industry “clearly has moved into a new era–the age of multimodalism, door-to-door transport based on efficient use of all available modes of transportation by air, water, and land.” 1 Schoenbaum 589 (4th ed.2004). The cause is technological change: Because goods can now be packaged in standardized containers, cargo can move easily from one mode of transport to another. Ibid. See also NLRB v. Longshoremen, 447 U.S. 490, 494, 100 S.Ct. 2305, 65 L.Ed.2d 289 (1980) (” ‘[C]ontainerization may be said to constitute the single most important innovation in ocean transport since the steamship displaced the schooner’ ” (citation omitted)); G. Muller, Intermodal Freight Transportation 15-24 (3d ed.1995).

Contracts reflect the new technology, hence the popularity of “through” bills of lading, in which cargo owners can contract for transportation across oceans and to inland destinations in a single transaction. See 1 Schoenbaum 595. Put simply, it is to Kirby’s advantage to arrange for transport from Sydney to Huntsville in one bill of lading, rather than to negotiate a separate contract–and to find an American railroad itself–for the land leg. The popularity of that efficient choice, to assimilate land legs into international ocean bills of lading, should not render bills for ocean carriage nonmaritime contracts.

Some lower federal courts appear to have taken a spatial approach when deciding whether intermodal transportation contracts for intercontinental shipping are maritime in nature. They have held that admiralty jurisdiction does not extend to contracts which require maritime and nonmaritime transportation, unless the nonmaritime transportation is merely incidental–and that long-distance land travel is not incidental. See, e.g., Hartford Fire Ins. Co. v. Orient Overseas Containers Lines, 230 F.3d 549, 555-556 (C.A.2 2000) (“[T]ransport by land under a bill of lading is not ‘incidental’ to transport by sea if the land segment involves great and substantial distances,” and land transport of over 850 miles across four countries is more than incidental); Sea-Land Serv., Inc. v. Danzig, 211 F.3d 1373, 1378 (C.A.Fed.2000) (holding that intermodal transport contracts were not maritime contracts because they called for “substantial transportation between inland locations and ports both in this country and the Middle East” that was not incidental to the transportation by sea); Kuehne & Nagel (AG & Co.) v. Geosource, Inc., 874 F.2d 283, 290 (C.A.5 1989) (holding that a through bill of lading calling for land transportation up to 1,000 miles was not a traditional maritime contract because such “extensive land-based operations cannot be viewed as merely incidental to the maritime operations”). As a preliminary matter, it seems to us imprecise to describe the land carriage required by an intermodal transportation contract as “incidental”; realistically, each leg of the journey is essential to accomplishing the contract’s purpose. In this case, for example, the bills of lading required delivery to Huntsville; the Savannah port would not do.

Furthermore, to the extent that these lower court decisions fashion a rule for identifying maritime contracts that depends solely on geography, they are inconsistent with the conceptual approach our precedent requires. See Kossick, 365 U.S., at 735, 81 S.Ct. 886. Conceptually, so long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce–and thus it is a maritime contract. Its character as a maritime contract is not defeated simply because it also provides for some land carriage. Geography, then, is useful in a conceptual inquiry only in a limited sense: If a bill’s sea components are insubstantial, then the bill is not a maritime contract.

Having established that the ICC and Hamburg Süd bills are maritime contracts, then, we must clear a second hurdle before applying federal law in their interpretation. Is this case inherently local? For not “every term in every maritime contract can only be controlled by some federally defined admiralty rule.” Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 313, 75 S.Ct. 368, 99 L.Ed. 337 (1955) (applying state law to maritime contract for marine insurance because of state regulatory power over insurance industry). A maritime contract’s interpretation may so implicate local interests as to beckon interpretation by state law. See Kossick, supra, at 735, 81 S.Ct. 886. Respondents have not articulated any specific Australian or state interest at stake, though some are surely implicated. But when state interests cannot be accommodated without defeating a federal interest, as is the case here, then federal substantive law should govern. See Kossick, supra, at 739, 81 S.Ct. 886 (the process of deciding whether federal law applies “is surely … one of accommodation, entirely familiar in many areas of overlapping state and federal concern, or a process somewhat analogous to the normal conflict of laws situation where two sovereignties assert divergent interests in a transaction”); 2 Schoenbaum 61 (“Bills of lading issued outside the United States are governed by the general maritime law, considering relevant choice of law rules”).

