(The following story by R.G. Edmonson appeared on The Journal of Commerce website on March 24, 2010.)
WASHINGTON, D.C. — The Supreme Court may have to decide whether or not ocean carriers will be considered “railroads” for cargo liability purposes after oral arguments on Wednesday morning.
The case involves Kawasaki Kisen Kaisha, Union Pacific Railroad and a group of shippers that had their containerized goods damaged in a derailment. The issue is whether or not Union Pacific’s liability limits were governed by the Carriage of Goods by Sea Act of 1936 or the 1906 Carmack Amendment to the Interstate Commerce Act.
The case has been called a “sequel” to the case of Norfolk Southern v. Kirby. In November 2004 the high court ruled that Norfolk Southern’s liability for damage was limited by Cogsa since the railroad was moving containers under the ocean carrier’s bill of lading. However, whether or not the Carmack Amendment applied was not an issue in the case.
Since the Kirby case, four federal appeals panels have ruled that Cogsa applied on ocean carrier through bills, but the 9th Circuit U.S. Court of Appeals last year ruled that Carmack applied in the “K”-Line case, which put the issue before the Supreme Court.
The Carmack Amendment as originally written placed liability on the railroad that originated the goods, and was limited to carriage within the United States or exports to Canada or Mexico. In a re-codification of the law in 1978, the “adjacent countries” language was omitted, and one of the issues Wednesday was whether or not the re-codification should substantially change Congress’ intent when it wrote the law.
Attorney David Frederick, who represented Regal-Beloit and the other shippers, argued that under the Carmack Amendment, “K”-Line was a “railroad carrier,” that originated the shipment, and provided the containers and chassis that Union Pacific used to move the goods inland.
Justices Sonia Sotomayor and Anthony M. Kennedy asked Frederick in detail about the meaning of language in the Carmack Amendment.
Frederick said that in terms of liability, “K”-Line was the “receiving carrier,” and the plain language of the law as it stands now indicated it applies to international shipments.
James Scott Ballenger, who represented Union Pacific, argued that Carmack was never intended to cover an ocean carrier’s through bill of lading.
Justice Stephen Breyer asked if it made sense to apply Carmack to international shipments, because “bills of lading all over the world would have to meet Carmack, and that’s a nightmare.”