Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co.

• Decision Date: 29 August 2012
• Docket Number: Nos. 11–2949,11–2967.,s. 11–2949
• Citation: Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co., 696 F.3d 647 (7th Cir. 2012)
• Parties: KAWASAKI KISEN KAISHA, LTD., “K” Line America, Inc., and Union Pacific Railroad Co., Plaintiffs–Appellants, v. PLANO MOLDING CO., Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

696 F.3d 647

KAWASAKI KISEN KAISHA, LTD., “K” Line America, Inc., and Union Pacific Railroad Co., Plaintiffs–Appellants,

v.PLANO MOLDING CO., Defendant–Appellee.

Nos. 11–2949, 11–2967.

United States Court of Appeals, Seventh Circuit.

Argued March 27, 2012.

Decided Aug. 29, 2012.

John P. Meade(argued), Attorney, Washington, DC, Warren J. Marwedel, Attorney, Marwedel, Minichello & Reeb Chicago, IL, Kyle Wallor(argued), Attorney, Lamson Dugan & Murray, Omaha, NE, for Plaintiffs–Appellants.

Allen C. Wasserman(argued), Attorney, Locke Lord Bissell & Liddell, LLP, New York, NY, for Defendant–Appellee.

Before FLAUM, WILLIAMS, and TINDER, Circuit Judges.

FLAUM, Circuit Judge.

On April 21, 2005, a Union Pacific Railroad Co. train derailed in Oklahoma causing extensive damage to both the railroad and the train's cargo.Kawasaki Kisen Kaisha, Ltd.(“Kawasaki”), “K”Line America, Inc.(“KAM”)(collectively “K–Line”), and Union Pacific Railroad Co.(“Union Pacific”)(collectively “appellants”) blame Plano Molding Co.(“Plano”) for the derailment, alleging Plano's steel injection molds were improperly packed, broke through their crate, and fell onto the track.Appellants now attempt to hold Plano liable for certain damages caused by the derailment, and seek indemnification for claims made against them by others who suffered losses in the accident.The district court granted Plano's motion for summary judgment.For the reasons set forth below, we reverse in part, affirm in part, and remand.

I.Background

A.Factual Background

Plano is an Illinois corporation that designs, manufactures, and sells plastic storage boxes, including tackle boxes.Identifying a need for new molds, Plano contacted CMT International, Inc.(“CMT”), a service provider that assists customers in the United States who wish to purchase products from Asia.After establishing Plano's mold specifications, CMT solicited bids from manufacturers in Taiwan and China.CMT presented Plano with the bids, and Plano selected Kunshan, a Chinese company, as its fabricator.The purchase orders (“POs”) between CMT and Plano were for the “design, engineer, construct and supply” of two steel injection molds for use in Plano's Illinois factory.

It is undisputed that World, a non-vessel operating common carrier, was selected to coordinate the molds' transportation from China to the United States.The original terms of carriage were Free on Board Shanghai (“FOB Shanghai”).The term FOB indicates that the buyer takes ownership of the goods as soon as it passes over the rail of the ship.At World's suggestion, in a series of emails between Robb Yunger(“Yunger”) of Plano, John Wember(“Wember”) of World, and Amna Shah(“Shah”) of CMT, the parties agreed to alter the delivery terms from FOB Shanghai to Delivered Duty Paid (“DDP”).Under DDP terms, the buyer does not take ownership until the goods arrive at its door.World representative Wember explained that ensuring the correct shipping terms was paramount because “if anything were to happen in transit you want your paperwork to reflect the true terms.”Despite this discussion, the World bill of lading indicates that World was the consignee, consistent with FOB Shanghai shipping terms.Even so, CMT sent Plano an invoice dated July 14, 2005.This invoice charged Plano for the price of the molds, as well as shipping; CMT paid World directly for certain shipping costs, billing Plano later.CMT also paid the import duty and custom cleared service charge, and then invoiced Plano.These facts suggest that it was CMT that arranged the transportation with World under DDP terms.

As the freight forwarder, World contracted with THI Group LTD(“THI”) and K–Line to ship the molds from China to Illinois.K–Line subcontracted the movement within the United States, from California to Illinois, to Union Pacific.K–Line supplied the shipping container to THI, and the molds were packed on-site at Kunshan.THI delivered the goods, packed in the container, to K–Line in Shanghai.K–Line transported the molds from China to the United States, transferring the molds to a Union Pacific in California.The train derailed near Tyrone, Oklahoma on April 21, 2005, causing $2 million in damage to K–Line customers' cargo and separately costing Union Pacific about $2 million.

