American Synthetic Rubber Corp. v. Louisville & NR Co.

• Decision Date: 18 February 1970
• Docket Number: No. 19153.,19153.
• Citation: 422 F.2d 462
• Parties: AMERICAN SYNTHETIC RUBBER CORPORATION and American Rubber & Chemical Company, Plaintiffs-Appellants, v. LOUISVILLE & NASHVILLE RAILROAD COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

422 F.2d 462 (1970)

AMERICAN SYNTHETIC RUBBER CORPORATION and American Rubber & Chemical Company, Plaintiffs-Appellants, v. LOUISVILLE & NASHVILLE RAILROAD COMPANY, Defendant-Appellee.

No. 19153.

United States Court of Appeals, Sixth Circuit.

February 18, 1970.

Hubert T. Willis, Louisville, Ky., O. Grant Bruton, Louisville, Ky., on the brief, for appellants.

Joseph E. Stopher, Louisville, Ky., A. J. Deindoerfer, Louisville, Ky., Joseph L. Lenihan, Eugene W. Herde, David M. Yearwood, Louisville, Ky., on the brief, for appellee.

Before EDWARDS and COMBS, Circuit Judges, and O'SULLIVAN, Senior Circuit Judge.

COMBS, Circuit Judge.

This action arose out of the misdelivery of a shipment of chemicals by the Louisville & Nashville Railroad, and the subsequent mixing of that shipment's contents with other chemicals by the consignees in their plant facilities. A complaint for damages based on breach of contract and negligence was originally filed against L & N in a Kentucky state court by the consignee, American Synthetic Rubber Corporation, and its affiliate, American Rubber & Chemical Company. The L & N removed the action to federal district court, contending that it arose under the Carmack Amendment, 49 U.S.C. § 20(11), and was therefore removable under 28 U.S.C. §§ 1337, 1441(a), and 1445(b). The district court denied plaintiff's motion to remand in an opinion reported at 291 F. Supp. 723. The L & N then moved for summary judgment. That motion was granted on the ground that plaintiffs had not filed a claim in writing with defendant L & N within nine months as required by section 2(b) of the bill of lading.

The facts are undisputed. In February, 1966, American Synthetic ordered several tank carloads of the chemical butadiene. The carload in question was shipped from Houston, Texas, via the Missouri Pacific Railroad on March 23, 1966, and arrived in Memphis, Tennessee, on March 27. That carload, numbered GATX 84196, was then transferred from the Missouri Pacific to the L & N pursuant to the bill of lading. Defendant L & N had contracted to transport the shipment from Memphis to Louisville, Kentucky, where a Louisville belt line company, K & I, would receive the shipment for later delivery to plaintiffs' Louisville plant.

On March 27, the L & N also received from the Missouri Pacific at Memphis a carload of ethylene oxide, numbered GATX 84796, destined for Olin Mathieson at Doe Run, Kentucky, approximately forty miles from Louisville. The waybills which outlined the routes for these two shipments were interchanged by L & N personnel in Memphis. As a result, L & N delivered the carload of ethylene oxide to K & I on March 29, along with documents identifying the shipment as butadiene, GATX 84196. Conversely, the butadiene was first delivered to Olin Mathieson although four days later it was delivered to and accepted by plaintiffs.

On March 31, American Synthetic ordered K & I to deliver the carload of butadiene, numbered GATX 84196, in conformance with the bill of lading which American Synthetic then had. When K & I later informed plaintiffs that there was no car numbered GATX 84196, but one numbered GATX 84796, K & I was told to deliver that one since it probably was the same car. Car number GATX 84796 was plainly labeled ethylene oxide and carried "dangerous" placards. Nevertheless, upon arrival at the plant, it was unloaded by plaintiffs' employees into facilities for butadiene. The resulting damages were extensive.

After receiving notice that an error had occurred in routing these shipments, L & N officials visited plaintiffs' plant on April 4, 1966, to investigate the circumstances surrounding the misdelivery of the carload of ethylene oxide. According to the affidavit of the president of American Synthetic, these officials were then made aware that damage was being claimed on account of the misdelivery although the extent of the damage had not been ascertained. It is said in the affidavit that L & N officials acknowledged the existence of plaintiffs' claim and admitted liability. At that time, two documents presented to the L & N representatives recited, in essence, that the railroad had made a misdelivery in that ethylene oxide had been delivered rather than butadiene. After these documents, which were essentially business records, had been examined on the spot by the L & N officials, they were handed back to the American Synthetic representatives. On January 20, 1967, more than nine months after this meeting, plaintiffs submitted a "Memorandum of Facts" to defendant, outlining the extent of the damages.

