Norfolk S. Ry. Co. v. Sun Chem. Corp.

• Decision Date: 29 November 2012
• Docket Number: No. A12A1195.,A12A1195.
• Citation: 735 S.E.2d 19,318 Ga.App. 893
• Parties: NORFOLK SOUTHERN RAILWAY COMPANY v. SUN CHEMICAL CORP. et al.
• Court: Georgia Court of Appeals

318 Ga.App. 893

735 S.E.2d 19

NORFOLK SOUTHERN RAILWAY COMPANY

v.SUN CHEMICAL CORP. et al.

No. A12A1195.

Court of Appeals of Georgia.

Nov. 29, 2012.

Glen M. Darbyshire, Savannah, Paul D. Keenan, for Appellant.

Edwin D. Robb Jr., Todd Michael Baiad, Savannah, for Appellee.

BRANCH, Judge.

Appellee Sun Chemical Corporation hired an ocean carrier to transport two containers of ink manufactured by Sun from Kentucky to Brazil. After the ocean carrier hired a freight forwarding company to arrange the shipment, the freight forwarder hired appellant Norfolk Southern Railway Company to carry the ink by rail from Kentucky to Savannah, where it would begin its ocean voyage to Brazil. The rail cars carrying the containers derailed, however, and the ink was destroyed. Sun and its insurer, Continental Insurance Company, sued Norfolk Southern for negligence and breach of contract. Sun moved for summary judgment on several theories, including that Norfolk Southern was strictly liable for the loss under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706. On appeal from the trial court's grant of summary judgment to Sun on that basis, Norfolk Southern argues that it is not subject to Carmack liability, that Sun should be bound by its agents' rejection of Carmack coverage, and that Sun has no viable state law claim remaining. We agree with these contentions and reverse.

The relevant facts are not in dispute. Sun entered into a contract with Compañia Sud Americana de Vapores (CSAV), an ocean carrier, to transport Sun's ink. Under what is known as a “through bill of lading,” in which cargo owners “can contract for transportation across oceans and to inland destinations in a single transaction,” ¹ CSAV took “responsibility for the entire (intermodal) transportation” of the ink from the place of receipt to the place of final delivery, and retained “the right to use the services of other Precarriers and/or Oncarriers and any mode of transport to accomplish the same.” ² The latter provision also includes a warning about the liability of such intermediate carriers:

Custody and Carriage of the Goods during the intermodal transportation are subject to the tariffs and terms of the relevant bills of lading and/or contract of carriage and/or other transport documents adopted by the Precarrier or Oncarrier and prescribed or made compulsorily applicable by the country in which the intermodal transportationis performed.... Particular attention of the Merchant is directed to the terms, conditions or provisions of such documents and laws of the country of transport, as the liability of the Precarrier and/or Oncarrier under such terms, conditions or provisions may be less than the liability of the Carrier in respect of the sea transport.

(Emphasis supplied.) Sun also authorized CSAV to “subcontract on any terms the whole or any part of the handling and [c]arriage of the Goods and any and all duties whatsoever undertaken by [CSAV] in relation to the Goods.” (Emphasis supplied.)

Under the authority thus granted it in the through bill of lading, CSAV subcontracted with Riss Intermodal, Inc., a freight forwarding company, to arrange inland transportation, which in turn hired Norfolk Southern to transport Sun's ink to Savannah.³ The intermodal transportation agreement (ISA) between Riss and Norfolk Southern, which provided that it was “for the sole benefit of [Norfolk Southern] and Riss,” incorporated Norfolk Southern's rules circular governing such transport, which offered customers a choice between “standard” and “Carmack” liability provisions. The rules circular stated in boldface capitals that “unless language expressly selecting ‘Carmack’ is included in the original shipping instructions, any tender of freight for transportation ... will be accepted under ‘standard’ liability coverage provided and not under ‘Carmack’ coverage.” ⁴

The ISA and the rules circular gave Riss the option to impose Carmack liability on Norfolk Southern if Riss complied with certain additional procedures and paid a higher rate. By contrast, the standard provision stated that Norfolk Southern “will not be liable for any loss, damage, or delay” to any party “other than the Rail Services Buyer.” The record provides no evidence that Riss chose, paid for, or otherwise selected Carmack liability under the ISA or the rules circular.

In September 2001, Norfolk Southern cars carrying Sun's ink containers derailed while traveling through Washington County, Georgia, destroying the ink. Sun filed a claim with Continental Insurance Company, which paid Sun $60,593.44. Sun and Continental then sued Norfolk Southern for that amount plus interest and litigation costs. After the parties filed cross-motions for summary judgment, the trial court granted Sun's motion and denied Norfolk Southern's motion on the ground that Norfolk Southern was strictly liable under Carmack.