Here, our touchstone is a concern for the uniform meaning of maritime contracts like the ICC and Hamburg Süd bills. We have explained that Article III’s grant of admiralty jurisdiction ” ‘must have referred to a system of law coextensive with, and operating uniformly in, the whole country. It certainly could not have been the intention to place the rules and limits of maritime law under the disposal and regulation of the several States, as that would have defeated the uniformity and consistency at which the Constitution aimed on all subjects of a commercial character affecting the intercourse of the States with each other or with foreign states.’ ” American Dredging Co. v. Miller, 510 U.S. 443, 451, 114 S.Ct. 981, 127 L.Ed.2d 285 (1994) (quoting The Lottawanna, 21 Wall. 558, 575, 22 L.Ed. 654 (1875)). See also Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 210, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996) (“[I]n several contexts, we have recognized that vindication of maritime policies demanded uniform adherence to a federal rule of decision” (citing Kossick, supra, at 742, 81 S.Ct. 886; Pope & Talbot, 346 U.S., at 409, 74 S.Ct. 202; Garrett v. Moore-McCormack Co., 317 U.S. 239, 248-249, 63 S.Ct. 246, 87 L.Ed. 239 (1942))); Romero v. International Terminal Operating Co., 358 U.S. 354, 373, 79 S.Ct. 468, 3 L.Ed.2d 368 (1959) (“[S]tate law must yield to the needs of a uniform federal maritime law when this Court finds inroads on a harmonious system[,] [b]ut this limitation still leaves the States a wide scope”).

Applying state law to cases like this one would undermine the uniformity of general maritime law. The same liability limitation in a single bill of lading for international intermodal transportation often applies both to sea and to land, as is true of the Hamburg Süd bill. Such liability clauses are regularly executed around the world. See 1 Schoenbaum 595; Wood, Multimodal Transportation: An American Perspective on Carrier Liability and Bill of Lading Issues, 46 Am. J. Comp. L. 403, 407 (Supp.1998). See also 46 U.S.C.App. § 1307 (permitting parties to extend the COGSA default liability limit to damage done “prior to the loading on and subsequent to the discharge from the ship”). Likewise, a single Himalaya Clause can cover both sea and land carriers downstream, as is true of the ICC bill. See Part III-A, infra. Confusion and inefficiency will inevitably result if more than one body of law governs a given contract’s meaning. As we said in Kossick, when “a [maritime] contract … may well have been made anywhere in the world,” it “should be judged by one law wherever it was made.” 365 U.S., at 741, 81 S.Ct. 886. Here, that one law is federal.

In protecting the uniformity of federal maritime law, we also reinforce the liability regime Congress established in COGSA. By its terms, COGSA governs bills of lading for the carriage of goods “from the time when the goods are loaded on to the time when they are discharged from the ship.” 46 U.S.C.App. § 1301(e). For that period, COGSA’s “package limitation” operates as a default rule. § 1304(5). But COGSA also gives the option of extending its rule by contract. See § 1307 (“Nothing contained in this chapter shall prevent a carrier or a shipper from entering into any agreement, stipulation, condition, reservation, or exemption as to the responsibility and liability of the carrier or the ship for the loss or damage to or in connection with the custody and care and handling of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by sea”). As COGSA permits, Hamburg Süd in its bill of lading chose to extend the default rule to the entire period in which the machinery would be under its responsibility, including the period of the inland transport. Hamburg Süd would not enjoy the efficiencies of the default rule if the liability limitation it chose did not apply equally to all legs of the journey for which it undertook responsibility. And the apparent purpose of COGSA, to facilitate efficient contracting in contracts for carriage by sea, would be defeated.

III

A

Turning to the merits, we begin with the ICC bill of lading, the first of the contracts at issue. Kirby and ICC made a contract for the carriage of machinery from Sydney to Huntsville, and agreed to limit the liability of ICC and other parties who would participate in transporting the machinery. The bill’s Himalaya Clause states:

“These conditions [for limitations on liability] apply whenever claims relating to the performance of the contract evidenced by this [bill of lading] are made against any servant, agent or other person (including any independent contractor) whose services have been used in order to perform the contract.” App. to Pet. for Cert. 59a, cl. 10.1 (emphasis added).

The question presented is whether the liability limitation in Kirby’s and ICC’s contract extends to Norfolk, which is ICC’s sub-subcontractor. The Circuits have split in answering this question. Compare, e.g., Akiyama Corp. of America v. M.V. Hanjin Marseilles, 162 F.3d 571, 574 (C.A.9 1998) (privity of contract is not required in order to benefit from a Himalaya Clause), with Mikinberg v. Baltic S.S. Co., 988 F.2d 327, 332 (C.A.2 1993) (a contractual relationship is required).