The initial question is whether the district court correctly held that the Carmack Amendment, 49 U.S.C. § 20(11), 34 Stat. 595 (1906), is applicable to the factual situation outlined above. If so, the case is within the original jurisdiction of the federal courts, and admittedly was properly removed from the state court under 28 U. S.C. §§ 1337, 1441(a), and 1445(b). A second question is whether the notice of claim was sufficient under § 2(b) of the bill of lading.

The Carmack Amendment provides in pertinent part:

"Any * * * railroad * * * receiving property for transportation from a point in one State * * * to a point in another State * * * shall issue a receipt or bill of lading therefor, and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it or by any common carrier * * * to which such property may be delivered or over whose line or lines such property may pass * * * or any * * * railroad * * * delivering said property so received and transported shall be liable to the lawful holder of said receipt or bill of lading * * * for the full actual loss, damage, or injury to such property caused by it or by any such common carrier * * * to which such property may be delivered or over whose line or lines such property may pass * * * And provided further, That * * * the delivering carrier shall be construed to be the carrier performing the line-haul service nearest to the point of destination and not a carrier performing merely a switching service at the point of destination * * *."

In contesting the applicability of the Carmack Amendment, plaintiffs-appellants point to the words "loss, damage or injury to such property," contending that the statute comes into play only where damages are sought for delay, loss, damage, or injury to the shipment itself. Relying on this premise, appellants maintain that, since the shipment of butadiene was delivered intact, the Carmack Amendment does not apply, and therefore their suit for damages caused by the delivery of the carload of ethylene oxide was improperly removed to district court. The railroad, however, takes a broader view of the Carmack Amendment, contending that it applies to any cause of action arising by virtue of a breach of an interstate contract of carriage. It is argued that the delivery of ethylene oxide instead of butadiene breached the interstate contract of carriage so that an action for damages occasioned by that breach necessarily arose under the Carmack Amendment.

After examination of the relevant pronouncements of the Supreme Court interpreting the Carmack Amendment, we conclude that statute encompasses an action, such as this, for damages arising out of an abortive attempt to deliver in accordance with the interstate contract of carriage. In Adams Express Co. v. Croninger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314 (1913), an action for nondelivery was brought in state court to recover the full market value of the shipment; the bill of lading adopted pursuant to the federal statute contained a limitation of value clause. The carrier relied upon the Carmack Amendment "as the only regulation applicable to an interstate shipment." In discussing the exclusive character of the Carmack Amendment regarding a carrier's liability under interstate contracts of shipment, the Supreme Court made the following observations:

"That the legislation supersedes all the regulations and policies of a particular state upon the same subject results from its general character. It embraces the subject of the liability of the carrier under a bill of lading which he must issue and limits his power to exempt himself by rule, regulation or contract. Almost every detail of the subject is covered so completely that there can be no rational doubt but that Congress intended to take possession of the subject and supersede all state regulation with reference to it. Only the silence of Congress authorized the exercise of the police power of the state upon the subject of such contracts. * * *

"It is evident that Congress intended to adopt a uniform rule and relieve such contracts from the diverse regulation which they had been theretofore subject. * * *

"The liability thus imposed is limited to `any loss, injury or damage caused by it or a succeeding carrier to whom the property may be delivered,\' and plainly implies a liability for some default in its common-law duty as a common carrier.

"But it has been argued that the non-exclusive character of this regulation is manifested by the proviso of the section, and that state legislation upon the same subject is not superseded, and that the holder of any such bill of lading may resort to any right of action against such a carrier conferred by existing state law. This view is untenable. It would result in the nullification of the regulation of a national subject and operate to maintain the confusion of the diverse regulation which it was the purpose of Congress to put an end to." 226 U. S. 491, 505-507, 33 S.Ct. 148, 152

The interpretation of Carmack adopted in Croninger was further developed in New York, Philadelphia & Norfolk R. R. v. Peninsula Exchange, 240 U.S. 34, 36 S.Ct. 230, 60 L.Ed. 511 (1916), a suit by the consignee seeking damages from the carrier for failure to deliver with reasonable dispatch. Rejecting the argument that the Carmack Amendment did not cover an...