ABB Inc. v. CSX Transp., Inc.

• Citation: 721 F.3d 135
• Decision Date: 07 June 2013
• Docket Number: No. 12–1674.,12–1674.
• Parties: ABB INC., Plaintiff–Appellant, v. CSX TRANSPORTATION, INC., Defendant–Appellee. Transportation and Logistics Council, Inc., Amicus Supporting Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

721 F.3d 135

ABB INC., Plaintiff–Appellant,

v.CSX TRANSPORTATION, INC., Defendant–Appellee.

Transportation and Logistics Council, Inc., Amicus Supporting Appellant.

No. 12–1674.

United States Court of Appeals,Fourth Circuit.

Argued: March 21, 2013.

Decided: June 7, 2013.

ARGUED:Jeffrey Mark Young, ABB Inc., Raleigh, North Carolina, for Appellant. Hyman Hillenbrand, Hillenbrand, O'Brien & Solomon, LLP, Fort Lauderdale, Florida, for Appellee. ON BRIEF:Dauna L. Bartley, Sessoms & Rogers, P.A., Durham, North Carolina, for Appellant. Thomas D. Garlitz, Thomas D. Garlitz, PLLC, Charlotte, North Carolina, for Appellee. Raymond A. Selvaggio, Pezold, Smith, Hirschmann & Selvaggio, LLC, Huntington, New York, for Amicus Supporting Appellant.

Before AGEE, KEENAN, and FLOYD, Circuit Judges.

Vacated in part and remanded by published opinion. Judge KEENAN wrote the opinion, in which Judge FLOYD joined. Judge AGEE wrote a separate opinion concurring in part and dissenting in part.

BARBARA MILANO KEENAN, Circuit Judge:

In March 2006, rail carrier CSX Transportation, Inc. (CSX) transported an electrical transformer worth about $1.3 million from shipper ABB Inc.'s plant in St. Louis, Missouri to a customer in Pittsburgh, Pennsylvania (the March 2006 shipment). ABB Inc. (ABB) later filed a complaint in the district court alleging that the transformer was damaged in transit, and that CSX was liable for over $550,000, the full amount of the damage. CSX denied full liability, and alternatively contended that even if the court found CSX liable for the cargo damage, the parties had agreed in the bill of lading to limit CSX's liability to a maximum of $25,000.

The district court held that the parties had limited CSX's potential liability in the bill of lading to $25,000. The parties thereafter entered into a consent judgment, reserving ABB's right to appeal the district court's resolution of the liability limit issue. Upon our review, we conclude that the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, subjected CSX to full liability for the shipment, and that the parties did not modify CSX's level of liability by written agreement as permitted in that statute. We therefore vacate the portion of the district court's judgment limiting any liability on the part of CSX to $25,000.

I.

We begin with a discussion of the complex regulatory scheme governing interstate freight shipments, and the historical context in which the shipment in this case occurred. We also address the role of the Carmack Amendment, which restricts carriers' ability to limit their liability for cargo damage.

A.

In 1887, Congress enacted the Interstate Commerce Act (ICA), 24 Stat. 379, to regulate the transportation industry. Emerson Elec. Supply Co. v. Estes Express Lines Corp., 451 F.3d 179, 183 (3d Cir.2006). The Interstate Commerce Commission (ICC) initially was designated to administer this regulatory regime, but was replaced in 1995 by the Surface Transportation Board. Id. at 183, 186; ICC Termination Act of 1995, Pub.L. No. 104–88, 109 Stat. 803, 932–34. Among other things, the ICC “regulated the railroad industry by requiring rates to be ‘reasonable and just’ and prohibited certain railroad practices, such as rate discrimination [and] price fixing,” and eventually expanded to include the regulation of motor vehicle transportation. Emerson, 451 F.3d at 183.

Until 1995, carriers were required to file their rates, or “tariffs,” publicly with the ICC. Tempel Steel Corp. v. Landstar Inway, Inc., 211 F.3d 1029, 1030 (7th Cir.2000); Comsource Indep. Foodserv. Cos. v. Union Pac. R.R., 102 F.3d 438, 442 (9th Cir.1996). Under this scheme, “the filed rate govern [ed] the legal relationship between shipper and carrier,” and the carrier could not deviate from the published tariff. Maislin Indus., U.S. v. Primary Steel, 497 U.S. 116, 119–20, 126, 110 S.Ct. 2759, 111 L.Ed.2d 94 (1990). For these reasons, shippers and carriers generally were charged with notice of the terms that were required to be included in the carrier's published tariffs. See id. at 127, 110 S.Ct. 2759 (citing Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94, 35 S.Ct. 494, 59 L.Ed. 853 (1915)).

In 1995, in an effort to ease regulatory burdens on the transportation industry, Congress abolished the requirement that tariffs be filed as public documents. ICC Termination Act of 1995, Pub. L. No. 104–88, 109 Stat. 803; Tempel Steel Corp., 211 F.3d at 1030. The term “tariff,” even when still used by shippers and carriers “out of habit,” is now merely a contractual term with “no effect apart from [its] status as [a] contract[ ].” ¹Tempel Steel Corp., 211 F.3d at 1030.