This is a simple question of contract interpretation. It turns only on whether the Eleventh Circuit correctly applied this Court’s decision in Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 79 S.Ct. 766, 3 L.Ed.2d 820 (1959). We conclude that it did not. In Herd, the bill of lading between a cargo owner and carrier said that, consistent with COGSA, ” ‘the Carrier’s liability, if any, shall be determined on the basis of $500 per package.’ ” Id., at 302, 79 S.Ct. 766. The carrier then hired a stevedoring company to load the cargo onto the ship, and the stevedoring company damaged the goods. The Court held that the stevedoring company was not a beneficiary of the bill’s liability limitation. Because it found no evidence in COGSA or its legislative history that Congress meant COGSA’s liability limitation to extend automatically to a carrier’s agents, like stevedores, the Court looked to the language of the bill of lading itself. It reasoned that a clause limiting ” ‘the Carrier’s liability’ ” did not “indicate that the contracting parties intended to limit the liability of stevedores or other agents…. If such had been a purpose of the contracting parties it must be presumed that they would in some way have expressed it in the contract.” Ibid. The Court added that liability limitations must be “strictly construed and limited to intended beneficiaries.” Id., at 305, 79 S.Ct. 766.

The Eleventh Circuit, like respondents, made much of the Herd decision. Deriving a principle of narrow construction from Herd, the Court of Appeals concluded that the language of the ICC bill’s Himalaya Clause is too vague to clearly include Norfolk. 300 F.3d, at 1308. Moreover, the lower court interpreted Herd to require privity between the carrier and the party seeking shelter under a Himalaya Clause. Id., at 1308. But nothing in Herd requires the linguistic specificity or privity rules that the Eleventh Circuit attributes to it. The decision simply says that contracts for carriage of goods by sea must be construed like any other contracts: by their terms and consistent with the intent of the parties. If anything, Herd stands for the proposition that there is no special rule for Himalaya Clauses.

The Court of Appeals’ ruling is not true to the contract language or to the intent of the parties. The plain language of the Himalaya Clause indicates an intent to extend the liability limitation broadly–to “any servant, agent or other person (including any independent contractor)” whose services contribute to performing the contract. App. to Pet. for Cert. 59a, cl. 10.1 (emphasis added). “Read naturally, the word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’ ” United States v. Gonzales, 520 U.S. 1, 5, 117 S.Ct. 1032, 137 L.Ed.2d 132 (1997) (quoting Webster’s Third New International Dictionary 97 (1976)). There is no reason to contravene the clause’s obvious meaning. See Green v. Biddle, 8 Wheat. 1, 89-90, 5 L.Ed. 547 (1823) (“[W]here the words of a law, treaty, or contract, have a plain and obvious meaning, all construction, in hostility with such meaning, is excluded”). The expansive contract language corresponds to the fact that various modes of transportation would be involved in performing the contract. Kirby and ICC contracted for the transportation of machinery from Australia to Huntsville, Alabama, and, as the crow flies, Huntsville is some 366 miles inland from the port of discharge. See G. Fitzpatrick & M. Modlin, Direct-Line Distances 168 (1986). Thus, the parties must have anticipated that a land carrier’s services would be necessary for the contract’s performance. It is clear to us that a railroad like Norfolk was an intended beneficiary of the ICC bill’s broadly written Himalaya Clause. Accordingly, Norfolk’s liability is limited by the terms of that clause.

B

The question arising from the Hamburg Süd bill of lading is more difficult. It requires us to set an efficient default rule for certain shipping contracts, a task that has been a challenge for courts for centuries. See, e.g., Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854). ICC and Hamburg Süd agreed that Hamburg Süd would transport the machinery from Sydney to Huntsville, and agreed to the COGSA “package limitation” on the liability of Hamburg Süd, its agents, and its independent contractors. The second question presented is whether that liability limitation, which ICC negotiated, prevents Kirby from suing Norfolk (Hamburg Süd’s independent contractor) for more. As we have explained, the liability limitation in the ICC bill, the first contract, sets liability for a land accident higher than this bill does. See n. 1, supra. Because Norfolk’s liability will be lower if it is protected by the Hamburg Süd bill too, we must reach this second question in order to give Norfolk the full relief for which it petitioned.

To interpret the Hamburg Süd bill, we turn to a rule drawn from our precedent about common carriage: When an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed. The intermediary is certainly not automatically empowered to be the cargo owner’s agent in every sense. That would be unsustainable. But when it comes to liability limitations for negligence resulting in damage, an intermediary can negotiate reliable and enforceable agreements with the carriers it engages.

We derive this rule from our decision about common carriage in Great Northern R. Co. v. O’Connor, 232 U.S. 508, 34 S.Ct. 380, 58 L.Ed. 703 (1914). In Great Northern, an owner hired a transfer company to arrange for the shipment of her goods. Without the owner’s express authority, the transfer company arranged for rail transport at a tariff rate that limited the railroad’s liability to less than the true value of the goods. The goods were lost en route, and the owner sued the railroad. The Court held that the railroad must be able to rely on the liability limitation in its tariff agreement with the transfer company. The railroad “had the right to assume that the Transfer Company could agree upon the terms of the shipment”; it could not be expected to know if the transfer company had any outstanding, conflicting obligation to another party. Id., at 514, 34 S.Ct. 380. The owner’s remedy, if necessary, was against the transfer company. Id., at 515, 34 S.Ct. 380.

