547 F.3d 351 (2nd Cir. 2008), 07-1207, Rexroth Hydraudyne B.V. v. Ocean World Lines, Inc.

Docket Nº:07-1207-cv.
Citation:547 F.3d 351
Party Name:REXROTH HYDRAUDYNE B.V., Plaintiff-Appellant, v. OCEAN WORLD LINES, INC., Cosco North American Inc., Cosco Americas, Inc. and Cosco Container Lines Americas, Inc., Defendants-Appellees.
Case Date:November 06, 2008
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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547 F.3d 351 (2nd Cir. 2008)

REXROTH HYDRAUDYNE B.V., Plaintiff-Appellant,


OCEAN WORLD LINES, INC., Cosco North American Inc., Cosco Americas, Inc. and Cosco Container Lines Americas, Inc., Defendants-Appellees.

No. 07-1207-cv.

United States Court of Appeals, Second Circuit

November 6, 2008

Argued: Aug. 4, 2008.

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[Copyrighted Material Omitted]

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Susan Schneiderman, Ballon Stoll Bader & Nadler, P.C., New York, NY, for Appellant.

Peter D. Clark, Clark, Atcheson & Reisert, North Bergen, NJ, for Appellees.

Before: RAGGI, WESLEY, and LIVINGSTON, Circuit Judges.

WESLEY, Circuit Judge:

Two years ago this Court examined the interplay of two federal statutes that govern the transport of goods from foreign shores to inland delivery points in the United States. See Sompo Japan Ins. Co. of Am. v. Union Pac. R.R., 456 F.3d 54 (2d Cir.2006). We concluded that, when a rail carrier is charged with damage to the shipment, its liability is defined by the Carmack Amendment 1 to the Interstate Commerce Act (“ Carmack" ), 49 U.S.C. § 11706, and that alternative contractual provisions of the accompanying intermodal bill of lading-even when authorized by the Carriage of Goods by Sea Act (“ COGSA" ), 46 U.S.C. § 30701 note sec. 7-are ineffective as to the rail carrier unless they satisfy the requirements set forth by Carmack and the Staggers Rail Act of 1980, Pub.L. No. 96-448, 94 Stat. 1895 (codified

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at 49 U.S.C. § 11706). See Sompo, 456 F.3d at 76.2 COGSA has the force of federal law at sea (“ tackle-to-tackle" ) but is stripped of its statutory power during the land portion of the shipment's journey (“ beyond the tackles" ). This case presents an interesting variation of the problem presented in Sompo : can parties that either provide the ocean portion of the international journey, or play a role in making rail carrier arrangements for the inland leg, employ the contract-based liability protections authorized by COGSA for the inland leg when the injury to the shipment occurs on the inland leg, or are those parties subject to the same Carmack-based liability as that imposed on the domestic rail carrier? We hold that defendants here do not fall within the statutory grasp of Carmack and are therefore entitled to employ the contractual limitations of liability set out in the through bills of lading. Accordingly, we affirm the judgment of the United States District Court for the Southern District of New York (Kaplan, J. ).


The material facts are undisputed. On October 24, 2000, Rexroth Hydraudyne B.V. (“ Hydraudyne" ) contracted with Ocean World Lines, Inc. (“ OWL" ) for the transport of cargo consisting of “ 27 Packages, being totally one set [of] equipment for a six degrees of freedom motion system for a 1900 beech flight simulator" between Rotterdam, the Netherlands, and the ultimate consignee, Training Devices International, Inc. (“ TDI" ), in Englewood, Colorado, via the Port of Houston. OWL in turn contracted with Cosco Container Lines Co., Inc. (“ Cosco Shanghai" ) to carry the cargo to the Port of Houston. Cosco Shanghai, through its U.S. agent, Cosco North America, Inc. (“ Cosco NA" ), arranged for inland rail transport from Houston to Colorado by Union Pacific. The cargo reached Houston on November 11, 2000. Two days later, Cosco NA delivered the cargo to Union Pacific for transport to Denver, where it would undergo customs clearance.

On or before November 20, 2000, Hydraudyne instructed OWL to “ hold" the cargo and not to release it to TDI, explaining that TDI had defaulted on financial obligations to Hydraudyne. OWL accepted these instructions and undertook to perform. The instructions were relayed to Cosco NA by OWL. The cargo remained at the Union Pacific freight station in Denver until January 5, 2001, when it was released improperly by Cosco Shanghai for delivery to TDI. OWL and the Cosco defendants concede this constituted a breach of the contract of carriage. TDI failed to pay for the cargo, ultimately filing a voluntary proceeding for liquidation under Chapter 7 of the Bankruptcy Code. Hydraudyne lodged a timely claim against the carriers.