[318 Ga.App. 896]1. The primary question before us is whether Sun can be bound by Riss and Norfolk Southern's bargain, reached without notice to Sun, such that Norfolk Southern could not be held strictly liable under the Carmack Amendment.

We read United States Supreme Court precedent as authorizing parties to international intermodal transport agreements involving any “substantial carriage of goods by sea” to reach their own terms as to liability for damage or loss of cargo. Norfolk Southern R. Co. v. James N. Kirby, Pty Ltd., 543 U.S. 14, 27, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004). And the Court's recent decision in Kawasaki Kisen Kaisha Ltd. v. Regal–Beloit Corp., ––– U.S. ––––, 130 S.Ct. 2433, 177 L.Ed.2d 424 (2010), appears to have significantly limited Carmack's application to such agreements in an import context when it held that Carmack liability did not apply “if the property is received at an overseas location under a through bill [of lading] that covers the transport into an inland location in the United States.” Id. at 2444(IV)(A). Following Kawasaki Kisen, at least one federal district court has held that Carmack liability does not apply to a carrier hired by a freight forwarder under a through bill of lading concerning a freight shipment for maritime export (as is the case here), and the caselaw on which the trial court in our case based its decision to the contrary has been either abrogated or undermined by Kawasaki Kisen. For these reasons, which we explain more fully below, we conclude that the trial court erred when it concluded that Norfolk Southern was strictly liable under the Carmack Amendment for the loss of Sun's ink.

(a) We begin by considering how the two leading United States Supreme Court decisions on through bills of lading and Carmack liability—Kirby and Kawasaki Kisen, supra—apply to the case before us.

In Kirby, an Australian manufacturer hired a freight forwarding company, ICC, to arrange for delivery of its machinery from Sydney, Australia, through the port of Savannah to Huntsville, Alabama. Kirby, 543 U.S. at 18–19(I), 125 S.Ct. 385. Like CSAV in this case, ICC hired an independent contractor, Hamburg Sud, which in turn hired Norfolk Southern to transport the machinery from Savannah to Huntsville. Hamburg Sud's bill of lading with ICC limited its liability for the sea leg of the shipment to the default amount set by the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C. § 30701 et seq., of $500 per package.⁵ In a so-called “Himalaya clause,” ⁶ the bill of lading extended that liability limitation to all of Hamburg Sud's downstream agents and subcontractors, including inland carriers. Id. at 19–21, 125 S.Ct. 385. As in the case before us, the manufacturer sued Norfolk Southern for the value of the freight after it was damaged on the inland rail portion of its journey. Id. at 21, 125 S.Ct. 385. The Supreme Court held that the liability terms negotiated by Hamburg Sud (the independent contractor who hired Norfolk Southern) with ICC (the freight forwarder) were enforceable against the manufacturer because ICC had acted as the manufacturer's limited agent when making arrangements with downstream carriers, including Norfolk Southern. Id. at 33–34(III)(B), 125 S.Ct. 385.

As a preliminary matter, and as the U.S. Supreme Court noted in Kirby, it is to a manufacturer's advantage to arrange both foreign and domestic components of transport “in one bill of lading, rather than to negotiate a separate contract—and to find an American railroad itself—for the land leg.” 543 U.S. at 26(II), 125 S.Ct. 385. Likewise, the independent contractor hired by the freight forwarder seeking to save the freight forwarder and its clients money by purchasing cheaper liability protection “would not enjoy the efficiencies of the [COGSA] default rule if the liability limitation it chose did not apply equally to all legs of the journey for which it undertook responsibility,” with the consequence that “the apparent purpose of COGSA, to facilitate efficient contracting in contracts for carriage by sea, would be defeated.” Id. at 29(II), 125 S.Ct. 385.Kirby serves, therefore, to “reinforce the liability regime Congress established in COGSA” and “protect[ ] the uniformity of federal maritime law[.]” Id.; see also Kossick v. United Fruit Co., 365 U.S. 731, 741, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) (even though a maritime contract involving substantial ocean transport “may well have been made anywhere in the world,” it “should be judged by one law wherever it was made”).

The Kirby Court's rationale for validating the Himalaya clause before it, which extended specific liability limitations to downstream carriers and agents, applies with equal strength to the provisions in the through bill of lading before us, which authorizes downstream carriers to reach their own liability terms:

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...