Respondents object to our reading of Great Northern, and argue that this Court should fashion the federal rule of decision from general agency law principles. Like the Eleventh Circuit, respondents reason that Kirby cannot be bound by the bill of lading that ICC negotiated with Hamburg Süd unless ICC was then acting as Kirby’s agent. Other Courts of Appeals have also applied agency law to cases similar to this one. See, e.g., Kukje Hwajae Ins. Co. v. The M/V Hyundai Liberty, 294 F.3d 1171, 1175-1177 (C.A.9 2002) (an intermediary acted as a cargo owner’s agent when negotiating a bill of lading with a downstream carrier).

We think reliance on agency law is misplaced here. It is undeniable that the traditional indicia of agency, a fiduciary relationship and effective control by the principal, did not exist between Kirby and ICC. See Restatement (Second) of Agency § 1 (1957). But that is of no moment. The principle derived from Great Northern does not require treating ICC as Kirby’s agent in the classic sense. It only requires treating ICC as Kirby’s agent for a single, limited purpose: when ICC contracts with subsequent carriers for limitation on liability. In holding that an intermediary binds a cargo owner to the liability limitations it negotiates with downstream carriers, we do not infringe on traditional agency principles. We merely ensure the reliability of downstream contracts for liability limitations. In Great Northern, because the intermediary had been “entrusted with goods to be shipped by railway, and, nothing to the contrary appearing, the carrier had the right to assume that [the intermediary] could agree upon the terms of the shipment.” 232 U.S., at 514, 34 S.Ct. 380. Likewise, here we hold that intermediaries, entrusted with goods, are “agents” only in their ability to contract for liability limitations with carriers downstream.

Respondents also contend that any decision binding Kirby to the Hamburg Süd bill’s liability limitation will be disastrous for the international shipping industry. Various participants in the industry have weighed in as amici on both sides in this case, and we must make a close call. It would be idle to pretend that the industry can easily be characterized, or that efficient default rules can easily be discerned. In the final balance, however, we disagree with respondents for three reasons.

First, we believe that a limited agency rule tracks industry practices. In intercontinental ocean shipping, carriers may not know if they are dealing with an intermediary, rather than with a cargo owner. Even if knowingly dealing with an intermediary, they may not know how many other intermediaries came before, or what obligations may be outstanding among them. If the Eleventh Circuit’s rule were the law, carriers would have to seek out more information before contracting, so as to assure themselves that their contractual liability limitations provide true protection. That task of information gathering might be very costly or even impossible, given that goods often change hands many times in the course of intermodal transportation. See 1 Schoenbaum 589; Wood, 46 Am. J. Comp. L., at 404.

Second, if liability limitations negotiated with cargo owners were reliable while limitations negotiated with intermediaries were not, carriers would likely want to charge the latter higher rates. A rule prompting downstream carriers to distinguish between cargo owners and intermediary shippers might interfere with statutory and decisional law promoting nondiscrimination in common carriage. Cf. ICC v. Delaware, L. & W.R. Co., 220 U.S. 235, 251-256, 31 S.Ct. 392, 55 L.Ed. 448 (1911) (common carrier cannot “sit in judgment on the title of the prospective shipper”); Shipping Act, 46 U.S.C.App. § 1709 (nondiscrimination rules). It would also, as we have intimated, undermine COGSA’s liability regime.

Finally, as in Great Northern, our decision produces an equitable result. See 232 U.S., at 515, 34 S.Ct. 380. Kirby retains the option to sue ICC, the carrier, for any loss that exceeds the liability limitation to which they agreed. And indeed, Kirby has sued ICC in an Australian court for damages arising from the Norfolk derailment. It seems logical that ICC–the only party that definitely knew about and was party to both of the bills of lading at issue here–should bear responsibility for any gap between the liability limitations in the bills. Meanwhile, Norfolk enjoys the benefit of the Hamburg Süd bill’s liability limitation.

IV

We hold that Norfolk is entitled to the protection of the liability limitations in the two bills of lading. Having undertaken this analysis, we recognize that our decision does no more than provide a legal backdrop against which future bills of lading will be negotiated. It is not, of course, this Court’s task to structure the international shipping industry. Future parties remain free to adapt their contracts to the rules set forth here, only now with the benefit of greater predictability concerning the rules for which their contracts might compensate.

The judgment of the United States Court of Appeals for the Eleventh Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

© 2025 Fusable™