B.

The Carmack Amendment, 49 U.S.C. § 11706,² originally enacted in 1906 as an amendment to the ICA, “creates a national scheme of carrier liability for goods damaged or lost during interstate shipment under a valid bill of lading.” ³5K Logistics, Inc. v. Daily Express, Inc., 659 F.3d 331, 335 (4th Cir.2011) (citation and internal quotation marks omitted). The statute requires that a rail carrier issue a bill of lading for property it transports, and that a carrier is liable to the “person entitled to recover” under the bill of lading “for the actual loss or injury to the property” caused by a carrier.⁴49 U.S.C. § 11706(a). The Carmack Amendment specifies that “[f]ailure to issue a receipt or bill of lading does not affect the liability of a rail carrier.” Id.

Subsection (c) of the statute provides only a limited exception to full carrier liability:

(1) A rail carrier may not limit or be exempt from liability imposed under subsection (a) of this section except as provided in this subsection. A limitation of liability or of the amount of recovery or representation or agreement in a receipt, bill of lading, contract, or rule in violation of this section is void....

(3) A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part may establish rates for transportation of property under which— (A) the liability of the rail carrier for such property is limited to a value established by written declaration of the shipper or by a written agreement between the shipper and the carrier ....

49 U.S.C. § 11706(c) (emphasis added). In other words, the Carmack Amendment “constrains carriers' ability to limit liability by contract,” Kawasaki Kisen Kaisha Ltd. v. Regal–Beloit Corp., ––– U.S. ––––, 130 S.Ct. 2433, 2441, 177 L.Ed.2d 424 (2010), by requiring that a rail carrier remains fully liable for damage caused to its freight unless the shipper has agreed otherwise in writing. 49 U.S.C. § 11706(a), (c); see also Emerson, 451 F.3d at 186 (“[A] carrier's ability to limit [its] liability is a carefully defined exception to the Carmack Amendment's general objective of imposing full liability for the loss of shipped goods.”) (quoting Carmana Designs Ltd. v. N. Am. Van Lines, Inc., 943 F.2d 316, 319 (3d Cir.1991)) (internal quotation marks omitted).⁵ The Carmack Amendment thus protects shippers from attempts by carriers to avoid liability for damage to cargo under the carriers' control, and “relieve[s] cargo owners of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.” Kawasaki, 130 S.Ct. at 2441 (citation omitted).

To determine whether a carrier has limited its liability consistent with the strictures of the Carmack Amendment, courts have applied a four-part test, under which carriers must: (1) provide the shipper, upon request, a copy of its rate schedule; ⁶ (2) “give the shipper a reasonable opportunity to choose between two or more levels of liability; (3) obtain the shipper's agreement as to his choice of carrier liability limit; and (4) issue a bill of lading prior to moving the shipment that reflects any such agreement.” OneBeacon Ins. Co. v. Haas Indus., 634 F.3d 1092, 1099–1100 (9th Cir.2011); see also Chandler v. Aero Mayflower Transit Co., 374 F.2d 129, 137 (4th Cir.1967) (explaining the requirement of “reasonable notice” to choose between levels of liability). The Carmack Amendment's exception allowing for limited liability is “a very narrow exception to the general rule” imposing full liability on the carrier. Toledo Ticket Co. v. Roadway Express, 133 F.3d 439, 442 (6th Cir.1998) (citing Carmack Amendment for motor carriers, as previously codified at 49 U.S.C. § 10730). Courts “will [ ] carefully scrutinize[ ]” any alleged limitation of liability “to assure that the shipper was given a meaningful choice and exercised it as evidenced by a writing.” Acro Automation Sys. v. Iscont Shipping, 706 F.Supp. 413, 416 (D.Md.1989).

II.

In its complaint filed against CSX, ABB alleged that CSX was liable for the “actual loss or injury arising from the damage to the [t]ransformer” under the Carmack Amendment. ABB also asserted state law claims for negligence and breach of contract.

CSX did not admit liability, but raised as an affirmative defense that any liability on its part was limited to a maximum of $25,000.⁷ CSX argued that the bill of lading (BOL) executed by ABB had incorporated by reference a $25,000 liability limitation contained in a separate price list used by CSX.

The district court did not consider the issue whether ABB had established a prima facie case of liability against CSX but, on submissions by the parties, proceeded to consider the liability limitation issue. The court awarded summary judgment to CSX based on its defense that it had limited its liability. The court also reasoned that the Carmack Amendment did not apply to the shipment because the shipper, rather than the carrier, had drafted the BOL. Pursuant to the consent judgment entered into by the parties, ABB timely appealed from the district court's determination regarding CSX's limitation of liability.⁸

Before beginning our analysis of the Carmack Amendment, we describe the two documents central to our resolution of...