The cargo was carried under two contracts of carriage executed on the same day. The OWL bill of lading incorporated the terms of its tariff. It also provided for a $500 per package liability limitation as authorized by COGSA and extended COGSA's reach beyond “ the period from the time when the goods are loaded on to the time when they are discharged from the ship." 46 U.S.C. § 30701 note sec. 1(e). This provision is known as a period of responsibility clause. See Sompo, 456 F.3d at 56. The bill of lading extended the

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benefit of all its provisions to the agents and subcontractors of OWL (a so-called “ Himalaya Clause" ). The Cosco Shanghai combined transport bill of lading provided that carriage to or through U.S. ports would be subject to COGSA and also contained a Himalaya Clause. The Cosco Shanghai non-negotiable waybill provided that the shipper accepted all terms and conditions of the combined transport bill of lading, including the package limitation.

In November 2001, while TDI's bankruptcy was pending, OWL commenced an action in the United States District Court for the Southern District of New York against Hydraudyne, Cosco NA, and Cosco Shanghai, seeking a declaratory judgment that would limit OWL's liability to $500 per package as provided under COGSA, or a maximum of $13,500 for 27 packages. Union Pacific was not named as a party in the suit. In April 2002, the parties stipulated to discontinue the action without prejudice. In February 2006, Cosco NA was dissolved and Cosco Container Lines Americas, Inc. (“ CCLA" ) assumed its duties and obligations.

The present action was commenced by Hydraudyne on July 21, 2006, following its recovery of $386,619.19 from TDI's bankruptcy estate, thereby reducing the principal amount of its claim against the defendants to $297,630.81. As before, Union Pacific was not named in the suit.

Defendants moved for partial summary judgment, arguing that as a result of the package limitation provisions contained in the through bills of lading, their combined liability was limited to $13,500. The district court found Carmack inapplicable because it “ applies only to certain rail carriers" and “ the issue of rail carrier liability is not presented here." Rexroth Hydraudyne B.V. v. Ocean World Lines, Inc., No. 06 Civ. 5549, 2007 WL 541958, at *2 (S.D.N.Y. Feb. 14, 2007). The court further found that the defendants' “ erroneous failure to adhere to the delivery ‘ hold’ " did not “ constitute[ ] such a deviation as to deprive defendants of the package limitation [of COGSA]." Id. at *3. Accordingly, the district court granted the defendants' motion for partial summary judgment limiting their liability to no more than $13,500. Id. This appeal followed.



This case has nothing to do with the conduct or acts of the rail carrier Union Pacific or any other inland carrier. Instead, the defendants consist of a non-vessel operating common carrier (OWL), a vessel operating common carrier (Cosco Shanghai), and its U.S. agent (CCLA). Thus, the present case differs markedly from the circumstances present in Sompo. As the district court correctly noted, Sompo “ addresses the impact of the Carmack Amendment, which applies only to certain rail carriers, to the liability of a rail carrier." Id. at *2.

It is clear from Sompo that a “ contractual provision extending COGSA's terms inland must yield to Carmack" if Carmack is applicable. 456 F.3d at 73. In Sompo, a shipper's insurer pressed a subrogated claim for goods damaged during the domestic rail portion of a continuous international shipment against the rail carrier-Union Pacific-that transported the goods on the inland leg of the journey. Id. at 55. The district court granted partial summary judgment in favor of Union Pacific, giving effect to a contract for carriage-similar to the provisions in play here-that incorporated COGSA by reference and effectively limited Union Pacific's liability to $500 per tractor. Id.

On appeal, this Court determined that Carmack applied to the domestic rail

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portion of the continuous intermodal shipment and contrary contract provisions were unenforceable. See id. at 68, 73. In support of its interpretation of Carmack, the Sompo Court stated “ Congress's understanding that the boundaries of Carmack's applicability have always been co-extensive with those of the ICC's [Interstate Commerce Commission's] jurisdiction." 3 Id. at 68. Thus, Carmack covered any carrier subject to the ICC's jurisdiction and did so with the force of law. The Court noted that applying a contractual extension of COGSA to the exclusion of Carmack would “ contradict well-established circuit precedent holding that period of responsibility provisions do not have statute-like status and would undermine the text of the statute itself, which explicitly states that COGSA does not affect laws governing the carriage of goods prior to loading and after discharge." Id. at 74-75. Ultimately, the Court concluded “ that the contractual provision extending COGSA's terms inland must yield to Carmack." Id. at 73.4 Sompo did not address whether Carmack is applicable to those similarly situated to defendants in this case-an intermediary shipping company that agrees to make shipping arrangements for the shipper from receipt to delivery (OWL), an ocean carrier that provides the ocean passage (Cosco Shanghai), or that carrier's agent that arranges rail carriage for the inland leg (Cosco NA, now called CCLA). Sompo establishes that Carmack trumps a conflict between itself and a contractual extension of COGSA inland for transports covered under Carmack. It does not, however, answer the dispositive question in this case: does Carmack also define the liability for the defendants presented...

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