Plano received World's bill of lading via email on April 3, 2005, the day the molds were placed on the shipping vessel in Shanghai.The World bill of lading contained a “Himalaya clause” granting World's subcontractors all warranties and indemnities defined in the World bill of lading.Relevant to this case, under the World bill of lading, when a container is packed by a party other than World, the “Merchant” warrants “that the stowage and seals of the containers are safe and proper and suitable for handling and carriage and indemnifies[World] for any injury, loss or damage caused by breach of this warranty.”(emphasis added).Section 2.3 of the World bill of lading defines “Merchant” as “the Shipper, the Receiver, the Consignor, the Consignee, the Holder of this Bill of Lading and any person having a present or future interest in the Goods or any person acting on behalf of any of the above-mentioned persons.”

K–Line issued its own bill of lading which contained a similar indemnification provision:

If Goods received by Carrier are in Container(s) into which contents have been packed by or on behalf of Merchant, Merchant warrants that the stowage and securing of the contents of the Container(s) and their closing and sealing are safe and also warrants that Container(s) and contents thereof are suitable for Carriage....In the event of Merchant's breach of said warranties, Carrier shall not be responsible for any loss of or damage to or in connection with goods and Merchant shall be liable for loss of or damage to any property, or for personal injury ... and shall defend, indemnify and hold Carrier harmless against all loss, damage, liability, cost or expense....

The definition of “Merchant” in K–Line's bill of lading was similarly inclusive defining a “Merchant” as “shipper, consignor, consignee, owner and receiver of goods, and holder, and anyone acting on behalf of any such person.”

B.Procedural Background

Following the derailment of the Union Pacific train near Tyrone, Oklahoma, in April of 2005, eight complaints were filed in the Southern District of New York by owners of cargo damaged by the derailment, or their subrogated insurers, against Kawasaki, KAM, and Union Pacific.Union Pacific also sued Kawasaki and KAM for damage to the railroad property.Kawasaki and KAM filed third-party complaints against Plano, World Commerce Services LLC(“World”) and CMT for indemnity or contribution.Union Pacific filed a third-party complaint against Plano and CMT on the same grounds.Four other cargo damage cases were filed in California.

The third-party complaints against CMT and Plano were dismissed by the district court in New York for lack of personal jurisdiction, and Kawasaki and KAM then filed an action in the Northern District of Illinois against Plano and CMT.The Illinois action and the eight New York actions were centralized for consolidated, pre-trial proceeding in the Southern District of New York.Union Pacific filed a complaint in intervention.

All cargo claims have settled, as have appellants' claims against World and CMT, leaving only the claims of Kawasaki, KAM, and Union Pacific against Plano.The Southern District of New York transferred the case to the Northern District of Illinois, where the district court granted Plano's motion for summary judgment.This appeal followed.

II.Discussion

We review de novo the district court's grant of summary judgment.O'Leary v. Accretive Health,657 F.3d 625, 630(7th Cir.2011).Summary judgment is appropriate where the movant demonstrates that there exists no genuine dispute as to an issue of material fact, and he is entitled to judgment as a matter of law.Fed.R.Civ.P. 56(a).The court must review the record in the light most favorable to the non-moving party and construe all reasonable inferences in that party's favor.Righi v. SMC Corp.,632 F.3d 404, 408(7th Cir.2011).Here, we apply federal maritime law because jurisdiction exists under 28 U.S.C. § 1333.SeeNorfolk S. Ry. Co. v. Kirby,543 U.S. 14, 24–25, 125 S.Ct. 385, 160 L.Ed.2d 283(2004)(findingbills of lading involving overseas shipment of goods to be maritime contracts even where the last leg of the journey was by rail).

Appellants unsuccessfully sought damages and indemnification from Plano in the district court, asserting theories grounded both in contract and tort.Though we conclude that appellants' negligence claims were properly rejected, we find unresolved questions of fact material to the determination of one of appellants' contract claims.Therefore, we affirm the district court as to the contract claim based on K–Line's bill of lading but reverse as to the contract claim based on World's bill of lading.We also affirm the district court's decision regarding the negligence claims.We remand for further proceedings consistent with this opinion.

A.Contract Claims

Appellants assert that Plano is liable for injuries caused by the train derailment under both the K–Line and World bills of lading.Under both bills of lading, Plano could likely be considered a “Merchant” and thus subject to liability if it breached the warranty to safely and adequately package the molds it handed over for shipment.First, appellants argue that World was acting as Plano's agent under a non-traditional agency theory, and therefore legally bound Plano to the K–Line bill of lading.In the alternative, appellants argue that Plano is liable under K–Line's bill of lading because Plano accepted its terms through conduct.Finally, appellants contend that Plano contracted directly with World, and is therefore bound to the World bill of lading, which contains explicit warranties...